Negotiation preparation in a global world : symptoms of success and failure 9781138042797, 113804279X, 9781138042810, 1138042811

Table of contents :
1. Failures and Negotiation Nightmares 2. The Role of Perception: When I look through your glasses, everything is blurry3. Emotions: Emotional Garbage: Sorting through the impact of emotion on the negotiation process4. Communication Incompetency, Deficiencies and Miscommunication: I hear what you are saying, do you hear how you sound? 5. Contracts' Role in Chaos Prevention6. Culture: Behavior, Beliefs and Breakdowns-Why can't you just do it may way?7. Strategies and Other Failed Plans: Exploring Strategy and Tactics from an Intercultural Perspective 8. Alternative Dispute Resolution (ADR)9. OOPS: Opportunity, Outcomes, People, and Success

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Negotiation Preparation in a Global World

Negotiation Preparation in a Global World guides the reader through a series of issues to consider in building international and intercultural business negotiation skills. It takes the approach of examining failed business negotiations to analyze how improved communication might have led to successful outcomes. Each chapter presents the theoretical background related to a particular communication failure and explores alternative strategies for approaching the situation. This volume is ideal for undergraduate- and graduate-level students studying business, leadership, and organizational development, as well as those new to the global marketplace or interested in learning how to negotiate in the intercultural business arena. Jill E. Rudd, Ph.D., is currently Professor of Communication and University Ombudsperson at Cleveland State University, USA. She has published in a number of journals, such as Mediation Quarterly, Human Communication Research, Communication Quarterly, Women's Research in Communication, and several books on communicating in international business negotiations. Rudd has consulted for more than 100 organizations and businesses in negotiation, strategic planning, dispute resolution, and effective communication. She continues to serve on　local, state, and national organizations for her expertise in dispute resolution.　 D. Timothy Hughes is an attorney in private practice in Ohio, focusing on civil matters representing small businesses and individuals in all types of contracts. He has also been involved in training and consulting for many Fortune 500 companies on supply chain management issues and has served as an arbitrator for construction and environmental conflicts. He has a Bachelor’s degree in Business Administration and Economics from Kent State University and a Juris Doctorate from Cleveland-Marshall College of Law.

Negotiation Preparation in a Global World Symptoms of Success and Failure

Jill E. Rudd and D. Timothy Hughes

First published 2020 by Routledge 52 Vanderbilt Avenue, New York, NY 10017 and by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN Routledge is an imprint of the Taylor & Francis Group, an informa business © 2020 Taylor & Francis The right of Jill E. Rudd and D. Timothy Hughes to be identified as authors of this work has been asserted by them in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. Library of Congress Cataloging-in-Publication Data A catalog record has been requested for this book ISBN: 978-1-138-04279-7 (hbk) ISBN: 978-1-138-04281-0 (pbk) ISBN: 978-1-315-17339-9 (ebk) Typeset in Bembo by Taylor & Francis Books

To Johnna and Zachary

Contents

List of Figures 1 Failures and Negotiation Nightmares

x 1

Failure: An Emerging Perspective 1 An Example Application of Failure Perspective 4 The Study of International Business Negotiation Failures Through Storytelling 6 2 The Role of Perception: When I Look Through Your Glasses, Everything is Blurry

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Overview 9 Perspective: Viewing Ourselves and Others in Conversations 9 How to Combat the Perception Issue in Negotiation 17 Summary 22 3 Emotions: Sorting Through the Impact of Emotion on the Negotiation Process

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Emotion and its Origins 24 Emotional Footprints 25 Emotional Intelligence 28 Role of Culture and Emotion 29 Ten Takeaways to Avoid Failure 36 4 Communication Incompetency, Deficiencies and Miscommunication: I Hear What You Are Saying, Do You Hear How You Sound? Listening 39 The Miss in Miscommunication 45

