ORGANISED THINKING AS A TOOL OF INTERNATIONAL NEGOTIATION: HOW EFFECTIVE?

Transcription

1 ORGANISED THINKING AS A TOOL OF INTERNATIONAL NEGOTIATION: HOW EFFECTIVE? Babatunde Osadare* ABSTRACT: Negotiation as a tool has been part of man s daily life from time immemorial. The tool, whether in the primitive ages or in contemporary times has taken different shades and its evolvement has come of age. In contemporary times, parties engaged in negotiation over a possible business deal may often be faced with barriers such as language, culture, ideology, environment and several militating factors. They indeed come to a crossroad where they decide whether to quickly concede and reach an agreement, to their disadvantage, or to walk away from the negotiating table. When they choose the latter option, a deadlock is said to have ensued. In resolving deadlock situations, several skills have been adopted including the use of principled negotiation of which part is organized thinking. The aim of this paper is to examine the elements of organized thinking and its continued relevance in the process of negotiation. The paper will examine practical examples as well as the recently concluded Negotiation Simulation Exercise between students of WCL, American University and CEPMLP students from the University of Dundee. The paper will find that organized thinking in the process of negotiation will continue to be relevant as long as men continue to inter-relate. *The author is currently completing his LLM in International Business Law and Transactions with interests in Oil and Gas Contacts, Energy Policy and Finance, and Transfer Pricing at the Centre for Energy, Petroleum, Mineral Law and Policy (CEPMLP), University of Dundee, UK. He was called to the Nigerian Bar in 2004 and has since been practicing with the Law firm of Prof. A.B. Kasunmu Chambers, Lagos Nigeria. He is a member of the International Bar Association and the Association of International Petroleum Negotiators (AIPN). enioladunamis@googl .com

2 Abbreviations TABLE OF CONTENTS Page 1. Introduction.1 2. Negotiation and Deadlocks Negotiation as a tool International Negotiation and Deadlocks Problem solving approaches - win/win strategies Organized Thinking Elements of organized thinking Parties alternatives Looking beyond positions Options for mutual gain Legitimacy Commitments Communication Relationship Practical Application of Organized Thinking KJH MCC Example Conclusion.. 7 Bibliography ii

3 ABBREVIATIONS AU BATNA CEPMLP PCCP WCL JVA KJH LA MCC UNESCO UN J.LEG.EDU American University Best Alternative to a Negotiated Agreement Centre for Energy, Petroleum and Mineral Law and Policy Potential Conflict to Cooperation Potential Washington College of Law Joint Venture Agreement A United States Pharmaceutical Company Licensing Agreement Malundian Cassava Corporation United Nations Education, Scientific and Cultural Organization United Nations Journal of Legal Education. iii

4 1. INTRODUCTION The tool of negotiation has always been part of man s daily life from time immemorial. The tool, whether in the primitive ages or in contemporary times has taken different shades and its evolvement has come of age. In contemporary times, parties engaged in negotiation over a possible business deal may often be faced with barriers such as language, culture, ideology, environment and several militating factors. 1 They indeed come to a crossroad where they decide whether to quickly concede and reach an agreement, to their disadvantage, or to walk away from the negotiating table. When they choose the latter option, a deadlock is said to have ensued. In resolving deadlock situations, several skills have been adopted including the use of principled negotiation of which part is organized thinking. 2 The approach is to lay emphasis on the key interests and needs of the parties; the ability to separate the people from the problem and the creativity of inventing options and considering alternatives for probable mutual gain. 3 This is against the posturing and unyielding attributes of the hard negotiator who cares less about the relationship of the parties but on being able to score point on his instructed or personal preset agenda. The approach is also not supportive of the negotiator of seeks at every point in time to avoid conflict with his counter-part. This is characterized, as stated above, by the quick making of concessions and the unwillingness to explore options for mutual gain. Whether conducting business at home or abroad, these principles when properly utilized can be a potent tool for overall business success. The aim of this paper is to examine the elements of organized thinking and its continued relevance in the process of negotiation. Part one of this paper will examine negotiation and its use in international business bargain. Problem solving approaches towards a win-win situation will be examined in part two. In part three, the elements of organized thinking and their relevance will be considered using practical examples as well as the recently concluded Negotiation Simulation Exercise between students of WCL, American University and CEPMLP students from the University of Dundee. This paper will find that 1 Salacuse, J.W., Making Global Deals: What every Executive Should Know About Negotiating Abroad (New York: Time Book, 1991), 1. 2 Fisher R., Ury W., & Paton B., Getting to Yes: Negotiating an Agreement Without Giving In (London: Random House Business Books, 1999), 4. 3 Lewis L.F. & Spich R.S., Principled Negotiation, Evolutionary Systems Design, and Group Support Systems: A Suggested Integration of Three Approaches to Improving Negotiations in Proceedings of the 29 th Annual Hawaii International Conference on System Sciences, (1996), p. 238, at proceedings/h#5, (last visited on 9 th April 2009). 1

