"Celebrate what you want to see more of." Tom Peters
Hal Movius is a Principal at the Consensus Building Institute and directs its Assessment, Coaching and Training services. Hal helps organizations to understand how well they are currently negotiating, and to develop systems and structures that improve how individuals and teams negotiate. He has trained more than a thousand executives and advised organizations of all sizes.
Hal has regularly taught The Program on Technology Negotiation, an executive seminar offered through the Program on Negotiation at Harvard Law School. Previously Hal served as Senior Consultant at Linkage, Executive Search Consultant at Auerbach Associates, Research Associate at Harvard Business School, and Executive Coach at Harvard's Kennedy School of Government. He holds a Ph.D. in Clinical Psychology from the University of Arizona, completing his clinical internship training at Cambridge City Hospital and Harvard Medical School. He holds a B.A. in History from Harvard College.
In our interview, he and Erik discuss the book Hal coauthored with Professor Lawrence Susskind, Built to Win: Creating a World-Class Negotiating Organization.
[Bio adapted from the Consensus Building Institute website.]
tompeters.com asks ...
Hal, you work with an organization called the Consensus Building Institute. What does that do?
HM: CBI is a not-for-profit that was founded by Larry Susskind, one of the original founders of the Program on Negotiation at Harvard Law School CBI does three things. The first thing we do is help organizations develop their capability to negotiate better agreements. By better agreements, I mean more valuable agreements using a more efficient process that leaves relationships in a better place. We do a lot of that in public sector and civil society settings.
The second thing we do is act as neutrals. Sometimes we're asked to assess the prospect for mediation of some sort, to conduct a stakeholder assessment. Or we agree to serve as a neutral mediator or facilitator, often in complex, high-stakes disputes at the community, state, national, or international levels. Our main role as a facilitator is to help organize a conversation that creates options to help the parties resolve the dispute. Sometimes there are a handful of parties, and sometimes more than a hundred.
The third thing we try to do is advance the field. We train the next generation of practitioners in a very hands-on way in our capability-building and dispute-resolution efforts around the world. We write books and articles that reflect what we've learned based on applying a general theory of negotiation to a very wide range of both commercial negotiation contexts and larger, more messy kinds of disputes.
You've written this book as part of that outreach program?
HM: Yes. There was a watershed moment in our field almost 30 years ago when the book Getting to Yes was published in 1981. Advice about negotiation was very patchy back then and was based on either the war stories told by people who negotiated for a living or social scientists who had run various game theory or decision theory experiments. It wasn't the kind of thing that people could go out and use in most of their negotiations.
Roger Fisher and Bill Ury provided a very general outline of a different way of negotiating. They said you ought to think about what peoples' interests are, that is, the kinds of things they care about behind the demands or the positions they take. You ought to try to invent options that meet peoples' most important interests. That's the crux of the theory.
If you fast-forward 30 years to the present, you'd find that although organizations are now spending tens of billions of dollars on training in communication, problem-solving, and negotiation, there's not a strong demonstrable change in the way they go about preparing for and executing negotiations.
So frankly this book is born out of some sense of failure that Larry and I felt as we surveyed the field. It's great that people are being sent to training seminars and they're learning a new way of negotiating that involves value creation. But it seems like when people go back to their organizations—their very messy organizational landscapes with politics, incentives, and interests—and they're expected to do complex financial and legal negotiations, they aren't able to apply what they've learned.
We wanted to lay out a more comprehensive way of learning that focused on negotiation as an organizational capability, not just an individual skill-building enterprise.
Are you talking about building an organization that's a negotiating organization, or is it a change management proposition?
HM: It's change management in the sense that we're asking leaders to take responsibility for preparing their people for negotiations. We're asking them to anticipate the possible negotiations that their people will face and support them more effectively as they negotiate so that they can create value for all involved.
But how many people in an organization are really going to be negotiating internally or externally?
HM: It depends in part on what you think of as a negotiation. When you think of commercial negotiations in a corporate or private setting, you're probably thinking of people who are in purchasing, sales, marketing, and sometimes customer support. These are people who are selling stuff or supporting stuff. They're the typical domains of negotiation in a corporate setting.