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viii Contents Violations 49 Framing Messages 50 5 The Contract’s Role in Chaos Prevention Introduction 54 Agency Law: Who has Authority to Commit to What? 55 How are contracts formed? 57 What are the Required Elements to Form a Contract? 59 Service Agreements 59 Definition of a Good Contract 60 Applicable Laws 60 Verbal Agreements are for Friends, Family, Fools, and Lovers 60 The Contract is King 62 More Verbal Agreement Problems 62 What is “the Contract?” 63 Letter Agreements 65 Negotiation Memoranda 65 Incorporated by Reference and Made a Part of this Agreement 66 Key Legal Terms and Conditions That Should be in Every Contract 66 The Right to Terminate the Agreement 66 Breach of Contract 68 Anticipatory Repudiation of the Contract 68 Performance and Technical Specifications for Products 68 Acceptance or Rejection of Products or Services 69 The Perfect Tender Rule for Tangible Goods 69 The Doctrine of Substantial Performance for Service Agreements 70 Scope of Work Descriptions in Service Contracts 70 What Happens When Nonconforming Goods are Tendered for Delivery to the Purchaser? 71 Written Notice of Breach of Contract 72 Letters of Credit 72 US Government Regulations and Laws Affecting International Transactions 73 Imports to the U.S. 74 Exports from the U.S. 74 Intellectual Property Rights 75 Risk of Loss 75 Warranties 76 Contract Administration During the Performance Phase 77 Contracts Include Actions and Words 78 Summary 78

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Contents 6 Culture: Behavior, Beliefs, and Breakdowns—Why Can’t You Just Do It My Way?

ix 80

Culture and Negotiations 80 Cultural Dimensions 80 Cultural Intelligence 86 The Third Culture 88 7 Strategies and Other Failed Plans: Exploring Strategy and Tactics from an Intercultural Perspective

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Background 92 Mindfulness 93 Empathy 96 Face Honoring 98 Adaptation 100 Effectiveness 101 Conclusion 105 8 Alternative Dispute Resolution (ADR)

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Introduction 107 Why ADR? 107 Conciliation 110 Mediation 111 Arbitration 120 Mini-Trials and Rent-a-Judge 128 9 OOPS! Opportunity, Outcomes, People, and Success

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Opportunities Exist when Failures Arise 129 Outcome Focus Limits Our Success 131

Index

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Figures

8.1 The Parties’ Level of Control over Dispute Outcome (Self-determination) 8.2 Decision-Making Authority of Third Parties

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1

Failures and Negotiation Nightmares

Failure: An Emerging Perspective For many years researchers have examined, discussed, and debated negotiation process in the context of the success framework. How to successfully “get to yes”? “What strategies assure collaboration?” “What is the best negotiation personality and characteristics?”, and “How do cultural dimensions determine best tactics?”, are questions we have spent the last four decades answering. We seem to repeat the same, familiar recipe with little variability in ingredients and thus no real difference in flavor. This has led us to a limited view of international business negotiations. This is not to say that what we have learned about negotiation success is not relevant, but this perspective may limit our ability to see an expanded view of the complex nature of our actions and agreements. We have pounded out lists of tactics, types of strategies, communication competencies, and stages of negotiation process and procedures for successful negotiation. Yet we know that there is something that we are missing. Some throw up their hands and conclude it is just the nature of negotiation. Others dig deeper and look for the answer: what did we miss? History has shown the most influential and creative paradigm shifts occur when someone is willing to fail. Thomas Edison knew the importance of understanding failure, which is reflected in his observation, “I failed my way to success”. Michael Jordan knew that failure was critical to his career. He states, “I’ve missed more than 9000 shots in my career. I’ve lost almost 300 games. Twenty-six times, I have been trusted to take the game-winning shot and missed. I’ve failed over and over and over again in my life. And that is why I succeed.” If we look to those who have become true inspirations for us to excel, they attribute their skill, achievements, and outcomes to the role of failure in their pursuit for better. The study of negotiation is in need of this approach. The whispering of a paradigm shift can be heard in the negotiation field. The movement is turning away from strategy focused success in favor of studying failures to promote positive change. Although past research gives lip service to understanding the “what went wrong” focus, examining the important role of failure as center stage remained obscure. Writings such as

