Episode 22 - Negotiation strategies for commercial dispute resolution - how to set up for success – Part 2
Part 2 Podcast Transcript
Hello, and welcome to the Beyond Hourly Podcast, hosted by Omni Bridgeway, one of the world’s most experienced dispute funders and enforcement specialists. Our podcast series focuses on commercial disputes around the globe and innovative ways to maximize value for clients and law firms.
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My name is Justin McLernon and I’m your host for part two of our podcast: ‘Negotiation strategies for commercial dispute resolution - how to set up for success’. In this podcast, Clive Bowman, Omni Bridgeway's Global Chief Investment Officer, continues his chat with our guest, Robert Bordone, a senior fellow at Harvard Law School. In Part 1, Clive and Bob discussed what is a negotiation, why it can fail or become protracted, and Bob also gave some useful tips about how parties can prepare themselves for a negotiation to maximise the prospects of success.
A reminder that this discussion took place last year, before the COVID-19 pandemic and before the merger of global dispute funders, IMF Bentham and Omni Bridgeway, in November 2019.
In part two, Clive and Bob continue the discussion, beginning with the concept of positional bargaining.
In our area, in conflict dispute funding, we see positional bargaining a lot - where one party starts high, the other side starts low, and the parties work towards some point in between these extreme positions. And that can often result in no negotiated outcome. It can see the parties become entrenched in their positions and neither side being willing to move. Bob, what do you see are the issues with positional bargaining, what could it lead to and what are the alternatives?
Yes, so positional bargaining, I wish I could say it was just in your world Clive. Regrettably it's in almost all worlds. And it's the classic stereotypical approach to negotiation which starts when we're kids. If you had a bedtime as a kid and your parents might have tried to get you to go to bed by 7:00, hoping that you'd be in bed by 8:30, and of course you aim for 10:00pm. And maybe it ended up at 9:00 or 9:30.
It's a little sad to me to think that that model of bargaining persists all the way up to incredibly sophisticated parties, whether they be in business or international affairs, but it does. And the problem with that approach, again, is that it doesn't really get at the reasons why someone may want X million dollars; Or may want anything that they're claiming. All it really does is put into motion a sophisticated dance of concessions.
Some of the other downsides with this, as you mentioned, is that there could be a real escalation. And so, you could end up with an impasse where, in fact, if we were able to understand what really mattered to the parties, we might be able to come up with a really creative agreement.
I think the other challenge of positional bargaining is that it can lead to arbitrary results. So, the arbitrary results, by the way, can sometimes be in our favour and can sometimes be not so much in our favour. There's a famous story of the very first movie that The Beatles were going to be in. And their music producer negotiated with the movie studio around the royalties that The Beatles would get. And the music producer thought, "Wow, these are The Beatles. I'm going to ask for a very, very high royalty." And he asked for 7.5%. The movie company very quickly accepted because, in fact, the movie company was prepared to give 25% of the royalties to The Beatles.
What we see there is because positional bargaining is so random, it's tethered to nothing. It can lead to really arbitrary results. And so instead, what we really try to recommend is something that is variously called either inter-space negotiation or principled negotiation or mutual gains negotiation. All three of those names all represent a really different approach. Where the idea is, ‘Let's not look at positions, but let's understand what's driving each of the positions. And is there a way we can meet the interests of both sides?’
So, I can give you an example involving a mediation I was involved in recently. This was a family that is trying to divide property between them. And there's a particular piece of property that one sibling really wanted to see sold within two years of their parents passing away and the other sibling wanted to be sold five years after the parents passing. So, the range there seems like it’s between two and five, so then you could have a battle and figure out somewhere in the middle. But if you kind of dig in and learned what the interests of the parties are, one party, the one who wanted to sell earlier, was really concerned that because of climate change the value of the property was going down each year. And therefore, they wanted to sell as soon as possible after their parents passed away. The other sibling felt that they would just be not emotionally ready to let go of the property that quickly and that's why they wanted to hold onto it longer.
Once you understand that, it's quite easy to craft an agreement where you basically say, ‘Okay, two years after your parents die, let's identify three real estate agents who will make independent valuations of the valuation of this property. We will take the average and put it in an envelope. Then, in year five, when the other sibling wants to sell, if the value of the property has in fact declined, then the party that wanted to hold on to the property longer will pay the differential to the party that wanted to sell earlier. And if the property is the same value or has increased, of course we'll just split the proceeds.’
The point being here, once we get at the interests the idea of 2, 3, 4, 5 fades away because we can actually structure something that meets the interests of both sides. And that's the real alternative to positional bargaining.
