Case-1

One of the biggest stumbling blocks encountered by a negotiator is to clearly understand the real issues as the root cause and basis for the negotiation in the first place. All too many times, negotiators take insufficient time to clearly identify and frame the problem or issues to be resolved and negotiated. This is the crucial first step to any negotiation. If this first phase of the negotiation process is not addressed properly, than it is quite likely that the rest the whole negotiation process will unravel because the core issues were not properly understood at the outset. Lets look at an example case study which emphasizes the need to define and identify the problem. In this example, a substantial electronics firm face considerable difficulties in one of their subassemblies. The root core of the problem revolved around certain types of fittings and pins that were becoming bent and distorted by the operation of the machinery. Units which were being produced were damaged and had to be rejected because of imperfections. These rejected components were put aside and then re-worked later on in the month. This duplication of effort resulted in increased costs as workers had to work overtime to meet their quotas. These extra costs for the extra work performed had not been considered in the manufacturing budget. The manager of this subassembly line did not want be charged with these overhead expenses because he felt it was not their responsibility. Likewise, the manager who was the overseer of the final assembly department also refused to accept the increased costs to his budget. He argued that the extra costs were a direct result of the poor work of the personnel in the subassembly department as this was where the problem originated. The subassembly department manager countered this argument by claiming that the parts were in good condition before they left his department and that the damage must have occurred in the final assembly managers department instead. Both parties had reached am impasse. Some time passed before a resolution to the matter was worked out that was agreeable to both parties. What both parties were really seeking was to find a long term solution to this dilemma. It was only when they truly understood the nature of the problem they were able to negotiate a reasonable solution that was acceptable to both of them. It was ascertained that the subassembly workers had some slack time available during every working month. The damaged parts were returned in small batches form the final assembly plant so that the subassembly personnel could work on them during these slack periods. Also, when they examined the problem in more minute detail, the managers learned that some of the personnel in the final assembly plant may not have been adequately trained and may have also been partially responsible for the damaged incurred. These personnel were identified and were sent to the subassembly plant to further their training and to learn more about what transpired in that department. The resulting solution addressed the increased cost concerns of both departments on the one hand. On the other hand, overtime was reduced by allocating the personnel where and when they most needed and finally, because of the enhanced training, the number of damaged parts was considerably reduced. The lesson to be drawn here is that the two managers were only able to address the problem when they were able to understand the real issues that lay beneath the problem as the cause for their cost overruns.

Case: 2 Third Party Intervener

This case study shows how a third party intervener can assist two dead locked

parties in a negotiation and find a resolution.

There are occasions when the negotiating parties cannot see the forest for the trees. They are unable to see past their own goals and interests which prevent them from arriving at a successful agreement in their negotiations. These are the instances when a third party intervener can help both parties find a solution to the dilemma that is plaguing their talks that have likely stalled in a stalemate with no possible resolution in sight. The Egyptian and Israeli conflict of the mid 1970s posed that kind of dilemma. There were also peripheral parties that also posed problems for the negotiators. Syria had grave concerns about the Palestinian issue while Israel had no particular desire to sit down and negotiate with the Palestinian Liberation Organization. Egypt had concerns about the growing influence of the Soviet Union in the Middle East Region. This tangle of opposing interests posed quite a challenge to the negotiators to overcome. However, extending the olive peace branch in hand, Anwar Sadat made his memorable and historic trip to Jerusalem to hold talks with the Israeli Prime Minister, Menachem Begin. President Sadat said he represented all of the Arab concerns in this matter and stated that he wanted all the Israeli occupied areas to be returned before normal peaceful relations could be established with Israel. Begin believed that a separate peace with Egypt would offer Israel some stability and a possible military advantage. However the issues were extensive and extremely complicated. It began to appear there was no resolution possible in bringing some stability to the region. However, despite the ongoing talks, the United States and in particular, President Carter and his Secretary of State, Cyrus Vance, saw a possible opportunity to offer their services to act as third party intervener and mediate a resolution. In the interim, most of Sadats Arab allies had abandoned the peace talks leaving Israel and Egypt to pursue their own talks. However, animosity began to build between Sadat and Begin and the whole situation began to look hopeless. President Carter and Cyrus Vance took the initiative and invited both Sadat and Begin to come to Washington separately where they met with both parties to discuss their respective issues, concerns and objectives in the Middle East. As negotiations went back and forth, it became apparent they could not resolve this on an issue by issue basis. The U.S. negotiators, acting as third party interveners, began the process of presenting a resolution package that is often described as single negotiating text, a device often used in multiparty negotiations. Each text is revised and gradually makes both parties more comfortable with each improvement made, thus allowing the contending parties to slowly find a middle ground upon which they both can agree. Finding neutral ground was crucial to this process, so the meetings between Begin and Sadat took place at Camp David in the United States. Eventually, both parties found an effective means to resolve their seemingly insolvable dispute when both Sadat and Begin signed the Camp David Accord. This historic agreement resulted in that poignant moment when both leaders and President Carter shook hands for the entire world to see.

