CHAPTER 15

WHAT SHOULD WE DO IF WE CAN’T REACH A SOLUTION?

(Developing a Contingency Plan)

What are you going to do if you can’t find a solution? If you don’t know that, you’re not prepared. You will be at a tremendous disadvantage in your negotiations if you do not have a well-thought-out contingency plan in case negotiations fail. Someone without such a strategy will have no measure of success. Their only reference point to measure the value of possible solutions is their hopes and dreams or fears. People trying hard to build collaborative relationships are vulnerable to the seduction of agreeing with the other side just to build the relationship if they have no well-thought-out contingency plan.¹

Without a well-thought-out contingency plan it may be too easy to enter into an unfavorable agreement out of a sense of desperation. The opposite is also true. Negotiators may get rigid on a given issue and may be willing to sacrifice an entire agreement even though it is better than any other available opportunities. In either of these situations, a thorough understanding of a contingency plan could have saved the negotiators from a mistake.

In the first example, they would have realized that the negotiated deal would not be as advantageous as the contingency plan. They would have rejected the agreement and moved on to their contingency plan. In the second example, they would have realized that the negotiated agreement, although not including all that they had hoped for, was nevertheless better than any other course of action available.

CAN YOU IMPROVE YOUR CONTINGENCY PLAN?

It is always time well spent doing whatever you can to improve your contingency plan. The stronger your plans that are separate and apart from any negotiated agreement, the stronger you will be in the negotiation.

Imagine that you own a small café with outdoor tables shaded by large trees. One day your neighbor has cut down some trees that you believe were on your side of the property line. You want the trees replaced or at least to be reimbursed for the cost of replacing them. You want to maintain a good relationship with your neighbors, so you are trying to resolve the dispute using a neighborhood mediation service. If you can’t reach a settlement with your neighbors, you figure you have three possible contingency plans. You could replace the trees yourself at a cost of about $3,000 and considerable time and effort on your part; you could do nothing and live without any trees on that side of the café; or you could go to small claims court and if you win, you would get reimbursed for all your expenses.

After reviewing these three possibilities, you believe your contingency plan will be to go to small claims court. You’ve researched the issue and know you have a strong legal case. You don’t feel completely comfortable with this plan, however, because you aren’t quite sure how small claims court works and you’re a little afraid you’ll make a mistake when you are in front of the judge.

Some ways of improving your contingency plan might be for you to go to the library to check out some how-to books about small claims court. You could also spend an afternoon or two watching Judge Wapner on TV to see how people do it in his court. You could even go down to the local small claims court and sit in on a few cases to become more familiar with how it works and how to tell your story. You could rehearse telling your story to a friend. These are all ways of improving the strength of your contingency plan. Once you feel more comfortable that you can do a good job in small claims court, you are in a much stronger negotiating stance.

A manager and an employee are in a dispute that might result in the employee being terminated if they can’t reach an agreement. The employee might improve his contingency plan by seeking legal representation or updating his résumé and looking for other work. The manager might improve her contingency plan by preparing for litigation or searching for other candidates to replace the employee if the employee is eventually terminated.

If you are having conflict with a parts supplier, it will strengthen your negotiating hand if you spend time finding other possible suppliers. If you have only one source for the parts, you have a weaker contingency plan than if you have three other possible suppliers lined up.

AGREEMENTS MUST BE BETTER THAN ALL CONTINGENCY PLANS

It is helpful to understand, as best as you can, your counterpart’s contingency plan. Any final agreement will have to be better than the contingency plans of both parties. Any party with a contingency plan better than the negotiated agreement will probably reject the agreement. If your counterpart has opportunities that are better than anything you can offer, it would save you a lot of wasted time and energy to find that out early.

