UK: Standoffs are for losers.

UK: Standoffs are for losers. - The real hero of negotiation is not the tough-sounding businessman, but Lt Columbo with his modesty and persistent questioning.

by Fiona Jebb.
Last Updated: 31 Aug 2010

The real hero of negotiation is not the tough-sounding businessman, but Lt Columbo with his modesty and persistent questioning.

Ask Ingemar Dierickx to name the biggest walking disaster of the business world, and he puts forward his candidate without even a moment's hesitation: Jacques Calvet, one of France's biggest businessmen. Dierickx, in case you don't know, is a former lawyer, a game theorist, a high-falutin' business consultant and negotiation guru at Insead business school. He has more than earned his spurs in the world of commercial and diplomatic negotiation. Meanwhile Calvet, you may recall, is the outgoing head of Peugeot Citroen. Despite real successes, his history is littered with union and government standoffs. During his 15 years at the helm, Peugeot has been turned into a largely debt-free and profitable company. But falls in profits over the last couple of years are deeply alarming.

The reason for Dierickx's antipathy towards Calamity Calvet, as he dubs the businessman, is the Cartesian, utterly logical approach underlying his negotiating technique. Parodied slightly, it goes something like this.

'I have studied the facts, and reached the only possible correct solution.

This is a matter of logic pure and simple. The purpose of our meeting therefore is to agree on my solution, not to get diverted by any smokescreens or diversions that you might care to invent. Since I am so clearly right, I just have to convince you of this. If you will not see reason then you are obviously wrong (subtext: and pretty stupid to boot). QED. If you persist with your idiocy, then I must find a way of making you see sense.

And if I can't, obviously I'll just walk away. Then you'll be sorry.' Well, the rest is history. But Calvet could hardly be called the master of the win-win deal.

Over a three-day negotiation course for senior managers held at Insead in the late summer, Dierickx had ample time to develop this caricature and to build on the negotiating expertise of his hugely experienced, yet vastly enthusiastic audience. It became clear that the guru's disapproval of just about everything in the Methode Calvet derived from his conviction that negotiation has almost nothing to do with logical argumentation; that taking a position and sticking to it belongs to the debating hall rather than to the meeting room; that taking a single-issue approach is the best and fastest way to reach the worst deal; and that the very idea of anything possessing an innate fair or market value is 'BS - and by that I don't mean business school,' he adds.

So what is the gospel according to Ingemar? The most important tenets have already been outlined. And as Dierickx is a firm believer in stories as a means of conveying ideas (he has a great respect for a certain Galilean prophet and genius at parables), participants on the course were regaled with many an amusing tale to illustrate salient points. We were also asked to negotiate sample deals in workshops, an exercise which comes to pretty much the same thing and has the advantage of incorporating training best practice - and participants' emotions - into the bargain.

One of the most telling exercises, however, was a game conducted in full session revolving around the auction of a 10 franc coin. The rules of engagement were straightforward: bidding started at one franc; only increments of one franc were allowed; and anyone who chose to do so could bid for the coin. The winner was the person who bid the highest price; the twist was that the runner-up would have to pay the value of his or her bid to the original owner of the 10 franc coin. Kids' stuff, it might seem - and it was. Bidding started gently yet efficiently. At eight francs, the tension grew and the room got quieter - even though the sum involved was so paltry. By this time, only two bidders out of an original 30 or so remained in the game. The bidding edged up from nine to 12 where it stopped.

The 'winner' was down two francs, the runner-up down 11. The real winner: the original holder of the coin, our own, very own professor.

He, mind you, had the advantage of having playing the game many times before: chiding the winner for his foolish deal and congratulating the runner-up on his lack of wild aggression, Dierickx went on to describe playing the game with a group of North American executives where the sum at stake was a dollar. Bidding, he said, between the two hornlocked protagonists stopped at $47 for the $1 bill - so much, it seems, for logic being the driving force in negotiation.

'It is hard to describe just how vicious and aggressive it got,' says Dierickx, who describes the outcome as 'a mutual bleeding process' - a frequent outcome of bullish negotiations.

While he did not dwell on the nationality of the class in question, it seems more than a coincidence that the bulldogs were from the US. Many of the best negotiators were from less assertive nations or regions such as Italy, Spain, Turkey, Belgium or the Middle East. Meanwhile one highly-charged German negotiator was neatly described as the sort of person you really want to see on the other side; his dogmatic insistence on cutting to what he saw as the chase probably wound up his own colleagues more than it did the other team. (And he was certainly bugging the hell out of us.)

The dollar bill parable was useful too in illustrating patterns of risk-taking behaviour, a variation on the double or quits approach. Most people quit while there was still a profit to be made in buying either the bill or the 10 franc coin. But those who did not effectively boxed themselves into a corner, where one last push (and then another and then another) seemed preferable to accepting known loss. 'When making profits, people are risk-averse,' says Dierickx. 'When losing money, they just give it one more try - they gamble.' His advice? Look to legend for example. If you have set yourself a cut-off point, recognise that you will be tempted to go beyond it, and, like Ulysses who knew he would be tempted by the siren's call, find a way of tying your hands to the mast, of making sure that your intended policy of limited engagement remains just that.

