Knowledge Network: Faculty & Research

Strategic negotiation skills and adaptation competences are tested more than ever during a decline in global economic activity. Currently many global MBA candidates and corporate clients attend Thunderbird courses on how to strengthen negotiation skills for all levels of management in an uncertain world economy. When it comes to transforming challenges into opportunities, there are two critical areas of expertise required: 1. Knowledge concerning strategic leverage, and 2. Social engagement practices in a cross-cultural context.

Strategic leverage: Prepare with business intelligence

Strategic leverage in an uncertain climate requires a robust understanding of global business intelligence, often a less visible component of a successful negotiation strategy.

Many experienced negotiators would recognize this as the “preparatory” phase of a negotiation when they undertake their “due diligence” to uncover the fundamental needs and goals of their counterparts (a process that often provides useful insight into one’s own goals as well).

Of course, very few negotiators would ever pursue negotiation without knowing something about the background and interests of the other players. However, in a rapidly changing and declining economic market, the impulse to bypass rigorous business intelligence preparation is seductive.

Although it is tempting, the pursuit of a negotiation planned on the “back of an envelope” without a systematic challenge of key assumptions or “lore” about what has worked in the past should be avoided. Quality information increases negotiation leverage.

Social engagement: Plan for multicultural complexities

Social engagement skills or emotional and social intelligence (ESI) are required in addition to strategic planning if negotiators ever wish to elevate their prospects of success in an increasingly diverse economic environment.

A good plan is only as good as the ability to style switch, influence and collaborate with others in a multicultural negotiation.

Today’s complex markets have created progressively more demand for rigorous insight and cross-cultural social skills in order to problem solve creatively and create sustainable agreements. A successful organizational or individual negotiation plan can only be achieved when there is an integrated approach of analytical, psychological and social insights and skills.

Most accredited negotiation programs focus either on strategic planning or behavioral skills in one-to-three day sessions. However, Thunderbird’s negotiation program combines preeminent frameworks from the research fields of business, cultural, social and emotional intelligence — including the latest developments in neuroscience.

The frameworks have been tested through practical application by working with hundreds of executives and companies. We strive to consult with companies to develop plans and processes that provide negotiators with clarity on their strategic planning and cross-cultural practices that are pertinent in today’s global context.

Business intelligence: Learning from other cultures

So, why is strategic business intelligence so important to a successful negotiation outcome? Well, consider this: In the 1970s and ’80s, many western executives got lots of water cooler mileage out of how their Japanese negotiation counterparts would know amazing details about their personal lives, ranging from where they grew up and attended college, to how many children they had and what their favorite foods were.

What they did not realize was that these activities were integral parts of an extremely dedicated business intelligence effort that was, in turn, at the very heart of “Japan, Inc.’s” hugely successful strategy for catching up to the United States and gaining a long-term competitive advantage.

In post mortem after post mortem of deals U.S. companies had made with the Japanese, it turned out the Japanese had “won” the negotiation game at the expense of their less-prepared American counterparts. The cost would be measured in the flow of technology, the unequal structure of deals to enter the Japanese market, and the pricing of components, among other factors.

Tackling the tangibles and intangibles

Rigorous business intelligence techniques allow exploration of each side’s need level and negotiation alternatives. If the counterpart’s need level is not as critical as one’s own, this highlights a negotiation vulnerability that must be enhanced.

Businss intelligence also can help negotiators gather critical information about the authority structure and profiles of counterpart negotiators.

Consider the case of a Mexican retail clothing company looking to enter the U.S. market a few years ago. The company spotted a California-based retail chain that looked like a good vehicle to acquire.

Preliminary financial due diligence, along with some basic market mapping, showed that the company’s outlets broadly served the Hispanic market. This seemed to confirm that the California target should be approached with an offer to purchase it.

Before initiating contact, however, the Mexican company employed a buisness intelligence consultancy to do the full due diligence. The results showed that the owner of the California company was strongly committed to going it alone, even though his company was struggling. He had no interest in negotiating a sale, and an approach to him would be met with little chance of success.

