Challenging times bring challenging negotiations: legal negotiation skills needed in times of unprecedented change
Dr Claudia Winkler
The Negotiation Academy, Vienna
How to master legal negotiations in times of unprecedented change
As unexpected as it came, as unpredictable a future it leaves us with. We are negotiating business in a new reality. The Covid-19 pandemic has thrown people, businesses and countries into what could potentially become the most severe state of emergency and the biggest economic crisis of our lives.
The top deals of 2020, small and big, will be made by negotiators who remain flexible, creative and collaborative.
With a flood of legal claims on the horizon, many courts have shut or are limited to essential business. Closing deals and resolving conflicts in flexible and consensual ways have never been more important.
It will be lawyers well-versed in negotiation who will emerge with the fastest, most flexible and most beneficial solutions for their clients.
Here are my top seven tips for negotiating in the midst of the unknown.
Create a ‘we-atmosphere’ and think long term
Blame games never make for good agreements. Now is not the time to focus on rights and contracts. Put away those clauses and sit down with your clients and opponents and start by asking: ‘How do we get through this together?’ You need to see the human on the other side to be able to strengthen the long-term relationship. Finger-pointing keeps you stuck in the past. Shift your focus to how to deal with the future to get through this together.
Inside and out, communication is key now. Not only because working in remote settings can make it harder to convey a message effectively, but mainly because many former boundaries of negotiation have been stretched to near inexistence.
A lack of team alignment in an everyday business situation is often possible to be bridged with common sense or from experience. We now lack all of that. Putting extra focus on making sure everyone has the same information and is aligned with the same interests, goals and limitations is critical to your uniform front.
Focus on the fundamentals
‘Fail to prepare and you prepare to fail’ is the credo of negotiation pros. Professionals who believe in ‘winging it’ consistently underperform against their more strategic colleagues, regardless of their relative years of experience. Make sure you (over)prepare like never before: get as much information as you can, think about the other side’s interests and limitations, prepare options, set goals, decide on walkaways, align closely with the client on what their real drivers, motivators and limitations are, and make sure you have some creative ideas for solutions prepared before you hit the negotiation.
Look for ideas outside the box
‘When nothing is certain, everything is possible’ is a premise I have fallen back on many times in my life. It is needed now more than ever. Known solutions are no longer suitable and contractual clauses no longer feasible. Your alternatives (best alternative to a negotiated agreement, or BATNA in negotiator speak) present themselves in various shades of horrible. This is a time that calls for more creativity and thinking beyond what used to be possible. How to get started? Get your team and clients together (maybe even with the other side) and start an open brainstorm. Ask: ‘What would it take so we could all get out of this safe?’ Get as many people involved as possible – sometimes the solutions are so outside the box (or even relationship) that they might sound crazy at first. Have an open mind and don’t dispel them too quickly.
Overcome the psychological ‘loss aversion’ hurdle
Losses loom larger than gains. This means the disappointment of losing $100 is bigger than the excitement of finding $100. People will fight harder to avoid losses than to bring in gains. This is why framing a settlement as a win for the other side (eg, ‘if you accept, you win $100m of the $200m you claimed’) will make them less risk-taking and get them to settle sooner than framing it as a loss (‘taking this offer would only be a $100m loss’).
Most businesses will be in a loss mindset, trying to minimise the hit. Be careful to not play further into this loss frame and work extra hard to find ways and language to bring them back into a win frame.
Negotiate, renegotiate, re-renegotiate
The virus has caused a global state of emergency unlike anything we have seen before. It remains to be seen what major economic consequences countries all over the world will face next. Safe bets or secure answers are out of stock just like toilet paper, just much more indefinitely. Not a good time to agree to anything? You need to move forward, but you need to remain flexible and open. You may renegotiate now, just to do so again in a few weeks, then months and then again. Use temporary agreements to tide things over phase by phase. Think about creative contingency clauses whenever your predictions differ from the other side.
Renegotiating your fees
Like any other business your law firm will be forced to take a hard look at its own numbers. Make sure to work through two scenarios:
- Clients who ask you to reduce fees. Are your lawyers trained in how to skilfully handle these conversations and protect the margin while not hurting the client relationship? Do you have clear guidelines on what, if any discounts are possible? Does everyone understand the effects a small discount has on the bottom line, that ten per cent discount does not mean ten per cent less profit but maybe 20 or 30 per cent? The requests will be coming; it’s time to train everyone up in these essential skills.
- Practice groups that might now want to increase fees. Clients have had an upper hand in fee negotiations for many years. Now is the time to look closely at the pricing strategy of practice groups that are under high demand and deliver critical, sensitive and time-pressured expertise. You certainly wouldn’t quote your most discounted rate to a new client and might equally want to look at renegotiating rates of in-demand services that currently provide high value to existing clients.