Of course in real life, Dierickx would have done his damnedest to make sure that such a negotiation was not based on a single issue, since single-issue negotiation often leads either to a compromise - usually a split straight down the middle - struck for no particular reason or, worse still, to a standoff. When faced with a straight yes or no option, 'you either capitulate or fight, you can't negotiate'. Where possible, negotiators should therefore add, add, add to the items under discussion since this makes trade-offs so much more viable (and value-adding). Where the issue seems too complicated for addition, the solution, says Dierickx, is division.

To the cynic, it sounded like sophistry until he gave the example of a sovereignty negotiation. Handled as a single issue, he points out, the negotiation is tantamount to proposing, 'give me sovereignty and I'll give you an ice cream. OK, make that two ice creams.' Division, however, makes it possible to talk about policing rights, water rights, definition of regional boundaries and so on. The proof of the pudding? The Palestinian peace agreement - however precarious it might now be looking - which ran to a 200-page document tackling the problem issue by issue (and which was largely brokered by Scandinavians). 'Everyone would rather deal with 28 issues than with one,' asserts Dierickx, shocking some of his audience whose gut reaction was to disagree.

Multi-issue negotiation comes with a health warning, however: it relies on an understanding that nothing will be agreed in isolation, that salami slicing is out. Everything must be talked through, with sensitivities and priorities being identified as closely as possible before any deal is eventually struck.

Such talking and questioning lies at the heart of Dierickx's approach to negotiating: where Calamity Calvet sought to convince, Dierickx seeks to weasel out as much information as possible either from the other side or from external sources. So, for example, in another best-avoided single-issue negotiation on a plot of land for sale outside of Paris, those 'sellers' who opted to buy-in notionally expensive expert advice from Real Estate Agent Dierickx, uniformly came out selling our land for far higher prices than those who felt confident they already knew enough (this despite the fact that our brief clearly told us the seller had not set foot in the area for many a year and gave only the most basic estimates of the value of the land). If Calvet is Dierickx's baddie then the raincoat-clad Lieutenant Columbo is his supreme hero - not least for the seemingly throwaway random question he would always pose at the end of an investigation just when suspects were beginning to lower their guard.

Such questioning is not purely an intellectual exercise, it is also a means of making the other side feel that their opinions matter. To illustrate the point, Dierickx reports that a number of Chinese officials have taken great exception to the style of foreign deal-makers coming to Beijing. The Chinese have apparently developed a Pavlovian dislike of the blue background to the Powerpoint slides US executives in particular use throughout their presentations. These always seem to the Chinese to take the same lines: state of the industry, opportunities in the market, advantages to the Chinese of working with the Americans, 'here are some of the questions you might want to ask, here are our answers, now would you sign on the dotted line?' The inflexibility with which the slides have been prepared has been read by the Chinese as a signal that their input is not welcome, that they could not possibly have any ideas worth feeding into the discussion. Its effect is not unlike the 'Yes but' interruption that most of us recognise from meetings where the subtext appears to be: 'I was just being courteous in allowing you to babble on, you know'.

Such interruptions have to be one of the best ways of winding up the other side, setting that adrenalin flowing: another of Dietrickx's no-nos. The image he conjured up to remind us of the need for calm at the most difficult times was of a US lawyer with a huge belly that colleagues felt impelled to poke whenever they felt inclined to marvel at or simply mock its enormity. The belly registered the impact and then re-formed into its previous undented splendour. While any seasoned negotiator ought, according to Dierickx, to be able to control his or her own aggression, only a veteran or a natural knows how to shrug off or appease their counterparts'.

While full of practical advice on this issue and many others, Ingemar the Effervescent seemed closest to silence on the subject of how to sell even the most brilliant multi-issue deal back at the ranch. For broadening the parameters often steps on what others see as their turf. All Dierickx could do was summon up an observation from John Dunlop, three times US secretary of labor, who used to claim that every negotiation involved three deals: one across the negotiating table and two back at the respective ranches. And to point out that worthwhile things can take time. So, to all budding multi-issue negotiating hotshots out there - good luck. You may be in for a long haul.

Do's and Don'ts

1 Don't fool yourself that negotiation is just about logic. It has far more to do with some pretty basic emotions.

2 Don't seek to convince: question. Think Columbo, not Calvet. Information is power. The more information you have, the better you will be able to gauge the other side's real BATNA (best alternative to a negotiated agreement) as well as their priorities and wishes.

3 Don't allow single-issue negotiation. Add items or divide the issue into subsections.

Remember the basic negotiating law: if you increase the number of discussable items, the total value added tends to increase.

