H ESSELBE I N & C OM P AN Y

The Four
Pillars of
Effective
Negotiation
b y Me l an ie B il l in g s - Y un

A
while ago, I was contacted by the director of a youth center I had met when
conducting a negotiation training session for community organizations in devel-
oping countries. He was visiting my city and wanted to know if he could come
by to ask me a few questions. Thinking he wanted some follow-up advice on negotiation,
I invited him to drop by my office. The man arrived, launched into a slide presentation
on his center and its activities, and then asked how I could help them. Confused, I asked,
“Help in what way?”
He pulled out a list. “We are asking for donations for . . . ”
I felt ambushed and exploited. Needless to say, this meeting did not yield the donation the
director was looking for. Instead, I gave him some tips on better ways to approach future
donors, then hustled him out as soon as I politely could.
What had gone wrong? It was not that the center director was unprepared, precisely. He
had produced the presentation, compiled a list of needs, lined up possible donors, and set
up meetings. The problem was that his preparation had consisted only of developing his
own message. The director had approached me with his eyes fixed firmly on himself and
his interests. As a result, I felt like nothing more than a mark—the object of a one-sided
transaction.
Effective negotiation needs to begin from an understanding that there is more than one
party at the table and that, like you, that other party has interests and concerns. This ap-
plies whether you are seeking donors, negotiating budgets, or hoping to inspire employee
cooperation in implementing a change plan. It is naive, even arrogant, to expect others to

summer 2010 11
buy into your vision simply because it appeals to you.
Rather, all parties in the process need to feel that they
too benefit and that their contributions are balanced
with gains.
Relationship-based negotiation sets an even more am-
bitious target. Instead of focusing on a single transac-
tion, it aspires to develop the mutual trust, reliability,
and future cooperation that will create value stretching
far beyond the immediate deal. As I note in Beyond
Dealmaking: Five Steps to Negotiating Profitable Rela-
tionships, such a strong and enduring edifice is con-
structed on four central pillars: a focus on relationships,
outcomes, solutions, and fairness.
Build a Productive Relationship
The aim of relationship-based negotiation is to find
ways to collaborate with others so as to benefit yourself
now, throughout the life of the agreement, and ide-
ally into the next agreement, even when the situation
changes or problems arise. To create effective collabo-
ration you must start by inspiring cooperation. Coop-
eration is far more dependable and easier to achieve
when others feel that you have their interests at heart as
well as your own. In the end, they must feel that they
too are benefiting from working with you.
An example of this collaborative approach is natural
food retailer Whole Foods Market. Among its core val-
ues is “creating ongoing win-win partnerships with our
Effective negotiation begins
from an understanding
that there is more than one
party at the table.
12 leader to leader
suppliers.” This isn’t a pious aspiration. Whole Foods
partners with vendors to develop new products and
reduce production and distribution costs; shares ideas
on how to become greener; and provides advice and as-
sistance in packaging, marketing, and media relations.
Whole Foods’ philosophy is to treat its suppliers with
respect, to understand their concerns, and to listen to
their views.
Why go to all this trouble when it is hard enough just
managing your own agenda, much less bearing others’
goals in mind? Because relationships work both ways.
Those strong supplier partnerships saved Whole Foods
from ruin when, in 1981, its flagship store was badly
flooded, wiping out its inventory and damaging much
of the building and equipment. The young company
at that time was uninsured, a surefire trigger for a raft
of lawsuits. Instead, the retailer’s creditors and vendors
worked with the store management to help it reopen
just four weeks later. Today Whole Foods has grown
from the single store it opened in Austin, Texas, in
1980 to 270 outlets across North America and the
United Kingdom.
What are the keys to building a productive relation-
ship? As I advised my acquaintance from the youth
center, relationship-based negotiation doesn’t start
with hello. Rather, it takes place in three stages, two
of which should begin well before opening words are
spoken:
•• Understand: Learn everything you can about the
other party and the issues that concern them.
