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The debate concerning the pay levels of Britain’s top executives raises a number of issues concerning negotiating needs.

There has been considerable debate since the publication of figures by Incomes Data Services showing a 49 percent jump in total earnings of all FTSE Directors. This compares to a 2.6 percent increase for average workers. This comes on top of a 55 percent increase for FTSE Directors in the previous year. The average annual total of such remuneration is now £2.7 million.

At a time when ordinary families are facing a period of considerable belt tightening this kind of apparent extravagance jars, and has provoked reaction from politicians on all sides against “fat cat” behaviour. David Cameron called for more boardroom responsibility. Nick Clegg called the report a “slap in the face” for millions who are struggling.

From a deal-making point of view this kind of apparent disconnect can be reversed if the relevant parties focus on the emotional needs arising out of pay negotiations, rather than just on the size of the pay-cheque.

The participants in these negotiations tend to be CEO’s on the one side and remuneration Boards on the other. These Boards are often composed of Non Execs or other shareholder representatives. They will be looking for reassurance that they are doing the right thing in setting remuneration packages, and such reassurance often consists of knowing that other companies elsewhere are taking a similar approach. This kind of social conformity is an important element in the way individuals are influenced according to US influencing guru, Robert Cialdini. They will therefore also be mindful of wider debates in the economy about how Executives should be remunerated.

If there is a general feeling that CEO’s are paid too […]

Congratulations to Sir Alex Ferguson, who has now been manager of Manchester United for a remarkable 25 years. The nearest challenger in terms of longevity is the Johnny-come-lately, Arsene Wenger, who has been manager for a mere 15 years at Arsenal. Beyond that the longest serving manager is, as you all know, John Coleman, who has served in the slightly less pressurised environment at Accrington Stanley for 12 years…

Part of Sir Alex’s secret is no doubt his skillful use of negotiation in the man management of his players and in the transfer market. This is a man who persuaded Ronaldo to stay for an extra year when Ronaldo had decided to go to Real Madrid, and who then sold Ronaldo for a world-record transfer fee which even money-bags Manchester City have yet to match. This is the man who persuaded Wayne Rooney to stay after the player had announced he was leaving, and the man who has coaxed consistent excellence out of the mercurial Eric Cantona and the apparently ageless Ryan Giggs.

This kind of man management requires considerable negotiation skills. He is known for his “hairdryer” technique, but there must be more to the man than that. He seems instinctively to know when to kick someone up the backside, when to praise them, when to put an arm around the shoulder, when to criticise and when to simply stay silent.

All great negotiators know that you need to use different negotiating behaviours on different occasions with different personalities. Sometimes you need to “push” people by stating expectations or using incentives and pressures. Sometimes you need to “pull” and listen or look for common ground. Sometimes you need to “join” and visualise positive joint outcomes, and […]

The Government’s response to the Unions in the dispute over public sector pensions is an interesting negotiating tactic, but does not suggest that the underlying dynamics of the negotiation have changed.

Union leaders were summoned to Downing Street on Wednesday last week to hear the Government’s latest proposals. They were told that an average worker would now be able to get a pension of 2/3 of their average salary, and that anyone retiring over the next 10 years would suffer no reduction in the amount of pension. Overall, some 5 million public sector workers will have to work six years longer and pay 3.2 percent more in contributions in order to get their pension pot. However, Minister Danny Alexander claimed that the new deal was about 8 percent better than previously offered.

The manner of the proposal was interesting. One of the characteristics of the negotiation so far is that there has not been much traditional negotiation process. There have been lots of declamatory statements of expectation on both sides, but very little apparent engagement. There does not seem to have been any climate setting, or exploration of needs or concessions that might meet those needs – emotional payments that can be just as effective as cash in enabling agreement. In the absence of such process it is easy for both sides to retreat to positional statements which simply develop a hostile climate. Once again this latest offer from the Government seems to have come somewhat out of the blue – with Union leaders having no idea what to expect when they were summoned to their Downing Street meeting. So, the negotiation process still seems somewhat disconnected.

The timing of the proposal was also interesting – just […]

As George Papendreou contemplates the political wreckage of the last week he may well agree with the maxim that there should be “no surprises” when you are negotiating.

Mr Papandreou’s announcement that the latest EU bail-out deal would require a referendum took the Eurozone by surprise. It totally overshadowed the G20 Summit and disrupted the financial markets. A no-confidence motion ensued in the Greek Parliament, amid rumours of impending Government collapse and a military coup. Papendreou narrowly survived the no-confidence motion, but has now bowed to the inevitable and agreed to step down and make way for a government of national unity.

