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The prescription for negotiations, says Roger Fisher, applies to corporate mergers as well as international diplomacy.
A CFO Interview, CFO.com | US
September 1, 2001
It is said that life is one long negotiation, and Roger Fisher could not agree more. The Harvard Law School professor argues that whether it's settling a diplomatic crisis or working out the details of a multi-billion-dollar merger, the mechanics of all negotiations are essentially the same. And with US Secretary of State Colin Powell now looking to pull together an international coalition to fight global terrorism, Fisher's set of negotiating principles seem more timely than ever.
Those principles were laid out in his groundbreaking 1981 handbook on negotiation, Getting to Yes: Negotiating Agreement Without Giving In (Houghton Mifflin), written with William Ury. (The second edition was written with Bruce Patton.) The book proffered the then-revolutionary notion that a drive for mutual satisfaction should lie behind negotiation strategies. In the 20 years since its publication, Getting to Yes has been translated into more than 20 languages, and Fisher has since co-authored six more books on negotiation.
His basic framework for negotiating is a series of seven relationship-building, option-creating, and communication-enhancing steps between the parties. But Fisher is no mere theorist: He has helped make international political history for more than 50 years. As a renowned international-conflict negotiator, he has advised American leaders in situations ranging from the implementation of the postWorld War II Marshall Plan to the Iran hostage crisis in 1980. He helped design the negotiation process used during the successful Camp David negotiations between Egyptian President Anwar Sadat and Israeli Prime Minister Menachem Begin in 1979; helped facilitate South African reconciliation discussions in 1991; and helped resolve a border dispute between Peru and Ecuador in 1995. He has also been active in negotiations on behalf of numerous companies, although that work is far less celebrated — in part because he declines to reveal the names of specific corporate clients.
The personal trauma of losing friends in World War II sparked Fisher's interest in alternatives to violence. After graduating from Harvard Law School in 1948, he worked on war reparations in Europe with W. Averell Harriman in Paris, then joined a Washington law firm, where he advised clients on international legal questions. He joined the Harvard faculty in 1958, was named a Guggenheim Fellow in 1965, and became the Samuel Williston Professor of Law at Harvard, a chair he still holds, in 1976.
In 1980, he co-founded the Harvard Negotiation Project, which offers executive-level courses on negotiation and facilitates negotiation workshops for both business and political organizations. And in 1984, he founded Conflict Management Group Inc., a negotiation consulting firm.
CFO staff writer Kris Frieswick interviewed Fisher, 79, at his office in Cambridge, Massachusetts. The discussion took place before the September 11 terrorist attacks in the United States.
What's the most important ingredient of a successful negotiation?
Both sides have to be able to explain the outcome to their constituents, to be able to say, "We had good reasons for doing it." So, to persuade somebody, you should first understand their interests — well enough, in fact, to be able to write down what they can say in the settlement's defense. In the case of the negotiations during the Iran hostage crisis, my colleagues and I drafted the kind of statement that President Carter would be able to make, and the kind of statement that the other side could make. Those two statements went to the Algerian foreign minister, who mediated. All the basic, substantive points were in the terms: recognition of the new Iranian government; the end of U.S. sanctions; closure of the U.S. embassy until the United States was invited to come back; and settlement of financial claims at The Hague, and not in New York courts. The deal that was [eventually] negotiated essentially contained the statements that we had written.
It's the same in business. It really opens doors if you understand the interests of the other side. I was helping the president of a company sell a building he owned. He was retiring, and wanted $2 million, which he considered a fair price. He had a buyer, but the buyer wouldn't pay that price. I asked the seller, "What's the worst thing about selling this building?" And he said, "All of my papers for 25 years are mixed up in my corner office. When I sell the building, I can't throw everything away. I've got to go through that stuff. That's the nightmare I have."
When I asked the buyer what he wanted the building for, he said, "Well, I hope to use it for people whose main office is out of town. How about a lease with an option to buy?" I explained that every nickel is taxable income on a lease, and asked if he'd buy it on the installment plan, with the right to cancel the contract by forfeiting [his] prior payments. He said, "It's just like a lease with [an] option to buy," and I said, "That's true, except none of it is taxable against capital costs." Then I added, "There's one requirement: The president wants to lease his office back from you for the first three years, and put his name on the door so he can sort papers there all he wants to." The buyer responded, "Of course, that would be fine."
It wasn't a question of money, the scale of the monthly payments, or whether it was a lease or an installment payment. Once they'd taken care of this corner-office issue, arranged a tax exemption, and set it up so the buyer could get out if it didn't work, it was obvious that those were the real interests that they had.
Is it often the case that money seems to be the central issue in negotiations, but really isn't?
Money is usually the issue that people focus on. But while money is important, and many times is the most visible outcome of a negotiation, we often care more about other things, such as being treated fairly, having a transaction concluded quickly and easily, and having an outcome that's easy to explain. When I'm able to help somebody, I look for all those other issues.