•• Anticipate: Develop appropriate approaches,
imagine likely reactions, and prepare compelling
responses.
•• Connect: Communicate with people from the
other side as partners; listen to their views, show
an understanding of their concerns, build mutual
empathy, and work together to resolve the issues
dividing you.
If nothing else, remember that the people you are
seeking to influence are not interested in hearing what
you want. They want to know why they should care,
how they will benefit, and why they should agree. It’s
hard to provide answers to those questions unless
you’ve spent some time looking at the world from
their perspective.
The people you are seeking
Pursue Outcomes, Not Points
Have you ever had a conversation with someone who to influence want to know
was fixated on getting you to agree to every point, no
matter how small? What about someone who lectures
you on every perceived flaw in the way you think or do why they should care, how
things? Do they persuade you? The problem with these
approaches is that they are aimed at making points
rather than achieving a positive outcome: gaining your
they will benefit, and why
honest acceptance and willingness to carry out the
agreed terms. they should agree.
One of my clients opened my eyes to the importance
of looking beyond points to outcomes. Mr. Choi had a
thriving business importing American meat, which he
sold to Western restaurants and chains across Korea.
When Choi came to see me, he was gripping the letter
For several years he had bought beef from a supplier in
tightly in his shaking hand. “I’ve given these people
Texas, his orders growing each year. However, things
my business for four years,” he fumed. “I even invited
changed suddenly in November 1997 when Korea was
them to stay in my home! Now, the first time I have a
hit by the Asian financial crisis. Overnight, Korean cur-
problem they send me this?” He flung the letter onto
rency dropped to less than half its value. Banks called
the table in disgust.
in loans in hopes of avoiding collapse. Worst of all for
Choi, the Korean public reacted with an intense wave In fact, we quickly resolved the dispute, but the bad
of nationalism, boycotting all foreign products and taste remained. Within months, Korea was on its way
businesses. By December, usually the busiest time of to economic recovery, and Choi was able to recom-
year in the food industry, the only people to be seen in mence his orders. However, from then on he kept them
foreign-linked restaurants were the staff. at the minimal level specified in the contract and, once
he had concluded the contract, he ceased all business
Reeling from the one-two punch of currency devalua-
with the Texas supplier. Over the next years the Ko-
tion and customer desertion, Choi wrote his supplier to
rean economy thrived and Choi’s business boomed.
say that he would have to cancel the orders he had con-
However, it was another meat supplier who reaped the
tracted for the next several months, until the economic
benefits.
situation in Korea improved and the boycott was called
off. He expected some understanding, perhaps words of The Texas company had focused on points at the ex-
support. This was, after all, a national crisis, not a busi- pense of outcomes. While it was fully within its rights
ness failure—and the supplier, as its management had to enforce the terms of the contract, its managers
stated many times, was his “valued partner.” Instead, had missed the bigger picture. By treating a business
he was stunned a few weeks later to receive a letter of partnership as nothing more than a set of contractual
demand from the company’s lawyers, setting out point terms, they failed to connect with Choi as a human
by point how he was in violation of the contract and being facing difficult but temporary conditions, thus
warning him that, if he didn’t immediately rescind his sacrificing the good will that would have led to much
cancellation, they would sue. greater business profits down the road.

summer 2010 13
It is imperative to look hard to see whether the specific
terms you are pursuing will lead to the outcome you
desire. Fundamental questions to ask include:
•• Why do I want this term or provision? What will
it help me achieve?
•• Does it conflict with or imperil any of my other
goals?
•• Are these terms implementable?
•• If the terms were to become public, what negative
repercussions might they set off?
