Monthly Archives: November 2010

Fail to prepare and you prepare to fail

As the latest episode of the Apprentice comes to our screens tonight, spare a thought for Melissa, last week’s fired contestant.

It’s difficult to pinpoint exactly what she did right as a negotiator, as she was a poor listener and highly confrontational throughout. But one of the things which consistently let her down was a lack of preparation. In the previous week she managed to quote a price for a bread roll which, at £1.82, was quite ridiculously high, and was clearly made-up. Last week she attempted to bludgeon Debenhams into purchasing two products which they don’t even stock. They don’t sell gardening equipment, but this didn’t stop Melissa digging a hole for herself by continuing with a futile pitch for a spade. They also don’t sell bathroom equipment, but it would have taken more than cold water to have stopped Melissa continuing to pitch her other pointless product, a shower head.

All such humiliations could have been avoided if she had only prepared for her pitches in advance. Negotiators who simply dive into the haggle, thinking they can busk it, are doomed to fail…

Let’s see who fails to prepare tonight…

Interesting to see Judge Jed Rackoff ruling against Terra Firma in its EMI case this week on the question of the maximum level of damages that Terra Firma could win if the Court finds in its favour.

He held that the maximum pay-out could be US$2 billion rather than the US$8 billion of punitive damages claimed by Terra Firma.
Is that encouraging for Citigroup? Maybe. But this dispute is more about each side’s reputation than the money. Moreover, a clearer indication of the Judge’s view may be his aside that he regards this as a “catfight between two rich companies”. That suggests that he may not have vast wells of sympathy for either party.

All of which should point to a settlement being the right answer, rather than the continued enormous expense of litigation. The only problem there is that, as pointed out in my blog of October 22nd, each party needs to feel that its reputation has been saved by virtue of any settlement. As so often in negotiation, face-saving options for the participants are the most critical part of the deal….

Don’t be fooled by the mass marches in Dublin over the weekend, or the carping comments from the opposition parties, the Irish government simply has no choice but to agree to the current bail-out, regardless of the terms and the Eurozone countries have no choice but to provide it.

Both parties to the negotiation have the same “survival” need. Without the bail-out the Irish economy will sink under the weight of its own debt, pulling the credibility of the Euro with it.

The interesting subject for debate is not this bail-out and its terms, but where this negotiation between the Eurozone and the money-markets goes next. Despite throwing 85 billion Euros at the Irish problem I would say that the Eurozone countries are no further forward in resolving this problem. In any negotiation you can only secure a win if the other side believes you mean what you say. In this case the money markets simply do not believe that the Euro can or will be defended indefinitely. Expect Portugal and Spain to come under an intense spotlight over the next few weeks and months as the money markets test the Eurozone’s resources of willpower and money to defend what the markets regard as indefensible.

The latest spat between North Korea and South Korea. May have raised tensions in the area but it is difficult to believe that it will lead to war.

From the point of view of the West, the stakes involved in confronting the North Koreans appear to be too high. The Worst Alternative to a Negotiated Agreement is some sort of nuclear conflict triggered by threatening an unstable and unpredictable regime. Faced with this WATNA the West is going to continue to pursue a negotiated settlement of the current tensions, however elusive that may be.

And what of the North Koreans? Do they really want to precipitate a war? I think not. Their bombardment of a South Korean Island has all the hallmarks of being aimed at a negotiation with their own population, rather than a genuinely aggressive move against their neighbour. If you were a paranoid one-party dictatorship, going through a leadership transition, wouldn’t it be convenient to create the spectre of a foreign threat? Wouldn’t that perceived threat be helpful in encouraging the local population to rally around the new leadership rather than focusing to carefully on any misgivings they might have about the leasdership transition to the current dictator’s son?

The bombardment and the predictable strong reaction against it by the West gives the North Korean leadership extra authority. “Authority” is an acknowledged source of bargaining power in any negotiation, and the North Korean leadership knows how to create it. This feels like another re-run of their favourite movie….

It’s often the balance of bargaining power in a deal that governs the parties’ attitudes. That is certainly the case in the London transport tube strike.

Where the aces are very evenly poised it means that neither side can browbeat the other into submission by sheer weight of bargaining power.

Sometimes this can be very positive as it encourages each party to pursue a win/win approach in order to get a deal done.

However, in highly ritualised negotiations where win/win is not a traditional approach, the opposite can happen. The two side get frustrated by their inability to force a solution. A deadlock ensues and the parties start to play “lose/lose”, a self- destructive attitude where it’s more important to make sure the other guy loses than to secure a win for yourself.

That’s what’s happening in the London transport dispute, as you can recognise by the rather shrill and negative rhetoric on either side. Certainly both sides seem to have forgotten what the dispute was originally about and the general public has no idea what they are fighting about.

It’s very difficult to break this cycle, and hence the succession of strikes (including today’s), which shows no sign of abating.

This will only stop if one side is able to force the other into submission (which may take some time), or the two parties come to a realisation that they have more to gain from granting a win to each other than by continuing with the present stand-off.

Meanwhile the commuter, who pays for all of them, will continue to suffer. Mind the Gap….