Negotiation strategies for commercial dispute resolution - how to set up for success – Part 1
Clive is Omni Bridgeway’s Global Chief Investment Officer, based in Sydney. Clive has led some of the company’s most high-profile and significant investments and chairs our global investment committees to assess funding opportunities across the globe. Bob served as the Thaddeus R. Beal Clinical Professor of Law at Harvard Law School for two decades before beginning his advisory and consulting practice. Bob founded the globally renowned Harvard Law School Negotiation and Mediation Clinical Program, which he directed for more than a decade. He has taught several courses at the law school, including the school's flagship Harvard Negotiation Institute workshop.
This podcast has been divided into 2 episodes. Part 1 includes a discussion about:
- Theories behind negotiation methods
- Principles for negotiating a good outcome
- How to create value in negotiation and why it is important
Part 2 of the podcast includes a discussion about:
- Positional Bargaining and alternative methods of negotiating
- How to get around difficult behaviour from the other party
- Key learnings from the globally renowned Harvard Negotiation Institute workshop
To listen to part 2, click here.
Part 1 Podcast Transcript
Hello, and thank you for tuning in 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.
Episodes of this podcast can be found on our website, www.omnibridgeway.com, and also on iTunes, Spotify and other podcast networks. We welcome you to subscribe to the podcast and leave us reviews and suggestions.
My name is Justin McLernon and I’m your host for today’s podcast: ‘Negotiation strategies for commercial dispute resolution - how to set up for success’. I’m an Investment Manager based in Omni Bridgeway’s Perth office. My role at Omni Bridgeway is to source and evaluate potential case investments and manage those which are approved for funding through to resolution.
Today’s podcast is a flashback to a discussion last year between my colleague Clive Bowman, Omni Bridgeway’s Global Chief Investment Officer, and our guest, Robert Bordone.
Bob is a senior fellow at Harvard Law School. He served as the Thaddeus R. Beal Clinical Professor of Law at Harvard Law School for two decades before beginning his advisory and consulting practice. Bob founded the globally renowned Harvard Law School Negotiation and Mediation Clinical Program, which he directed for more than a decade. He also taught several courses at the law school, including the school's flagship Harvard Negotiation Institute workshop, which is a seminar Bob created on dispute systems design. Clive Bowman attended this course in June 2019 and, following on from this, we wanted to introduce Bob to our podcast audience.
Bob and Clive share some of the insights and pragmatic tips that arose from the workshop, and how they apply in the context of commercial dispute resolution.
As I mentioned, Clive is Omni Bridgeway’s Global Chief Investment Officer. Clive is based in Sydney and leads five Chief Investment Officers across our jurisdictions. He also chairs our Global Investment Committees to assess funding opportunities. Clive has led some of the company’s most high-profile and significant investments.
In this podcast, Bob provides some theory behind negotiation methods and principles for negotiating good outcomes. Bob and Clive also discuss those aspects of the Harvard negotiation course that are most relevant to our industry and to our clients, namely, how to negotiate the successful resolution of commercial disputes.
Bob and Clive’s chat took place before the COVID-19 pandemic and before the merger of global dispute funders, IMF Bentham and Omni Bridgeway, in November 2019. Earlier this year IMF Bentham and all brands in the group adopted the unified global name Omni Bridgeway. During the podcast, you will therefore hear Clive refer at one point to our former company name, IMF Bentham.
This podcast has been divided into two episodes.
I started by welcoming Bob and Clive.
Thank you, Justin for that introduction. Bob, firstly, I'd like to ask you what is negotiation and, before you answer, you said something which I found very funny and interesting at the start of your lecture series and that is - negotiation is the art of letting the other side have your way.
Do you want to just take it off from there Bob?
Sure. Thanks so much for inviting me to do this Clive and I'm really looking forward to our conversation.
Yes, when I think about negotiation, I have a very broad definition of what I mean by it. Sometimes, people think it's a very stylized thing that happens between lawyers who are trying to settle litigation, or between two countries who are in a conflict, or between labour and management; and all of these things are, in fact, negotiations. But, the way I define it, is it’s any communication, whether it's spoken or written, or verbal or non-verbal, between two or more persons with an intention to influence or to persuade.
And so, with that definition, I really see negotiations as pervasive. They're really all around us whenever we try to influence or persuade anyone to do anything; whether it's to cook us dinner, agree with us on where we should go on vacation, raise our salary, do a particular task on a team, all of that is negotiation. And that little alternate definition you gave, the art of letting the other side have your way, is really to suggest that skillful negotiators put themselves in the shoes of the person they're trying to influence and really try to make sure they're giving that person, or set of people, an attractive choice - something that they would want to say yes to when they're negotiating.
