Negotiating the Impossible

How to Break Deadlocks and Resolve Ugly Conflicts (without Money or Muscle)

Deepak Malhotra

• Publisher: Berrett-Koehler Publishers
• Year: 2018
• ISBN:
  9781626566996
• Topic: Business
• Subtopic: Business Skills
• Index: Business

"Filled with great strategies you can immediately put to use in your business and personal lives... extremely entertaining, thought-provoking." —Tyra Banks, CEO, TYRA Beauty, and creator of America's Next Top Model Some negotiations are easy. Others are more difficult. And then there are situations that seem completely hopeless. Conflict is escalating, people are getting aggressive, and no one is willing to back down. And to top it off, you have little power or other resources to work with. Harvard professor and negotiation adviser Deepak Malhotra shows how to defuse even the most potentially explosive situations and to find success when things seem impossible. Malhotra identifies three broad approaches for breaking deadlocks and resolving conflicts, and draws out scores of actionable lessons using behind-the-scenes stories of fascinating real-life negotiations, including drafting of the US Constitution, resolving the Cuban Missile Crisis, ending bitter disputes in the NFL and NHL, and beating the odds in complex business situations. But he also shows how these same principles and tactics can be applied in everyday life, whether you are making corporate deals, negotiating job offers, resolving business disputes, tackling obstacles in personal relationships, or even negotiating with children. As Malhotra reminds us, regardless of the context or which issues are on the table, negotiation is always, fundamentally, about human interaction. No matter how high the stakes or how protracted the dispute, the object of negotiation is to engage with other human beings in a way that leads to better understandings and agreements. The principles and strategies in this book will help you do this more effectively in every situation. "This book is magic for any deal maker." —Daniel H. Pink, New York Times -bestselling author

Part I
THE POWER OF FRAMING

Yes, I have tricks in my pocket. I have things up my sleeve. But I am the opposite of a stage magician. He gives you illusion that has the appearance of truth. I give you truth in the pleasant disguise of illusion.

TOM WINGFIELD, IN TENNESSEE WILLIAMS’S THE GLASS MENAGERIE

1
THE POWER OF FRAMING

Negotiating in the NFL

“YOU’VE GOT TO COME up with some new idea. You guys keep talking past each other instead of to each other.”¹ These were the exasperated words of United States Magistrate Judge Arthur Boylan, who had been tasked with helping to end an escalating conflict between players and owners in the National Football League (NFL). It was May 2011, and team owners had already locked out the players. Much of the action was taking place in courtrooms, as each side tried to gain leverage through legal maneuverings. Ultimately, if a deal could not be struck, the coming season would be in jeopardy. This was not just a theoretical possibility: in 2005, a prolonged dispute between owners and players had decimated an entire season in the National Hockey League, eliminating more than $2 billion in projected revenue. The NFL had even more to lose, with approximately $10 billion standing in the balance.

With so much money at stake in professional sports, you can be assured that, once in a while, the action at the bargaining table will rival anything fans get to witness on the field. At issue in 2011 was the fate of the new collective bargaining agreement (CBA), a multiyear contract between owners and the players’ union that governs the negotiation of individual contracts for all NFL players. The CBA also dictates, among other things, the revenue distribution between players and owners, the salary cap, minimum salaries, free agency rules, the terms of the annual draft, and working conditions. As in most CBA disputes in sports, one of the most salient and contentious issues in 2011 surrounded revenue sharing between owners and players. In other words, what percentage of the game’s revenue should go to players and what percentage to owners? In this case, the owners were demanding a $2 billion off-the-top credit to support investments before any split of revenues would take place, after which the players would receive approximately 58% of what remained. Players wanted no off-the-top credit for owners, and a 50–50 split of all revenues.²

How do you resolve a dispute in which the demands of each party add up to more than is on the table—and neither side is willing to concede?

