The One True Limit To Making A Deal

World-renown negotiator Chester Karrass once said, “successful people are successful negotiators . . . it's as simple as that.”

In 2012, Kiewit, an international general contractor sent me on a negotiation-training seminar run by Karrass, as part of its leadership development program. Over the last 48 years, more than 1,000,000 professionals from over 10,000 companies have attended Karrass seminars.[1] In the seminar, Karrass argues that your agreements, understandings, and relationships make the difference between success and failure. You need the right skills for the job, whether you are determining, closing, persuading, setting, finalizing and administrating, working, managing and supervising, breaking or avoiding. You need to fully understand your position, as well as the position and pressures of the other side. You need to be ready with an arsenal of tactics and strategies.[2]

In my third year at law school, I took a class designed to develop interviewing, counseling, and negotiation skills. The negotiation section of the course required students to engage in a mock negotiation. The negotiation was based on an employee-employer contract. Half the class took the side of Keith Blatter, an infamous New York restaurant owner. The other half took the side of an up and coming west coast chef, Amy Walkoveak. The facts established that Blatter owned a prestigious restaurant that was in financial decline, and that Blatter had an appreciation for culture, and was detested by a recent New York Times article, which referred to his restaurant as “touristy.”

On the other side, Walkoveak was a prestigious west coast chef working in Seattle, who had already received four offers to take control of other restaurants around the country. But Walkoveak wanted to grow her brand by working in the Big Apple. While time was not of the essence for Walkoveak, she wanted to get a deal done. My partner in the mock negotiation and I represented Walkoveak.

Before the negotiation began, our side identified Walkoveak’s three major decision making criteria, which were: (1) improving financial security; (2) artistic control over cuisine; and, (3) a challenge, and an opportunity to grow. We acknowledged that Blatter’s New York restaurant was uniquely qualified to satisfy Walkoveak’s needs. After establishing Walkoveak’s key decision-making criteria, we identified each side’s best alternatives to a negotiated agreement. For Walkoveak it was obvious, taking an offer to run a new restaurant opening in New Orleans. It satisfied all major decision making criteria, and only lacked the New York prestige. On the other side, we believed that Blatter’s best alternative to a negotiated agreement was to either offer the position to a lesser-known chef, or, close down the restaurant. In other words, both sides had an alternative that included walking away.

During our side’s pre-negotiation meeting, I remembered the closing remarks from the Karrass seminar. Karrass made three interesting points: (1) in a negotiation, all sides have some pressure points; (2) approach every negotiation thinking “both-win” (translation, don’t think bigger slice, think bigger pie); and, (3) everything is a negotiation. My law school mock negotiation proved at least one of these principles true: From the start, everything was a negotiation.

"Spiritual High" As Evidence Of "Mutual Assent"

Before negotiating with the other side, you have to negotiate with your side. A pre-condition to your side’s chance for success is "mutual assent" to a strategy and tactics. Contract law scholars have long debated how mutual assent (i.e. the precise moment of agreement) in fact manifests itself, from an ordinary, reasonable, and prudent outsider's perspective. When exactly is the moment in time when an offer is accepted, and a deal is struck?

The law applies an "objective test" to answer that question. In 1897, revered Justice Oliver Wendell Holmes pointed out the test's impossibility, since the “meeting of the minds” from an objective perspective, is really just a fiction:

"We talk about a contract as a meeting of the minds of the parties, and thence it is inferred in various cases that there is no contract because their minds have not met; that is, because they have intended different things or because one party has not known of the assent of the other. Yet nothing is more certain than that parties may be bound by a contract to things which neither of them intended . . . In my opinion no one will understand the true theory of contract or be able even to discuss some fundamental questions intelligently until he has understood . . . that the making of a contract depends not on the agreement of two minds in one intention, but on the agreement of two sets of external signs — not on the parties' having meant the same thing but on their having said the same thing.”

Holmes argues that what is important is not what is meant, but rather what is said. So, understanding the true theory of contract requires the ability to read external signs. Holmes' statement explains the philosophy behind the objective theory of contract formation. But what about the truth, the subjective insider position?

In our side’s pre-negotiation meeting, I explained that I thought the negotiation would run more effectively if there was a plan, and the negotiation was well structured. Since the employment contract negotiation was complex, with at least ten independent elements of negotiation, I believed that a well-structured negotiation would help to achieve the goal of getting a deal done. My partner and I experienced the feeling of mutual assent!