Likewise, it would be a tremendous advantage knowing that your counterpart has no other opportunities available and may be quite desperate to reach an agreement with you. If that is the case, of course, they’re unlikely to share that information with you. You will then have to make some assumptions about their contingency plan. Any chance to check those assumptions will be worth the effort. Doing research, asking questions, and looking at past actions or patterns all give you a more informed understanding of your counterpart’s other opportunities.

It may be helpful or necessary to share your contingency plan with the other party. If you have a better contingency plan than what is being offered and your counterpart appears to be unyielding, it may be helpful to say something like “The proposal before us now is simply not in our interest to accept. We have other opportunities that will offer us a greater return (or more control or whatever the sticking point is).”

CAUTIONARY NOTES!

There are three cautionary points about sharing your contingency plan. First, it is crucial that if you share your contingency plan, you share it with the intent and effect of educating your counterparts rather than threatening them. If it is communicated as a threat, e.g., “You’d better yield on this point or we’ll go someplace else,” it will have a negative impact on relationship issues and drive others into a Red Zone reaction. People typically find education helpful, but react to threats in counterproductive ways, i.e., getting rigid themselves.

The second caution is, do not cry wolf. Don’t use your contingency plan as a bluff, because your counterpart may call your bluff. If you are not prepared to implement your contingency plan, it is not effective. One of our past clients, a U.S. company, sells parts to a Chinese company. The sale was in the tens of millions of dollars. The Chinese company demanded that the U.S. company match what the Chinese company said was a price offer of a competitor. The U.S. company felt that it would have to take a loss if it lowered its price that low, so it broke off negotiations and prepared to return to the United States.

The negotiating relationship changed rather dramatically two hours later when the Chinese delegation came to the hotel and asked to reopen negotiations. It seemed that while the competitor’s price had been lower, other factors made that deal unacceptable to the Chinese company. They had no other offer that they could actually accept. The bluff had been called, and their deception had been uncovered. This not only put the U.S negotiators in a significantly stronger bargaining position with the Chinese company, but also caused a great loss of face for the Chinese negotiators. When the deception became obvious, it also lowered the trust level for future negotiations.

The third and final caution is to be hesitant in revealing your contingency plans if your counterpart can block them or reduce their effectiveness. A contingency plan that can easily be influenced by your counterpart is ineffective and should ideally be revised and improved or at least not volunteered. If you’re negotiating with Thomas to do all your local shipping and your contingency plan is to hire William, the only other trucker in town, and William and Thomas are brothers, you don’t have much of a contingency plan unless the brothers are not getting along well.

Some negotiation books urge not only that you try to improve your contingency plan, but also that you try to worsen the other side’s possible contingencies. This makes a lot of sense if you are talking about a one-shot negotiation, or if you plan on maintaining an arm’slength relationship with the other side. This book, however, is about building long-term collaborative relationships. We have seen it backfire time after time when a relationship partner does something to undermine the other side’s possible contingencies. It’s best to assume that such actions will always be discovered, and when they’re found out, it will be destructive to the relationship. If you are in a relationship and the other side has a contingency plan available that is much better than anything you can offer, you are probably better off in the long term giving them your blessing to take the other deal.

CHAPTER SUMMARY

Your well-thought-out contingency plan is your best measure of success in negotiations. A good understanding of your plan will prevent you from entering into a bad agreement or rejecting a good agreement. It is always worth your while to try to improve your plan. The stronger your possibilities that are independent of a potential agreement, the greater leverage you will have in the negotiations. It is important that you try to understand the other side’s available contingencies as well as your own. Any agreement will have to be better than the contingency plans of both sides. If either party has a contingency plan that is better than any proposed agreement, they shouldn’t enter into the agreement.

If you decide to share your plan, make sure you do it from the Green Zone, trying to educate the other side rather than threaten them. Don’t use your contingency plan as a bluff. If you can’t carry it out, it isn’t a contingency plan: it’s just smoke and mirrors that will work to your disadvantage when the smoke clears. Finally, avoid sharing you contingency plan if your counterpart has the ability to block it or lessen its effectiveness.