After decades of one-on-one negotiation with corporate division heads, the CEO of a large company considered himself an expert bargainer. So when he was offered the chairmanship of a national council of more than fifty nonprofit organizations, he quickly accepted and got to work on his first initiative: creating an integrated fundraising policy. While member organizations had successful fundraising strategies of their own, the new chairman saw several advantages to a uniform approach. In his convention acceptance speech, he explained that the council's long-term success depended on every member group adhering to the new model, and listed the reasons why.
Soon after the speech, the roof fell in. The chairman was attacked from all sides by member organizations that wanted no part of his new policy. Within days, he received a letter signed by the heads of fifteen member organizations demanding that he abandon his proposal.
Where did the new chairman go wrong? He overlooked the important differences that exist between two-party and multiparty negotiations. The many similarities between them can blind us to their distinctions. The key difference is that as soon as the number of parties increases to more than two, coalitions are likely to form—as in the case of the fifteen organizations that joined forces against the new chairman.
The prospect of coalition formation requires special preparation. Entering a multiparty negotiation means thinking ahead about offense—how to build a winning coalition—and defense—how to organize a blocking coalition that could thwart other parties' aggressive moves. And because coalitional dynamics are likely to play a crucial role in most multiparty negotiations, negotiators also need to pay close attention to managing group interaction.
| The first rule of coalition building is: Think carefully about how and when to meet one-on-one with other parties. |
Two-party and multiparty negotiations do share one important goal: the discovery of the trading zone. As we've described in previous columns, the trading zone is that moment in a negotiation when adversaries switch (if only briefly) to become collaborative problem solvers. No longer trying to win at each other's expense, parties in the trading zone shift from primarily competitive to explicitly cooperative behaviors, working to create as much value for all as possible. In the trading zone, you and the other parties accept the notion that, at least temporarily, helping meet each other's interests will make it easier for everyone to achieve their negotiation goals.
Whether you're navigating the trading zone with two, ten, or twenty partners, success usually requires that you:
- Closely attend to each other's needs and interests.
- Put forward proposals that incorporate valuable tradeoffs.
- Suspend criticism and explore creative but nonbinding ideas.
- Agree on problem-solving procedures.
While entry into the trading zone does not guarantee a perfect outcome for all, it is an essential step in generating negotiated outcomes that surpass everyone's "next-best" options.
Preparing for multiparty negotiation
When you're getting ready to meet with more than one party, the usual steps of two-party negotiation apply. First, you must determine what Roger Fisher and William Ury, in their classic text Getting to Yes, call your BATNA—your "best alternative to a negotiated agreement."
Assessing your BATNA means forecasting what you are likely to end up with if an upcoming negotiation falls apart. For someone who has filed a lawsuit against her employer, this means estimating her chances of winning in court in order to figure out what she will and won't accept as a settlement. Specifically, the claimant can determine her BATNA by multiplying her chances of winning the case by the amount she's likely to get if she wins (based on how much past litigants in similar situations were awarded), minus legal costs. Suppose she figures out that she has a 50 percent chance of winning $100,000, minus $25,000 in projected legal costs—a BATNA of $25,000. If her employer offers a last-minute $50,000 settlement, she might decide to snap it up, since this amount doubles her BATNA.
It's important to analyze other parties' BATNAs as well. Assessing someone's BATNA means putting yourself in his shoes: gathering necessary information and making the same estimates you made for yourself. When you've figured out someone's BATNA, you've identified the bare minimum you need to offer to convince him to say yes. If he has no reasonable chance of getting more than what you offer, he should logically accept what you are prepared to commit.
Here's where negotiations with more than one party get tricky. When you just have one partner, you typically only need to calculate your BATNA and the other side's once. As the number of parties increases, BATNA calculations and resulting considerations of possible settlements take on a kaleidoscopic quality. In a multiparty negotiation, you must recalculate your BATNA every time you imagine a new coalition that might strand you on the outside of an agreement.
Imagine a merger being negotiated by the chief executive officers of three competing companies. None of the CEOs is dissatisfied with the status quo. If two of them decide to merge, their combined resources and market share will swamp the one left out. As a result, each CEO has to compare the status quo with a variety of two-way and three-way merger deals—some of which would leave one of them out in the cold. This need to compare fluctuating proposals makes preparation in multiparty negotiation all the more important—not to mention quite a bit more difficult—than preparation for a two-party negotiation.
Anticipating coalitional behavior
Once a multiparty negotiation gets off the ground, it's crucial to build a winning coalition. The fifteen nonprofit council members who united in opposition to the new chairman's fundraising agenda knew their clout would be enhanced if they spoke with one voice. In the early days of his tenure, the chairman clearly spent too much time reviewing the details of his proposed policy with his staff and not enough time sounding out council members to drum up support for his reforms.
The chairman's missteps lead us to the first rule of coalition building: think carefully about how and when to meet one-on-one with other parties. As you talk with each potential coalition member, you may be asked to make tentative commitments before you know what other possible partners might emerge. Before tying yourself down, ask yourself some key questions. How will we divide up whatever value we create in the negotiation? Should I really commit to a "pretty good" split before hearing what others have to offer?