But if you think for a minute about the kinds of internal conflict that might arise as those negotiations are carried out, and the range of other kinds of internal interactions that you might call negotiation—roles, responsibilities, compensation and so forthmdash;then I think it's clear that at one time or another most people in an organization are negotiating. To clarify, our book really focuses on the enterprise-level of commercial negotiations that are going to affect companies' bottom lines.
One of the approaches you speak about is MGA, which stands for Mutual Gains Approach. You suggest that until 1981, that was generally not used in negotiations.
HM: I don't want to oversimplify the very complex evolution of a field of thought. But I would say that Getting to Yes laid out four or five very important concepts like the difference between positions and interests, and the difference between creating value and claiming value or distributing value.
The Mutual Gains Approach takes that one step further. What if you wanted a process map, a general template? For example, what should I do before I sit down at the table? What should I do when we first sit down? What should I do before I get up from the table to close? What should I be mindful of between the time that I finish the deal and the time that everybody delivers on the things they said they would do in the deal?
We lay out a four-step process called the Mutual Gains Approach. It's based on a set of ideas that I think are also present in Getting to Yes but not laid out as a process.
This approach requires gathering a tremendous amount of information. You've got to research the other side, what you think might be their interest beyond the immediate impact of that particular negotiation, as well as research within your own organization. You're suggesting that this has to be done as an enterprise because to do this most effectively, a lot of information has to be in the hands or the mind of the negotiator?
HM: Yes. Gathering the right kind of information is critical. But negotiations can be handled more efficiently if people ask the right questions and the organization supports them in answering those questions. The problem is that people don't do the right things, particularly when they're preparing. Therefore negotiations are more likely to become positional, drag on and on, fail to create value when they should, and leave one or more parties feeling that they were taken or bullied in some way.
So it's not that there's a huge amount of new tasks that people have to do or a huge amount of information that they have to gather. They do have to be mindful that different people in their organization will care about different things. So imagine that somebody tells you, "Here's our contract renegotiation with our biggest client. Make sure to not lose anything that we currently have and try to get more. But don't make them too angry, and don't take all day." That's a typical mandate, right?
HM: Well, we think that's a useless mandate. It's a bunch of very general guidelines that don't give the person any idea about how to really proceed. A better way would be to consider the range of things that your organization cares about. Finance cares about cost, Sales wants to bring in more revenue. Legal cares about exposure, so let's tighten up a few clauses or try to make some changes to the language. Engineering or Operations or Quality cares about the quality of the good or service that we're selling or buying. How are we going to deliver that? How are we going to support that? How are we going to delight the customer?
Different people in the organization care about different things. If you go around and make a Christmas list of everything that everybody wants, and then you go to the table and try to get some of it by managing a compromise on each individual item, that won't create value. A much better thing to do is force your organization to rank their interests. Which are the things that are relatively less important to us that I should be willing to give up in order to get the things that are relatively more important to us?
Doesn't everyone think that his or her own department is the most important thing in the universe?
HM: Absolutely. Whoever owns the negotiation must help the negotiator clarify how to value the different things because everybody will say, "My thing should be at the very top."
HM: If you don't do that task, it's not clear how to create value. We work with one Fortune 50 company that spends in the neighborhood of 70 billion dollars annually. Part of their process involves scoping what they're going to buy, agreeing on a price, and then after some months of negotiating all that, they send it on to Legal. Well, Legal has a whole set of other things that it cares about that nobody's talked about yet. The lawyers then begin to negotiate. Meanwhile, the internal stakeholders are getting more and more angry because there's no agreement and it's taking too long. The process is broken.
Instead, you need some way to have legal's interests represented in the first part of the negotiation so that it becomes part of the initial discussions.
It sounds to me as if you need to have all of your own internal parties negotiate the priorities prior to the discussions with outside parties. That's not part of your process?
HM: I don't want to over-specify. We're not suggesting that there's a format through which people must clarify or rank their preferences.