The problem when you spring surprises in negotiations is that you upset the climate and create suspicion – and if nobody believes what you say in a negotiation then you are in trouble. All constituents in this negotiation immediately became even more frustrated by and suspicious of Mr Papendreou, including the administrations in France and Germany, the Greek opposition, his own party, and the Greek public. Chancellor Merkel and President Sarkozy in particular were reportedly incandescent with Papendreou, and that is not surprising.

In this negotiation Greece has been “pushed” relentlessly by the Eurozone to accept the bleakest of austerity programmes, and has been negotiating hard to minimise the impact of that. By disengaging and referring the decision to a referendum, Papendreou effectively employed “parting” negotiation behaviour – taking his energy out of the negotiation with the Eurozone. When someone has been “pushing” you in a negotiation and you take your energy out of the negotiation without warning, it can cause the other side to “over-balance” – it’s almost as though they topple over in the sudden absence of your resistance, which […]

So the G20 summit has duly failed to deliver a meaningful plan for solving the Eurozone crisis. Or has it?

To the consternation of many observers the best that could be managed was a communique vaguely promising that further IMF resources would be made available for the Eurozone. The summit had been billed by George Osborne as the last chance to save the Euro, and expectations were high. This muted outcome, played out against the tragi-comedy of the Greek on-off referendum and their no-confidence motion, will no doubt have its repercussions in the Financial Markets this week.

The irony is that finally the Eurozone may be inching its way towards the right answer – at least temporarily. It has been apparent from day one that there was not enough money in the Eurozone to solve its 7 trillion sovereign debt problem. The attempts to impose impossible austerity programmes on beleaguered states, or partition debt between Greece and its creditors, or announce bailout funds that don’t exist, have all been the equivalent of shuffling the deckchairs on the Titanic as the Eurozone sank. The only European-based solutions have been largely impossible politically – Germany to write a blank cheque for a Euro Bond; full monetary union; indiscriminate printing of money by the ECB; or a dismantling of the Euro. It has been apparent for some time that the solution to this problem needed to come from outside Europe, where there is genuine money available to address it.

Attempts to solicit cash directly from the likes of China are unlikely to work – from a negotiating point of view China holds all the Aces. However, the idea of the IMF providing financial support seems far more plausible. The only […]

As we digest the verdict in the Conrad Murray trial it’s worth bearing in mind that being on trial is something of a negotiation – albeit with an umpire. You need to be able to persuade the Judge or jury to go along with your point of view rather than the other side’s.

As in any negotiation you need to make the most of your bargaining power and in this sense I feel that Dr Murray has had to deal with two crucial elements which were not in his favour.

One source of bargaining power is “authority”. This can come from your reputation or your position in the hierarchy. In this case an enormous amount of bargaining power vested in the Prosecution by dint of the fact that, in effect, they represented one of America’s greatest icons of popular culture. It is difficult to have more authority than that in the US. This will have weighed against Dr Murray – there must have been a small voice in the heads of a number of the jurors that revered Jackson’s status and told them that America needs someone to blame for the loss of one of its greatest stars.

Secondly, Dr Murray has declined to testify. You always have your personal power in any negotiation and that can be a potent source of bargaining power. However, by not testifying Dr Murray chose to give away that personal power – any skills he had as a negotiator he chose not to use. Moreover, when one party doesn’t explain its position in a negotiation, it is not uncommon for other parties to fantasise about the motivations for that and assume the worst.

So, Dr Murray faced a large deficit in bargaining […]

Interesting to see Francis Maude quoted at the weekend, suggesting that the Government would be “ok” if the Unions just staged a “token” strike for 15 minutes on the planned day of action on November 30th.

There were also some side swipes at the Union personnel involved in the negotiations with Mark Serwotka being described as “too grand to come to meetings…politically motivated…. and betraying his members”.

Once more, one is left with the irresistible feeling that there isn’t a real negotiation going on with the Unions here. The Government seems reconciled to a day of action going ahead, so the real negotiation is with the wider public, to gain their support for the Government’s position. In this context, the 15 minute strike “offer” is surely not expected to be taken seriously by the Unions, but it is another example of the government wanting to be seen as being “reasonable”. Equally, rubbishing of the other side in public is hardly conducive to getting a deal done, but it does play up to traditional public stereotyping of an old fashioned Union leader as aggressive and overbearing.

