Role play: CPA INC.

In today’s role play the starting point was that within the company CPA INC. payroll checks have been stolen and cashed with false endorsements. Two long term employees, Roo and Dana, are convinced that Sandy, the new employee, is the thief. Even if the forensic service has not yet analyzed the handwritings and thus no final proof is available, Roo and Dana told everyone that Sandy is guilty. JT, the head of payroll heard of all that and asks for a meeting.

I was playing Sandy and against everyone’s beliefs, I am not guilty. The mentioned accusations put my job at risk. I went to see my lawyer and he told me that there are grounds to sue Roo and Dana. I like working at CPA and I work very hard. I need the money as me and my husband just bought a house. My honor has been defamed, so I have to defend myself.

At the negotiation table were the manager JT, Roo and 2x Dana and me - Sandy. The negotiation started immediately, we did even forget to introduce ourselves. The other employees did not let me talk, they started with harsh accusations that it was me the thief and that they found it strange that I couldn’t afford the house at my age if it was not for theft. The three of them threw their accusations at me and it was quite tough to defend myself. I argued that they had no proof and that I would never put my job at risk. Further they found it suspicious that I was always working late and the last one to leave the office. Moreover I was not a sociable person they said, I was always on my own. This might be, it is my character but no reason to blame me for theft without proofs. The back and forth went on and it was very tiring to defend myself against three agressive opponents. I kept repeating that I had nothing to hide, that too much was at stake for me and that most of all, there was no proof that it was me. The results of the investigations of the forensic service were not out yet. Unfortunately the manager did not intervene very often at the beginning. I think she should have lead the negotiations more, it would definitely have been supportive for me. Towards the end she started to lead the negotiations by reaping and proposing to wait for the results of the handwritings. While one of the employees continued to attack me, two of them got a bit more cooperative as they saw how I was struggling and feeling bad. They proposed me that I should go eating with them more often and tried to integrate then they would wait for the the forensic results. But if I was said I was guilty I had to be fired immediately. I agreed on that point however, I could not agree on the fact having lunch with them before evidence was there that proves me innocent, which is what I was!

When debriefing afterwards we discussed the following points:
- no personal attack should be tolerated
- Set deadlines
- Try to break up the group as a group has a dynamic that is more violent than when one is alone.
- Not „you“ing too much
- Make the parties feel part of the solution
- Ask how they could feel safe without firing Sandy

Summary: Mental Errors

There are numerous mental errors that a party can commit during negotiations. Hereafter they are presented together with remedies.

ESCALATION

Irrational escalation is continuing a previously selected course of action beyond what rational analysis would recommend. This happens to otherwise level-headed businesspeople when they get into difficult and competitive negotiations. Even a good strategy will produce a bad result if it is escalated beyond a point where it no longer makes sense.

Possible reasons for such behavior:

• Their egos cannot abide losing. If they shoot over the top, that is what would be reasonable, they point to future synergies or other nebulous values as justification for their behavior.
• Auctions and other bidding contests that pit individuals against each other encourage irrational behaviors. 
• A principal/agent problem is at work. In general the business-people who spend to win beyond the point of rationality do so with OPM (other people’s money). They would not spend it differently if it was their own. 

 Remedies:

• Get a firm to handle your alternatives to the deal before you negotiate. Money that you don’t throw away for an over-priced deal you’ll have it at your disposal for other investments.
• Be very objective and empirical in setting a price beyond which good sense dictates walking away. Agreement by many people regarding the price will reduce the temptation to escalate. 
• Set clear breakpoints where to stop.
• If during the negotiation ne information suggests raising the walk-away price apply objectivity in recalculation that walk-away price. 
• Concerning the principal/agent problem the best solution is to align the negotiator’s rewards with the economic interest of shareholders.

PARTISAN PERCEPTION

This is a psychological phenomenon that causes people to perceive the world with a bias in their own favor or toward their won point of view. Effective negotiation know how to stand outside a situation and see it objectively thus avoiding partisan perceptions.

Try to put yourself in the other side’s position, pose the issue to colleagues and solicit their opinions or try to pose the problem as it appears to you and ask how the other party view it. Another technique for reducing partisans perceptions is for the opposing sides to reverse their roles.