NEGOTIATING THE IMPOSSIBLE

The conflict escalated, and good faith bargaining gave way to legal maneuverings, heavy-handed tactics, and even appeals to the US Congress for intervention. Finally, there was a breakthrough. The resolution came when the parties agreed to a proposal (originating from the owners) that called for an entirely novel structure for revenue sharing. They decided that the way forward was to stop negotiating over “what percentage of all revenue” goes to each party. Instead, the parties would divide “all revenue” into three separate buckets that represented the different streams of NFL revenue. Then, they negotiated a different revenue sharing percentage for each bucket. The idea worked. The final agreement, signed August 4, 2011, states that players will receive:

• 55% of League Media revenue (e.g., revenue from TV rights)

• 45% of NFL Ventures / Postseason revenue (i.e., revenues from related businesses of the NFL)

• 40% of Local revenue (e.g., stadium revenue)

The solution, however, begs the question: What percentage of all revenues do the players receive from this deal? Running the numbers indicates that the three-buckets solution gives the players between 47% and 48% of all revenues in the first year of the contract. But wait! If that’s the case, why go to all the trouble of creating three buckets with different percentages for each? Why not avoid the hassle of creating a new accounting system and simply agree to the players getting ~47.5% of all revenues?

There is an economically rational explanation for why three buckets may be a wiser solution than one big bucket. For example, consider what happens after the first year of the contract. If the players expect that League Media revenue will grow faster and hence represent a larger share of all revenues in the future, and the owners project that Local revenue will grow more rapidly, then the three-buckets approach is a value creating solution: it gives each side a higher percentage of the bucket it values most. The only problem with this economically rational explanation is that it has very little to do with why the two sides actually agreed to three buckets. We can be sure that the economically rational explanation falls short because when you read further down in the CBA, there is another provision that contains the following language:

If, in any of the 2012–14 League Years, the Player Cost Amount … is greater than 48% of Projected “All Revenue” then the Player Cost Amount will be reduced to 48% of Projected “All Revenue.” … If, in any of these League Years, the Player Cost Amount is less than 47% of Projected “All Revenue”, the Player Cost Amount shall be increased to 47% of Projected “All Revenue.”

In other words, the two sides are agreeing to roughly 47.5% of all revenues going to players. If the percentage deviates in any meaningful way from 47.5% in any direction, it will be brought back to this relatively tight range.³

So we still have the same question: why go to the trouble of creating three buckets if the agreement is practically indistinguishable from what they could have achieved by agreeing to some specified percentage of all revenues for each year of the contract? To answer this, we need to first keep in mind that very few people actually look carefully at these kinds of contracts, and almost no media outlets comprehensively report or analyze the finer details of the deal. Second, while practically inconsequential, there is a small degree of movement possible in the revenue split in future years. Most importantly, the three-buckets approach is superior to the one-bucket approach in one essential respect: it allows each side to go back to its constituents and declare victory. It creates just enough room for league negotiators to report to the owners that they can keep a higher percentage of revenues where owner investments are greater (i.e., stadium-related revenues), and it lets Players Association negotiators announce that they get more than 50% of revenues whenever fans click on the television.

CONTROL THE FRAME

As the NFL example illustrates, even in difficult negotiations where the parties are deadlocked, stalemate might be overcome without the use of money or muscle.⁴ Even though the argument was over money, the league did not have to keep throwing more dollars on the table to get the players to agree to the deal. Instead, what they did is a great illustration of the power of framing: objectively identical proposals can be made more or less attractive simply by how they are presented.

The “frame” of the negotiation is a psychological lens. It is a sense-making apparatus that influences how people perceive each other, the issues at hand, and the options that exist. There is almost no limit to the number and types of frames that can emerge in a negotiation. For example, negotiators may look at a deal through a financial or a strategic lens, see it from a short-term or a long-term perspective, or regard it as a friendly or hostile engagement. Likewise, diplomats may look at a problem from a political or a security point of view, as being a central or a peripheral concern, or in a historic or present-day context. Deal makers may evaluate a proposal relative to their initial aspirations for the deal, or how well it compares to what others have achieved, or how it will be judged by others.

There are no “right” or “wrong” frames, but which frame takes hold has important implications for how the parties behave and what they will ultimately be willing to accept. For example, sometimes a low-stakes issue that neither side really cares much about becomes infused with so much political or symbolic significance that neither side is willing or able to back down. In recent years, Democrats and Republicans in the United States Congress have been confronting this problem extensively: compromise on the slightest issue is considered by many partisans to be akin to wholesale betrayal, making it harder to reach agreements even where there is a lot at stake and plenty of bipartisan support on the substance of an issue.