Focusing on outcomes doesn’t mean ignoring com-
mitments. Commitment is what differentiates healthy
partnerships from transactions. However, instead of
passing the issue to their lawyers at the first sign of a
problem, the senior management could have spoken
to Choi personally and collaboratively, opening the
door to joint and productive problem-solving, possibly
even finding new areas for mutual gain. Instead, they
sent a message that effectively told him, “We’re not
interested in your problems, only in maintaining our
terms.” The outcome was that the Texas company not
only lost Choi’s loyalty and the profits their relation-
ship would have generated over the long term, it also
suffered a reputational loss as Choi recounted his tale
of fair-weather friends throughout his wide business
network.
Seek Solutions, Avoid Blame
Point-winning contests don’t just divert our attention
from our desired outcomes, they also mire us in con-
flicts. Instead of pursuing creative and effective solu-
tions, we blame the other party for being unreasonable
and dig in even further. Negotiation becomes a private
battle for victory.
Problem solving is the skilled negotiator’s greatest
asset. If instead of trapping ourselves in either/or
contests we focus on achieving both/and solutions, a
myriad of possibilities present themselves. Our energy
moves from fighting battles (“Either you get your
way or I get mine!”) to finding solutions (“How can
we satisfy both of our concerns insofar as possible?”).
Once we put our minds to problem solving, we are
14 leader to leader
Arguments over who’s
right and who’s wrong
are counterproductive in
business relationships.
able to work out our differences in a fraction of the
time we would have spent fighting—with a much
greater likelihood of our working together positively
in the future. Moreover, the solution is often better
than either of the two one-sided options would have
been on its own.
Here’s an example. The CEO of a midsized retail chain
called me regarding a dispute it was having over cracks
that had recently developed in the walls of its ware-
house. Convinced that the cracks were caused by the
pile-driving at a nearby construction site, the ware-
house manager had written a letter to the supervisor of
the site, accusing him of causing the damage and de-
manding compensation. Naturally, the accused denied
all responsibility. Frustrated, the warehouse manager
escalated her demands: to compensation plus an admis-
sion of responsibility for any as yet unknown damage;
and, when that got no response, to compensation plus
an admission of responsibility as well as an apology.
She was met with a wall of silence.
Seeing no end to the dispute, the CEO asked me to
help him craft a different approach. We quickly es-
tablished that the biggest concern from the company’s
point of view was that it was shortly putting the ware-
house up for sale and a good appearance was necessary
to get a decent price. In other words, it needed the
cracks repaired as quickly as possible. That was it!
Putting himself in the other party’s shoes, the CEO
could appreciate that the construction supervisor would
fiercely resist any apology or admission of liability and
would stand firm against what he viewed as exorbitant
compensation claims. However, he probably wanted
the problem to go away as much as my client did. Most
interestingly, he had a site full of construction workers
and materials that might provide an easy solution.
With those thoughts in mind, we drafted a new let-
ter, this time from the CEO. It began by apologizing
for the sharp tone of the previous letters. Such acri-
mony among neighbors never benefited anyone, the
CEO wrote. He then explained the problem and the
chain of events leading up to it—cracks in the walls
of his company’s warehouse had formed shortly after
the pile-driving had begun—but he did not insist that
there was an absolute connection between the two. He
neither cast blame nor demanded money. Instead, he
asked whether, as a gesture of neighborly goodwill, the
contractor could send over some of his construction
crew to repair the cracks. Two days later, the building
supervisor called to set a time for his crew to make the
repairs. They fixed the cracks that weekend. They even
repainted the exterior. Both sides were happy to resolve
the issue and get back to business. In two days we had
solved what the warehouse manager had been fighting
over for more than a month.
Although engaging in arguments over who’s right and
who’s wrong may have a hallowed tradition in the
courtroom (and the playground), it is counterproduc-
tive in business relationships, where we are seeking
to maximize cooperation. You don’t build honest co-
operation by forcing another party to admit to being
wrong. Genuine victory comes when you can work
together to solve the problem.
Focus on Fairness
While many people see negotiations as games, there is
a key difference. A game is over when the closing bell
rings and a winner is announced. However, negotia-
tions are just the beginning of a relationship, in which
you need the cooperation of the other party to get the
agreed result and to build or safeguard your reputation.