Case:3 Win-Win Negotiation Badly Executed

This case study discusses some of the critical errors that can be made in a Management and Union Labour negotiation, where Management were trying to achieve a win-win negotiation.

In trying to create win-win negotiation agreements, one of the biggest mistakes made by negotiators is to deal with the issues on an issue by issue basis. This often results in a breakdown in negotiations because invariably, conflicting monetary issues arise that result in a showdown between the two parties. Negotiating on an issue by issue agenda does not present the opportunity to make concessionary trade-offs between the different issues. For example, in January, 1993, management and labour of Bayou Steel in Laplace, Louisiana, sat down to negotiate a new contract. Neither side dreamed that these talks would lead to a strike. Each side believed that they had built a solid relationship. Management went into the negotiations thinking and believing that if they used a win-win negotiation concept, they would increase and enhance the relationship between the shop floor and management. Even Ron Farraro, president of United Steel Workers of America did not conceive of the possibility that talks would collapse into a strike, and that a negotiated contract would be reached with little or no difficulty. Management of Bayou Steel enlisted the help of two facilitators from the FMCS (Federal Mediation and Conciliation Services) to guide management through a win-win style negotiation with its workers. The president of Bayou said that the facilitators helped them identify each sides objectives and concerns, and led him to believe that they had in effect, resolved 90% of the contract issues. The facilitators set up an issue by issue agenda. They left the economic issues such as incentives, base pay, overtime, and vacation time as the final issues to be discussed. Management believed that they had correctly addressed the employees concerns about these pay issues. However, union members became suspicious about managements good intentions to take a win -win approach. They began to believe collectively that this negotiation approach by management was a disguised ploy meant to undermine their position, especially on the economic issues. At first, negotiations went relatively well and as predicted. Yet, as the economic issues were placed on the table for discussion, the situation quickly turned upside down into a hard nosed bargaining negotiation. Management attempted to stay the course with a win-win approach, but this no longer washed with the union. Can you guess what happened? Thats right union members walked and went out on strike. By using an agenda to address the format of the contract negotiations, Bayou Steel failed to consider that any single issue could be so divisive. As the economic issues rose to the foreground of the talks, Bayou Steel no longer had leeway in considering trade-offs. They literally painted themselves into a corner because of their structured of agenda items. We need to be able to compare and contrast all the issues collectively, and by order of relative importance. Package or multiple offers offer a greater latitude in finding creative solutions as it gives us more to work with, as opposed to dealing with issues on a one-on-one basis through a predesigned agenda. Planning and using a Concession Strategy effectively can give one side a big power advantage over the other. So be careful to plan your agenda wisely.

Case: 4 The Importance of Business Communications

A case study that shows how a business relationship can fall apart when communications between the partners are not maintained.

