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Negotiation is a relationship not a transaction

IbyIMD+ Published 23 March 2022 in Magazine • 5 min read • Audio availableAudio available

Respect and empathy for the person sitting on the other side of the table is key if a negotiation is to be a success. 

The world is becoming increasingly polarized as the disruption wrought by the financial crisis and the pandemic pushes people into opposing camps. Yet if we are going to solve our most pressing problems – the climate emergency, gaping inequality and social unrest – we are going to have to learn to listen to the other side. Negotiating tactics provide us with a toolkit to start a constructive dialogue and resolve conflict – whether you may be dealing with a customer complaint, a tricky supplier, or a hostile takeover bid.

The first step is to view negotiation as a relationship not a transaction. Many organizational and political leaders don’t take the time to build a relationship first, instead moving to the bargaining phase too soon. This is a mistake. By respecting the other party’s motivations and opinions and showing empathy, you have a good foundation for dialogue. What made Mikhail Gorbachev, the former president of the Soviet Union, and former US President Ronald Reagan successful, was their ability to build a bond, respect each other and find the common goal for the concessions for nuclear disarmament.

This applies to the corporate world, too. One reason for the success of the 2006 merger of The Walt Disney Company and the computer animation studio Pixar was the tone set in early negotiations. Despite being the stronger party, Disney’s people listened to their counterparts at Pixar, accepting its employment conditions, which helped retain talent, while Disney CEO Bob Iger also reportedly asked Pixar employees how to improve Disney. Over the next decade, Pixar added significant value to Disney by helping improve computer-generated animations for the whole group.

It’s important to move away from a win-lose model of negotiation and seek a mutual gains approach. Be open and curious about what you can learn from the other side. By adopting a positive mindset and establishing trust, you can override the brain’s natural urge to search for negativity. A CEO at a big pharmaceutical company urged his staff to start viewing the Food and Drugs Administration as partners rather than the enemy, by acknowledging that the regulator might know more about their medicines than the company itself. Good disagreement often leads to better results by establishing a shared problem-solving relationship.

Haier Headquarters in Qingdao, China
Haier Headquarters in Qingdao, China

Haier, the Chinese multinational home appliances group, has managed to innovate and take advantage of the Internet of Things by viewing its partners as idea-laden co-creators rather than just vendors. Central to this is Haier’s willingness to share the value created, rather than limit the fees paid to suppliers. The group purposefully grows the partnership for the benefit of all involved, rather than maximizing the profit gained by the most powerful partner, enabling Haier to build healthier ecosystems and in turn giving it a competitive advantage. 

Take time to listen to the pain points that are motivating your counterpart’s behavior and blocking any move towards concessions. Be willing to talk about the losses – past, present, and anticipated – that may be influencing how you and your counterpart respond. These can include betrayal, ostracization, humiliation and lack of respect.  Former German Chancellor Angela Merkel, a rational scientist by training, famously called out Russian President Vladimir Putin after he intimidated her during negotiations in 2007. Aware that Merkel had been afraid of dogs since childhood, Putin allowed his black Labrador to enter the room. Later, Merkel revealed a deep insight of her counterpart’s character. “I understand why he has to do this – to prove he’s a man,” she told reporters. “He’s afraid of his own weakness. Russia has nothing, no successful politics or economy. All they have is this.”  

Once you have understood the pain points and responded with empathy and respect, you have the foundations for shared problem-solving.

Steps to successful negotiation, based on my research 

  1. Show empathy: approach the other side with a positive regard and show respect for their opinion. 
  2. Ask questions: use questions to better understand what’s in the other person’s mind; avoid ‘why’ and instead ask ‘how did you experience..?’ 
  3. Avoid defensiveness: being defensive is an indication that you have been psychologically taken hostage.  
  4. Inquire: engage in in-depth dialogue about what the other person needs, desires, and wants. 
  5. Paraphrase: repeat what you have heard to see if it is correct or not. 
  6. Use and look for ‘no’: ‘no’ empowers the other person and provides an opportunity to go deeper in the inquiry. 
  7. Label emotions: this helps to understand and clarify the other person’s emotions. 
  8. Awareness of mirror neurons: mirror neurons are part of a brain system whereby we respond to actions that we observe in others, laying the foundation for imitation.  
  9. Reframe: don’t reject outright your negotiating partner’s proposals with a counter proposal; build on the other party’s ideas using their language. 
  10. Use your person effect: this is the unique impact, positive or negative, in how you come across and connect with others. It is also a trigger to activate constructive or destructive emotions.  
  11. Identify pain points: understand that motivation is more influenced by loss than by benefits; listen to the pain points before emphasizing the benefits. 
  12. Consider the timing and delivery of your message: this is often more important that what you say. 
  13. De-escalate: separate the person from the problem; view problem-solving as a partnership, including asking the other party to help you. 
  14. Use humor: laughing has a positive impact on the brain. 
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George Kohlrieser

George Kohlrieser

Distinguished Professor of Leadership and Organizational Behaviour at IMD

Professor of Leadership and Organizational Behavior at IMD and Director of the High Performance Leadership program. He serves as a consultant to several global companies including Accenture, Amer Sports, Borealis, Cisco, Coca-Cola, HP, Hitachi, IBM, IFC, Jaeger-LeCoultre, Morgan Stanley, Motorola, NASA, Navis, Nestlé, Nokia, Pictet, Rio Tinto, Roche, Santander, Swarovski, Sara Lee, Tetra Pak, Toyota, and UBS.


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