Negotiation Training
People are bad negotiators. They leave money on the table, passing up deals that can benefit both sides. Worse, most think themselves as good to decent negotiators. They are wrong.
How do we know that people are bad negotiators? For more than 30 years, theorists have been devising little bargaining puzzles. In these very simple problems, people routinely leave money on the table. Routinely fail to make the best possible deal.
Why? There are many types of answers, and my expertise is looking at how people failed to manage the process of both expanding the pie, creating value, and demanding their fair share of the pie, claiming value because they failed to comprehend their strategic position.
The process of managing or mismanaging the creating/claiming value process has been extensively studied, starting in the 60's with Walton and McKersie's A Behavioral Theory of Labor Negotiations.
One explanation of why people are bad negotiators, something Bob Mnookin stresses, is that people often look past their interests in common and go directly to undue focus on adverse interests.
We have all heard the term "win win", but what does it really mean? Bob Mnookin talks about the Program on Negotiation, an executive training program at Harvard.
"When you're mired in a dispute, it's natural to focus on differences.
But negotiation experts at Harvard University suggest looking for hidden similarities instead.
Identifying shared interests that aren't competitive can pave the way to a solution that benefits all parties, Harvard authorities recommend.
The Harvard Program on Negotiation specializes in win-win solutions to disputes, even ones the parties have written off as intractable.
Success is all in the mindset, Harvard experts say.
Rather than viewing the matter as an "intractable" dispute, view it as a business deal - then pursue it as you would a deal, looking for ways to create value."
Here is a real life example of focusing on shared values, or common interests, The Postal Service versus the United States Postal Service
Take the case of The Postal Service — the musical group, that is. This electro-pop duo saw its career take off in 2003 with release of its first album, “Give Up,” which sold more than 400,000 copies. Two singles — “Such Great Heights” and “The District Sleeps Alone Tonight” — were getting airplay too. For Jimmy Tamborello and Ben Gibbard, life was good … until the actual Postal Service, also known as United States Postal Services (USPS), entered their lives.
USPS served them with a cease-and-desist letter alleging trademark infringement. The agency was concerned that the musical group was diluting its trademarked brand by calling itself “The Postal Service.”
How might two young musicians go about taking on one of the largest enterprises on the globe?
They could hire high-priced lawyers and dig in for a battle that could drag on for years and cost many millions of dollars … a battle they might lose.
Or they could roll over and give up … and then they would lose.
Or they could negotiate the Harvard way and search for interests that both “The Postal Service” and the Postal Service shared.
Negotiate they did. The Internet and e-mail have cost USPS dearly, especially among the young who listen to indie-pop bands, Tamborello and Gibbard pointed out. But if they were allowed to keep using their name, they would put the USPS trademark notice on their albums, promote the use of USPS among their fans, and even perform at an annual USPS event.
More effective communication, in my opinion, is the critical skill set that Independent Franchisee Associations (IndFAs) have to obtain in order effectively collaborate with the franchisor. Mnookin , and the entire PON program, has an emphasis on managing the tension between creating and claiming value, or what he calls an undue focus on distributive bargaining.
Mnookin describes the seminar as a practical learning, complete with training and practical applications.
One thing not made clear in this short video, is the range of techniques for dealing with those interests that are different and not shared.
But the overall emphasis on focusing on disputes as business deals before they become litigation files is an important emphasis.
It will require different types of skills than transactional or trial lawyers typically have. Bargaining in the shadow of franchising law and contract requires more than simply an understanding of legal cases.
The Program on Negotiation has a website, and there are a number of interesting free resources about effective communication and negotiation. Sign up at the site and get negotiation tips by email.
- Franchise topic:
Vickie a great blog on negotiation and mediation, and BMM readers should watch this video in which Vickie explains her love for mediation. Watch the video.
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
You have made your point. If Vickie's approach to mediation transfers to franchising I congratulate the people and commend the process. But that is a far cry from what happens here.