In the context of dispute resolution funding, which is what IMF Bentham does, we probably adopt a more narrow definition of negotiation. And the most significant negotiation in that context is going to be in relation to attempts to resolve the dispute itself. So, this can sometimes occur in writing; written offers going back and forth, counteroffers, or in face-to-face meetings, often by way of mediation.
So now that we've defined what we talking about more broadly in life, and more perhaps a little bit more narrowly in the context of dispute resolution funding, I'm interested to hear from you Bob as to the circumstances in which negotiations can become protracted or why they might fail.
Sure. Well of course it's always going to start out as more complicated when you're in a dispute resolution context than when you're in a deals context. Already when you're in the context of a dispute, typically, one of the big challenges around negotiation has already been enacted or in play, and that is that usually there's a high level of emotionality involved; people are feeling often angry, taken advantage of in some way, perhaps treated unfairly; and that's one domain of complication. You add to that another really common bias in negotiation, which is that sometimes people really see negotiation purely in win/lose terms and, in the context of a dispute in particular, the negotiation is set up that way often, someone is going to get the better end of the bargain. Although in fact, at times, both parties can actually, sometimes even in a dispute context, have their deeper interests met in ways that aren't really win/lose.
If you have a really skillful mediator, and if the parties have lawyers who have some training and understanding in negotiation, that's really possible. I would say another real challenge in negotiations, that can often make them be more protracted than they might, is that typically parties don't really know how to prepare well for negotiation. So, what they ought to prepare might be a settlement offer. They might also think about what are the limits of their authority, what they're willing to offer before they walk away, and maybe they'll spend a little bit of time coming up with arguments around why their proposal is more fair; but that's a pretty inadequate way to prepare for negotiation.
So, I think all of these really come together and make coming negotiations more protracted. Add to that, the fact that parties, even the most interpersonally skilled among us, we often have some blind spots. That is to say, sometimes, we're really unaware of the ways in which our behaviours can be experienced by others as irritating and all of this together can explain why negotiations that, from a purely analytic perspective, might be relatively easy to find a solution for, actually become quite complicated. Because typically the problem in a negotiation is not finding the solution, but finding how do we actually get to a solution.
Do you think that one of the reasons why negotiation might be protracted or fail, at least at the first attempt in the context of dispute resolution, is because it's just simply too early?
Absolutely right. There are times when there needs to be more discovery perhaps or there is not really a good sense of information exchange, right, so there could be really big information asymmetries. Sometimes it's too early because people are still in an emotional sense of upset, where they haven't taken a deep breath and realised that the costs of conflict might actually be higher than the costs of a more expeditious settlement.
I think its very context specific of course and, depending on the issues and the parties and you know, where the parties find themselves when they're first beginning let's say a mediation or settlement negotiations.
I think there can often be a trade-off between the benefits of resolution, which will often occur in circumstances of uncertainty, and waiting until there's more certainty and waiting until you go through that process of discovery; but that will come at greater cost.
That's right. And part of it is knowing when is the right moment. Lawyers, sometimes, are incentivised to keep the discovery going beyond its usefulness. On the other hand, you do have to have some information if you want the settlement to actually be grounded in something that isn't just arbitrary or isn't just about who caved in first.
So yes, I think there's a real challenge there for skillful lawyers and clients to work out.
And I think sometimes the ego and emotion can play a role in inhibiting a proper discussion.
There's no doubt about that. I mean one of the things that I always find striking is how lawyers have a real opportunity to help their clients handle those emotions well and to really help reality check them to be more prepared for a negotiation sooner. And yet there are lawyers, sometimes, who actually can make things worse; at least in the US context. Maybe this doesn't happen so much in your context, but I always find that quite striking and really regrettable when, instead of the lawyer being attentive to the emotions and helping the client think through how to handle them and separate them from the substance, the lawyer can actually make it worse by saying ‘not only do you deserve X, but I think you should make a claim for five X’ and in the process they're actually making ultimate resolution tougher.
Of course, this doesn't explain something that in our field we call principal-agent tension; because at times the interest of the principal, that is the client, aren't perfectly aligned with the interest of the agent, the lawyer.
Yes, that's a tension I think that often arises in litigation or in arbitration.
For sure. It's a very big topic in a longer negotiation course. The course that you attended with me, Clive, we didn't get so much into the issue of principal-agent tension, but in the even longer course, we spend a significant amount of time talking about what are some ways to handle that and minimise that gap between the interests of the principal and the interest of the agent.
I'm sure you see that all the time though in your work.
We do see that.