And if you're a party who's faced with somebody else who is seeking to adopt a positional bargaining approach, how can you get around that and start exploring the interests that you're talking about?
Yeah, it’s really challenging if the other side is being positional or using difficult behaviours. I think there's any number of strategies. In the most ideal world, I might be really direct with them and almost invite a conversation about ‘is there some other way we can do this?’
Now let's imagine that that doesn't work. Then I think the next step is really deploying skills around what we call active listening. But really trying to take each of their positions and dig in and try to ask them why a particular provision is important, or why a particular position is important. And as they start to answer that question, you'll start to learn what some of their interests are.
Now let's imagine that they resist even that. Then sometimes giving them a proposal and asking them, ‘Help me understand why this doesn't work?’ Positional parties, in particular, love to criticise. So that gives you a real opportunity, as they're telling you everything that's wrong with your proposal, to learn what their interests are.
Now, if none of that works, sometimes what I do is scan more broadly to say, ‘Is there anyone in that organisation, or maybe someone else on the legal team, or maybe reaching the clients. Is there someone else that I can work through and around because a particular party is being so intransigent?’ Obviously, a move like that has to be done with care, it has to be well considered. But at times that can be very effective.
You mentioned that one of the strategies might be to actively listen. I'm interested to explore that a bit, could you tell us what is active listening?
Sure. By active listening what we really mean is not just sitting there politely, nodding, saying ‘uh-huh or ‘thanks’ or ‘I totally understand’. But really it's an approach that uses a number of discreet behaviours for the purpose of making the other side, first of all, feel heard; secondly, to have their emotions validated; and thirdly, really to again get at this idea of moving from positions to interests.
And so, the component behaviours of active listening involve paraphrasing what you heard the other person say in a way that communicates that you really heard them fully. It also involves asking open-ended questions of the other side. And when I say open-ended, I mean questions that don't lend themselves to a yes or no answer, but questions that are more like ‘how’ or ‘why’ or ‘help me understand’. And then the last piece of active listening really goes to what we were talking about earlier when we talked about emotions. And it is really kind of acknowledging underlying emotions or feelings that the other party might be expressing but in a more indirect way. And the purpose of acknowledging emotions is to really help them feel heard so they can move from being angry, anxious, upset, hurt, fill in the blank, to actually constructive at the negotiation table.
By the way I would say active listening to me is the kind of critical, most important skill of a great negotiator.
I wanted to talk about difficult and/or unhelpful behavior exhibited by parties. In our line of business we can come across that sort of behaviour often. And it sounds like active listening is potentially an antidote to that sort of behaviour. But what sort of difficult or unhelpful behaviour can people come across? And, in addition to active listening, what sort of strategies do you think can be employed to deal with it?
Yeah, I mean, the list of difficult behaviours unfortunately, is long. And I think what each of us experiences as difficult might really vary. But common difficult moves can include strategies such as a 'good cop/bad cop' strategy. So, in other words, you have someone saying, ‘Oh everything you're saying is totally reasonable but my client will never agree.’ Certainly there's a whole bunch of, you know, interpersonal difficult strategies. So, whether that is screaming, yelling, being condescending, tone.
There's other kinds of really hard bargaining strategies, you've probably seen many of these. Constantly delaying, saying they have no authority, 'take it or leave it' moves. And yes, active listening is a really helpful piece, in terms of what you might do. But, in addition to that, rather than playing their own game, so that is to say if someone is yelling at you it's really tempting to yell back, we would instead say, ‘Is there a way that you could find something of value in what they're saying, and refrain that anger or yelling into some kind of a conversation about the party's interests.
Sometimes I do think it is appropriate, particularly if the behaviour is repetitive, therefore there's a lot of delay or escalation, to be explicit about the dynamic. So, we call this a 'name the game' strategy. Where you're really kind of naming the observed dynamic and why it's not being constructive in the negotiation. Of course, there's always some danger in that, because the other side might react poorly to it. But if you do it with skill, right, if you explain it as your experience of the dynamic, it's a little bit hard for them to fight on that.
So again, in a longer negotiation course we spend many hours on this topic of how you deal with difficult or unproductive negotiation behaviours. It's quite an advanced topic and always hard to do because, usually, when the other side is using hard bargaining behaviours, we find ourselves already kind of irritated and less skillful than we might prefer to be.
I think one of the keys is to not become irritated and to remain unemotional and objective. And also to work out what the appropriate reaction is. So, something we see often is final demands, ‘This our last position.’ And I think you can either react to that by saying, ‘Well fine, we're leaving.’ Or you can explore why they have that position and maybe do more of what you're talking about, which is to identify what their interests are and to try and get them into a dialogue around value creation.