Mediation requires 'good faith' and without that Vickie would be climbing the walls. Reminds me of the head of the FCA going on national radio here last year and proclaiming that 'churning does not exist because it is against the law.' Mediaion in principle should work but this is franchising and for many there are no principles.
The more things change; the more they stay the same.
As if I don't have enough to read. There is some interesting material here and I will read on. I've already downloaded the 'free' reports. Very useful.
‘Listen to learn. If there is a common denominator in virtually all successful negotiations, it is to be an active listener, by which Ury means not only to hear what the other person is saying but also to listen to what is behind the words.'
I was almost going to publish this gem;
‘4. Understand your lawyer's role and perspective. Your lawyer's job is to educate you and advocate for you. He or she is not-and should not be-the primary decision maker on your behalf. As the disputant, you must understand not only your rights but also your options-especially your non-litigation options. The best lawyers will help you comprehend all of those alternatives. But the fact remains that lawyers make their living by giving legal advice and pursuing litigation. As a result, your incentives will never be completely aligned with those of your lawyer.'
But I decided against it.
The more things change; the more they stay the same.
It is important to be completely upfront about this - if you cannot accept the responsibility of negotiation, then you will have to hire a trial lawyer whose interests are not aligned with yours.
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
Howard, I disagree with you on this one, but I see your view about the ordinary franchisee. We are the Fram attorneys, "You can pay me now, or pay me later,"
But, what I am talking about is how to manage the franchise relationship through negotiation. A number of the recent class action lawsuits against franchisors indicate that a business dispute was not managed carefully and grew into a litigation dispute. In those cases, the franchisor has to be careful of his litigation counsel driving a lawsuit that hurts the ability of the franchisor to manage the relationship.
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
before franchisee potential litigants show up in my office.
Individually or in small groups, they have already tried to "reason" with the franchisor. The franchisor's attitude has been absolutely intransigent - my contract says I can do it, so I will do it - I make money doing it.
The franchisees do not have an effective independent franchisee association.
They are convinced they have already tried everything that might result in compromise. The would not be in my office, checkbooks in hand, if they could see any way to avoid it.
Even so, I try one more time to attempt collaborative communications with the franchisor - whose lawyers tell me to go enjoy my own nether regeons by assuming a contorted position not even to be found in aggressive rehab sessions. The lawyers are not interested in anything other than what the franchisor has already told my would be clients - which the franchisor checked with the lawyers before taking in the first place.
I suspect that even for someone as charming as you, Michael - and you really are slicker than owl shyte - negotiated progress is more the exception than the rule.
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Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
Richard, I entirely agree with you. I had the amusing experience, which I will soon be able to blog about, about asking a well known franchisor attorney what his client's business interests were in enforcing their non compete. Quick as a flash, our legal bunny said "our legal interests are our business interests". In the end, our legal bunny lost the arbitration, paid legal costs, incurred legal costs. The non compete was not enforceable, because of breach of contract, but my client would have paid to get out of the system. Legal bunny brought a negative recovery, all because he refused to seriously entertain the question. So, asking for a collaborative solution while promising litigation almost never works.
But consider the Carvel mess almost 20 years ago. A group of franchisee's contract did not allow Carvel to place its ice cream in grocery stores, while another group had a different contract allowing the placement of ice cream in the grocery stores. Carvel likely needed a subset of both groups for their change in the business model to make sense; but where pitching the new routes at 30-40k per franchisee operator. The operators had a dim view of the likely success in terms of cannibalization of their products; while the franchisor had a rosey picture. This strategic scenario cries out a negotiated solution, probably beginning with a strategic simulation. It was absurd that the litigation once started was negotiated with a view to the brand's success.
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
Howard, a recent salary survey in the WSJ for franchise systems showed that the person making the most money was in legal compliance! Compliance! That is how you manage a network, with legal compliance?
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
Howard I would agree in the instances where the franchisor is a sophisticated business operator, whether he be a charlatan or not, but there is, at least in Aus, a clear over-riding influence on much of the lower end of the scale. Enter the Giles. Enter the FCA. One only has to consider that the majority of small franchise systems are run by amateurs who take their lead from such organisations as FCA. No matter what they portray to the naive; Stephen Giles aka Deacons Lawyers, run the FCA. The agenda is clear - and it is clearly written on their website and at the multitude of zor educational programs, conferences etc that they run.
