You Wouldn't Start From Here - Negotiation and Brexit

There hadn’t been a public vote in the UK of the magnitude of the EU Referendum on 23rd June 2016 in decades. The unexpected result created a huge division in the country, and even twenty months on, positions have barely shifted at all. This week, the highly-credible UK pollster John Curtis of Strathclyde University confirmed that if the vote was repeated on a like-for-like basis, then the result would almost certainly be the same. This would suggest that, despite the difficulties and complexities in negotiations between the UK and EU and the highly-charged political atmosphere, that voters’ views on the matter are deeply-held, a point made by a recent Cambridge academic study that most voters (particularly ‘Leave’ ones) had made up their minds long before the official pre-vote campaign started. The continuing ‘noise’ over the result suggests that frustration on both sides is off the scale.

Because of that high emotion associated with the Brexit vote, I’ve held back on my commenting on what have become tortuous negotiations between the European Union and the UK Government, even though there is something for professional commercial negotiators to learn.

It’s not my intention here to make the case for or against Brexit, but instead focus on the negotiation itself. Neither is it my intention to home-in on the policy minutiae, such as the Customs Union, the Irish border, or the rights of UK and EU citizens living and working in member states (frankly, I’m not qualified to do so, and don’t personally know anyone else who is), so don’t expect a conclusion that says Brexit is the ‘best thing since sliced bread’, or that it’s a slow-motion train wreck.

Instead (as well as reflections on the EU approach) my aim is to claim that the negotiation approach from the UK Government has been lamentably poor, due to a number of fundamental flaws, some of which are not under its control, and others a failure of leadership and planning. These offer lessons to all of us who operate in and around corporations and public-sector organisations with a professional responsibility for negotiating with third parties.

There are two areas, in particular that I will discuss: (1) positional bargaining versus a mutual gains approach, and (2) the concept of whole-enterprise competence.

For students and long-time practitioners of negotiation, the notion of positional bargaining will be very familiar and, although there are better ways to negotiate, it characterises the ‘standard’ approach taken by most people in most negotiation situations.

The basic idea is that you decide what you want (your ideal result), your walk-away point, you then build-up several arguments that support your position and then you negotiate in a tough or even compliant manner (depending on the situation). You attempt to get the result you want as efficiently (and often as quickly) as possible. This method of negotiation is nothing like a journey of discovery; it’s more about ‘getting the job’ done, either by exploiting a dominant position (if you have one), or moving quickly beyond feelings of discomfort. After all, most people intensely dislike negotiating, and that includes even some of the professional ones who aren’t adept at, or fancy, handling conflict.

I’ll discuss some more characteristics of position bargaining shortly in relation to the Brexit negotiations, but it’s worth stating here that this approach is rarely effective when used in the context of long-term relationships (those involving multiple transactions over time), because it can so easily become a battle of wills and quickly erodes trust.

In contrast, we have the ‘mutual gains’ approach, developed by the Harvard/MIT Program on Negotiation; its origins being Fisher and Ury’s ‘principled’ prescription from the 1980s, laid-out in the standard negotiation text ‘Getting to Yes’. Here, the method can be summarised as both (or all) parties working collaboratively to achieve what the authors describe as a ‘wise outcome’. To get there, parties seek to understand the interests of the other, and proactively work to ensure that such a ‘wise outcome’ represents a deal that is enthusiastically implemented by both (or all) parties. The by-product of the mutual gains approach is that value can be created, trust can be maintained (even improved), and the consequences for the ongoing relationship are more benign.

So, what of the Brexit negotiations?

Although it’s sometimes difficult to distinguish between the rhetoric and the real behaviour of both parties, the EU negotiation team, led by Michel Barnier have, so far, taken a ‘hard’ positional bargaining approach. The parties have become, to a large degree, adversaries, with the UK cast as the ‘bad boy’ (mainly for allowing the referendum vote in the first place) to the EU’s claim for its legitimate desire to hold the rest of the EU together. This no small issue. The wider political risk for the EU is for other less-than-enthusiastic member states to countenance a referendum of their own in the future. Growing anti-EU political movements in Poland, Hungary, Italy, France, and elsewhere is part of the political landscape now. To protect the EU’s future as a project of ‘ever closer union’, the EU must ensure that the UK cannot be seen to get a ‘good deal’, and so Barnier et al display rigidity and a determination to ‘win’. The refusal of the EU to make concessions, and even make threats (e.g. sanctions for the UK during any transition period), demonstrate that the EU is prepared to risk damaging the post-Brexit relationship. Not insignificantly, it has also successfully used its early dominance in the proceedings to secure control of the negotiation timeline.