The consultants concluded, however, that his business strategy probably would fail within about two years, and that the Mexican company should bide its time. The consultants also offered a detailed personality intelligence profile that included substantial background information on the California company’s owner and his likely negotiating style.

On the basis of the report, the Mexican company decided to hold off and devote its time and resources to other business opportunities.

Business intelligence leverage begins with a focus on the “tangibles” surrounding the negotiation, such as industry dynamics, competitor goals and perspectives, any regulatory drivers and the goals and resources of the negotiation counterparts.

Successful negotiation preparation also involves an understanding of the “intangibles,” like the underlying psychological and emotional motivations that may directly or indirectly influence the parties during a negotiation. For example, do the counterpart negotiators: (A) need to “look good” to the parties they represent, (B) have a desire to book more business than others within their organization, or (C) have a fear or desire to set a precedent or reputation for future negotiations.

Intangibles also can include core beliefs and values, such as the fact that the California company owner mentioned above was a first-generation exile from a communist country and was determined to make his stores succeed. Needless to say, such factors have enormous impact on negotiation processes and outcomes.

Understanding emotional and social intelligence

The execution of a successful negotiation strategy also requires an understanding of social engagement rules and preferences. How to negotiate becomes just as critical as what to negotiate.

Successful social engagement requires negotiators to have a strong sense of self and an understanding of their own value preferences about how to build trust and get agreement. Skilled negotiators are aware of their own cultural profiles, psychological and behavioral biases about fairness, how to build trust, and how to win.

Confident and successful negotiators have the ability to accomplish their own goals, along with assisting others to achieve the same by fostering social resonance among negotiators. Awareness of one’s own and others’ emotions, and how to manage social relationships and interaction are critical for the execution of a negotiation strategy.

If a problem-solving negotiation strategy is required, a negotiator must have the strategic knowledge, cultural sensitivity, optimism, resiliency and ability to connect and generate positive energy among diverse negotiators.

Negotiators with both the strategic knowledge of the negotiation and the required social and psychological competencies can achieve significant results despite any economic downturn. These qualities of a global mindset serve as a foundation for collaboration and adaptation required even more than ever in an uncertain market.

Negotiators with global mindset have the social and psychological awareness and ability to approach a negotiation not solely from their own perspective, but they also have the willingness and curiosity about others’ goals, interests and beliefs about negotiation and trust building.

Preparation, reflection and practice about emotional and social competencies such as listening, patience, empathy and optimism also enhance the strategic leverage for a negotiator.

Global mindset: Strategic, psychological and social

No doubt, rigorous strategic planning can bolster a negotiator’s chances of success. However, leadership in negotiation also requires an understanding of, and an ability to practice critical emotional and behavioral skills.

Such capabilities may sound “soft,” but there is a strong relationship between negotiators who are aware of their own emotions and behaviors and whether they can successfully influence others in a negotiation.

The emotional skill of empathy, for example, is a significant source of leverage because a negotiator has the ability to understand the emotional and behavioral make-up of other negotiators. This competency and skill to treat people according to their emotional reactions and motivations allows negotiators to build rapport and trust — two factors that, not surprisingly, are also important in developing and retaining clients, customers and employees through a service and consulting orientation.

Negotiators with a global mindset are able to influence others who have different world views. The power of global mindset, along with business intelligence and emotional-social intelligence, makes for a unique set of capabilities that many negotiators people do not have.

Insight and skills around potential cultural preferences and differences are important frameworks for the appropriate behavioral demands in global negotiation. Assessment tools such as the Cultural Orientations Indicator (COI) generate insight about targeted behavioral changes that can impact negotiations.

This tool creates learning and skill building around the key differences in cultural preferences and practices across national, organizational and individual boundaries. This assessment tool is fundamental to the confidence and optimism needed in the most difficult and competitive negotiation situations.

As the economic downturn demands more skillful negotiation, the search for increased leverage and cross-cultural communication skills will become an essential quest.

Karen S. Walch, Ph.D., is an associate professor and consultant at Thunderbird School of Global Management in Glendale, Ariz. Paul Kinsinger is a professor at Thunderbird School of Global Management and managing consultant of the Thunderbird Learning Consulting Network.