HM: It's not incumbent on the negotiator to organize a kind of town hall meeting where everybody yells at each other and tries to convince each other that their interests are more important. Leaders somewhere in the organization who are responsible for managing and accountable for the results of the negotiation should develop a list with the help of the stakeholders that ranks the organization's interests. And you're right if you're suggesting that that's not the easiest thing to do.
I am, yes.
HM: But if you take seriously the idea of value creation, then that's one of the ways you should spend your time. We think people spend an awful lot of time preparing in other ways that are not as useful. For example, they think, "What's the biggest amount we could get away with asking for?" Or they think, "Let's do all the market research we can on which similar services other people are buying. Let's do lots of benchmarking. Let's hire consultants and pay them a lot of money to figure that out." Well, there may be use in that. But if you're trying to create value and preserve a relationship, walking in the door and setting benchmarks and demanding that somebody meet the average cost unit is not the way to do it.
As part of your preparation, you need to know what your best alternative to the negotiation is. What happens if you can't reach a deal with this group or can't renegotiate the contract? Literally, what happens to you? And how do you estimate the value of that? Now that is not easy to do, but you ought to do it. Otherwise, in a tough negotiation, you won't know what to say yes or no to at the end of the day.
You would want to think about different options that might meet their interests and ours. And you would want to create multiple bundles of options, which we call packages. You need some way to compare which ones are more valuable or less valuable to you. Now that requires some cost analysis, value analysis, and so forth.
Research tells us that people very often skip over preparation. Then they skip over value creation—they don't really talk about interests or set up ground rules for brainstorming options to meet those interests.
Instead they go straight to an argument about what's fair. The client comes in with benchmarks, "We've surveyed the biggest six firms in this area. Even though we couldn't get all the data, the consultant tells us that this is the cost per unit." And the other side says, "No, no, no. That's not at all right. You guys are a completely different account. We're doing all these different things for you. It's apples to oranges." The client insists, "No, no, no. Our consultants really know what they're talking about." The other side says, "They can't know what they're talking about, because they didn't ask us for the data." Now we're in the middle of a fight about whose numbers are more valid. Sadly, that is the way that most people spend their time negotiating. It has nothing to do with creating value. That's my point.
What's an example of how value is created? Rather than having two parties squabbling about who gets a bigger slice of the pie, you're saying that through the negotiation, you should be able to create a bigger pie?
HM: Yeah. That's the metaphor that people often use. Let me give you an example that applies to the contraction in the economy we've been experiencing. Very often organizations come to the table saying, "Sorry, but we have our marching orders. We have to spend 15 percent less but we need you to do exactly what you're doing for us now. By the way, there are lots of other people who would gladly do it for us, so don't get any ideas. We're really sorry about this; you're a valued partner."
That's a very real scenario for a lot of people. The question is, if you wanted to create value, what is it that the other side might value that you could give them that's worth the 15 percent on price? Reconceive this opening demand as an interest, and the interest is, they need to reduce total spend in the next four quarters.
So if they need to reduce their total spend, what can you figure out together about things that might be valuable to them that would enable them to help you make this trade?
It could be the way that you work together. You say, "Working with you can be challenging. You have 35 decision points for each project that we work on, and most of our clients have 14." Client says, "Wow, really?" "Yeah. That price reduction wouldn't hurt us so much if we could spend less time waiting for all of the decisions and having to change things because you guys can't make up your minds." "Oh, so if we could make up our minds quickly and work differently with you, then it wouldn't hurt so much?" "Right." So that would be a very simple trade.
Another trade might be, "Well, we can give you this discount if you would agree to award us future business in the coming year, so that we knew that we were going to get more business from you. That would help us cover overhead and other costs which are going to be more difficult for us to cover since you want to spend less."
Another way to do it would be to say, "Let's look at some legal terms and conditions. Right now we have an intellectual property clause that gives you everything and us nothing. Or we have indemnification clauses that require us to carry high amounts of insurance that are costly to us."
