The art of the deal: Smart strategies for complex negotiations
Monday, December 3, 2012/
Most big deals are built on a series of smaller ones. Mega-mergers, major sales, infrastructure projects and even some UN resolution are the culmination of many focused negotiations among various parties, each with its own concerns.
Accordingly, we have come to think of the negotiation process as a campaign, frequently conducted on multiple fronts, each typically involving many parties. To illustrate what we mean by a multi-front campaign — and the limitations of direct negotiation — we’ll describe what happened when port operators faced longshoremen from a position of weakness.
Showdown on the waterfront
The Pacific Maritime Association, which represents 72 US and global shipping lines, traditionally held contract negotiations every three years with the International Longshore and Warehouse Union. When Joseph Miniace became the PMA’s president, his priority for the 1999 talks was an agreement to introduce new information technologies that would help overcome the paralysing inefficiencies of clogged West Coast ports.
At the bargaining table, however, Miniace’s efforts crashed into potent union opposition to anything that might lead to future job loss. Wielding its power over US seaborne trade flowing through the West Coast – then worth some $6 billion a week – the union began an informal slowdown; the PMA quickly caved.
Looking ahead to the 2002 contract talks, Miniace was resolved to reintroduce technology issues in order to address port congestion, which was only getting worse. But he worried about the ILWU’s response.
This time Miniace took a different approach to boosting the PMA’s weak position. Well in advance of the 2002 talks, Miniace embarked on a four-front campaign to set the stage so that the longshoremen would ultimately view a “yes” to his technology proposal as better than a “no”.
- Front 1: Internal. Miniace focused on his own organisation first, educating the PMA’s shipping-firm members on the importance of new technologies.
- Front 2: Business. Miniace then co-ordinated with Robin Lanier, who had built many close ties as the president of the International Mass Retail Association. She brought the case to shippers, large importers, manufacturers and retailers, all of whom were eager to press for measures to increase the efficiency of port operations.
- Front 3: Government. Next, Miniace and his team arranged visits to the US departments of Commerce, Treasury, Labor, Transportation and Homeland Security, and to the Office of the United States Trade Representative. He impressed upon them that, in the event of a similar move by the ILWU, the PMA would not settle: it would shut down the ports.
- Front 4: The public. Finally, the PMA took the public relations initiative to frame its message to the media and the wider public. This involved painting a picture of a privileged, well-paid, anti-technology union.
The PMA’s campaign was a forceful one, but the organisation tried to avoid a purely coercive approach since the parties would have to live together. Ultimately, with the assistance of federal mediators, the parties negotiated a mutually beneficial agreement that gave technology rights to the shippers and jurisdiction over new technology jobs to union members, and guaranteed current union jobs.
When and why to choose a campaign
When is a campaign likely to be more effective than direct negotiation? If a campaign would help overcome the barriers to your target outcome by building up useful alliances, enhancing your credibility, increasing the value you bring to the table, strengthening your no-deal option, weakening that of the other side or thwarting potential blockers, you might be well-served by a campaign-style approach.
Here are six steps to reaching your target deal — and building a winning coalition that can make it stick.
1. Choose the right parties and group them into fronts
Given the barriers to agreement that you’ve identified, what parties must – or could usefully – be involved, and how should you group them into more-manageable fronts? In some cases, the answers are reasonably clear, but as with the PMA campaign, identifying the useful players may not be obvious. In 2002, figuring out the most advantageous set of parties for the talks – retailers, manufacturers, agricultural interests, federal agencies and the broader public, as well as PMA members – required creativity and initiative.
2. Assess interdependencies among fronts
Are the fronts you’ve assembled largely independent, or can they positively or negatively affect one another? For example, if a potential ally or blocker becomes aware of your activities on another front, will it help or hurt your overall prospects?
3. Determine whether and when to combine fronts
In general, keep fronts separate when there is little or no interdependence among them, when there has not been sufficient progress on each, when they might negatively affect one another, or when joining them might create an opposing bloc. Combine fronts when it’s important for transparency, when success on separate fronts can yield joint gains, and when doing so unites your allies.
4. Sequence your campaign
Just as knowing which parties to approach in what order within a front can make or break a deal, so can smart sequencing among fronts. When the probability or value of success on one front is greatly enhanced by success elsewhere, focus elsewhere first. If a deal with a critical partner is conditional on your having locked in financing, for instance, concentrate first on the financial front.
5. Determine how much information to share and when
Your sequencing choices often determine the extent to which you reveal your activities to opponents or to various fronts. For example, you’ll want it to be widely known if a savvy investor has signed on. But for some activities, such as fundraising efforts, you’ll want to keep quiet about your progress. Revealing your interim results may then generate momentum or an unwelcome sense of inevitability.
6. Learn and adapt
Campaign design and execution decisions are inherently iterative. We’ve listed the steps sequentially, but you need to continually evaluate where you are and be prepared to update your tactics.
When a negotiation shifts from one deal to a multi-front campaign, the focus turns from tactics “at the table” toward a process that may unfold over months or years. Going straight to a key decision-maker to negotiate often makes good sense, yet designing and executing a negotiation campaign can sometimes be far more effective.
Direct negotiation “at the table” often makes sense. But for complex deals, which are usually built on a series of smaller ones involving multiple parties, a more strategic approach is to focus on what unfolds away from the table: the process of sequencing individual deals in a way that achieves the target outcome with enough support to make it stick.
A “negotiation campaign”, which may take months or even years, involves identifying the relevant parties and grouping them into fronts; determining if the fronts can be combined; figuring out the order in which you will engage the fronts; and assessing how much information to share among the parties – and with your opponents.
For example, when Boeing set out to sell $11 billion worth of aircraft to Air India, in late 2005, the company did significant advance work to build support for the deal on many fronts: its internal departments; banks, export agencies and aircraft leasing companies; and the Indian government, which holds an ownership stake in the airline.
David A. Lax is the managing principal at Lax Sebenius, a negotiation strategy firm. James K. Sebenius is the Gordon Donaldson Professor of Business Administration at Harvard Business School, the director of the Harvard Negotiation Project in Harvard Law School’s Program on Negotiation, and a principal at Lax Sebenius.
Harvard Business Review, © 2012 Harvard Business School Publishing Corp.