By appealing to principles of fairness, PictureQuik might be able to identify the standard that SuperMart is applying to all of its in-store partners by asking, “Why should we pay you an additional 10 percent of our in-store revenue? Are you asking all your suppliers for equivalent increases? If not, is it fair of you to single us out?” SuperMart might reveal that it has set new, higher revenue goals for each square foot of every store. If that’s the case, PictureQuik could offer to redesign its booths to reduce their size by 10 percent.
It’s possible the response to such appeals will be, “Take it or leave it. We have someone else ready to step in.” But wise executives recognize the importance of focusing not only on increased short-term profitability but also on solid relationships and consumer satisfaction.
Of course, it’s important to present an appeal to principle to the right person. The middle manager with a mandate to get the best deal possible may not be the right audience for such arguments. Whenever you’re dealing with a stronger party, nurture contacts with top management on the other side—throughout the life of your partnership. At the moment of contract renegotiation, you won’t have the time or the opportunity to build such ties.
Form Strategic Alliances with Your Competitors
THE PREVIOUS TWO STRATEGIES will usually be the most desirable, as they allow you to keep the entire market to yourself. But it makes sense to explore a third strategy before it becomes clear that the other two won’t work on their own.
As the weaker party in a negotiation, you can increase your leverage by forming strategic alliances that undercut your stronger opponent’s ability to generate a better offer that excludes you. In the language of negotiation, your goal should be not only to improve your own walk-away option but also to reduce the 900-pound gorilla’s walk-away by co-opting the competition.
Imagine that PictureQuik has been anticipating SuperMart’s hard-line bargaining for almost a year before the end of their current contract. In that case, the photo processor could easily identify which competitors would be most likely to bid against it. From its competitors’ standpoint, getting a contract with SuperMart would be a major coup, even if they initially made little or no money off the deal. A competitor that replaced PictureQuik in SuperMart stores could see its share of the photo-processing market climb from 10 percent to 50 percent nationally.
Suppose that PictureQuik knows that SuperMart has been seeking to expand its presence in other countries. If so, PictureQuik could approach Phototime, one of its most likely competitors, about making a joint bid to split the retail chain’s global market in areas where Phototime is already well established. From Phototime’s standpoint, a joint bid would more or less guarantee a larger share of the market. From PictureQuik’s standpoint, such a deal would avoid a head-to-head competition with a major competitor and would reduce the risk of being boxed out of the business entirely.
Another option would be to bypass your main competitor and approach your next-strongest competitor in pursuit of a partnership with them instead. In this case, PictureQuik, the industry leader, would bypass Phototime and invite the third- or fourth-largest photo-finishing provider to be part of a joint bid to SuperMart. After all, they and a lower-ranked competitor should be able to offer SuperMart a better deal than Phototime could on its own. PictureQuik would supply the inventory needed to move to SuperMart’s new stores and train supervisors to oversee expanded operations and employees in global markets. Phototime would have to struggle mightily just to handle existing SuperMart booths.
In an alliance, the combined strength of the partners exceeds the sum of their parts. For this reason, finding a partner that operates in markets where PictureQuik and SuperMart would like to expand could be an ideal solution. Such an arrangement might allow PictureQuik to retain most of their market while letting a competitor control a larger share of its expanding overseas business.
Often, you can expect the 900-pound gorilla to be so confident of its strength that it won’t listen to counterarguments. In such circumstances there is no way to win at win-win negotiation. Such a behemoth may not understand the value of focusing on the full range of its own long-term interests. Instead, it may treat each negotiation as an occasion to flex its muscles and defeat weaker opponents. In such situations, your best response may be to seek out the gorilla’s handler—members of top management rather than, say, regional sales managers—and put forward an elegant proposal that’s better than your existing deal. You might also want to point out the important principles that are at stake, such as reliability and loyalty, and turn the discussion into an inquiry about meeting those standards.
WHEN THE OTHER SIDE IS MORE POWERFUL:
•Seek an elegant solution
•Appeal to principle
•Form strategic alliances with your competitors
OVERCOMING THE NOT-IN-MY-BACKYARD SYNDROME
FOR MORE THAN A DECADE, backers of the Cape Wind project have been seeking to build America’s first offshore wind farm. A small but determined and well-funded group of opponents has tried to stop them at every turn. In a National Public Radio story about growing opposition to renewable energy facilities, wind power advocates were asked how they might overcome local opposition—dubbed the “NIMBY syndrome”—in the future. The spokesperson said, “We’ve got to get in there earlier and educate people.” Wrong, I say! How arrogant! You think people are opposed because they don’t understand? No, they’re opposed because the costs to and impacts on them are likely to outweigh the likely benefits to them. The only way to overcome the NIMBY syndrome, regardless of the type of facility, is to make sure that the overwhelming majority of people in the area know that the benefits to them will outweigh the costs and impacts they are likely to experience if the facility is built.