Doubts about the fairness of the agreement or resent-
ment over perceived ill-treatment during the negotia-
tion can lead to a much less pleasing outcome than the
one you thought you had won.
The central concern of any negotiator should not be
merely to reach an agreement, but to reach an agree-
ment that will be carried out fully and voluntarily. Most
agreements that fall apart do so because the people
on one side—moral, conscientious, reasonable people
in most cases—decide that they were treated unfairly
in the original agreement. Fairness is not just a nice
word or perfect-world ideal. It’s a basic emotional
need, hardwired into our brains. We reject coopera-
tion with—or even seek to get back at—those we feel
have taken advantage of us.
Broadly speaking, our need for fairness kicks in at three
different stages. Sidestepping any of these can break an
agreement or even a relationship:
Process fairness—the way the negotiation is conducted.
For example, do all parties
•• Have a chance to voice their views and be listened
to respectfully and empathetically?
•• Feel their concerns are being taken seriously?
•• Receive accurate and reasonably complete infor-
mation?
•• Receive sufficient explanations to help them un-
derstand and accept arguments made to them?
•• Feel they have a role in the decision-making pro-
cess?
•• Have sufficient time to make thoughtful decisions?
Equity—the sense of a win-win deal. For example, do
all parties
•• Feel they have received a reasonable return for
their contributions?
•• Feel that everyone benefits to a degree comparable
to what each has brought to the table (balanced
against the realities of supply and demand)?
•• Feel that their benefits measure up to those re-
ceived by others in equivalent positions?
summer 2010 15
•• Understand and accept why any disparities in the
agreement are justified?
Follow-through—how the agreement is implemented.
For example:
You want an agreement
•• Are promises kept?
•• Does the outcome correspond to claims made dur-
that not only looks good
ing the negotiation?
•• Were mistakes corrected? on paper but keeps looking
•• Have the parties sought to maintain the spirit as
well as the letter of the agreement? good in practice.
•• Do the parties continue to communicate openly
and treat one another respectfully?
•• Is there reasonable flexibility in dealing with prob-
lems, new information, and unforeseen changes?
set scale or their personal contribution to the company.
Fairness doesn’t mean giving up on your goals. It
A fair business partner seeks an agreement that bal-
merely means being open, honest, and reasonable; of-
ances risk and creates reasonable profit for both sides.
fering explanations, legitimacy, and objective evidence;
A fair negotiator listens, explains, and responds to the
behaving in a way that is justifiable; and respecting the
concerns of the other side. The result is an agreement
value that all parties bring to the table. It means con-
that not only looks good on paper but keeps looking
sidering the relationship over time, not just how much
good in practice.
you can squeeze out of the immediate transaction.
It is quite straightforward, really. A fair employer ne- Relationship-Based Negotiation Yields
gotiates a pay package with employees according to a Strong and Lasting Returns
Negotiations based on these four pillars will be far
more likely than transactional dealmaking to achieve a
value-maximizing agreement that will bring you strong
and lasting returns. Benefits include
Consider the relationship •• Ensuring reliable and complete implementation
•• Creating more productive, cooperative, and sus-
over time, not just how tainable relationships
•• Building loyalty
much you can squeeze •• Reducing conflict and the high costs of conflict
resolution
out of the immediate •• Paving the way to future agreements
Moreover, as I advised the director of the youth center
transaction. before sending him on his way, you will benefit from
not having to spend so much time searching for new
business partners.

16 leader to leader
Melanie Billings-Yun is a negotiation consultant and the author of “Be-
yond Dealmaking: Five Steps to Negotiating Profitable Relationships.”
She has spent the past two decades assisting international companies,
NGOs, and public agencies in improving their internal and external rela-
tionships through negotiation. A former lecturer at the Harvard Kennedy
School, she now teaches at the School of Business Administration at Port-
land State University. Her Web site is www.beyond-dealmaking.com.

summer 2010 17