Absolutely. I mean, I think it's easier said than done but that's the approach.
I just wanted to say a little bit about my own experiences.
Yeah, I'd love to hear that.
I did the week-long negotiation course with Bob at Harvard Law School in June. And it was taught with a mixture of plenary sessions, smaller group discussions and simulated negotiations. Each night we were given instructions and then the next day we faced a counterparty who had different instructions. And we negotiated a particular factual scenario. And then we went back into our smaller groups and analysed that situation and talked about and tried to apply the learnings from the plenary sessions. And my experience was very positive, it was extremely stimulating, not only because of the energy and positivity of the lecturers, but also because of the energy and positivity of the students themselves.
And I just wanted to mention two key takeaways for me, in the context of the work that we do. And the first is, and you've touched on this in the course of our discussion, the real importance of planning before the negotiation. And not just coming along and thinking that you'll wing it. And that really involves thinking about the issues; what the alternatives are to a negotiated outcome; what are both sides’ interests; what are the possible options, and they don't necessarily need to be at that stage; of thinking about the options, things which you've analysed and you've definitely decided are going to work. I appreciated the importance of being free and thinking about all of the possible options, not necessarily ones which you think are ultimately you're going to proceed with, questions to ask and what messages to send.
And as I found myself in the evening preparing for these negotiations the next day, it really struck me how useful it was to undertake that sort of details analysis. And that's something which you know, I'm bringing to bear in my own life situations where, as a funder, particularly in Australia, we are going to mediations and participating in the strategies around how to achieve a successful outcome for the claimant.
And the second learning for me was, what are limitations of positional bargaining, which I said earlier is something which we encounter quite frequently in the type of dispute funding that we do. And how to deal with that and what is a different way of negotiating which ultimately has a real chance of producing a better outcome for both parties. Focusing on ascertaining interests and how to create value. And those learnings, I think, are directly applicable to what we do, which as I say, primarily focuses on negotiations around the dispute. But, as you said at the start of this discussion Bob, negotiations occur daily and in respect of everything we do. So, in the context of dispute resolution funding, there are negotiations around timetables and what's to occur in the course of the litigation or arbitration. And importantly the negotiation process, or the types of negotiations, can often start with the funding agreement that we enter into, when we have a discussion with the claimant about the terms.
So, I found it a very valuable learning experience and I would recommend it to everyone who is involved in negotiations. Which as you said is basically everyone.
Well that's very nice to hear. I'm so glad that you got this out of it. And you know it's interesting because if I think about myself before I took a negotiation class and then started studying and writing and teaching it, I also spent very little time on preparation and the way I prepared was, I mean, pretty limited. And so that insight that you had about preparation, I think, you know, on the one hand can sound obvious, but on the other hand we're all so busy and we can kind of skip over that level of detail. As you were saying, ‘what are the messages that I want to send, what is the impact they're going to have?’
And, I mean, your other point about positional bargaining, you know, it's such a part of so many negotiation cultures and I think shifting that sometimes... some would take the course like you did Clive and then it can be hard to go back and shift that as kind of the only person, or one of only a few people, who may have a broader or a slightly new or different view of negotiation. But I think there are ways to do that. And certainly in my work I sometimes have the opportunity to really work within an organisation to expose a broader set of people to this approach. And that can really lead to bigger cultural change, because the more people who, you know, kind of have a sense of what's possible, the more people you have trying to shift from the positional to that mutual gains culture.
But I'm pleased to know that you are there trying to do that in your work. It makes me feel good.
I am. Bob, thank you very much for this discussion. I've thoroughly enjoyed speaking with you.
Same as well. Thanks for inviting me to do it.
That brings us to the end of our podcast today. Thank you very much to our guest, Bob Bordone, for joining us and sharing some of the theory behind negotiation, as well as some useful strategies and practical tips to prepare for a negotiation and set it up for success.
You can access a transcript of this podcast on our website blog page.
As I mentioned at the outset, episodes of Omni Bridgeway’s Beyond Hourly podcast can be found on our website, www.omnibridgeway.com as well as iTunes, Spotify and other podcast networks and I invite you to subscribe and leave us your reviews.
If you are interested in exploring third party dispute finance and want to get in touch, please feel free to contact me at [email protected], or to provide any feedback, ideas or insights you have on topics we should cover on the podcast. We’ll be back soon with another episode.
Until then, thanks for listening and good-bye.