Even though it has been reported that individual member states’ domestic interests in their own post-Brexit relationship with the UK might lead to concessions and compromise, these are quickly leapt-on by the EU’s negotiating team, and it maintains the mandate given by the 27 remaining members to hold a no-compromise line in the negotiations. The stakes are high for all involved in these negotiations (the UK and the EU, contrary to what you might read in the UK press), and if some member states were to ‘break ranks’ in an attempt to secure their own interests in a new post-Brexit arrangement, then Barnier and the EU’s positional bargaining strategy would likely crumble. Nevertheless, the way in which the EU has remained aligned through the negotiations so far is commendable, if questionable in its sustainability.

Turning to the UK’s approach, this has, so far, been based to date on a desire for all parties to adopt a mutual gains strategy. The rhetoric (or ‘conditioning’) has been all about a good deal for both parties, a close future partnership of equals, co-operation, and a problem-solving ethos. The UK is projecting ahead ten, maybe twenty, years, whilst the EU’s strategy involves focusing on the here and now, where the perceived risk and pain is most acute. The UK’s own strategy is to rebuild, then maintain, trust following the unwelcome vote (remember Government policy pre-referendum was unequivocally to Remain, and little or no preparation was done for the consequences of a Leave vote.) It’s no surprise that the UK Government thinks this whole process is a pain and a huge distraction, despite some prominent figures in the Government having campaigned to Leave.

Researchers at Harvard/MIT’s Program on Negotiation would undoubtedly suggest that the most sustainable deal would be best achieved by adopting such a mutual gains approach. Even in hostile negotiation scenarios, the proactive engagement of the other party, including forensically analysing their interests has, under research conditions, been proven to result in better outcomes, in particular (but not limited to) for relationships involving multiple transactions over time. So, the UK negotiation strategy is of the right nature and it may, in the end, secure the moral high ground (a democratic vote, after all, is hard to trump). Under its own terms, the UK could not have ‘won’ had it taken a hard, positional bargaining approach, as one of its primary aims was (and is) to maintain a free-trade arrangement. The damage to all parties might, in the short-to-medium term, be significant; with the opportunity to regain trust and re-establish greater collaboration left to the next generation of leaders (which I believe is likely to happen - the next generation of leaders, that is).

It’s hardly news to suggest that the UK is caught between a rock and a hard place. It cannot take a hard stance, and its mutual gains approach is not yet making an impact. It’s like trying to mix oil and water – the UK and the EU are not only literally speaking different languages in the negotiations; their respective strategies are making it incredibly difficult to find common ground.

This has parallels with commercial negotiations between procurement and sales professionals. Often suppliers will be endeavouring to build a close, dependable relationship with the customer organisation (perhaps classifying the customer as a ‘development’ account), and its approach will be collaborative in its desire to create a long-term profitable revenue stream. On the other hand, Procurement sees the relevant spend category as ‘transactional’ or ‘leverage’, and its relational approach is more likely (but not always) to be arm’s length, with collaboration less of a concern. Procurement’s own power analysis may well underline a tougher negotiation approach along the lines of positional bargaining. A key point to remember is that, should Procurement enjoy a favourable power position, relative to that of the supplier, it has relationship management and negotiation choices that are not available to the supplier.

Returning to the Brexit negotiations, despite the best endeavours of the UK Prime Minister and David Davis’s negotiation team to take a mutual gains approach, it cannot do so effectively because of an additional, even more significant, reason. That is the lack of ‘internal’ alignment.

The concept of ‘divide and rule’ is as old as the hills, and any competent negotiator could be forgiven for seeking to identify cracks in the other party’s hitherto united front, and then exploit any misalignment for commercial advantage. This opportunism would be less likely to occur if both parties adopted a mutual gains approach, but would be highly relevant where one or both parties are bargaining hard. I’ve already suggested that the EU has been successful in maintaining its united front, but the UK side has failed miserably to do the same.

“Negotiation is a core organisational competence, and not just an individual skill”

MIT’s Professor Susskind and co-writing consultant Hal Movius re-framed the negotiation challenge for negotiating teams and organisations as being a ‘whole-enterprise competence’. They argued that “negotiation is a core organisational competence, and not just an individual skill”, and went on to say “since negotiation capability is so often assumed to be a matter of individual skill, organisations typically don’t understand or support a systematic approach.”