Once you start opening up all the possible things that might be valuable to the other side, it's a different kind of negotiation. It becomes, in effect, a problem solving effort. "Hey, I've got 15 percent less money to spend. What can we do here so that we work with you to come up with good results and you don't feel taken or pushed around?"
So it becomes more of a collaboration, less of a battle. Negotiation, to me, sounds like somebody wins and somebody loses.
HM: That's a very common connotation. Negotiation is essentially a situation in which two or more parties have both conflicting and common interests, and are trying to either exchange something or reach a decision together. Collaboration doesn't necessarily involve conflict; it involves parties trying to do something together.
In negotiation, even if you collaborate, you still have to decide how to divide the pie. It helps to agree to try to bake a bigger pie so that you're not fighting over a small one. If each side tells the other the kinds of things they care about, and they declare a period of brainstorming, of inventing without committing, they're more likely to both end up with things that are important to them.
The negotiator's dilemma is the challenge of inducing a cooperative frame. If one side wants to collaborate, they don't want to get exploited if the other side decides to behave in ways that are not collaborative. How do you manage that? That's what we try to help people do with the Mutual Gains Approach.
The MGA is not about being cooperative or nice. It's about trying to engineer a process in which you're more likely to create value at the beginning so that you can distribute it later. If you start off fighting over what's fair or who's right or whose data are better, it's then very hard to switch into a mode where you say, "Now let's try something different. How about if we brainstorm together? Tell me the kinds of things that are most important to you." People are in no mood for that if they've already been fighting for four hours. It's best if you start by collaborating. But it doesn't mean that that's all you're going to end up doing.
Who are some clients that you're working with who are using these ideas?
HM: Proctor & Gamble, Hewlett-Packard, WPP Group, McDonald's, the US Army—
What kind of work are you doing with the Army?
HM: We're working with a brigade that is deployed overseas to help them learn from their negotiations in the field with various local leaders. So the ideas in the book, even though we focus on a business context, are actually being adopted in a wide range of contexts where organizations are desperate to learn more quickly about what's working and not working.
I'm curious about the title Built to Win, since using the word win seems to imply a combative frame of mind.
HM: I'm glad you asked that question.
The title doesn't quite mesh with my understanding of the message of the book.
HM: We had a big debate about this title. What does win mean?
HM: One of the things that we posit that world-class negotiating organizations do is to define success criteria. Your only success criterion could be: I want to pay the least, or I want to get the most, and that's all I care about. I don't care about the relationship, my reputation, or how long it takes. We don't endorse that definition of winning. We think that there are much broader criteria that most organizations say they pay attention to. And the question is whether they hold people accountable.
We lay out seven criteria in the book that we think are relevant to most organizations. First, you've got to produce an agreement that's better for all parties than what they could get if they walked away. Second, you've got to use an efficient process in terms of time and resources. Don't take all day. Don't spend a lot of money getting the agreement.
Third, maximize the chances that you will create value by discovering differences that you can trade across. Fourth, generate an agreement that is understandable so that people can actually implement it effectively. Look at some of the thousand-page healthcare bills. You throw up your hands wondering how we're going to implement such a thing. Fifth, manage risks while you're negotiating in association with brand and reputation. Don't blow up your reputation.
Sixth, negotiate in a way that makes future dealings easier, not harder. And seventh, negotiate in way that reflects the values of your organization. If candor or humility is important, if you say culture or learning is important, don't just throw those things away when you go in to negotiate.
We're not saying every organization would outline those seven criteria or would rank them in the same way. But we are saying you should give people some notion of what you mean by a successful negotiation, and hold them accountable using those success criteria. There's a much more mindful way of going about this than saying every quarter, "Look, things have changed. Go out and spend less."
The idea of getting everyone on board with what they need to know sounds like a huge undertaking. Though I think you say that given where people are spending their energy now, they could be doing more mindful things that would be more efficient than just battling over needing to pay less.
HM: I think that's right. People end up spending a lot more time than they need to, because they don't spend a little bit of time upfront doing the things that they should.
Thanks for your time, Hal.
Email: hmovius (at) cbuilding (dot) org