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Papendreou Pays the Price for Shock Negotiation Tactics

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 […]

By |November 7th, 2011|Blog|1 Comment

Union Strikes – Negotiation process still disconnected but improved Government offer could provide Moral High Ground

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 […]

By |November 7th, 2011|Blog|Comments Off on Union Strikes – Negotiation process still disconnected but improved Government offer could provide Moral High Ground

Expert Negotiation the key to Fergie’s 25-year Success

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 […]

By |November 7th, 2011|Blog|Comments Off on Expert Negotiation the key to Fergie’s 25-year Success

Focus should be on CEO Achievement Needs to reduce ‘Fat Cat Pay’

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 […]

By |November 7th, 2011|Blog|Comments Off on Focus should be on CEO Achievement Needs to reduce ‘Fat Cat Pay’

Lack of ‘Process’ at fault for Strike Hostility – but does the Government want to Negotiate?

We are now in to November and the strikes scheduled for the end of this month show no sign of being averted.

What is happening in these negotiations?

These strikes were called following the TUC Conference, over changes in public sector pensions. Ministers insist the changes are needed to make schemes sustainable in the face of an ageing population.

TUC Boss Brendan Barber promised mass action at the time, with Unison, Unite, the GMB, the Fire Brigades Union and up to 10 other Unions all potentially involved. Mr. Barber said “we are absolutely committed to justice for the millions of workers we represent” and GMB’s Brian Sutton referred to it as “The Fight of our Lives”.

The rhetoric shows no sign of diminishing, with Barber quoted during the week as saying “we are at a historic turning point” and widening the front line of the debate to include complaints about the Government’s deficit cutting programme generally. He told his audience at Liverpool University that the Government’s programme was directed at the “poorest and most vulnerable” rather than those with the “broadest shoulders” who should be bearing tax rises and declared that the cuts were not borne out of necessity but out of “ideology and the electoral timetable”.

This row has simmered since Lord Hutton’s pensions review was published in March, and advocated the raising of the age at which pensions can be drawn as well as changing pension calculations from a final salary basis to an “average salary” basis.

Missing Process

One issue has been that there has been no “process” of negotiation between the parties. Negotiations normally involve 7 stages;

– Preparation
– Climate setting
– Exploring needs
– Finding concessions or “coinage” to meet those needs
– Bidding
– Bargaining
– Closing

In this case, the […]

By |November 1st, 2011|Blog|Comments Off on Lack of ‘Process’ at fault for Strike Hostility – but does the Government want to Negotiate?

Eurozone Countries need to ‘Engage’ with Ratings Agencies, not Silence them

One interesting side show in relation to the ongoing Euro negotiations concerns the attempts to “gag” the Ratings Agencies such as Moodys and Standard and Poor. Preventing the other side in any negotiation from having their say is normally a mistake in any deal, and this is indeed a negotiation, between the representatives of the financial markets, and the Institutions of the Eurozone.

There is no doubt that in ongoing negotiations over the Euro these agencies play a role, since they seem to lead market sentiment with their negative pronouncements. In some ways it is surprising therefore that the Eurozone Institutions have not previously engaged more proactively with these agencies – in any negotiation you need to embrace all stakeholders in the ultimate outcome. Michel Barnier, EU Internal market commissioner has now announced that Credit rating agencies could be banned from downgrading countries in the Eurozone’s bailout scheme and the ban could be extended to countries negotiating the bailout.

The pronouncements of the Agencies are certainly often very inconvenient. They frequently trigger market tensions. It is not surprising that the Eurozone institutions wish they could be muzzled. However, in any negotiation it is critical to allow all participants to have a voice. If you don’t they will not buy-in to the outcome. Regulating against the Agencies will not prevent them finding unofficial ways of letting their views be known. Moreover there are plenty of other analysts around who don’t work for Agencies and will be happy to continue to give their downbeat opinions to the market place. In addition, attempting to gag the Agencies makes it look like the Eurozone Institutions are running scared and that in itself would be enough to spook the markets.

The […]

By |October 25th, 2011|Blog|Comments Off on Eurozone Countries need to ‘Engage’ with Ratings Agencies, not Silence them

Will Apple continue to ‘Push’ without Jobs’ Influence?

Fascinating insight into the negotiating psyche of Steve Jobs in Friday’s Financial Times (article here). According to his biographer, Walter Isaacson, he was apparently so incensed by Google’s creation of the Android platform that he threatened he would “destroy” it. “I am willing to go to thermo-nuclear war'” he is reported to have said.