You spoke earlier about the importance of preparing for a negotiation and how, sometimes, the parties don't know how to do that or they don't do it properly.
What should parties do to prepare for a negotiation?
I think preparation is absolutely critical, if you want to be successful as the negotiator. I could probably go on for this topic for a full hour, but I'll say a few things. I think the most critical error that people make in preparation, is that they focus largely on themselves; that is to say they think about what do they want, what are their bottom lines, what are their arguments, what will they do if there's no agreement. And of course, you should think about all those things, that makes a lot of sense. But I would say the number one most important thing to do is that at least 50% of your time should be spent thinking about what's important to the other side, what might their arguments be, what will they do if no agreement is reached? And, in particular, really imagining what does the world look like to them.
One of the critical aspects of a negotiation is that you're trying to persuade someone to agree to something or to do something or to not do something. So, if you are making an offer to the other side, that if you were sitting on the other side, you would recommend that they reject, then you probably shouldn't have made that offer to them. So, I would say, most critically, just spending a lot of time sitting in the chair of the other side. And there's a lot of resistance to that, particularly in dispute situations, where a client might be thinking I don't want to see the world from their perspective, they are a bad person or they're a cheater. That would be, I would say, the most critical piece of advice I would give.
Beyond that, right, I would really suggest, as much as possible, doing the needed research to understand whatever it is we're negotiating, what are the market norms, what are the reasonable, legitimate criteria that could be used to resolve a particular area or point of contention. And I would say you always need to spend time thinking about what you're going to do if you don't reach an agreement. In negotiation, we have a term of ours called the BATNA, the Best Alternate To a Negotiated Agreement. And you want to spend time thinking about what that will be, but you also want to spend time thinking about what are the possible arrangements or aspects of the deal that could be made with the other side that would actually meet both of our interests.
How important is the relationship between the negotiating parties? Should parties be investing in creating that relationship?
I always think that having a better relationship is better than not. I think the answer to the question of how much time, energy and effort we should put into that, is somewhat context specific. But even in a dispute situation; it is not atypical that the parties will need to work with each other around implementation of any agreement; and that the parties may still bump into each other in their business and in the world in some way.
So, because of that, I do think spending time really working out how will we work with each other when differences may arise, how can we build an atmosphere of trust? And one of the phrases that we often use in our field is that we want to really separate the people from the problem. So, I can be very rigorous around the substantive aspects of whatever it is we're negotiating, without being hard on the people.
I could be gentle and respectful of the individuals, while being tenacious around the substance. And, even in a dispute context, where we may not be working with each other going forward, it's still the case that we have reputations. And what we know from research is that, negotiators who have a reputation for trustworthiness, are more likely to get better deals for their clients over time.
So that's a long way of saying that relationships do matter. We shouldn't make substantive concessions to preserve the relationship, but one of the things I will always say is I don't want to be wholly trusting, but I want to be wholly trustworthy. So, I want to say things I mean, and to mean the things that I say.
Is it important to think about how we can create value in negotiation and why should we do that?
Sure. So, in our field we have this phrase called ‘creating value’. And you know, I think sometimes people intuitively understand what I'm talking about and sometimes not so much. But when we talk about creating value, what we don't mean is looking at a 10-point pie and thinking, how can I get seven or eight of those points? In negotiation we would call that claiming value. In negotiation what we mean is looking at a 10-point pie and thinking, is there a way that we can make that 20 points or 40 points or a hundred points, and then divide it. And the way we kind of do that is by looking past just opening offers or positions and really thinking critically about what are the underlying reasons why people have these positions, which in negotiations we call what are their interests?
And once we understand what their interests are, there may be ways that we can craft agreements that meet the underlying interests in a way that doesn't really involve compromise but allows everybody to actually get what they need. So, when we talk about creating value in negotiation, often the way we do that is by exploiting differences between the parties, differences that might exist with respect to their prediction about the future or with respect to differences they have around risk preferences or time preferences. I think one of the critical lessons in negotiation, one of the big shifts that I certainly hope people who either get coached by me or take a workshop with me will come away with, is understanding that the art of negotiation and the mark of a great negotiator is not primarily making the least concessions or the smallest concessions, but rather the ability to look at the situation and help the parties take that 10-point pie and make it worth 20 or 40 or 60 or 80 points, and then divide it.
I agree Bob and it's a very useful visual analogy to keep in mind.
Justin McLernon: That brings us to the end of part one of this podcast. Please join us for part two which will cover positional bargaining, alternative methods of negotiating and how to get around difficult behaviour from the other party. Clive will also share some of the key learnings from the Harvard negotiation workshop.
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 on 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 would like 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.