The sequence of events surrounding the dismissal of CEO Michael Woodford at Olympus illustrates that when you negotiate you sometimes have to accept that incremental progress is the way to proceed rather than insisting on negotiating to your ideal outcome from the get-go.

In this case CEO may have pushed for his desired result too early in his tenure as newly installed CEO. The outcome was his dismissal and ensuing chaos for the company.

Woodford was an interesting appointment. He was surprisingly installed as worldwide President in February. A 30 year veteran of the company’s European operations he bypassed domestic senior candidates for the job, to become the first foreign boss in the 92 year history of Olympus. His reputation was as a cost cutter and the plan was that he would change the company. Olympus needed to become more competitive and its employees would benefit from his international outlook, to match the international reach of its products.

Woodford alleges he discovered huge irregularities in the company’s books. He identified what looked like massive overpayments for 3 small unrelated companies with no obvious connection to the Olympus business. Olympus subsequently wrote off 76% of the value of these businesses. Woodford was also concerned at the identity of the beneficiaries of these overpayments – shadowy offshore special purpose vehicles. He also raised concerns about the price paid for another company, Gyrus, a maker of surgical cameras. The price paid included a $687 million payment to an obscure financial advisor. That is equal to 7 times Olympus’ net profits last year.

In October Woodford wrote to the Board demanding that they resign over a “catalogue of calamitous errors and exceptionally poor judgement’. He was himself sacked 3 days later at a 10 minute Board meeting, with the Company issuing a statement blaming “differences in management direction and methods”.

The issue has now created a major problem for Olympus, with revelations that its auditors, KPMG, have walked out, and shareholders demanding accountability. Even Nippon Life, a Japanese shareholder has demanded an explanation.

Yet maybe the issue is one of trying to address too much too quickly. These are indeed serious allegations and one can imagine how uncomfortable Mr. Woodford must have felt on discovering these discrepancies. How to deal witb that? Knowing the Japanese culture for conservative behaviour and reluctance to confront, maybe another way could have been found to raise the issue – a slower way that didn’t confront or risk anybody losing face.

Sometimes when you negotiate you have to recognise that change must be made incrementally. Small wins are still progress, and there is always the opportunity to do another deal later. A small step forward in addressing these financial regularities, an independent review maybe, might have avoided Mr Woodford being sacked but could have put the company on a path to resolving the issues without the damaging public meltdown which has now ensued.