This is sold as FCA ‘How to' programs but the reality is that it is all about maintaining the growth of Deacons [and partners (lotza law firms)] revenue.
It becomes blatantly obvious when conflict arises where protracted conflict, rather than negotiation, is a big earner. Then you have franchise management not really by compliance management but really by convincing a zor that his best interests are served by investing in his God-given financial and legal leverage.
There are a hell of a lot of unsophisticated franchisors out there and their gullibility and greed should not be underestimated. This can all be argued but one point can't - the best franchise systems in this country do not belong to the FCA. They don't need it and they won't be led around by the nose.
The more things change; the more they stay the same.
I love it "outhouse" litigation counsel! Actually, I think my concern is with both.
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
‘inhouse legal compliance guy' - I've never heard such high praise. How is it for those who have the ability to build something outhouse. Compliance management is critical to any franchise - when it is the ONLY perceived management tool we see a system operator who is a fool and/or a fraud. Pity the ‘inhouse' for he knows not what he does and doesn't have other job prospects.
The more things change; the more they stay the same.
It is difficult for inhouse counsel to do compliance audits. Inhouse has only one client - that company. Inhouse has to live with that management. Inhouse depends for his future income upon the relationship with that one company's management. In house has impediments to finding errata. Franchise company management generally have a low opinion of in house lawyers anyway. They think the good lawyers are all out in private practice. In house counsel is used more for housekeeping. There are exceptions, but not that many.
Outhouse counsel can - using as much tact as may be possessed - point out areas where things might be improved upon. Outhouse probably knows a bit more about the metrics of what should be done versus what is being done. Outhouse is assumed to be sharper bercause he is outhouse.
Don't ask me why it is this way, but it usually is this way. There are many illustrative stories. Outside law firm often takes someone who is not making the partner track and places him inhouse with a corporate client. That gives the non track lawyer a way to earn a iving and that lawyer is loyaol for the opportunity and tries to steer everything to be done by outhouse counsel to his old law firm.That is just one of many stories told for purposes of illustration.
One franchisor client of mine hired a disbarred crooked judge fresh out of prison to do its in house legal work. He knew how to do it and he worked cheap. Trouble was that he also took part in selling franchises. I found out about all that when there was a lawsuit on a deal he had sold. He told the franchise investor that the franchise was so good that he retired from the bench to buy one for himself - instead of the fact that he left the bench under indictment; served several years in prison for embezzlement; and had been disbarred.
My instructions were "Whatever you do, don't put him on the witness stand."
Few inhouse counsel are this bad.
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Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
with all those sophisticated suave negotiating skills - a real gent with manners and all.
That allows me to be myself.
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Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
‘By anticipating possible stumbling blocks during implementation, wise negotiators can structure agreements in ways that provide each side with appropriate incentives throughout the life of the deal.' Does this sound like franchising?
‘4. Accept your limitations. The realization that you've been making decisions based on faulty intuition can be threatening to your self-esteem. Good teachers reassure their students that we are all subject to judgment biases. Having them doesn't mean that you're a bad negotiator; it just means that you're human.' There's that 'human' word again.
The more things change; the more they stay the same.
Ray writes:"unnerving for Michael."
Ray, I have been in the business of diagnosing bad decision making, as well as engaging in it, for the better part of 30 years. The judgment biases we bring to the table as ordinary negotiators are one of the main causes of leaving money on the table. Programs like PON, and others, help people identify those judgment biases and plan for them.
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
Michael; my 'unnerving' reference was an attempt at humor related to you suffering/working with Richard.
I would think programs such as PON would have great effect across many decision making processes if franchisees and franchisors understood such processes early in the relationship and determined common goals - rather than needing to acquire such skills when it hits the fan.
The more things change; the more they stay the same.
Ray, all you need to know is that John Sotos in Toronto called Richard "a genius". John is a leading franchisee attorney, and he spoke those words directly to me.