Almost every significant construction project starts with a small percentage of people, probably less than 10 percent, who favor whatever is being proposed. These are usually people likely to gain personally if the facility is built, maybe by selling their land directly to the facility developer. And, as Mike Elliott, a professor at Georgia Tech, demonstrated many years ago, an equally small percentage of people usually start out opposed. Typically, these are people likely to bear disproportionate costs—maybe because they live right next to whatever is being proposed. While there are some people in every community who pay no attention to anything (maybe 10 percent), the vast majority—60–65 percent—fall into a category Elliott called “Guardians.” It’s what this middle group does that triggers and shapes the outcome of most facility siting controversies, such as the one involving Cape Wind.
We know two things about Guardians (thanks to Professor Elliott). First, if they think a licensing or permitting decision is unfair, they will side with the opponents. Second, they want to consider the arguments for and against a proposed facility on their merits. If believable information isn’t presented in an open forum where questions can be asked of experts and proponents in a problem-solving format, Guardians will side with the opponents. NIMBYism occurs when these two facts about Guardians are ignored.
Let me get back to the wind energy spokesperson on NPR. If proponents put out one-sided information to help sell citizens on the need for new renewable energy facilities, or try to convince them that there won’t be any adverse impacts, that’s sure to backfire. I advocate a different approach that emphasizes three very different ideas:
1.Engage in joint fact-finding, not one-sided “educational” efforts.
2.Let all the key stakeholders choose a mediator to help manage a consensus-building process.
3.Promise to compensate potential losers and hold any adversely affected neighborhoods harmless.
Most environmental studies are prepared after proponents have committed to building a facility. So whatever data or forecasts are generated tend to be dismissed by opponents as nothing but propaganda in support of decisions that have already been made. This is exactly the kind of thing that causes Guardians to side with
the opponents. The Cape Wind project in Massachusetts was caught up for most of the past decade in what must be the most elaborate regulatory review process in energy facility siting history in the United States. Whatever evidence was presented by proponents, though, was countered by opponents. Everyone had made up their minds long before studies of the likely impacts of the facility became available. By the time the formal regulatory reviews took place, it was impossible to get all the parties in the same room for a civil conversation. Maine, however, took a different tack. The state reviewed all possible offshore wind sites before any projects were proposed and noted publically those that seemed to make the most sense in technical, economic, and aesthetic terms. This made it a lot easier for energy industry developers to know where and how they might proceed.
Most public involvement in government decisions in the United States is a joke. Hearings and so-called town meetings offer trivial opportunities for opponents and proponents to make short statements that won’t convince anyone of anything. They are all for show. The real battle takes place in the media and behind the scenes as each group does its best to lobby the elected and appointed officials involved.
Only an extended public dialogue, when questions can still be asked and answered, before the Guardians have taken sides, is likely to lead to believable analyses of the merits and demerits of each proposed technology, location, design, or mitigation strategy. Most project proponents know how to do this, but it requires that some of the money that would otherwise be spent on lawyers and litigation be used to pay professional mediators to facilitate authentic problem-solving or consensus-building efforts early on. This is not about public relations (which is what the wind spokesperson meant by “education”). Rather, it’s about learning something through an inquiry facilitated by a professional mediator, also called a “neutral.” Most people don’t even realize that such a thing is possible! Mediators know how to bring the right parties to the table, prepare a jointly crafted agenda, and bring in a range of expert advisers acceptable to all sides to engage in joint fact finding.
Now we get to the third principle. Unless you hold potential losers harmless, they will oppose anything that is likely to hurt them. If you want to build a new facility in a particular location, there is no question that a small number of people living adjacent to the site will be opposed. Trying to get them to support the project by telling them that the gains to everyone else outweigh whatever losses they might experience is crazy. It is too easy for all the potential losers to find each other, especially if there are not that many of them. And they have a substantial incentive to try to block the facility. On the other hand, all the potential gainers (who could number in the millions if we are talking about switching from fossil fuels to clean energy on a regional basis) are unaware of the small gains they might realize over the long haul, so they don’t have much of an incentive to get organized.
If the gains to the gainers far outweigh the losses to the losers, that’s not going to stop the small number of potential losers from trying to stop something that is not in their best interest. And since regulators and public officials don’t think in terms of the distribution of gains and losses, they often play into the hands of a small group of opponents who can easily recruit Guardians by complaining that decisions have been made without them. Instead of 10 percent opposed, the opposition grows to more than 50 percent. When that happens, public officials have no choice but to take a stand against a proposed project.
The key is to help reframe the Guardians’ mandate and priorities by offering compensation and commitments to potential losers. If offers of compensation are structured properly, they can lead potential opponents into the trading zone. Compensation doesn’t have to take the form of financial payments. For example, a facility developer could promise to help a community fix something that has been a problem for a long time—like cleaning up a contaminated site somewhere else in the area—if they are allowed to build their new facility.