The importance of keeping the lines of communication with ones business partner cannot be overemphasized. Both our domestic partnerships and especially our foreign partnerships are premised extensively of the degree and quality of the relationship that the parties have assumed. A relationship

can only survive if the parties involved maintain a line of communications. This concept becomes even more relevant when the partnership entails an international agreement where the enhanced distance between the partners will exacerbate the need to keep in touch. An executive can only keep on top of things if they are in contact with their partners because otherwise, how are they going to know whats going on? Secondly, the line of communications needs to be a two way process and should flow back and forth. It happens that too many international negotiators do not take the time, and dismiss the need to include some frank discussion in how the two parties will maintain contact with each other. They assume wrongly that the communication process will evolve all in its own sweet time. The time to discuss the line of communications is when the venture is being negotiated. They should not consider the issue later, and after the fact, when serious problems suddenly arise and challenge the viability and the stability of the joint venture. The other problem occurs when the two parties neglect to keep in touch with each and simply allow their interest in their agreement to wither on the vine, while the agreement simply falls apart due to a genuine lack of interest. Many joint ventures have collapsed or gradually fell apart needlessly due to a lack of communications between the parties involved. International agreements are especially prone to dissolution when the partners fail to maintain a respectable level of contact. Take the case that occurred between one particular U.S. company and their Japanese partner for example. The agreement that they signed stipulated that the Japanese company would supply the manufacturing, management, and marketing components of the deal, while the American company would supply the technology. The American representative, who was based in Hong Kong, met with their Japanese counterparts only once every three months where all aspects of the operation would be discussed.

In between these quarterly visits, the two parties exchanged communications through written correspondence and infrequent phone calls. To the Japanese partner, this periodic though infrequent contact signalled that the American partner was not overly committed to the relationship. Needless to say, the Japanese commitment to the partnership began to dwindle as well. As time progressed, the U.S. companys strategy altered as they began to concentrate on a smaller product line. The Americ an company never bothered to advise their Japanese partner of the change in their strategy. Also, due to this smaller line, there was the additional fiasco in that the Japanese company was not going to be receiving the technology it had negotiated with the American firm. The Japanese took a dim view of what they now perceived as an agreement that was signed in bad faith. The Japanese became bitter as the relationship soured and ended in arbitration. What was the result the arbitration? The partnership was dissolved. This illustrates the importance and need for communications. The American firm should have appraised their counterpart about the change in their strategy, but the Japanese should perhaps have communicated their displeasure earlier, rather than allowing their disgruntlement to fester. Never dismiss the importance and impact that a good line of communications can have on your business relationships, whether it be a domestic or a foreign relationship.

Case: 5 Using Mediation for Resolving Disputes

This case study shows how mediation can be more beneficial to a business relationship than other dispute resolution mechanisms.

Companies that find themselves embroiled in a bitter feud over a contract dispute have three options to find a solution. They can litigate their claim through the court system; go to arbitration; or use a mediator to resolve the dispute. Many companies have invariably used one of these processes to address a dispute. However, there are significant differences that should be considered before deciding upon which method to take. It probably goes without saying that litigation is likely the more expensive and is the most time consuming. Lawyers have a knack for tying up a case in a tangle of legal knots for years. The outcome is often uncertain and the resulting benefits can be nebulous at best. Arbitration, as it turns may not be that much more productive than litigation, as this dispute resolution process can also be both costly and time consuming for the participants. However, the effect and influence of arbitrators can vary quite significantly between countries and cultures. In some countries, arbitrators may be inclined to impose a settlement on the parties in dispute, and in other countries they may be inclined to facilitate a more amicable agreement. Arbitration may be a more proactive venue than litigation. One thing is clear about a dispute in a joint venture partnership though; there is little hope that the relationship between the partners will likely survive either process. Often, too many companies will resort to either of these first two options first. This may be a mistake. This brings us to mediation. Mediation is the least used process to resolve disputes. So, what are the similarities and the differences? First, a mediator is chosen by both parties, and will bring their own applicable expertise to the dispute process and an understanding for the basis of the dispute. More importantly, mediators are both neutral and objective. The mediator will use the resources of both parties to help both parties resolve their conflict. In other words, a mediator, more than anyone else, can help mend a contractual dispute and save a relationship. Lets look at an example. In Italy, a company called Nuovo Pignone, which manufactured heavy equipment, was being sued by an insurance company to recoup a claim they paid out to one NPs customers. The customer had lost business when some of the equipment it had purchased from NP failed in contract job. NP suggested they use a mediator. Both the insurance company and the customer who had sustained the loss agreed. A retired Italian judge was called in to mediate. The judge focused on settlement as his objective in the dispute. By taking this approach, the parties were able to more realistically gauge each others strengths and weaknesses. The customer was persuaded to put pressure on the insurance company as he was still a valued customer of both parties despite his dispute with NP. As a result, the insurance company was persuaded to settle for a reasonable amount for a reasonable and acceptable amount of money. In the end, all parties were satisfied through the mediators efforts and the business relationship between the parties was successfully maintained. A mediator can more readily help the parties shape or restructure their agreements and is thereby more likely to also preserve a profitable ongoing relationship than would have been achieved through either litigation or arbitration. Next time you enter in a dispute, check out the available mediation services before you give your lawyer a call and enter the point of no return

