Negotiating in tough times

Even in the depths of a recession, it’s possible to reach agreement by using active listening, framing and other negotiating tools

By Wallace Howick

*This is an expanded version of a summary originally published in the December 2009 issue of CAmagazine.

With difficult economic times come agreements that no longer fit. They also bring renegotiation of contracts, some burdened by the circumstances in which they were forged:

Manufacturer: “We cannot continue to deliver smaller orders at these prices. Our transportation costs are rising.”

Wholesaler: “We cannot continue to pay these prices. Our customers are looking for price reductions and want smaller shipments to minimize their inventory levels.”

Union: “We gave up a lot the last time to stabilize the company. We want those concessions returned and job guarantees going forward.”

Company: “We do not have the resources to pay more and we need operational flexibility in the face of weak customer demand and strained cashflow.”

In “Improving the way you negotiate” (October 2007, p. 10; www.camagazine.com/negotiation), I pointed out that because relationships are central to our lives, negotiation is also central to our lives. We use principled negotiation to reconcile needs and interests, thereby facilitating our relationships. Tough economic times, hallmarked by elevated uncertainty and anxiety, heighten the need for successful negotiation skills to develop new relationships but perhaps even more importantly to preserve existing relationships through successful renegotiation wherever possible.

In any negotiation there is always the risk that positional bargaining will take hold, where each side argues for the necessity and correctness of its position. Entrenched, both sides become less willing to explore alternatives. The din of arguing one’s position, followed by the deafness of correctness, encages the parties in gridlock or a barren cycle of push, push back. Underlying interests and motives are not even articulated, much less explored. Anchors block that exploration.

The risk of positional bargaining is elevated in renegotiations by the temptation to play the blame game, where the focus is on allocating the incurred losses or costs at issue rather than the shared gains originally envisioned. The stress of renegotiation can often fray goodwill, even bring hostility.

Good negotiators defuse hostility and focus on engaging the other side in a shared search for a shared solution to a shared problem by listening and by framing.

Listening is a powerful vehicle on the road to resolution of differences. Understandably, it is difficult to do. Rather than suit up in defensive armour, stand up and leave or give them “a piece of your mind,” attune your radar. Look for underlying interests and motivation by asking short open-ended questions: “What’s most important to you? Could you help me to understand your perspective?” One of the wonderful characteristics of open-ended questions is that they cannot be answered by a curt “no.” They provide insight into the “why” underlying a stated position. A stated position can only be met one way. Understanding the underlying interests and motivations allows for a range of possible resolutions (see the example in my earlier article about dividing the orange).

Now stand down and listen -- actively. It’s important to paraphrase what we hear, then ask more questions: “I hear you saying…. What might work from your perspective? Why is that fair? Some negotiators wrongly fear active listening because they assume acknowledging what they hear will be mistaken as agreement. Active listening can disabuse us of assumptions, some of which we may not be consciously aware. Indeed, some may be blocking the road to renegotiation.

The other side needs to know that we have heard what has been said and that we understand it. It’s the old adage: Seek to understand then be understood. Experience suggests this approach leads to reciprocal behaviour.

For example, if the manufacturer and wholesaler mentioned above both actively listened to each other, they might agree to save costs by having the manufacturer ship directly to the wholesaler’s customers with the wholesaler’s labels attached. They would share the savings and use them to fund price reductions.

In any negotiation it is important to develop your best alternative to a negotiated agreement, or BATNA. BATNA answers the question: What will we do, how will we meet our interest/needs if we cannot reach an acceptable agreement with the other side? Equally important is for us to assess the other side’s BATNA. What do we think it will do to meet its interests if no agreement is reached with us? Equally bad BATNAs for both parties can lead to agreement. The next challenge for the negotiators is to persuade their respective constituencies to accept what has been negotiated.

Framing is the amalgam of what is said, how it is said and how it is heard. Unionized employees, even if agitated about “concessions made last time around” may forgo catch-up demands, continue to work without a contract and without work-to-rule or stoppages because to do otherwise might bring their employer to its knees. They viscerally recognize the shared problem of a protracted recession and their leaders’ articulate assessment, skillfully framed, of the viability of a strike: “Now is not the time.”

As difficult as difficult times are, good negotiators can use the combination of well- prepared BATNA analysis and active listening skills to achieve sustainable contracts and preserve relationships.

Wallace M. Howick, MBA, FCA, is an adviser and teacher with 35 years of international experience. Contact: wallace@wallacehowick.com