Published in the latest issue of the CIArb e-solver:
Parties need deals with dignity, where they leave the negotiation with heads high and believing they have worked hard to get the best deal.
Mediation is an assisted negotiation, so negotiation skills are vital for an effective commercial mediator. In fact, one could argue that it should be one of the key competencies for assessing newly-trained mediators.
Not only is it important for the mediator to understand negotiation tactics (and sometimes how to counter them) but it is also a key skill to know when to give information, when to hold it and when to re-frame it. So the mediator can have a huge influence in when a negotiation starts, how it develops and how it ends.
Some mediators head straight for the figures in a commercial mediation. Indeed, some lawyers suggest that all the ‘touchy-feely’ stuff is dispensed with and figures are tabled at the start. (Incidentally, ‘touchy-feely’ is now called ‘emotional intelligence’ which is slightly less insulting to us tactile human beings). In general, I try to put off going to figures until the shape of the deal is known. If a party sees their needs being met in the emerging deal, they are far more likely to pitch figures in the reasonable zone.
Pepperdine University has developed an analysis of negotiation styles and produced a chart which categorises offers in negotiation zones as:
- ‘insult’ – where offers are derisory and calculated to encourage a walk-out
- ‘extreme’ – which is not much better than the insult zone but less likely to cause a walk-out
- ‘credible’ – sending a message that you are going to have to work very hard to get a deal but we are here to do a deal
- ‘reasonable’ – the ZOPA (zone of probable agreement) where the offer encourages co-operative participation in the negotiation. Shared problem, shared solution.
The mediator’s aim must be to get first offers pitched in the reasonable zone, or failing that, at least in the credible zone. Outside that and there are problems!
So I try to delay offers until parties see the deal shaping up, see their needs being met and the chance of their misery ending. Then they are likely to pitch offers in the reasonable zone because they do not want to lose the change of a deal to which they can say ‘yes’.
Of course, some people are poor negotiators. Usually they don’t realise it and often consider that they are really good. Many times I have been tempted to give them my business card and say ‘I run a really good negotiation course … you should be on it!’ There is no doubt in my mind that the best deals arise from parties co-operating, but I accept that it can be counter intuitive to the more natural Western style of negotiation, which is adversarial and based upon a ‘winner’ and a ‘loser’. In my view two of the worst cases of inappropriate negotiation tactics are:
- Salami-slicing (or peeling the onion) – offering little and slowly. This is most likely if the mediator goes to the figures too early and is based on the premise that the more extreme you start the better chance there is of getting a ‘win’. Of course the other side are likely to reciprocate, so the negotiations start at the extreme and grindingly head towards the middle. In such cases parties often say, when faced with the reality of having to make a deal in the reasonable zone (which is rarely in the middle) ‘we’ve moved far more than the other side’. My reaction is not to say ‘but you started in a much more inflated position’ (tempting though that may be!). Instead, my reaction is to say ‘it’s not where you start but where you end that is important’.
- First/last offer – where a party tables a figure with the message ‘you know this is reasonable so just accept it and we can all go home’. No matter how reasonable the offer may be, parties will still feel that they have been deprived of a negotiation and that the other side are bullying them into a deal. Parties need deals with dignity, where they leave the negotiation with heads high and believing they have worked hard to get the best deal.
So, in conclusion: establish the parties needs first, shape the deal around them, and then go to the figures (and other detail) when the shape is known.