In the real world, commercial and diplomatic negotiations don’t simply take place between a pair of leaders, they involve many participants, any one of which can inadvertently (or deliberately) break ranks with an agreed negotiation strategy. Movius and Susskind advocate the provision of competence training for just about anyone involved in important negotiations, and it’s something Four Pillars regularly does with both procurement and sales teams. The important point to note is that internal alignment can be fundamental to the success of any negotiation, and lead negotiators risk much if they pay insufficient attention to briefing and securing support for their strategy from other potential participants (often senior executives) in their negotiations.

Such alignment is not only necessary, as I’ve explained, it’s also actually desirable for both parties, as it makes for efficiency in the negotiation process, with both parties at least reasonably secure in the authority of the other in being able to reach an agreement. A late intervention from one of those senior executives can easily scupper a deal that may have taken weeks and months to get to current stage, at great expense and opportunity cost. So, alignment is not a ‘like to have’; in complex, high-stakes negotiations it is essential. Which takes us back to Brexit and the UK’s negotiation team.

And this is where we leap (and I think it’s a justifiable leap) from David Davis’s negotiating team of civil servants, to the Houses of Parliament. One of the consequences of Prime Minister Dave Cameron immediately resigning following the Brexit vote is that the governing Conservative Party was thrust into a leadership election, and the moment for Cameron to command loyalty and adherence to the referendum result from his own party and Parliament passed. This created a vacuum, enabling distressed Remain-campaigning MPs to begin to sow the seeds of dissent within the House. The new Prime Minister Theresa May never succeeded to quashing that dissent, despite her “Brexit means Brexit’ exhortations, and subsequent speeches at Lancaster House and in Florence.

The (so far) successful efforts of Remain MPs to continue to fight the pre-referendum campaign has not only made life extremely difficult for the Government, it has also been quite catastrophic for the UK’s negotiating team. At every stage of the negotiations it has been unable to present a united front towards the EU, and this has been ruthlessly exploited by both the EU and Remain MPs, some of which have held separate talks (i.e. unofficial negotiations) with Michel Barnier and his team. Even adopting a mutual gains approach in an attempt to create a win/win outcome has not been enough to satisfy Remain MPs who have routinely smelt blood and a political victory against the Government’s Brexit policy. And as indicated earlier, any hard positional-bargaining optional approach has been impossible to contemplate, despite some zealots imploring the Government to leave immediately and trigger a ‘hard Brexit’.

This could all be regarded as a failure of political leadership, and the political press has constantly covered the tribulations of Mrs May since she took office. We will never know whether another leader (even Cameron) could have handled things with greater authority, sufficient to quell dissent and create genuine alignment amongst MPs (‘in the national interest’), but it remains clear that the negotiations between the UK and EU have been desperately challenging for the UK.

If we were to view the Houses of Parliament as an (obviously far too large!) corporation’s Board of Directors, then such a failure of alignment and leadership would have meant multiple Board members would have been fired, and the Chief Executive would be in a perilous position, not dissimilar to that of the Prime Minister (although not MPs, who can’t be ‘fired’). The corporation’s customers would demand changes, in a fashion that Parliament’s customers (UK citizens, whichever side they’re on) continue to be frustrated and dismayed by the actions of politicians since the referendum.

The lesson for those of us in business is twofold:

Firstly, although the mutual gains approach to negotiation is much more likely to create value and a mutually-beneficial outcome for all involved, as a strategy it struggles to gain traction when a powerful negotiating adversary takes a positional bargaining approach. And even though the latter approach is likely to seriously damage an ongoing relationship, negotiators should (if the deal is important enough – as Brexit undoubtedly is) continue with the mutual gains strategy until such time agitating negotiators can be replaced by others seeking a more equitable settlement. Of course, this is predicated on both parties wishing to sustain a relationship over the long-term.

Secondly, and finally, developing a negotiating strategy, and securing internal alignment is absolutely essential for complex multi-participant negotiations. A hostile adversary, determined to ‘win’ will exploit any weaknesses in your (dis)united front. Although it can be terribly difficult for lead negotiators to get senior executives to express their specific negotiating interests (and stick to the script), this must be done, and requires outstanding influencing skills to go with negotiating competence. And it also requires time; time to develop a strategy and brief it comprehensively with the extended negotiation team.

Both of the above, or course, underline the critical importance of systematically undertaking detailed preparation for major negotiations. This is an all-too-common shortcoming of busy commercial negotiators. More on that subject another time.

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