Disputes

Here is my basic set of rules for negotiations…

There are two extreme ways to approach a business dispute (or any other sort of dispute for that matter):

1. The confrontational approach otherwise known as the Scorched Earth angle. As in, “I’m warning you that if I don’t get what I want then nobody gets anything.”
2. The consensus approach.

In terms of participants in a negotiation you have these 4 general behavioural types:

1. Declared (real) consensus types
2. Declared (real) confrontational types
3. Consensus types pretending to be confrontational types
4. Confrontational types pretending to be consensus types

Working through game theory, these are the likely outcomes:

1. Two declared consensus types in a negotiation makes for an efficient and fair outcome.
2. A confrontational type, declared or otherwise, should always win over a consensus type, declared or otherwise.
3. However the confrontational type risks all if he or she is up against another confrontational type, declared or otherwise.

In reality people don’t fit in such neat boxes. They often drift around the categories, subject to how they think they are going in the negotiation. For example, they may be genuinely all consensus-like, until something causes them to become emotional and completely confrontational. Later on, when they have calmed down, they may switch back.

Even so, it pays to dig into the psychology of your opponent in order to come up with a working hypothesis as to what type they are. And here is what you do with said results:

1. If the other party is a consensus type, real or otherwise, then you need to be a confrontational type, real or otherwise.
2. If the other party is a real confrontational type then you also need to be one, real or otherwise.
A. If you are both real, then the deal is off anyway.
B. If you are both fake, then the best faker will win, or you will both revert to a consensus decision.
C. If you are real and he/she is not, then you will win.
D. If you are fake and he/she is not, then you need to ensure they never find out and then the negotiation will naturally revert to a no-deal unless you lose your nerve.

Today I talked to a business colleague about an upcoming negotiation that could be quite heated. I said that at the age of 52 I would not be part of a confrontational approach anymore because I don’t like it and I want to enjoy life. The irony being that I was practicing a second order confrontational approach – if the other party couldn’t promise to act as a consensus type, then I would walk away.

A final word – if there are three parties in a deal then they had better all be consensus types or you are all wasting your time. The chances of this happening accidentally are pretty low, so you need to be very careful in these cases. And this is true even if that third party is a mediator.