Dear Clients and Friends,

Join me in this October 2017 edition of Negotiation Strategies as I share with you a crucial skill and technique that can make the difference between resolution and impasse in all your negotiations.

The column is also summarized in the Lessons Learned bullet points at the bottom of the column.

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With Best Wishes

Raphael Lapin

Consider a negotiation where a land developer is negotiating with a building contractor to build a development of townhouses to rent or sell. Negotiations are going well until the developer demands a clause for an enormous liquidated damages penalty if the project is not completed on schedule. The contractor now feels exploited and pushed towards what he perceives to be an unfair and unbalanced contract. The developer is adamant that because of previous experiences with contractors and losses he has suffered due to delays, he will not agree to a contract without a heavy liquidated damages clause. 

The contractor will likely see his current problem in the negotiation to be how to eliminate the liquidated damages clause, while the developer sees his problem as how to convince the contractor to accept an unreasonable liquidated damages clause.

Typically, as in this example, there is no joint, intersecting definition of the problem to be solved, but rather parallel and polarized definitions as each sees his problem from his particular perspective. Furthermore, both contractor and developer in this case, have framed their respective problems in very narrow, limited and zero-sum-like contexts which often leads to sub-optimal outcomes at best and impasse at worst.

How we frame and define the negotiation problem that needs to be solved if parties are going to agree, can frequently make the difference between agreement and impasse.  

This week, the NAFTA (North American Free Trade Agreement) renegotiation is entering its fourth round of talks in Washington D.C. 

One very thorny area of dispute that needs to be resolved, relates to US berry farmers that struggle because Mexico sells berries in US markets at 25% below local production costs. The US farmers in the berry growing states of Georgia, the Carolina’s, Texas and California claim that NAFTA has hurt them severely by allowing Mexico to dump cheap berries into local markets. Mexican low-cost farm labor, state subsidies and a year-round growing season makes it impossible for US farmers to compete.

The US and Mexico are defining the problem to be solved in a polarized, limited and zero-sum-like way. The US sees the problem as how to reintroduce a protectionist policy, while Mexico sees the problem as how to preserve free trade and open markets at all costs.

This narrow definition will set the negotiations up for failure.

Defining the problem constructively so as to drive innovative solutions and strong agreements, requires framing the problem in a context that bridges and incorporates the concerns and needs of all parties.

The concerns and needs of the parties to NAFTA are clear. American business groups, as well as the Mexican and Canadian governments appreciate and wish to strengthen the business opportunities presented by free trade and open markets. However the US berry growing farmers specifically are suffering as a result of unfair Mexican competition.

Rather than defining this as a zero-sum polarized problem of protectionism vs open market, we could define the problem as a joint one by bridging and reframing it as: “What can we do that will provide us the benefits and advantages of a free market while at the same time allowing US berry farmers to compete fairly and make a decent living?”

This bridging formula for joint problem definition which incorporates the needs of all parties is what drives creative thinking. When we frame the problem in this way, we begin to see the hazy images of potential ideas emerge from the fog of the dispute. These ideas can then be further sharpened, developed and refined as we work towards a mutually acceptable resolution. 

Potential solutions that begin to emerge as a result of our new problem definition could be a seasonal tariff on Mexican berries limited to the berry season in the US; Perhaps a state tariff on Mexican berries imposed by the berry producing states only, but not a federal policy; Maybe the US could impose a minimal tax on US companies that outsource to Mexico that would help subsidize US farmers, or perhaps a combination of all of these ideas.

In our negotiations, we need to change our mindset from your problem/my problem to “ our problem”. By framing the negotiation as a joint collaborative problem to be solved as outlined in this column, we will significantly increase our chances of reaching creative, value-generating agreements and strong working relationships.