If any of these suggestions fail, bring in a neutral third party or expert to provide unbiased guidance.

IRRATIONAL EXPECTATIONS

Agreement is hard to find if one or more parties have expectations that cannot be fulfilled. This eliminates any zone of possible agreement. Such a situation can be remedied in two ways:

1. Education dialogue: the other side explains and shows why the expectations are irrational.
2. New information: provide information that convinces the other side that these expectations are well founded.

It is important to bring expectations in line with fact-based reality.

OVER CONFIDENCE

While confidence is a good thing during negotiations, overconfidence encourages us to overestimate our own strengths and underestimate those of our rivals. We observe such overconfidence in business and interpersonal disputes where one or both parties reject settlement in favor of litigation („we are very confident that the court will find in our favor. The lawyers say that we have a very strong case.“)

Overconfidence can blindside you to dangers and opportunities. It is reinforced by a related mental error know as groupthink. This is the result of convergence of thinking around a norm and driven by social psychological pressures instead of objectivity.

Some symptoms of groupthink: illusion of invulnerability exists, leaders are insulated from contradictory evidence, members accept confining data only, those with divergent views are censure and alternatives are not considered.

A solution to groupthink is to empower a team of bright and respected people to find an objectively represented the relevant data.

UNCHECKED EMOTIONS

Business partnership dissolutions involve tremendous anger and personal vitriol. Huge damage is caused when negotiators allow their emotions to get out of control.

Solutions might be to agree to a cooling-off period or to enlist an objective moderator.

Anger and irrational behavior are often triggered by an offense to one party’s sense of fairness.

Summary: When an angry public wants to be heard

When negotiators become upset finding joint gain might become difficult. When confronted with negative publicity, executives become so focused on controlling public relations and managing the crisis that they lose sight of the fact that they are even in a negotiation or often skip the value-creation step. They are too concerned defending themselves.

Communication specialists have traditionally advised companies in such situations to focus on message control. But what this advise ignores is the fact that what an angry public wants most is to be heard.

Six facts that can help any organization facing an angry public:

1. Knowledge the concerns of the other side. That way they can avoid to make large concessions. A better strategy than denying personal responsibility for past events might be to express empathy for example. It often is possible to acknowledge the public’s concerns without accepting responsibility and generating exposure to liability.
2. Entourage joint fact finding. This might be done by jointly choosing a set of respected experts, develop the scientific questions to be addressed, allow the experts to articulate areas of consensus as well as disagreement etc. This does not turn decisions over to scientists but it does ensure that the valuable information they have is factored into the negotiation. 
3. Offer contingent commitments. The next step after joint facts have been found is to develop contingent commitments that will satisfy both sides. These are promises that come into effect only if particular deadlines are missed for example. Contingent commitments allow negotiations to move forward in the face of conflicting predictions of the future. 
4. Accept responsibility, admit mistakes and share power. Often that’s the only method to clear the way for new agreements and what the angry public craves most of all. 
5. Act in a trustworthy manner at all times. There are two fundamental rules for building trust: say what you mean an mean what you say. Trust is hard to repair and in some cases may never be repaired at all.
6. Focus on building long-term relationships. Most negotiations require parties to maintain decent working relationships. A current negotiation may very well affect your reputations within the industry or that of your company. Therefore it makes sense to always negotiate as if the relationship matters.

Reaching an agreement, even when the parties are seriously at odds, requires an effort to create value.

Negotiation Simulation Chestnut Village

Negotiation between the Bunyon Construction Company and the residents of the Chestnut Drive, seving as access road to the construction site.


I was part of the representatives of Bunyon's Construction Company:

• Valentin: Senior VP
• Christiane: General Counsel
• Me: VP Construction Management
• Camille: VP Marketing & Development

BEFORE NEGOTIATON

Before entering the negotiations with the residents of chestnut drive, we had to agree on a strategy and an agenda. Speaking as one when in front of the residents would be crucial. Each of us had different core interests.

