During a conversation with a good friend last week, the topic turned to the trade situation between the United States and China. I wondered out loud how the situation could have possibly gotten to where it is. Clearly a “trade war” is not good for either party, but as one sees in a bad (and some good) horror movie(s) the main characters seem determined to make bad decisions resulting in really bad outcomes.
I observed that both the US and China seemed to be approaching trade negotiations as a zero-sum game, i.e. if one party wins the other loses. A couple of experiences at Harvard’s Program on Negotiation taught this amateur negotiator that this is the wrong approach. When one approaches a negotiation in this manner one of the parties wins and the other loses. This sets up a situation where one of the parties, the “loser”, is always looking to get the upper hand.
I would argue that this is where President Trump is today. He believes that the U.S. has been losing and he wants to win. On the other hand, General Secretary Xi believes that China has had the upper hand in its dealings with the U.S. and doesn’t want to lose the advantage.
Both parties are acting like transactional dealmakers rather than relationship dealmakers. Transactional dealmakers don’t ever expect to deal with their “opponent” after the current transaction is completed. The classic example of a transactional dealmaker is the used car salesman at a low rent used car lot. His objective is to get as much money out of your pocket, get you off the lot and never see you again. In this type of transaction, each party is out to get the best deal possible and has no incentive to acknowledge that the current transaction is likely to make any further dealings impossible—this is how used car dealers have earned their reputation.
The antithesis of the transactional negotiator is the negotiator that focuses on a long-term relationship. This type of negotiation focuses on each of the players walking away believing that they are better off. A key attribute of this type of negotiation (as described very nicely in the book: “Getting to Yes: How to Negotiate Agreement without Giving In”) is a belief that the size of the pie is not fixed and that a good deal enlarges the pie, producing more than enough excess proceeds for both parties to the transaction to benefit from the transaction. Well-crafted consulting arrangements have this characteristic. The consultant gets fees that reflect the value that they are delivering, and the customer gets a result that more than pays for itself.
Importantly, relationship oriented negotiations, as the label implies, assume that the parties have an ongoing relationship and that it benefits both parties to treat the other as though they are going to have to interact in the future and as such will want the good relations that result from win/win rather than the animosity that results from a zero-sum game type of outcome.
It seems to me that the negotiations related to China/U.S. trade should be more relationship oriented but have taken on a decidedly transactional character. This is not surprising on a couple of levels:
- Previous Presidents have been singularly unsuccessful with the relationship approach; and
- President Trump is a transactional negotiator.
On the other hand, the Chinese should recognize that: 1) the transactional approach is bound to fail; and 2) that they will win (the pie will get bigger) if they negotiate using the “Getting to Yes” strategy.
Here is the rub: President Trump is a classic transactional negotiator and both
General Secretary Xi and President Trump are used to getting their way. Furthermore, both are used to thinking about the pie as being fixed in size, i.e. everything win for you is a loss for me.
Further, there is some evidence that General Secretary Xi and his immediate predecessors were unwilling to negotiate in a manner consistent with the idea that there are scenarios where the outcomes are better, i.e. the pie grows substantially if both parties feel like they are winners. I would suggest that Presidents Obama, Bush and Clinton tried (with various levels of skill) to negotiate with General Secretary Xi and none were successful because Xi refused to accept the premise that China would be better off in any situation that was less favorable (related to commercial dealings) than the status quo.
I don’t have an answer to this situation. That said, given the likely outcome of a failure here, there are several points that this amateur would suggest that the U.S. and China consider before it is too late:
- Stop thinking about a zero-sum game. Focus on options that result in mutual gain. I can’t imagine two parties getting into a negotiation where one is going to be worse off. So, why go into a negotiation thinking that the other participant must lose for me to win. I can’t imagine a situation where it would be ethical to enter a negotiation like this with that worldview;
- Get the egos out of the room. I have personally witnessed partners making decisions that took a lot of money out of their (and their fellow partners) pockets because they couldn’t separate a good deal from what they saw as a diminution of their power. I saw this happen on multiple occasions with different players in several partnerships;
- Understand the consequences (for you and the other participant in the negotiation) of not reaching an agreement. I believe that successful negotiators assess the various outcomes better than those that fail. Understanding both your and the other participant’s BATNA (Best Alternative to a Negotiated Agreement—from “Getting to Yes”) provides the basis for determining whether you should enter (or stay in) a negotiation and provides a reality check for your negotiating positions as you move forward.
You might think that this subject is far afield from those that I normally cover. It really isn’t. It is a supersized version of business negotiations that happen every day. I would point out that the most successful negotiators are able to come to agreements even when the negotiation is asymmetric, i.e. one player is advantage by their size, resources or power. I witnessed one of my consulting partners negotiate a “fair” (a win/win) contract with one of the biggest industrial companies on earth, one that had a reputation for using their size to squeeze its suppliers. By understanding the client’s needs, clearly communicating how we could add value, and building a relationship that resulted in credibility, my partner was able to negotiate a contract that both benefited our client and provided a better than acceptable return on our investment in the relationship, which expanded into a series of consulting engagements over a long period of time.
In another situation I saw a business associate of mine decide to walk away from a negotiation with a very large potential client because his counterpart clearly saw the negotiation as a zero-sum game and was part of a corporate culture that was locked into operating that way. The chances that the client would be happy with anything less than taking all of the benefits from the deal (leaving nothing for us) were nonexistent.
It takes some talent, a moderate amount of training and a lot of practice to be a successful negotiator. In the 1990s, I participated in training offered to partners at PW that was designed to help us interact successfully (which meant learning how to listen) with our executive-level clients. And, the training didn’t even get into “negotiation”. Those listening skills were essential to understanding your counterpart’s position is just one dimension of being a good negotiator.
It wasn’t until the late 1990s when I participated in the Harvard Business School’s Program on Negotiation that I filled out the toolset necessary to be a good negotiator. I have taken both the active listening and Program on Negotiation courses multiple times over the years. I strengthened my understanding of those processes, was able to practice my skills and even learned something new each time. This is a very roundabout way of saying that if you are really serious about being a good negotiator (a skill the is essential to being successful in business), it takes significant work!
So, whether you are a project manager, a product architect, a technical lead, a CEO, or President of the United States, remember that “getting to yes” requires cooperation and a transactional strategy does not pay off in the long run. Without empathy and a desire for a win/win in your dealings, eventually the long knives come out; just ask Boris Johnson. He has a reputation for running roughshod over his “opponents” and is now paying a heavy price— https://www.nytimes.com/2019/09/04/opinion/brexit-vote-johnson-uk.html
Copyright 2019 Howard Niden
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