A bribe is an illegal payment which people would be embarrassed to have made public. But compensation, awarded based on clear principles that ensure that everyone in the same category is treated equally, is not a bribe. Community benefit agreements (currently on the books in New York City and Los Angeles) seek to ensure that everyone in a neighborhood will benefit when a new facility of some kind is built. Some of the gains to the gainers (especially proponents who stand to make a profit) are, in effect, taxed (before they go to the gainers) and used to ensure that the small number of opponents who really stand to lose will be made whole. Gains are used to compensate communities who experience real losses so that almost everyone in the city or region benefits. Compensation payments or compensatory measures to eliminate a problem in the area (or share benefits) ensure that all those who bear disproportionate costs (even small ones) realize some tangible advantage over and above the general benefits that all the gainers will get if a facility is built. Construction jobs, for example, ought to be set aside for those adversely affected. Property tax abatements (or at least property tax insurance) should be offered to those who live near a new facility. This will hold them harmless against any property value losses caused by a new facility. The key is to ensure that potential losers are fully compensated. This will lead the Guardians to reframe their priorities and allow them to side with the proponents. When this happens, NIMBYism will melt away.
If there is no way to capture some of the benefits to compensate the losers by taxing the gainers, then the proposed facility is probably a mistake—it’s either in the wrong location, using the wrong technology, or being proposed at the wrong time.
Now, there are some opponents who just don’t care what they are offered or what their neighborhood is offered (again, I’m not just talking about money). They oppose a new facility for ideological reasons or because they just don’t want things to change. In real life, when the ideas I have outlined are followed, the folks in this category (ideological opponents) are a very small minority (fewer than 5 percent of the total population of a community or region). Elected and appointed officials (and courts) who see that every effort has been made to use some gains to compensate losers and make the host community whole (through an open problem-solving conversation managed by a professional mediator) are not likely to block what 95 percent of the community supports. So the trick is to get the Guardians to side with the proponents, bringing them into the trading zone. Once they are there, the next task is to create as much value as possible.
TO GET PAST NIMBYISM:
•Engage in joint fact-finding, not one-sided “educational” efforts
•Let all key stakeholders choose a mediator to help manage the consensus-building process
•Promise to compensate potential losers, and hold any adversely affected neighborhoods harmless
2
CREATE MORE VALUE
Propose Packages That Are Good for Them and Great for You
CREATING MORE VALUE THROUGH TRADES
DOES YOUR PAST NEGOTIATION EXPERIENCE bear out the optimistic notion that it’s possible to uncover hidden value that improves each side’s outcomes in virtually every negotiation? Or are you skeptical?
At the Program on Negotiation at Harvard Law School, the mutual-gains approach to negotiation lies at the center of much of the prescriptive advice we offer practitioners. This way of thinking puts a premium on value creation—that is, enlarging the pie before dividing it. Value creation hinges on finding and making trades that allow each party to meet their underlying interests. If the package you invent helps both sides exceed their best alternative to a negotiated agreement, it makes sense to do the deal.
Most people agree that value creation sounds like a good idea. Yet many argue that their negotiations can’t be handled that way, either because their counterparts are too committed to hard bargaining or because no additional value exists. In effect, they presume that most negotiations are zero-sum games in which every bit of gain for one side is matched by a loss to
the other, and vice versa.
It’s true that finding issues to trade is not always easy. If you are negotiating with one person over just one issue, such as the price of a used computer on eBay, and you’re unlikely to have any future dealings with him, you may indeed be hard-pressed to create value.
Most of the time, however, the agenda in any negotiation can be expanded, and items can be packaged. For example, a financial deal that seems to be exclusively based on price (Issue 1) usually also concerns when the money will change hands (Issue 2) and the likely interest rate that will be charged in the interim (Issue 3). Suppose that a salesperson’s commission is determined by the price a buyer agrees to pay, and that the amount the buyer is willing to pay depends on when that payment is due. “If you sign the papers now, you won’t have to pay for a year,” the salesperson seeking a commission might say. “We’ll extend you a line of credit at no interest.” If the client can’t afford the purchase immediately, but knows that she’ll have the necessary funds in six months, the two sides can reach a value-creating deal by exploiting their differing rankings of the three issues on the table.
Often it seems as if there is only one issue at stake in a negotiation. But this is rarely the case. For example, if a negotiation is entirely focused on how much something will cost, it is possible to add issues like when payment will be due, how it can be financed, and how payment for one thing can be linked to subsequent purchases or sales. The key is to put together a package that exceeds each party’s expectations. Using a wide variety of examples—from negotiating a strategic alliance to resolving conflict that threatened the viability of a business—I’ll present four value-creating moves that all negotiators should be ready to use: preparing to create value, exploring interests and adding issues, playing the What-If Game, and bringing new parties to the table.
Good for You, Great for Me Page 4