My core interests as VP for Construction Management were the following:

• not slowing down construction to suit the residents
• imperative to held the project within the budget and schedule (not to agree to anything that makes construction more expensive or slow it down)
• rather come over budget than use substandard building materials (even if it costs your job)
• you don’t want anyone to tell the contractors and subcontractors how to do their job (they know - their job and they do it well)
• making the construction site safe, thus putting up fences

We discussed our main interests and agreed on the following points:

• safety: we agree that safety has to be increased, also in our interest to avoid any further vandalism. So we’ll put up fences around the site and propose speed bumps if the residents wish so
• stick to schedule: completing the building in time is crucial after the disaster with the shopping center
• sticking to the budget: not propose any measures to the residents that will have a considerable cost as the granit leak already uses a great part of the calculated reserves
• dust: we’ll cover the trucks in order to reduce the dust produced by the trucks
• NO alternative road will be built, way too expensive and would take too much time
• allow the residents to use the tennis court every Saturday for a lower fee
• invite them to the inauguration party

Our BATNA is actually quite simply to do nothing, However we need to avoid any damage of our reputation! So our strategy is first to listen to their complaints. Then start negotiating on the different points. Making sure not only to make concessions but also to get something in return, like cooperation and good press. Underline the positive sides for them: more families will move here, the faster we can work the faster the noise will have an end and their homes gain value.


DURING NEGOTIATION

We entered the negotiations and we were surprised by the relaxed atmosphere. Marina, the shopkeeper, was leading the negotiation during the whole time. She did a very good job. I think however, we should have leaded the negotiation a bit more. We discussed on different points:

• Security: The residents told that their kids fell into wholes and one child was almost run over by a passing truck. We agreed to put up the fences as soon as possible and to install speed bumps. This is a measure which is bearable for us as far as costs are concerned. We wanted to avoid the topic of the potential creation of a new access road so we agreed on speed bumps. However, we deny to install night lights as first, kids should not be playing on the street at night and second, the fences will not allow for anyone to enter the construction site. I also agree to talk to the site supervisor to let him know about the incident with the kid so that he could talk with his truck drivers to pay attention given that in this residential area there are kids around going to school.  The child needs therapy after the shock and we agree to look into a possible coverage of the fees with our insurance.

• Recreational facilites: The residents demand to have access to the recreational facilities that will are constructed with the new residence. Our Marketing & Development Manager just very hesitantly agreed for access every Saturday for a lower fee arguing that the facilites are actually exclusive for the inhabitants of the new residence. We felt the residents of Chestnut Drive had asked quite a lot so what we asked in return was some good press and cooperation by emphasizing the fact that delays would only result in a longer construction phase.

• Dirty street: The residents were complaining about the dirty (dust, dirt and litter) streets. And asked about a cleaning service in order to keep the street tidy. We argued that dirt comes along with every construction site. We agreed to protect the trucks in order to reduce dust. As we cannot guarantee for a regular cleaning service we agree to let the streets being cleaned once. They further complained about the workers peeing on the street. I do actually not want to intervene in the leading of the workers. This however is an unacceptable behavior and I will talk to the site supervisor about it.

• They had another complaint about workers, apparently they had whistled at one of the resident’s girl, aged 14. That is not acceptable either, and I assure them to bring the topic up when visiting the construction site the next time.

• Noise: Moreover the construction works as well as the trucks coming and going is noisy. We insisted on the fact that a construction site always comes along with noise. Apparently windows have broken because of the vibration of the works. We agree to send someone over to check and then to look into it with our insurance.

The residents tried to make us sign a contract with a penalty clause in case we do not fulfill the above mentioned points. We however refused to do so, as all of the above measures and gestures are done out of goodwill and our interest in keeping good relations with the residents.

Further topics we discussed:

• there would be a monthly meeting between representatives of Bunyon’s and the residents to address issues right away
• there will be better communication channels
• they will be invited to the inauguration party and may present their services (for example carpenter) there to the new residents.