The “offer” of the 15 minute strike deal is also accompanied by a threat – abandon the strikes or face legislation making it illegal to strike without at least 50% of members voting for a strike. Threatening the other side is a “push” behaviour, which in the seeming absence of meaningful negotiation to date can only serve to heighten the tension.

Finally there has been much written about Francis Maude playing “Good Cop” in the negotiation and Danny Alexander playing “Bad Cop”. Good Cop/Bad Cop is a pressure tactic which can normally be punctured by letting the other side know that you know […]

As the day of public sector strikes over pension plans draws nearer one cannot help feeling that the parties are no nearer to negotiating a solution, and are instead concentrating their energy on negotiating with the general public to support their position.

The Sunday Press was full of positional comments by government and Union representatives. David Cameron has branded the strikes as “irresponsible”. Danny Alexander has urged the unions to reconsider, saying that the government’s proposals on pension reform are “good and generous”. The Sunday Times carried a piece outlining the generous pensions of leading Union protagonists such as Bob Crowe (pension contributions equal to 40% of his salary). But it also carried interviews with ordinary workers explaining in measured terms why they are striking – one teacher commented: “This isn’t a whim. This is a national comment and the only way we can make our feelings known”.

Meanwhile TUC General Secretary, Brendan Barber has warned “This could be the beginning rather than the end…I don’t want this turned into a long battle, but they need to heed our warning”.

Amid the rhetoric, the one striking characteristic is that there seems to be no discussion about possible ways to resolve the dispute. This is largely a dispute about “values” – the Government valuing a reduction in public debt above all other priorities, and the Unions valuing the protection of existing benefits for their members.

Value disputes can normally only be resolved by reference to over-arching common values, which are bigger than the values which divide the parties. So, one way to make progress would be to re-frame the issue so that it captures shared values. For example, if the issue was framed as “How do we […]

Much has been made during the week of the deluge of bad economic news and the self-fulfilling blight this creates for the UK economy. Let’s get that bit out the way first and then examine if there are any reasons to feel cheerful.

We are warned by Mervyn King that “The banking system is facing a full blown systemic crisis…an exceptionally threatening environment”. According to the Office for Budget Responsibility we are facing an unprecedented squeeze on consumer spending, whilst the Institute for Fiscal Studies has described the UK as facing a “lost decade”. Meanwhile the Euro crisis continues to lurch from one “final chance” to another. The latest “plan” being floated calls for greater fiscal unity going forward and a greater interventionist approach from the ECB to protect Italy and other troubled states from escalating debt bond yields, perhaps financed with the aid of €200 billion from the IMF. This takes place in a context where the heads of several multinationals, including Unilever, Philips and Shell have publicly said that “it is one minute to midnight” in the fight to save the currency…”. The implications for the UK if the Eurozone breaks up are stark – with a 7 percent fall in output being predicted.

The trouble with this kind of Tsunami of bad news is that it has a draining effect on the confidence of businesses and consumers. This results in them being less likely to implement spending decisions which would provide the best solution of all to these problems – by encouraging a return to economic growth.

How can Governments negotiate with businesses and consumers to feel differently and more positive about these problems? One clue lies in the adage that if you can’t […]

The situation in Iran grows ever more perilous. Yet there seems to be precious little desire to negotiate.

Iran is reputed to be no more than 9 months away from having nuclear weapons at its disposal. The implications of this for peace in the Middle East are rather serious. Israel is acutely anxious about permitting this state of affairs to arise. There has been a much publicised debate in the Israeli media about the timing of a pre-emptive strike on Iran. For a start this is a risky operation. Iran’s facilities are being housed deep in mountains near Qom and would be very difficult to destroy from the air, certainly without killing thousands of civilians. Even if the Israeli’s were successful, one can only imagine the dangerous consequences of a raid. Iran has plenty of conventional weapons it could unleash on Israel. It also has allies in Hamas and Hezbollah who would escalate their terrorist activities. Iran might retaliate against the West, through terrorist activity or through mining the straits of Hormuz, through which one third of the world’s oil supplies flow.

All of this suggests that a negotiation is desperately called for. Yet in the US would-be Presidential candidate Mitt Romney has promised military intervention if he is elected. Meanwhile the West has embarked on a programme of economic sanctions to underscore its disapproval. France and Germany have withdrawn their envoys and the UK has expelled Iranian diplomats in the wake of the attacks on the UK’s embassy in Tehran. As one exiting Iranian diplomat ruefully put it “remember that I am one of those who was ready to talk – even if we disagreed”.

Part of the problem is our own demonisation of Iran. Its […]