What work went into the principles you developed in Getting to Yes?
I thought a lot about what the structure of a negotiation is. I consider myself a conflict doctor. I come into a situation, and there are two kinds of problems: what's wrong with the patient and what's wrong with the treatment he's getting. In any negotiation, there's always a relationship — enemy, stranger, friend — and some kind of communication, or lack of it. On the table are the interests of the parties: their wants, their needs, their hopes, their fears. And there are questions about how to settle: What options might lead them to reconcile? What standards can be used to measure fairness? Is that measure an appraised price, and is there precedent for it?
If participants leave the table, they're either going to walk away to their best alternative to a negotiated agreement — what we call BATNA — or they're going to make commitments.
Do you find that people work on the negotiation while simultaneously working on developing a BATNA?
The opposite side is certainly thinking about it, even if you're not. An agreement is an outcome that each side thinks is better than its best alternative.
So, what's being said at the table isn't the main thrust of negotiating, then?
No. It's about preparation: doing what you can on your walk-away alternative, and thinking about the other side's walk-away alternative. What will you put the money in, if you don't do this? What will they do? What is their alternative? Who's your competitor? You don't know. It's got to be better for both of you than walking away. That's just common sense. Producing our seven elements [see "Table Manners," below] took a lot of thinking and sorting, because just like in a body, there are a thousand different organs, cells, and things that could go wrong.
Every middle-aged person in America thinks they know how to negotiate. You demand more than you expect. You offer less than you expect to pay. You compete as to who will be more stubborn making concessions. You try to demonstrate a greater willingness to walk away without a deal. If you reach agreement — I said if you reach agreement — whoever is more skilled at those techniques will do pretty well.
The danger is, as in the case with the Palestinians, you don't reach agreement for 50 years. It's hard to get people to unlearn what they think they know, because they've got concepts. If it goes badly, they say, "Oh, it's all his fault."
What's the biggest obstacle you see when you're dealing with business negotiations?
People focus too much on the money. When it's a merger, the two chairmen will talk about what money is going to change hands and who's going to be chairman. And all the other issues of getting two companies to work together — when they have different cultures, different pay scales, different titles — don't get the proper attention. Most mergers fail because companies haven't set up a joint committee to deal with all the questions on wages, promotions, layoffs, and what they're going to do after a deal is struck. If someone sees a problem, that person should be able to pick up the telephone and say, "Let's get the committee together again on Friday. We've got some issues."
People think it's simple. There are numbers. It's quantifiable. On the other hand, there are either/or choices, like who's going to be chairman and who's vice chairman. Concentrating on money simplifies the decision process, but it makes the deal more difficult. You haven't thought through implementing the agreement. You haven't thought through all the concerns of who gets laid off. How do you merge two departments that are geographically and financially different?
People just say, "Oh, we'll work that out when it happens. Those are the details."
That's right. To me, it's like thinking that it's all about signing a piece of paper. People think, "If only the Israelis and Palestinians signed a piece of paper, then we'd have everything." Within a week, they'd be saying, "You're not living up to clause six. I'm not going to comply with clause three until you live up to clause six." To change their behavior, they've got to learn to listen and to work together.
How do you get people to step back from that tough negotiating posture?
You can be firm and friendly. When someone says, "This is what I'm offering you," you can answer back, "Where did that figure come from? Out of your head? Give me some standard; I can give in to some good standards if you tell me the market value, or the appraised value of that building, or the price of that stock. I'm not going to give in simply because you asked for more."
You want to be unconditionally constructive. Even if the opponent is acting emotional, balance the emotion with reason. If they misunderstand you, try to understand them. Even if they're not listening, consult them on matters that affect them. Even if they're trying to deceive you, be trustworthy yourself. Even if they're trying to coerce you, try to persuade them and be open to persuasion. And accept them as worthy of your consideration.
What are the odds someone is actually going to be able to behave that way?
You can certainly understand that trusting someone else is a matter of risk analysis. What's the risk? But being trustworthy is something you can control. If you don't make foolish promises and if you keep every promise you make, you can establish a reputation for being so careful about doing what you say you'll do that, within reason, you can be trusted.
What's the single most important piece of advice you would give going into a negotiation?
Professor Fisher's seven steps to successful negotiating.
1. Build a working relationship with your counterpart.
2. Promote efficient and clear communication.
At the Table
3. Dig under positions for each party's interests. (Hint: It's usually not money.)
4. Invent numerous options for solutions, maximizing potential gains for all.
5. Legitimize your requests. Refer to accepted standards (that is, market rate, stock price) when quantifying values.
Knowing When to Stop
6. Test the other party's best alternative to a negotiated agreement (BATNA) against a proposed settlement. Consider discussing your BATNA with the other party.
7. Commit only after comparing many options with your BATNA.