Importantly, negotiators almost always have the power to influence the frame, and as we will see, reframing can be a powerful tool for overcoming barriers to deal making. Regardless of the objective stakes, much of what determines how people approach a problem depends on how they (or their constituents) subjectively make sense of it. Deal makers are unwilling to make concessions to perceived adversaries but are more amenable to doing so when they perceive the task as a collaborative problem-solving effort. Negotiators who frame a conflict as “winner takes all” will have a harder time than negotiators who believe it is possible for everyone to “win.” Negotiators will be more or less willing to accept certain proposals when they adopt a short-term versus a long-term lens, or when the offer appears better versus worse than what they initially expected. As we discuss the power of framing throughout this section, we will pay particular attention to how objectively identical proposals and options can be reframed to make them more attractive to the other side. Paying attention not just to the substance of what is being negotiated, but also the lens through which parties are evaluating their options, can sometimes help break seemingly impossible deadlocks.

Control the frame of the negotiation. The frame that takes hold will shape how negotiators make decisions, evaluate options, and decide what is acceptable.

THE IMPORTANCE OF HELPING THE OTHER SIDE BACK DOWN

The problems that negotiators face in early stages of deal making can be quite different from the problems they face as talks progress. One critical difference relates to the reasons why someone stubbornly insists on making demands that you cannot possibly meet. When this happens early in a negotiation, it is usually a sign that you have failed to set appropriate expectations for what is possible. This can lead the other side to ask for the impossible—that is, to demand concessions that are true deal breakers for you. This is why it is a good idea to educate the other side at the outset about the limits of what you can offer and about the areas where you have more or less flexibility. Negotiators often fail to do this in the false belief that the other side is well-enough informed about the parameters of the negotiation, or because they are worried that discussing any limitations or constraints will raise doubts about their value as a partner. There may also be insufficient trust, making it harder for either side to believe that the other is genuinely so constrained, or that there is truly so little room for movement.

When people are initially deadlocked over incompatible positions, it usually means that their aspirations are unrealistic and there is simply not enough value on the table to meet them. If both sides want more than 50% of the pot, you have a serious problem, and the sooner you realize that it has nothing do with poor math skills, the better off you will be. This was undoubtedly the case in the NFL. The same problem frequently surfaces in diplomatic negotiations and business disputes.

But at some point in the process, perhaps after weeks of interaction, or months of trust building, or years of impasse, one or both parties may come to the conclusion that their earlier demands are not possible, and that major concessions will be needed to avoid a truly disastrous outcome. When that day comes, you may find that people are still unwilling to lower their demands. Now, you no longer have an education or trust problem to solve. The problem is how to get the other side to admit that they initially asked for more than was reasonable, and to back down and accept what is actually possible. The problem is all the worse when the other side will have to back down publicly, because they have committed to aggressive positions in front of others (e.g., their constituents or the media). In my experience, it is often relatively easier to get people to understand that they have overreached and that their demands are impossible to meet; it is a lot harder to get them to acknowledge this and change course. This was the problem that the NFL negotiators faced—and ultimately solved.

Convincing the other party that they will have to concede or withdraw from initial positions is not enough. You have to make it easier for them to back down.

NEGOTIATE STYLE AND STRUCTURE, NOT JUST THE SUBSTANCE

When the NFL negotiations were deadlocked, either side could have tried to make the deal more attractive to the other by reducing their own revenue demands. But this would have been a costly concession. As the solution they reached shows, you do not always have to throw money at the problem to move things along. Sometimes, wise concessions on style and structure can solve the problem more cheaply than costly concessions on substance. In this case, the three-buckets solution seems to have helped the parties accept a deal that did not seem palatable with a one-bucket structure, even though the objective value of the deal was almost identical. Negotiators who are mindful of style and structure are better positioned to overcome resistance, avoid impasse, and achieve better outcomes.

Wise concessions on style and structure can help solve a problem more cheaply than costly concessions on substance.

In the next chapter, we take a closer look at the various ways in which framing can help break deadlock without using money or muscle. In doing so, we derive more principles for resolving conflict of all kinds. We also devote particular attention to two factors that were at play in the NFL negotiations and that can make deadlocks especially difficult to break. First, there is the audience problem. The other side may be concerned not just with what they get from you, but also with how others will judge their acceptance of your offer. Second, there is the zero-sum problem. In a zero-sum situation the amount that one side gains must precisely equal what the other side loses.⁵ When people are stuck negotiating over only one divisive issue, and there are no other interests involved, it becomes hard for them to make concessions without feeling they have lost and the other side has won....