Case: 6 Power Negotiation

This case study shows how a weaker negotiating partner can successfully use power negotiation to win a good agreement with a stronger negotiating partner.

There are many occasions when a smaller company will want to form a partnership with a larger organization to further their business objectives. There are two hurdles that the smaller company

might have to overcome to succeed in the negotiation process. The first problem is to get the larger organizations attention as they may express little or no interest in the partnership. The second problem revolves around the prickly issue of negotiating from a much weaker power base. There exists the danger that the smaller partys business goals arent overwhelmed by the more powerful negotiating partner during the negotiation process. Although the following case study entails a similar problem faced by two countries, the lessons learned can be applied to any similar business negotiation model. On October 3, 1987, The Free Trade Agreement (FTA) was signed by representatives of Canada and the United States after two strenuous years of intense negotiations. Canada could be described as a medium sized economy. Its population is 1/10th the size of the U.S. which is considered an economic superpower in comparison. Canada is economically dependent on the United States. The reason is mainly due to its small domestic market, scattered over a vast geographical locale. More than 75% of its exports go to the U.S. making the U.S. Canadas prime trading partner. By contrast, the U.S. was exporting less than 20% of its products to Canada. In the 1970s, Canadas economic health rose and fell like the proverbial yo -yo. It was too resource based and needed to add some meat to its manufacturing industry to stabilize the economy. A Royal Commission concluded that Canadas only means to achieve this stability was to engage in an open free trade partnership with the United States. The problem was that the United States wasnt especially interested in such a free trade partnership agreement. The U.S. was in addition also becoming increasingly protectionist during this same time period. The result was that Canada was facing a whole host of penalties and countervailing actions against Canadian goods. Canada clearly needed a plan. The first step that Canada took was in the form of preparation by developing a succinct plan. A chief negotiator, Simon Reisman, was appointed by the Canadian Prime Minister himself. He established an ad hoc organization called the trade negotiations office (TNO) which reported directly to the Canadian Government Cabinet and had access to highest levels of bureaucracy. It established in no uncertain terms their negotiation goals and objectives which included a strong dispute resolution mechanism that the Canadians felt were vitally important to their success. In contrast, the United States did not consider the FTA to be especially important and let Canada do all the initial work. The only reason why the U.S. Congress even considered the FTA proposal was that they liked the idea of a bilateral approach to trade and were tired of the previous mechanism that failed to settle a host of trade dispute irritants between the two countries known as GATT. It would also allow freer access to other segments of the Canadian economy. President Ronald Reagan decided to fast track the negotiations and appointed Peter Murphy to represent their interests. The U.S. was also concerned about the growing hegemony of the European economy. Strong differences in interests and approach dogged the negotiations. The Canadians used every advantage available including the use of Summit meetings between the leaders of both countries to emphasize their concerns at every opportunity. Yet, the political powers in the U.S. dragged their feet to such an extent that the Canadian negotiators walked away from the talks to express their displeasure. This put some heat on the U.S. administrators to the extent that U.S. Treasury Secretary Baker took over the negotiations. As a consequence, the talks between the two countries were successfully concluded. Several concessions were made by both countries. The U.S. opened up a larger investment segment in the Canadian economy and removed some of the more time consuming trade irritants. The Canadians achieved their main goals of getting freer access to the U.S. economy, while implementing a strong trade dispute resolution method. The Free Trade Agreement between the two countries created the largest bilateral trade relationship in the world. Canada achieved its objectives because of its detailed planning and the intense focus of its negotiating team despite the asymmetry in power between the two nations.

Case: 7 Negotiation Overconfidence

This case study reveals how can negatively affect the outcome.