4 Don't allow a multi-issue deal to disintegrate into salami slicing, that is, agreeing a deal issue by issue. A global package is the thing.

5 Don't subscribe to the idea of an inherent market value. 'Fair value is BS - and by that I don't mean business school,' says Dierickx.

6 Don't let someone else's aggression get to you (think of the fat stomach which absorbs a shock and carries on regardless). More important still, don't let an aggressor's adrenalin get to him or her: acknowledge what they are saying, appease them. Do whatever it takes because they will only absorb what you are trying to get across once adrenalin levels have fallen.

In our class, often the women were better at these three As than the men.

7 Do practise what Dierickx calls 'the noble art of losing face'. If you need to look like a loser to calm down the other side, do so. If you feel it would be shaming not to continue with the bidding but ludicrously expensive to keep going, get out.

8 Don't leave all your negotiating to the formal meeting when tension and disbelief are up. If possible, try feeding a few lines to the other side long before you ever meet around the table. Use stories and images to get your point across - they stick.

9 Do your best to create an aura of expertise, of quiet authority. Think of the expert jeweller asked to value an antique necklace. He'll study it in silence and at great length before coming to some impossibly precise valuation. His silence will already have unnerved the owner and the exact figure he pronounces will ring true even if it's complete tosh.

10 Don't forget Mandy Rice Davies and that 'Well, he would, wouldn't he?' rejoinder of hers. In other words, don't expect the other side to believe you just because you are telling the truth. The less plausible the truth, the more this holds true. 'Words are cheap, money talks,' says Dierickx. So if you are trying to convince the other side of the potential of your business, the watertightness of your forecasts or the brilliance of your new technology, frame the conditions of your deal in such a way that the other side cannot fail to be convinced that what you say you have on offer is, indeed, what you have to offer.

11 Don't go into a negotiation without having done as much homework as possible. If you have done sufficient, then anchor your position before the other side gets in there, that is, start talking numbers to define the ballpark. If you don't have a grasp of the numbers, hold off for as long as possible. Remember Abraham Lincoln's saying that, 'It is better to be viewed as a fool and keep your mouth shut than to open it and remove all doubt'.

12 Never say 'yes' or 'no' in response to a proposal since everything is up for discussion (and 'yes' and 'no' often escalate to 'never' or 'impossible'). Use the magic word 'if'. 'We could lower our prices if you placed larger orders and changed our payment terms.' Bundle everything.

13 Don't think of time simply in terms of deadlines, think of it as a period of information advantage too. If you have information to your advantage which the other side does not, sign fast. If you think they have information which you do not, put your foot on the brakes.

14 Don't set up a deal which your competitors can emulate in no time at all. Squeeze selectively, creatively and efficiently. Why does M&S pay so many of its suppliers within 15 days and some within 10? Because the trade-off with suppliers is an open book system, while the cost is a barrier to entry for would-be competitors.

15 Don't worry if you can't find common ground; it is in differences that the real opportunities for trade-offs and value creation lie. Warranties are a good example here, because they reflect different perceptions of risk on the part of the buyer and the seller.

16 Don't over-rely on precedent. It may be useful but is often an excuse not to do your homework and to opt for the obvious deal which adds little value.

17 Do look for incentive compatibility for both sides. Profit sharing is an obvious option here, particularly with some sort of sliding scale either over time or against sales targets to reflect risk and cost incurred by either party.

18 Don't split it down the middle just because it seems the obvious thing to do. Easy deals are often bad deals.

19 Don't lie, opt instead for strategic misrepresentations (as important for what they omit or suggest as for what they say). You don't have to show all your cards, though.

20 Do practise some 'pre-recorded' responses to offers which you want to suggest are completely out of order. Always end on a question to keep the other side talking.

Useful lines include: 'On what basis did you arrive at that sort of figure?'

21 Don't agree a deal if you can't understand why it is attractive to the other side. The strong probability is that you are missing something.

22 Don't con yourself that a win-win deal is something that only happens when pigs fly.

CULTURAL MISUNDERSTANDING OR CLASSIC WIND-UP?

When asked what behaviour most annoyed them in negotiations, the class came up with the following list of ways to bug the hell out of the opposite side (and maybe members of your own):

- Smirks/laughter at serious requests or bids

- Lack of punctuality (depending on local culture - a meeting in Manila, for example, will be held on 'Philippine time' or on 'American time'.

Saying that a meeting is to be on American time, means 'and I meant 8'; Philippine time is somewhat more fluid.)

- The no show (favourite Asian trick)

- Bullying/patronising manner from someone claiming to know best while refusing to listen to the points others are trying to make

- Counterpart reneging on earlier agreement

- Ignorance of local customs ('not even knowing that Luxembourg is a country')

- Constant interruption from 'yes butters' (real meaning: that 'I was just being courteous in allowing you to babble on for a little while.')

- Someone saying, 'I hear what you're saying'.

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