Authors: Various
Publisher” Harvard Business Review Press
Book Review by: Nano Khilnani
Another compilation of excellent articles from Harvard Business Review, this book focuses on the often difficult art of negotiation.
If the decades-long intransigence of the warring entities in the Middle East region gives you any idea of how hard the process of negotiation is in the peace process, then this book can help you look at the obstacles you face before you start meeting with the people you’re trying to make deals with.
Often, we simply assume that the other party wants this thing or the other. But how sure are we about our assumption? So we are wasting our time thinking about something we are not sure of. Simply ask the other party, the authors suggest. Deepak Malhotra and Max H. Bazerman essentially tell you not to assume anything, in the first article Investigative Negotiation.
They cite a case wherein a U.S. company wanted an exclusive purchase deal with a European firm to buy a million pounds per year of a particular substance. They settled at a price of $18 a pound and both were okay at the quantity of a million pounds annually. But the supplier would not agree with the buyer on exclusivity.
The buyer, wanting no competitors, simply assumed the supplier wanted to keep his options open for a larger volume of business, which included other customers.
The talks had come to a dead end, much time had gone by and the relationship had deteriorated to such an extent that neither side trusted the other. A negotiator was brought in by the U.S. firm to open up the talks and come to a deal.
To his pleasant surprise the negotiator found out that the owner of the supply company had committed to provide a small amount of the material – only 250 pounds – to a cousin.
The negotiator quickly sealed the written agreement which noted the small exception.
The deal-making case history of two well-known giants in the housewares business – Newell and Rubbermaid – is cited in Building Deals on Bedrock by authors David Harding and Sam Rovit. It revolves around the $5.6 billion mega merger which initially described as “a deal from heaven” turned out to be “a merger from hell.” Read about the expectations and the turn of events in this interesting article.
The discoveries of problems in the companies after this deal was done, made Newell write off $500 million in goodwill. Newell shareholders lost 50% of their value in this investment, and Rubbermaid share owners lost 35%. The authors point out that Rubbermaid had a number of problems such as extensive price discounting, poor customer service and weak management.
The two companies, while large, were different in several fundamental ways. Newell was able to produce “prosaic goods” and sell them at cut-rate prices, while Rubbermaid was a classic name-brand company that sold its distinctive and innovative products at premium prices. Essentially, the two firms had different production processes and cost structures, so the merger did not add shareholder value.
In Six Habits of Merely Effective Negotiators, the author James K. Sebenius points out the mistakes to avoid in arriving at a mutually-satisfactory agreement. They are:
- Neglecting the other side’s problem
- Letting price bulldoze other interests
- Letting positions drive out interests
- Searching too hard for common ground
- Neglecting NATNA (best alternative to a negotiated agreement)
- Failing to correct for skewed vision
Sebenius, along with Ron S. Fortgang and David A. Lax, write in Negotiating the Spirit of the Deal that often, the parties negotiating an agreement focus on the letter or the terms of the deal rather than on the spirit or the purpose of coming together.
When the spirit or purpose of the talks is relegated to the side, in the end, there is no meeting of the minds, and expectations of the two parties are so vastly different. Recriminations can occur and often do.