It can feel like a breath of fresh air when negotiating with a like-minded party. While brilliant jurists like Holmes, and the law must, continue to struggle to calculate the manifestation of mutual assent through external signs, from a subjective analysis it is rather easy. The true moment of mutual assent occurs when parties to a deal experience a kind of rush, a "spiritual high." Of course, since this feeling of rush cannot be proved in a court of law, courts remain stuck analyzing outward acts, conduct, expressions, speech, and manifestations of the parties to determine if mutual assent has occurred de jure. Since the law demands these external signs as proof of mutual assent, a lawyer would be wise to study these signposts in a negotiation along the path to a deal.

My strategy and tactics to approach the negotiation was met like a breath of fresh air from my side. Unfortunately, the other side was not so impressed.

Taking The High Road To Get Around The Roadblock

A few minutes after meeting with the other side, my partner and I realized that the path to mutual assent was going to be difficult. To help explain the nature of the roadblock we faced, consider the following metaphor:

Two guests call a chef to make pasta sauce. The chef has never made pasta sauce for the two parties before. But the chef knows that physiologic studies show that there are only four sensations of taste: sour, salty, sweet, and bitter. Before beginning, to satisfy both guests, the chef asks each guest whether she likes sour, salty, sweet, or bitter pasta sauce. Simplifying the chef’s deal, luckily, both guests prefer a sweet-tasting pasta sauce. The chef sets out to make the sauce. He lays out the usual ten ingredients: tomatoes, garlic, oil, onions, meat, Italian seasoning, salt, pepper, etc. With objectives aligned, and all ingredients set out before him, the experienced chef begins to synthesize. Just because the chef begins by adding salt, doesn’t mean he won’t return to that ingredient. The chef adds some of this, and then some of that, creating combinations, tasting, and revising, to achieve the ultimate goal: to create a sweet-tasting pasta sauce for the guests.

This is how my partner and I attempted to frame the negotiation. Begin by aligning objectives. Lay out all the ingredients. And use our collective experience to synthesize. Giving here, to get there. Ultimately, trying to create a combination that satisfies our clients. Unfortunately, the other side firmly rejected the plan. They insisted on a linear approach. They wanted to control the discussion, and negotiate linearly. Begin with salary, and negotiate salary until it was settled. Then move on to life insurance, vacation, etc. The ultimate objective was never raised.

Instead of agreeing on the ultimate objectives (ex. our side’s need for artistic control, versus the other side’s need for financial reasonableness), the other side took a headfirst dive into discussing salary. Imagine that the chef in the metaphor began to make a pasta sauce without determining the guest’s desired taste. How could he satisfy them? Imagine the chef in the metaphor was allowed to use salt to season the sauce, but only once. Why would the chef restrict himself in such a way? By laying out all the ingredients, the chef has the tools to be creative. He can add some Italian seasoning, and if it doesn’t get him closer to the ultimate goal, he can return to it later, if needed. The chef can keep working with the ingredients, applying his experience, limited only by his creativity. Despite our best efforts to explain the wisdom of a well-structured negotiation, the other side refused to compromise.

My partner and I exchanged a, “let’s take the high road,” look. We conceded, deciding to try to shape the negotiation in real time. Interesting, sometimes the hardest negotiation, is negotiating the negotiation.

Limited Only By Creativity

Not surprisingly, without a plan, frustration set in early. The first point of negotiation produced a roadblock. Five minutes later, the other side had already stated: “that’s all we can do,” “that’s as high as we can go,” and, “sorry, there’s nothing else to say.” In other words, take it or leave it.

The other side’s insistence to negotiate each element linearly limited our collective creativity. Deadlock loomed. My partner and I privately convened. We agreed that if we had any chance to avoid a deadlock, we had to keep the discussion going, and had to think outside the box. Sometimes a chef needs to look beyond the ingredients, and into the pantry to find a solution.

Sometimes creative solutions need time to develop. We openly talked about what was missing. After a few minutes, a breakthrough happened. Both sides agreed that a form of performance-based profit sharing tied to revenue increases could bridge the widest gap in the deal, financial security. Neither side was authorized to accept performance-based compensation, so we agreed to meet again later in the afternoon, after discussing with our respective clients. The group left the meeting optimistic.

Fundamentally, lawyers are dealmakers. Getting a deal done requires creativity, the ability to think abstractly, to resolve issues. Steve Jobs once said:

“Creativity is just connecting things . . . the ability to connect experiences, and to synthesize.”

Like a good chef, a good negotiator is creative. Sometimes he looks beyond the ingredients, to possibilities in the pantry. He’s careful not to take anything off the table. It’s given, sure, ingredients are finite. But there’s only one true limit to making a deal: creativity.

Citations

[1] http://www.karrass.com

[2] Id.