Successful business managers need to possess a high level of confidence to succeed and meet the many challenges they face in a fast paced and evolving business climate. There is a razor sharp line that exists between being confident in what we do, and slipping across this fine, hazy line into being becoming overconfident. Overconfidence is a serious mental error that lurks in the background like a banana peel lying innocently splayed on the sidewalk. Preoccupied with our own sense of self importance while talking animatedly on the cell phone, we dont notice this innocent looking trap until weve fallen flat and solidly on our backside. Not only were we not paying attention, we also miscalculated by assuming the way was clear. Making assumptions or jumping to a false conclusion stems from overconfidence. It often leads to calamity, or a very bad case of Oops! RJR Nabisco was having a bad year with its stock performance. The CEO of the company, Ross Johnson thought that this was an opportune time to attempt a leveraged buyout to increase the shareholders value of the stock. He, and his management group, entered into negotiations with the board of directors special committee that had been assigned with the particular task of finding ways to maximize the shareholder value. Since he was the CEO of Nabisco, Johnson was confident, that because of his close ties to the company; his buy out attempt would be the proverbial no-brainer. He out stepped his confidence and found the banana peel instead. His overconfidence led him to fall into the trap of making assumptions and jumping to an erroneous conclusion. His first mental lapse was to assume that his company connections would automatically give him the go-ahead to make the buy-out happen. He made the second mistake of assuming that his investment bankers would simply have to put the financing in place, and that the RJR board of directors would also give him the power to manage the buy out. So, together with his main financial partner, Shearson Lehman Hutton, he offered an initial buyout price of $75.00 U.S./share. The initial offering meant that his management team would only have to put up $20 million dollars or 8.5% of the total offer. If the board acceded to this offer then Johnsons management team would receive 18% of the companys total equity. Johnson was also insisting that the 18% would be divided equally amongst the 15,000 personnel who were employed for RJR Nabisco. However, he neglected to mention that in reality, only six names actually appeared as the real beneficiaries of the transaction a real but unintentional Oops! So stroked by his overconfidence in closing the buyout he moved ominously close to the waiting banana peel because he wasnt paying attention to several occurrences that were transpiring in the meantime. First, the board never discussed or made any concessions with Johnson or his financiers. Johnson also never even conceived there were any other players who might also be interested in buying Nabisco. In truth, he had so alienated the board with his attitude that they eventually awarded the buyout bid to an investment banking firm, Kohlburg, Kravis, and Roberts (KKR) for $109 million dollars. One might think they were making the higher bid, right? Wrong! KKRs bid was actually lower than Johnsons bid. The board was so ticked off at Johnson that they took the loss instead because they appreciated KKRs negotiation flexibility, and believed that KKR would have a more positive influence on the company rather than Johnsons arrogance and overconfidence. So the moral of the story is that when you become overconfident and full of yourself, just remember theres almost always a banana peel lying there in wait .

Case:8 Distributive Negotiation

This case study shows how most out of court settlements are resolved through a distributive negotiation style.

