Don't Cut That Baby in Half!! Negotiate a Business Deal
(for more of the brilliant Charles Fincher, Jr., see LawComix.com)
When I hear from my old litigation buddies that "all mediators do is divide by two" I am tempted to wander into the "hard sell" marketing zone I usually avoid. Last night at the Los Angeles ABTL dinner, for instance, I runined my record of never overtly marketing my services by nakedly promoting myself in response to one such complaint.
For those litigators disappointed by the mediation services they receive, I'm supplying an executive summary (with commentary) of Harvard negotiation gurus Lax and Sebenius excellent article, "The Art of Getting the Best Deal."
Don't Say "Yes, Yes, Yes," When You Really Mean "No, No, No, No, No."
As Lax and Sebenius stress, business people should only say "yes" to a deal that "meets [their] real interests better than [their] best no-deal option." Mediators call the "no-deal" option your BATNA -- a Better Alternative to a Negotiated Agreement.
Let me reiterate: there is no reason to say "yes" to any deal that is worse than no deal. Ever. Period.
Tell that to the mediator the next time you're feeling pressured to accept an offer or meet a demand that makes your client really really really unhappy. Say, "I can do better at trial." Say, "I can negotiate a better deal than that." Say, "if I can't negotiate a better deal that that today, I'll approach the matter differently tomorrow." Say, "I don't believe the best settlement is one that leaves everyone unhappy." Say, "that's not what I promise my clients when they hire me." Say, "I've read Lax and Sebenius." Say, "good luck with your mediation career" and pack your bag. Bow out nicely but firmly.
Find the Deciders and Draw a Deal Diagram
A deal diagram is not a decision tree. Decision trees are about legal strategy. Business decisions are not driven by legal strategy. Business decisions are driven by finance, markets, business needs, and, commercial realities. Only lawyers are kept awake at night by legal dilemmas. CEO's are concerned with mergers and acquisitions, S.E.C. reporting requirements and how a settlement with a competitor might affect stock prices.
So what's a "deal diagram"? I'll let Lax and Sebenius explain:
In the simplest negotiation, two principals negotiate. Yet your deal diagram should include potentially complicating parties such as lawyers, bankers and other agents. While there may be a single negotiator for the other side, you should be alert for internal factions with different interests; they may be deal-blockers or internal champions of your proposal.
Anglo-Saxon companies attempting acquisitions in Germany, for example, have often been stymied by the unexpected importance of the management board (Vorstand) as well as the supervisory board (Aufsichstrat) and unions under the potent policy of "co-determination". The crucial first step is to map all parties in the context of their decision process -- and don't forget to include influential players in your own internal negotiations.
As Colin Powell says, the most important place for any international diplomat is "inside the other guy's decision cycle."
Having settled more cases than I tried, I know that all too often my own clients' decision-cycle was as mysterious to me as the other side's.
So the simple first step? Familiarize yourself with the corporate "decider" rules.
More naked salesmanship: This is where a mediator with industry-specific knowledge becomes a more valuable asset than one without it. As I often tell potential clients, I'm not a great mediator for personal injury cases because I don't know either side's decision-cycle (other than costs of defense and multiplying by 33.3%). But tuck me into your back pocket to negotiate a coverage, antitrust, intellectual property or complex commercial dispute and I can supercharge your negotiations because I'm inside both sides' decision cycles.
We're litigators. We didn't do transactional work because we thought we'd be chained to a desk fly-specking thousand page agreements. We don't readily think about the parties' interests (i.e., their business needs). We craft crafty lines of cross-examination in our sleep. We awake in the morning with the silver stake summary judgment motion in our heads. We're advocates, not "bean counters." We wield power and influence. We persuade.
Why, then, do mediators brush aside our most persuasive arguments with a wave of their hands and go back to bullying us about litigation costs and the uncertainties of trial.
Well, one of two reasons. The mediator is not as skilled a negotiator as you deserve
or . . . .
the mediator knows something you don't -- that commercial interests, not legal positions, drive all business deals.
Lax and Sebenius again on the Second Step -- Assessing Interests.
Probe negotiating positions to understand deeper interests. Issues are on the table for explicit agreement. Positions are your stands on the issues. Interests are underlying concerns that would be affected by resolution. Positions on issues affect underlying interests, but need not be identical.
Interest-driven bargaining sees the process primarily as a reconciliation of underlying interests: you have one set of interests, I have another, and through joint problem-solving we should be able to agree.
For example, environmentalists and farmers endlessly battled a US power company over whether to build a dam (the issue). Their positions: "absolutely yes" and "no way". Yet incompatible positions masked compatible interests.
The farmers were worried about reduced water flow below the dam, the environmentalists were focused on the downstream habitat of the endangered whooping crane, and the power company needed results and a greener image.
They devised a better agreement than continuing court warfare: a smaller dam built on a fast track, stream flow guarantees, downstream habitat protection and a trust fund to enhance whooping crane habitats elsewhere.
It's usually late in the day when the parties begin to reveal their true interests, often to the surprise of their counsel and always to the delight of the mediator. I once settled a "straight money" case, for instance, when Plaintiff's negotiator explained his company's bottom line as compelled by an earlier settlement for 64% of the total amount owed by the defendant. When informed of the reason behind the position, the impasse was immediately broken and the case settled -- for 64% of the total amount owed. See Rationalizing Numbers for the research on reason-giving.
I'll discuss a more complicated interest-driven patent mediation along with Lax & Sebenius' steps three and four tomorrow.
And remember, I have that great MCLE noontime negotiation seminar that I'm happy to bring to your law firm gratis, with or without one of my favorite sitting judges.
HAVE A GREAT BUSINESS DAY!