5 organized thinking in the process of negotiation will continue to be relevant as long as men continue to inter-relate. 2. Negotiation and Deadlocks 2.1 Negotiation as a tool Negotiation may be described as the art and science of changing ones position as a consequence of ongoing discussions and or persuasion over some competing interests until an agreement is reached. 4 This may involve the making and gaining of concessions. Negotiation is an ongoing but often unnoticed art in everyday life. Whether one is engaged at home about what the lunch menu would be or the price payable for a wrist watch being offered for sale by a friend, negotiation is taking place. Whether one is conducting business at home or on the international scene, the same underlying principles of negotiation would usually apply. This is not to say that the same playing field applies to both; for negotiation at the international scene is often met with barriers such as differences in culture, language, orientation of the foreign parties involved and other factors International Negotiation and Deadlocks As observed in the preceding paragraph, negotiation on the international scene as now become common placed. This is due to the increased and sophisticated technological advancement that has now turned the world to a global village. As described by Salacuse, 6 national boundaries are no longer business boundaries as major businesses are now crossing national borders to search for new markets. With this drive, every business manager has to equip itself with the necessary skills of negotiation or should perhaps have a team of negotiators that would help protect its interest in the course of business negotiation. 4 See Halpern, A., Negotiating Skills (London: Blackstone Press Limited, 1992), p. 3, see also Hawkins, L., Hudson, M., and Cornall, R., The Legal Negotiator: A Handbook for Managing for Managing Legal Negotiations More Effectively (Melbourne: Longman Professional, 1993), p Ibid. at p Salacuse, J.W., (supra), p. 1; see also Carroll, E. & Mackie, K., International Mediation The Art of Business Diplomacy, (The Hague: Kluwer Law International, 1999), p. 7. 2

6 Whilst negotiating however, parties engaged in negotiation may be faced with impasses which prevent further discussions in the negotiation process. This situation, often referred to as deadlock, occurs when relations between parties get frozen up as a result of perceived needs not being met. Deadlocks may mark the end of future relations or may trigger the beginning of hostilities e.g. recourse to litigation, when not properly addressed. 7 There is therefore the need for every negotiator to be proactive in resolving deadlock situations. 2.3 Problem solving approaches - win/win strategies Several strategies in problem solving have been proposed. But the three most recognized are the cooperative, competitive and the principled strategies. Whatever strategy is adopted will depend generally on the nature of the negotiation. 8 The cooperative or collaborative negotiator displays mutual concern and aims for an agreement at whatever cost. It is usually adopted when parties envisage a long term relationship even after negotiations have been concluded. 9 The Competitive or win/lose approach describes a situation where the interests of the parties are withheld. Very hard positional bargaining and confrontations are also involved. The principled approach also described as the win/win approach is a term introduced by Fisher and Ury to describe interest based bargaining based on fair principles upon which the interests and needs of parties may be fulfilled. 10 A key to understanding the principled negotiation is the ability to identify and separate the problem from the people. 11 This indeed marks the difference between this strategy and the cooperative strategy. Separating the people from the problem is necessary because of the numerous and underlying interests that drive the negotiating parties. This approach seeks to resolve issues on their merit rather than the positions adopted by the parties. Emotion, anger and personality are left at bay as what is considered fair and objective is used as a standard. The approach identifies what the problem is, analyses the problem, 7 Tribe, D., Essential Legal Skills: Negotiation ( London: Cavendish Publishing, 1993). 8 Henry, K., Interest-Based International Business Negotiations in Silkenat, J.R., and Aresty, J.M., (eds) The ABA Guide to International Business Negotiations: A Comparison of Cross-Cultural Issues and Successful Approaches (2 nd. Ed) (Chicago: ABA Book Publishing: 2000), p.160; see also Halpern, A., supra, note 4, p. 12; see also Lockwood, G., The Art of Win-Win Negotiating, (last visited 16th April 2009). 9 See Hapern, A. ibid., p. 15 describing a divorce situation where children are involved. 10 Supra. Note See Fisher, R., Ury, W., & Paton B., supra, note 2, p