A distributive negotiation will focus on the division of a set amount of resources, largely determined by the aspiration price (the maximum that party A would like to get, and which is also the least amount that party B would like to pay), and the reservation price (the least amount that party A would accept, and the maximum that party B would prepared to pay). Well over 90% of all civil lawsuits in the America are settled out of court, and most are largely resolved through the application of a distributive negotiation. On a dreary, rainy night in October of 1968, a young woman was driving behind a lorry truck in the U.S. Perhaps impatient with the speed of the transport in front of her, the young woman by the name of Ms. Anderson steered her vehicle to peer around the lorry drivers side to see if the way was clear. Before she could react, she was struck head on from an oncoming vehicle from the opposite direction. Ms. Anderson sustained permanent and debilitating injuries as a result of this horrific crash. Just recently, she had retrieved her vehicle from Sorensen Chevrolet which she had been having some repairs completed. Unbeknownst to her, Ms. Anderson did not notice that her front drivers side headlight was malfunctioning. The oncoming driver who had struck her had not seen her on that dark misty night when the accident occurred. Mr. Miller, lawyer representing Ms. Anderson, held Sorenson Chevrolet as being liable for the accident and subsequently filed a $1,633,000.00 law suite against Sorensen. Sorensen had a faulty repair policy with an insurance company (which shall be called ABC Insurance). The policy had a ceiling of $500,000.00. Sorensen made it very clear to ABC Insurance that they would readily sue ABC if they settled for anything over the half million limit of the policy, urging them to settle out of court. Miller, the plaintiffs lawyer countered that he would not accept an out of court settlement for anything less than the maximum half million allowed under Sorensens insurance policy. ABC went to court and won a summary judgment where the decision rendered entailed that the plaintiff had no legal basis for a trial. ABC made a tentative offer of $25,000.00. Miller countered this with a demand for $400,000.00 and had in the interim, appealed the courts decision not to hear the case. ABC upped their offer to settle at $50,000.00. In December of 1973, the appeal was heard. The Appellate Court reversed the decision and the summary judgment was overturned. The case could now be heard before a jury which turned the game around. Miller, once again demanded the full half a million. It was not until February of 1973 that ABC upped their offer to $200,000.00 which was rejected, and then upped their offer to $250,000.00. Miller lowered his demand to $400,000.00, as a counter offer. This was rejected by ABC, and he then lowered it again to $350,000.00. The time factor was beginning to play on the plaintiff, and Ms Anderson was becoming risk averse to the whole negotiation process. In January of 1975, Miller told ABC that the bottom line settleme nt that he would accept would be $325,000.00. ABC said they would go to trial over the difference. It was virtually on the court steps that ABC discovered that Miller had been replaced as Ms. Andersons counsel. Her new attorney offered ABC another bottom settlement of $300,000.00. ABC agreed to the settlement.

Case: 9 Negotiation Alliances

This case study shows the importance and power of forming alliances within a multi party negotiation.

In multiparty negotiations, the negotiation power, or the position of one negotiating party, can be enhanced or weakened by making alliances. The use of alliances is a powerful means whereby any member in a multiparty negotiation can strengthen their own BATNA (Best Alternative to a Negotiated Agreement), or weaken the BATNA of an opponent. The advantage of forming an alliance allows two or more parties to come together on one more issues where they share a common interest. This allows the alliance to present a common front on positions of mutual interest in opposing the position of another party at the negotiation table. The drawback to forming an alliance is that if a side agreement is reached which addresses some other issue of importance to a member of the alliance; they may simply withdraw their support and thereby weaken the alliance at any given moment. It is important to keep in mind that everybody involved in an alliance be fully aware of all the aims and goals of the parties with whom they are about to form an alliance. It is especially important to keep in mind the most important aims of the perspective partners, and be cognizant of any weak areas that can be exploited by their partners. Otherwise, you end up getting caught in their counterparts gambit to divide and successfully exploit your weakened position in return. Conocco, an American company, had developed plans to commence operations to drill for oil in a national park located in the rain forest of Ecuador. The government of Ecuador agreed to the Conoccos plans because it was in great need of the oil revenue that the drilling operations would produce. However, the plan was fiercely opposed by a number of human rights groups, and also by various environmental groups. These groups formed an alliance in a common cause to stop the drilling as this was their main intent. The alliance of the environmental and human rights groups initiated a very powerful and public campaign against the oil drilling plan. As a result, public opposition had swelled against Conocco and the government. To counter what the opposing groups were doing to block their drilling in the rain forest, Conocco sought to break up the alliance formed against them. Conocco began to hold secret negotiations with some of the more moderate members of the environmental groups by presenting them with what Conocco believed to be a very responsible and environmentally management plan. They were using a divide and conquer tactic in other words. Not to be outdone and perhaps realizing what Conocco was trying to achieve, the remaining environmental and human rights groups applied the same kind of divide and conquer tactic on their own. They took a different approach and applied pressure directly against the government of Ecuador to withdraw their support for the project. Conoccos tactics were ultimately and successfully nullified because in the end, Conocco withdrew from the drilling project. This is a clear lesson in how effective an alliance can be in achieving a compatible objective. It also reveals how such tactics can be countered, and that the alliance members always had to be on guard for these diversionary manoeuvres by the opponent.

Case: 10 Group Negotiations Style

This case study show what happens when management fails to use group negotiations to resolve their competing interests.