Jobs’ fanatical approach to preserving Apple’s “walled garden” of technology devices and platforms is well documented. The patent wars that commenced with suits against Samsung and HTC have their roots in this hostility.

This kind of omnipotent aggression can be detected even in relation to Steve Jobs attitude to his own difficult illness. He refused an operation for 9 months that might have saved his life. Apparently his view was “I didn’t want my body to be opened. I didn’t want my body to be violated in that way”. This stubborn refusal to co-operate, and to remain within the “walled garden” of his own body may have been costly indeed.

Apple’s habitually aggressive attitude to negotiations with competitors can be traced to this hostile approach to the outside world – “push” hard, no quarter given. It will be interesting to see whether this attitude continues in the days ahead as Apple comes to terms with Jobs’ demise. Will they continue to play negotiating hardball, or will a more collaborative approach develop in which Apple gets what it wants by considering the needs of others as well as its own expectations? Will it come to realise that it can get more of what it wants by being less protective of what it has?

By |October 25th, 2011|Blog|Comments Off on Will Apple continue to ‘Push’ without Jobs’ Influence?

A tale of ‘too much too soon’ proves costly for Olympus’ Woodford

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 […]

By |October 25th, 2011|Blog|Comments Off on A tale of ‘too much too soon’ proves costly for Olympus’ Woodford

Lack of unity over debt crisis decisions only weakens Eurozone position

When you are negotiating as a team it’s imperative to have a united team. If you don’t then the other side will make the most of your disunity. This is one of the many enduring problems in negotiations concerning the Euro. Ranged on the institutional side of the negotiation are the Eurozone Governments – in particular France and Germany, the European Central Bank, and the IMF. On the other side are the financial markets.

The Eurozone institutions are grappling in a disunited way with two major headaches – the inability of Greece to repay its debts on schedule, and how to set up safety mechanisms to offset the impact of a Greek default on other vulnerable countries such as Portugal, Italy and Spain.

In relation to the Greek issue a schism has emerged between the IMF and the ECB, with the IMF arguing that the bailout needs are that a further “haircut” is needed from private owners of debt in Greece as the economy has deteriorated so badly that global lenders would otherwise need to find €252 billion in bail-out loans through to the end of the decade. This is more than twice the €109 billion agreed by the EU and the IMF only 3 months ago. Accordingly the IMF is suggesting a “voluntary” 60% reduction in debt for bondholders as opposed to the 21% previously agreed. The ECB on the other hand fears that this would cause market panic. This very difference of opinion itself promotes anxieties in the financial markets.

The second issue is that of increasing the firepower of the European Financial Stability Fund which would address any need to buy or guarantee bonds of Governments under pressure because of their exposure to sovereign […]

By |October 25th, 2011|Blog|Comments Off on Lack of unity over debt crisis decisions only weakens Eurozone position

Moral Reflection over Yue Yue incident could impact Chinese Negotiating Needs

Interesting piece on Chinese public sentiment following a tragic accident during the week. It’s only a vignette, but could it be an indicator of how Chinese negotiating needs may change over time?

Yue Yue, A young girl of two was run over by a car in a hit and run accident. Nobody came to help and the driver drove off without stopping to assist. The child was left injured in the road. 18 passers-by walked on and didn’t stop. It was only after she had been hit by a second car that people came to her aid. This story has prompted a period of moral reflection in China, about whether the Chinese have become so fixated with money and material progress that they have no time for morals. Lawmakers are even meeting to discuss whether they need to introduce a ‘Good Samaritan’ legislation.

This is interesting. Individual’s needs in life (and in negotiation) often go through a progression, starting with survival needs, and moving through to a need for reassurance, then respect, then belonging, and then through to achievement. Each level of needs must be satisfied in turn.

China has been on a fast-track journey of economic growth, catapulting its population through these various stages of need. Negotiations with the Chinese are often characterised as being very hard-nosed; which is consistent with levels of need such as “respect”. It is also consistent with a negotiating need to “belong” – to be taken seriously as a leading economic super-power.

However, as China’s population becomes wealthier, a new imperative for “achievement” develops. It was interesting to see in the Sunday Times that China is pre-occupied with a desire to develop its own original internet businesses rather than copying western internet […]

By |October 24th, 2011|Blog|Comments Off on Moral Reflection over Yue Yue incident could impact Chinese Negotiating Needs