7 maps out strategies for problem solving and then follows with action. 12 The entire process of problem identification, problem analysis, approaches to problem solution and action taking is what is referred to as organized thinking Organized Thinking Organized thinking is a principled problem solving term that is not often and expressly referred to in the literature on this subject but it utilizes the general elements of the principled negotiation approach. Parties engaged in a negotiation exercise may embark on organized thinking as a method of mutually resolving their problems. The approach may also be adopted by one of the parties in an attempt to resolve existing disputes. The creative abilities of the parties are essential for the success of the process. A party may engage in brainstorming and questioning in an attempt to find the hidden and not often communicated needs of the other party and then come up with a range of options which is proposed to the other party. 14 The elements which drive organized thinking will be considered next. 3.1 Elements of Organized Thinking The elements are built round the goals and aims of principled negotiation. They include: Parties alternatives, looking beyond positions, options for mutual gain, legitimacy, objective standard, commitments, communication and relationship Alternatives Finding alternatives do not require the consent of the other party. This enables a party to consider its chances outside the negotiation room if it decides to walk away when negotiation proves unsuccessful. This is what is referred to in the literature as Best Alternative to a Negotiated Agreement (BATNA) Ibid., p Warden-Fernandez, J., CEPMLP class notes in Trans- Atlantic Simulation Negotiation Exercises (2009) Constanzo, M., Essential Legal Skills: Problem Solving (London: Cavendish Publishing, 1995), p See Fisher, R., Ury, W., & Paton B., supra, note 2, p. 104; see also Fox, W., International commercial Agreements: A Primer on Drafting, Negotiating & Resolving Disputes (3 rd Ed) (The Hague, London: Kluwer Law International, 1998), p

8 This is often very useful as a leverage upon which the other party may be encouraged to reconsider previous positions Looking Beyond Positions A negotiator is enjoined to focus on the interests of the parties rather than on positions. This is because the interests of the parties are the silent movers behind the hubbub of positions. 16 Once the underlying interest is identified, the shared and conflicting interests of the parties can be used to find a common ground to proceed. The Israel/Egypt negotiations over the Sinai Peninsula in 1978 vividly illustrate this point Invent Options for Mutual Gain Creative thinking is very essential in making options for mutual gain. One suggested approach for problem solving is for parties to restructure the problem so that they could perhaps see it from a different perspective. 17 What options can the parties come up with that would be satisfactory to their interests? Answers to this question will serve as a springboard to a beneficial agreement Legitimacy/Objective standard Once the legitimate concerns of the parties have been identified, parties would then have to fashion a fair agreement. Failure to do this may as well mark the end of the negotiation process. When parties cannot agree on what is fair because of their subjective beliefs, an objective criterion might be used. For example, in settling a multi-national dispute, international law may be resorted to rather than the domestic law of one of the parties. Also, the market price of a commodity may be used in settling a pricing disagreement between parties. 16 Fisher, R., et al, ibid. at p Sycara, K., Problem Restructuring in Negotiation, in Journal Of Management Sciences, Vol. 37, No. 10, (Oct 1991), p. 1248, at (last visited 15 th April 2009). 5

9 3.1.5 Commitment The need for parties to show commitment throughout the negotiation is very crucial. Oral and written statements of what a party will and will not do should be used in the negotiation process in such a way as render them practicable and easy to implement after the negotiation process Communication The importance of parties maintaining a two-way communication cannot be over-emphasized. Communication should at all times be concise, precise, clear, unambiguous and easy to understand. Communication includes body language, tone and level of speech and other signals Relationship The point here is to improve the parties ability to work together as well as develop and prepare the ground for future relationship even after the negotiation process. 3.2 Practical Application of Organized Thinking Organized thinking in principled negotiation has been utilized in many domestic and international negotiations. For example, during the Law of the Sea Convention, an objective criterion was used in determining the initial fee payable for companies mining in the deep seabed. 19 Also, several water and boundary disputes have been resolved by mutual agreement using principled negotiation approach. An example is the resolution of the disputes between the United States and Mexico in 1973 over the nitrate content and the salinity of the Colorado River. 20 Another example which will be discussed next is the practical Negotiation and Simulation Exercise designed by the University of Dundee and Washington College of Law. 18 See Warden-Fernandez, J., CEPMLP class notes in Trans- Atlantic Simulation Negotiation Exercises (2009). (last visited 15 th April 2009). 19 See Fisher, R., Ury, W., & Paton B., supra, note 2, p Shamir, Y., Alternative Dispute Resolution Approaches and their Application (UNESCO-PCCP Publication ), p. 20, at (last visited 16th April 2009). 6