Many people tend to believe that the people in charge of the companies or the organizations with whom we are employed are always working as a team and are united in achieving and working for the same goals and objectives. We like to believe that our management team has our companys best interests at heart. Well, sorry to stick a pin in this cozy balloon and burst your illusions, but this is not always the case. It occurs more often than one might think. Department heads and executive management sometimes succumb to the empire building delusion or Napoleon complex instead. They come to believe that their department is more integral and important to the success of the company than the other departments. They become like amnesiacs who suddenly forget the team concept notion, ignore or neglect group negotiations, and become full of their own self aggrandizement instead. This attitude can seep into the mentality of larger corporations like a mould silently spreads behind the drywall of your house. One day your family seems fine and healthy, and the next day, everyone is feeling ill and out of sorts without knowing why. The unseen corruption has spread and infected your entire household, and the only way to fix your once happy little home is to literally gut the entire insides. Back in the 1850s, Lehman Brothers was formed and became a vital and affluent trading house on Wall Street. Unfortunately, some 134 years later, the company fell afoul of misfortune and had to be sold to avoid bankruptcy. Part of the downfall occurred because of the intense enmity between Peter Peterson, chairperson of the banking department, and Lewis Gluckman who was the head of the trading department. This rivalry between the two departments had become deeply rooted over time and is said to permeate many other trading houses on Wall Street. It is quipped that traders are often described by the investment bankers as poorly educated dronesthinking of the moment, not the long term. On the other hand, it is said that the traders describe the bankers as elitist Ivy League preppies who rise late [and] take leisurely lunches. One can now foresee some of the basis for the hostile rivalry that was taking place in Lehman Brothers. Interestingly enough, the bankers and the traders worked in different buildings as well. Generally speaking, it was an unspoken belief in the firm that the traders were considered subordinate to the bankers, but it was the traders who were generating the greater amount of income at Lehman Brothers. As the rivalry intensified, both Gluckman and Peterson struggled for supremacy within the company. They both began to seek out alliances to enhance their respective positions. As the power coalitions built, Gluckman and his coalition prevailed and won the turf war. The trading department under Gluckmans control began to act unilaterally. They bypassed the board of directors and made their decisions by majority rule, refusing to negotiate their decisions with Peterson and the banking department.

When market conditions deteriorated, Lehman Brothers was sucked into the whirlpool because the traders were making decisions that were in their best interests .

Case: 11 Creative Problem Solving in Negotiations

A study that shows how effective creative problem solving can benefit any negotiation.

All too often, negotiators can become tied up and bound as they commit to taking a competitive approach to their negotiation. As a result, they don't allow themselves to be flexible nor consider a creative approach to derive more value from the negotiations. On the other hand, a common error committed by those who believe they are taking the win-win approach to their talks is to overcompensate their need to find agreement by making unwise compromises. A compromise invariably means that both resources and money will likely be left on the table, unclaimed by either party. Heres how two west coast energy producers, Southern California Edison Co. and Bonneville Power Administration created a joint partnership through creative problem solving whereby each party met their objectives. In 1991, the two parties conceived of a way to help the Columbia River salmon in the Pacific Northwest, while improving the polluted air of southern California, and they managed this feat without spending any money in the process! Heres a prcis of this very unique and imaginative problem solving that illustrates the powerful benefits of the create process at work. During the summer months, Bonneville Power would increase the flow of water into the Columbia River. This would automatically increase the amount of hydroelectric power generated by California Edison. The increased flow of water allowed the young salmon to swim through the channels more easily. It also increased their survival rate because a weaker current made them more prey to becoming lost or more vulnerable to being devoured by predators. Later, in the fall and winter months, California Edison returned the power back to Bonneville Power Administration that it had borrowed during the preceding summer months. As a result, Bonneville had very little need to run its coal-fired and oil plants during the summer months. This was truly a win-win agreement. The exchange of power, roughly equivalent to about 100,000 households improved the migration of the salmon, thereby increasing their survival rates and expanding the fish population. Additionally, air pollution was reduced significantly as Bonneville didnt have to resort to smog producing plants during the stifling and oft smoggy summer months that normally occur. What kind of impact? It's been estimated the saving was about equivalent to taking about 5,000 cars off the highways. The best part of all was that absolutely no money exchanged hands in the entire process. Pretty smart, eh?