But, I entirely agree with your observation that the franchisor and IndFA need to acquire these skills before things get rough. Always hard to sell novel insurance products, though.
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
I had to come back to this topic. In good franchising negotiation is a constant.
In this thread and others I have briefly argued the futility of the mediation process in Australia and the rubbish that has been produced that suggests that statistically mediation works here.
I have no doubt that when both parties enter into mediation in good faith they will have every chance of reaching a mutually agreeable outcome. I maintain that many of the day to day minor scuffles that occur in the best of franchise systems are resolved without having to enter into formal mediation or even think ‘litigation', because agreed negotiation is planned early.
My perspective comes from deliberately structuring informal resolution of complaints and it is my opinion that in good franchising this is almost always achievable. Anyone that knows me will appreciate that I jump the franchising fence regularly depending on my opinion of where I see fault in any particular situation. Sometimes I sit on the fence to observe the brilliance or the stupidity within some franchise systems where everyone contributes to the end result.
Conflict happens in some basically good systems where I often find that the contentious issues arise from poor and sometimes gutless communication. Here is what I believe is necessary to resolve disputes and negotiate an agreed outcome.
Ground Rules - the ground rules and key elements needed to achieve a meeting of minds should be stated up front or preferably before any meeting so that parties can adjust their ‘game plan' mentality accordingly.
It does not take long to cover an overview of the following.
Trust - not absolutely necessary but it is a prerequisite to a maximizing the benefits from a good long-term relationship. When it doesn't exist then the parties involved should firstly look at how they have contributed to that lack and realise that great trust in a franchising relationship is often the leader to greater financial success. So if it isn't there then mature people should sit down and discuss what they have to do to achieve it. Franchisors often don't trust a franchisee reaction to change and operate from a position of strength to hide the ‘fear' of a messy, bad reaction. Franchisees often don't trust the franchisor because the communication was poor and they tend to have lively imaginations where they interpret any poor communication in the worst possible way.
Honesty - In negotiating a resolution it means coming to an agreement at the outset that parties will put all their cards on the table and work through any points of difference.
Hearing - The participants must be open to hear and consider the opponent's point of view and this must be agreed to and stated. Too often people enter into negotiations only believing that the process is their opportunity to voice their argument. They walk in with a game plan that involves their needs and their wants.
Negotiating peace doesn't work unless you are prepared to accept that compromise is one possible outcome but any acceptable outcome must be based on a mutual understanding of how any agreement will affect the other party. There must be a genuine agreement from everyone to find a fair and reasonable solution to avoid damage and further action.
Issues - Too often disputes get side-tracked to incidental issues that will be resolved when the core issues are resolved. Agree on what are the critical issues.
Facts - Participants must bring to the table facts that can be substantiated.
Power - The power of one party over another must be left at the door. The potential fallout of a failure to resolve disputes can be costly for all parties and the advent of damaging blogs, brand damage involving prospective franchisees and expensive litigation are just some of the possible repercussions.
Every franchisor and every franchisee should consider how well they communicate and whether that communication not only achieves desired goals but also maintains the relationship. Demands are dangerous - the approach must be to ‘sell' a particular idea. Support grows support in franchising. The art of ‘selling' seems to be disappearing and those with skill have an advantage when the outcome provides long-term satisfaction for all.
I am a layman with an unsophisticated straight-forward approach but I've always had a good record of success in resolving disputes. That is until late 2001 when I ran into a brick wall and underestimated a situation. I never knew that scum-sucking, thieving, low-life slobs such as the Midas Australia franchisor, Philip Bonney, existed. The point here is that you cannot win in those situations without a united and committed front against a scum-sucking, thieving, low-life slob if he wants to abuse his more powerful position within the relationship. And there are scum-sucking, thieving, low-life slobs like Philip Bonney out there. If you don't have one then it is in everyone's interest to save the relationship and protect the investment in the brand.
Too many get stubborn - too many can't bring themselves to consider a fair and reasonable outcome without damage as a win.
The more things change; the more they stay the same.