10 3.2.1 The MCC - KJH Example The Simulation exercise, in which the writer recently participated, was designed to give students first hand knowledge and experience in practical terms. It involves a State owned corporation in an African country (MCC) and a United States Pharmaceutical company (KJH) negotiating over the possibility of producing a new patented drug. 21 Whilst MCC had the surplus raw material (cassava), labour and man power, stable political environment and attractive Foreign Direct Investment Laws (FDI), needed for the production of the drug, KJH had the know-how, patent, existing market networks and the financial power to establish the plant. From the joint briefing given to the negotiating teams, an alternative source of raw materials is not commercially viable until the expiration of five years. This is against the pressing desire of KJH to begin the commercial exploitation of its patent which has a twenty year lifespan. Both teams had also been given a set of secret instructions by their respective Board of Directors to guide the negotiations and they could either agree on a Joint Venture relationship (JVA), a Supply Agreement (SA) or a Licensing Agreement (LA). The teams were left alone to negotiate with very limited assistance from their course instructors. The organized thinking tool of principled negotiation was put to good use by the MCC team in the course of negotiation. The team considered its alternatives (BATNA) from the negotiation table. Options for mutual gains were invented whilst making and gaining concessions at the same time. A deadlock situation was broken with both teams having to reconsider their hard positional stands. Recourse was had to the use of back-channel (unofficial) communication link when no progress was being made. This helped to identify the underlying interests and needs of both teams and as a result, parties were able reach an agreement. 4. CONCLUSION Organized thinking has been seen to be very important in the process of negotiation. The principled negotiation strategy has been criticized as excessively soft because of its alleged near total ignorance of 21 See Bradlow, D.D., and Finkelstein J.G., Training Law Students to be International Transactional Lawyers Using an Extended Simulation to Educate Law Students about Business Transactions in Business, Entrepreneurship and the Law, Vol. 1:1, (2007), p.67 for extensive discussion. 7

11 the win - lose strategy. 22 It is also argued that the principled negotiation is not appropriate where gains for one of the parties will only be derived at a very high cost compared to the other. 23 On the relative strength of the different strategies, it is further said that there is little or no empirical evidence to support the argument that the principled negotiation is better as compared to the other principles. 24 Notwithstanding the above criticisms, the benefits and relevance of principled negotiation especially the elements of organized thinking will always remain potent. Other strategies and tools may be developed and existing strategies modified, but the concept of organized thinking in principled negotiation will continue to be useful when adapted flexibly to fit changing and varying circumstances. 22 See White, J., The Pros and Cons of Getting to Yes, 34 J. Leg. Educ (1984) cited in Fox, W., supra, note 15, p Ibid. 24 See Halpern, A., supra note 4, p

12 BIBLIOGRAPHY PRIMARY SOURCES (NONE) SECONDARY SOURCES Books Carroll, E. & Mackie, K., International Mediation The Art of Business Diplomacy, (The Hague: Kluwer Law International, 1999). Constanzo, M., Essential Legal Skills: Problem Solving (London: Cavendish Publishing, 1995). Fox, W., International commercial Agreements: A Primer on Drafting, Negotiating & Resolving Disputes (3 rd Ed) (The Hague, London: Kluwer Law International, 1998). Halpern, A., Negotiating Skills (London: Blackstone Press Limited, 1992) Hawkins, L., Hudson, M., and Cornall, R., The Legal Negotiator: A Handbook for Managing for Managing Legal Negotiations More Effectively (Melbourne: Longman Professional, 1993). Tribe, D., Essential Legal Skills: Negotiation (London: Cavendish Publishing, 1993). 9

13 Articles In a Periodical Bradlow, D., and Finkelstein J., Training Law Students to be International Transactional Lawyers Using an Extended Simulation to Educate Law Students about Business Transactions in Business, Entrepreneurship and the Law, Vol. 1:1, (2007). White, J., The Pros and Cons of Getting to Yes, 34 J. Leg. Educ (1984) In a Book Henry, K., Interest-Based International Business Negotiations in Silkenat, J.R., and Aresty, J.M., (eds) The ABA Guide to International Business Negotiations: A Comparison of Cross-Cultural Issues and Successful Approaches (2 nd. Ed) (Chicago: ABA Book Publishing: 2000). OTHER Internet Sources Lockwood, Gary, The Art of Win-Win Negotiating, at (last visited on 9 th April 2009). Senger, J.M., Tales of the Bazaar: Interest-Based Negotiations Across Cultures, at (last visited on 9 th April 2009). Shamir, Y., Alternative Dispute Resolution Approaches and their Application, UNESCO-IHP, at (last visited on 9 th April 2009). Sycara, K., Problem Restructuring in Negotiation, Journal Of Management Sciences, Vol. 37, No. 10, (Oct 1991), p. 1248, at (last visited 15 th April 2009). 10

14 Warden-Fernandez, J., CEPMLP class notes in Trans- Atlantic Simulation Negotiation Exercises (2009). 11