At this stage, your goal should be to collect relatively firm commitments from potential coalition partners while retaining the flexibility to switch allegiances. In the absence of clear ground rules, this can be a delicate process, but the results are well worth the effort.
| The possibility that a manager or faction will wrest control of the agenda is a constant threat. |
The perils of coalition building played out on a global scale in mid-2003. Facing an important round of World Trade Organization negotiations in Cancún, Mexico, the U.S. government approached the European Union and a handful of its other usual partners from the developed world. Together, this informal coalition hammered out a preliminary agreement on issues from the meeting's agenda, such as agricultural subsidies in wealthy nations. Noticeably absent from these preconference talks were members of the G22, the coalition of developing nations.
Once the WTO talks were under way, it quickly became apparent that the developed nations had made a crucial miscalculation in excluding the developing world from their coalition. The G22 wanted a strong commitment from developed nations to reduce farm subsidies. The wealthy nations were not prepared to make a deal, and the developing world was insulted by the developed world's failure to take its concerns seriously. Talks broke down, and all sides walked away empty-handed.
The lesson for all multiparty negotiators: choose your coalition members wisely!
Managing group interactions
When multiple parties gather to discuss multiple issues, someone has to oversee the group's efforts, or the process will descend into chaos or stalemate. A negotiation manager should prepare the group's agenda, establish ground rules, assign research tasks, summarize conclusions, and represent the process to the outside world.
It's too much to expect that any interested party can juggle these tasks without bias. If one side tries to assume the role of chair, others may view the move as a power grab. And in multiparty negotiation, process opportunism—the possibility that a manager or faction will wrest control of the agenda—is a constant threat.
Right from the start, whether talks are being held within one organization or among many, participants in a multiparty negotiation may want to enlist a trained neutral—a professional facilitator or mediator. It may seem premature to bring in a mediator before a dispute has even erupted. But the fact is, a neutral party can guide participants into the trading zone much more effectively than they can on their own. Neutrals can be particularly helpful in the information-gathering stage. Through a process of joint fact finding (described in my December 2003 column), the leader can help parties generate data and forecasts that everyone can accept.
As the size of a negotiation increases, group management becomes a challenge. One factor is the phenomenon known as groupthink, a term coined by psychologist Irving Janis. When people work together, sometimes their wish for unanimity overrides their commitment to weigh all possible alternatives and hampers their decision-making ability. In their desire to get along, coalitions begin to accept irrational solutions to their shared problems. For this reason, negotiators in multiparty situations need to remain in close contact with their constituents—senior members of the organization to whom they're accountable. Otherwise, the pressure to conform may cause them to lose touch with the interests of those they represent.
When multiple parties are balancing dozens of issues and preferences, it makes sense to break into smaller working groups. For example, when a federal agency opens up a dialogue on proposed regulatory reforms, a variety of stakeholders join the conversation, from corporations to politicians to activists. In such cases, subgroups can work to create preliminary proposals on elements of the larger agenda, a strategy that helps the larger group cover a lot of ground quickly. Subgroups must be sure to link their findings to the group's larger goals and communicate them in a way that's understandable to all.
Prospering in a multiparty trading zone
With thorough preparation, the help of a trained mediator, and useful reports from subgroups, participants in a multiparty negotiation should be able to find their way to the trading zone. Once they've arrived, the next step is to work together to ensure that everyone's interests are met.
In the trading zone, parties must identify and address disagreements quickly and correct miscommunication before relationships deteriorate. For example, consortia that come together to work out complex construction contracts almost always form partnering agreements—arrangements to meet regularly to take up any misunderstandings that have arisen. Another key to progress in the trading zone is a clear commitment to joint problem solving. Once negotiators agree to seek out wise tradeoffs, they almost always succeed.
To prosper in a multiparty trading zone, you also need to pursue a carefully crafted coalitional strategy, building alliances to increase your leverage. It's important to do this in a way that doesn't undermine relationships with those who may have started out as your antagonists in a blocking coalition, only to emerge as potential members of a winning alliance. When others approach you about joining their coalition, be sure to respond with caution and tact.
| Clarity about the group's decision rules is crucial. |
When a group has succeeded in generating a number of possible proposals or package deals, how should they decide which one prevails? Clarity about the group's decision rules is crucial. A commitment to unanimity as a decision rule is usually a mistake, inviting blackmail by those who care more about a pet issue than about the overall success of the negotiation. Majority voting is also undesirable; large numbers of parties can be boxed out entirely, leading to unstable agreements as disgruntled minorities look for opportunities to sabotage implementation of whatever agreement emerges. Most of the time, agreement by an overwhelming majority—what we call consensus agreement—is the best decision rule. Under such a rule, parties should strive to seek unanimity, but settle for near-complete agreement after every effort has been made to meet everyone's interests.
Finally, keep in mind that the structure of the negotiating forum itself—that is, the ground rules that constrain the way a multiparty negotiation unfolds—will be a constant topic of conversation in a multiparty negotiation. Negotiators need to be able to quickly size up and react to possible changes in group membership and communication. By paying close attention to coalitional strategies and the changing BATNAs of all parties, multiparty negotiators can learn to pursue their interests and succeed in the trading zone.