RECAP

Both parties left the negotiation table being content about the outcome. The negotiations were not at all hostile and both parties seemed willing to cooperate and to accept compromises. It’s true that we have made many concessions. When writing the blog now I actually only realize how many they were. On the other hand I think it was wise to do so. Even if the residents of Chestnut Drive could not have stopped the construction of the new Residence they could easily delay the construction or make it more expensive. Both of which we want to absolutely avoid, after the shopping center disaster.

What was good:

• we acted as one, we sticked to what we agreed on beforehand
• we did not say yes to all their demands
• the topic of a new access road did not even come up

Critics:

• we did not really distribute rules for the negotiation process
• I maybe should have sticked more to my rule as Construction Manager, that is not to care so much about the well being of the residents but rather about the budget and schedule being kept within the planning
• we were not the leading party during the negotiations. We maybe behaved a bit too much as the accused with the feeling of having to defend ourselves.

All in all I found this kind of negotiation exercise very interesting and helpful as it allows you really to assume a role and to discuss the issue in your group - which makes it easier and more difficult at the same time.

Summary of Frequently Asked Tactical Questions

FAQs about the price

• Don’t reveal your reservation price even if asked for it, rather work in terms of your bottom line („the best I can do“). The only reason to reveal your reservation price would be towards the end of a negotiation in order to discourage the other side push you beyond it.
• Only reveal your bottom line when you’ve reached it. And if you do so do it with appropriate emphasis or firmness.
• What to do if the other side opens with an incredibly unreasonable number?
1. Make a joke to indicate that you don’t consider the other side’s number a serious offer.
2. Clearly state that the other side’s number is entirely out of range. Go back talking about interests and explain your perspective of the deal. Let pass some time and discussion and than propose a number. Do NOT refer to their initial offer, ignore it. 
3. Indicate that the offer is entirely out of range and express your concern that a deal my not be possible: „Why don’t you confer with your people and get back to me with something more realistic?“.

FAQs about process

• Try not to bid against yourself, don't make two moves in a row. If however the other party pushes you to do so, announce your awareness of what you are doing. Explain your reasoning. To bridge the gap consider broadening the discussion of the partie’s interests.
• Is it okay to bluff of to puff during a negotiation? Sure. You need not reveal all the circumstances that make you willing to conclude a deal. However, lying about a material fact is almost certainly grounds for legal action.
• It is generally better to reach agreement at the end, not issue by issue as you would risk to lose opportunities to create value through trades. 
• Dealing with easier issues first will build momentum and allows the parties to become familiar with one another. On the other hand, starting with the difficult issue will not cause you any waste of time on the smaller issues in case you cannot reach an agreement on the difficult issue.
• If unexpected developments appear try to analyze how it affects the decision to go forward, determine if the deal still makes sense. Contact the other party immediately, aknowledge the unexpected nature of what has happened, affirm your commitment to working on the problem and jointly discuss the underlying principles etc.

FAQs about people problems

• A positional hard bargainer aims to win at the other side’s expense. An effective collaborative negotiator should be able to deal with this type of negotiator and should seek reciprocity of refrain from providing additional information. The question is whether the collaborative negotiator will be able to „convert“ the hard bargainer at least sufficiently to create some value in the deal.
• The winner’s curse is that they will always feel that they could have gotten more. If the other side tries to change one item, express surprise or disappointment. If they are willing to renegotiate other issues in return then they are serious, if not they just wanted to test you. 
• If the other side has a temper tantrum don’t respond in the same way but try to help him regain control. Either sit quietly and say nothing or say something like „This is getting us nowhere. I’m inclined to leave and let you cool off. Is this what you want?“. Keep in mind that you have some control over who you will deal with.
• If you don’t believe what the other side is saying ask for back-up documentation and insist on enforcement mechanisms such as penalties for non-compliance. 
• The best way to negotiate is the negotiation face to face. People are less likely to lie in person. Negotiating by email contains the danger that messages are misunderstood in their tone. On the other hand email is devoted of emotions and there is a smaller risk of unwarranted disclosure. Using the telephone allows to interpret the tone of voice, however, it is not easy to propose creative ideas and people are more likely to bluff over the phone. 
• If the other party is challenging your authority shift the discussion to general ground rules. And if this calling was posed to make you feel defensive, you will have to demonstrate that such strategies will not be successful.