Too often, managers treat disputes as distinct from other aspects of business deal-making. Some behave as if resolving a dispute requires a distinct choice: You get your way, or I get mine. Others focus their energies entirely on compromise, with each party trying to give up as little as possible. Neither of these mindsets serves negotiators well. Savvy business leaders search for the same set of value-creation opportunities in disputes as they do in deals. Here, we present four ways to find value when you’re in the throes of a seemingly intractable business dispute.
- Capitalize on shared interests. Disputes highlight how we differ from the other side. After all, without differences, there would be no disputes. These noticeable differences often mask the noncompetitive similarities that also exist between those involved in dispute similarities that can add value for both sides.
Consider a dispute between a high-tech manufacturer and a small company that licenses a critical piece of intellectual property to the manufacturer. The two sides bitterly disagree about the appropriate method for calculating royalties under the license, but this isn’t their only set of relevant interests. Both are interested in sustaining the market’s confidence in the new product, and they’re aware that suppliers, creditors, and prospective customers might shy away from deals with feuding business partners. Given this shared interest, the two sides could agree to keep certain aspects of the dispute confidential. They could also put the proceeds from the new product into escrow, pending resolution of the dispute according to a specified timeline.
- Explore differences in preferences, priorities, and resources. In the heat of the moment, disputants too often focus on one salient issue such as money, a mistake that risks masking other important concerns. Whenever more than one issue is on the table, it’s likely that parties will value certain issues more than others. You may be able to resolve the dispute by capitalizing on differences in relative preferences, priorities, or resources.
- Capitalize on differences in forecasts and risk preferences. One common source of conflict arises from diverging expectations about what will happen in the future. And when it comes to predicting the future, disputants tend to behave less than ideally. The overconfidence bias can lead both sides to overestimate the likelihood of achieving their desired outcomes. Similarly, egocentrism can cause people to have an inflated perception of the fairness of their position. Such biases quickly lead to an impasse.
One value-creating antidote may be contingent agreements—deal structures that permit parties to “bet” on their predictions by specifying different payoffs based on future events
- Address potential implementation problems up front. Resolving a significant dispute typically requires more than a one-time exchange of dollars. Implementation often occurs over time, raising reasonable fears that one or more parties will violate the agreement’s explicit provisions or its spirit. The fear of misbehaviour can be so high that it prevents disputants from reaching a resolution.
Successful negotiators explicitly address implementation difficulties by crafting resolution terms that manage risk.
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.
Adapted from “Create Value out of Conflict” Negotiation, June 2006
By: Robert C. Bordone and Michael l. Moffitt