2 Failures and Negotiation Nightmares the Harvard Business Review, (Rottenberg, 2011) “Failure chronicles” and Faure’s (2012) book Unfinished Business, along with Tim Harford’s (2011) Adapt are examples of how learning from failures can lead to success in negotiations. As we dive into understanding failure and its critical role in long-term relationships and successful agreements, we need to do so with the understanding of global impact. The reasons for failure in international business negotiation remain absent or at least opaque. This book examines negotiation from a failure lens. Examining failure in negotiations, especially international business negotiations, may give us a clear picture of a process that we have engaged in for centuries—negotiation. Costs of Avoiding Failure We go to great effort to avoid loss in a negotiation and to deny failed outcomes. Most of us would agree that failure is the opposite of success. Simply, failure is to be avoided! However, if we don’t succeed in getting what we want we will often frame the failure as a “missed opportunity” or a “misunderstanding” or a situation that needs further discussion. What if we unapologetically framed our less than successful actions as simply failures? What if we became comfortable with “I failed today”? How might we discuss problem-solving issues when past failure lessons offer insight? What if our CEO were willing to open the dialogue of growth by examining the mistakes we have made? Instead of only sharing our great success stories, we can share our failed stories that lead us to success. Let us change the structure of our stories to include the acceptance of failures as part of growth and contribution to adaptation of a changing world. One example of this can be seen in the watchmaking industry in the mid1900s. Swiss watchmakers may have benefited from a willingness to widen their perspective of watchmaking. Instead, their slowness to adapt to new quartz technology resulted in the demise of the Swiss watch industry. When you are the leader and have the reputation and credibility of being the best in your area, the cost of avoiding failure is high. Sitkin (1992) explains that success can create complacency and that there is little motivation for adaptation. The aphorism, “if it ain’t broke, don’t fix it” can become what Sitkin refers to as the “absence of action”. Trying something new and failing often results in blame, whereas, avoidance of new behaviors or strategies is less risky. This is demonstrated in our Swiss watch industry example. We get rewarded for following the rules until someone changes the paradigm and creates a new product or service that was not previously part of the parameters of the industry. One might view Uber and Lyft as examples of a willingness to fail in an attempt to move beyond the compliancy of the traditional transportation options. These companies were able to see transportation differently from the automobile industry. Uber was willing to tolerate risk on private individuals’ willingness

Failures and Negotiation Nightmares 3 to engage in a new service for an old product. This ultimately resulted in an improved outcome of transporting individuals at reduced cost. Private ownership of automobiles is projected to decrease as a result of this new market use. In addition, some project the use of shared vehicles versus private ownership in the next decades. Car dealerships, automobile manufacturing, insurance companies and public transportation systems are among the many that may feel the effects of change. The issue here becomes, if an industry continues to reflect a strategy of inaction because “it ain’t broken” they run a substantial risk of failing to see when they are truly failing. The issue for these companies is their ability to adapt to a changing market and their motivation for adaptability. As Sitkin explains, the benefits of not avoiding failure are a deeper understanding of information, a motivation to adapt, a willingness to tolerate risk, and often an improved outcome. “Success fosters reliability, whereas failure fosters resilience” (Sitkin, 1992, p. 241). Improvements in cellular technology offer us another example of how adaptability occurs and sometimes very quickly. The telephone industry for decades behaved in a “success fosters reliability” style. However, adaptation to new cellular technology required flexibility for continued survival. In merely a decade household use of landlines only has gone from 85 percent to a mere 6.5 percent and is expected to disappear in the near future. Historically there were few choices for services and the industry made few changes since its inception. The status quo approach worked well for Bell for nearly a century (Blumberg and Luke, 2016). Negotiating the changes in the industry from Bell to individual customers has been an on ongoing example of adaptability to changing technology. What if the giant telephone companies choose inaction? How would our individual households look? Negotiating change in an era of technological advancement is essential, and embracing the “failure” perspective becomes a part of the evolution of change. What types of failures are we talking about? Certainly not all failures offer such optimistic conclusions. Matson concluded that it is the “intelligent failures” (Matson, 1991) that foster learning. When we take a closer look at this issue, we see that there are parameters around the types of failures that offer the best lessons. For example, Birkinshaw and Haas (2016) offer advice on how to review failure in an organization. In their Harvard Business Review article, “Increase your return on failure” they address the importance of how to talk about failure. They present the concept of the “Triple F review” process for business organization leaders. Their idea is that if you can bring senior leaders in the organization together to discuss their failures, the organization will benefit from learning from their mistakes and the end result will be better future decision making. Essentially, they concluded that reviews should be “fast and to the point, take place frequently, through good times and bad, and are forwarding-looking” (p. 6). “Sometimes embracing failure is as important as toasting success”, states Linda Rottenberg (2011) in her article, “Failure chronicles”, Harvard Business Review. Linda learned from her Endeavor India initiative

4 Failures and Negotiation Nightmares the important role of failure and how to “fail smart” so that one can learn from it and continue to move forward. According to Tim Harford (2011) in his book, Adapt: Why Success Always Starts with Failure “Faced with a mistake or a loss, the right response is to acknowledge the setback and change directions. Yet our instinctive reaction is denial. That is why ‘learn from your mistakes’ is wise advice, that is painfully hard to take” (pp. 37–38). He argues that making peace with our failures is essential to keep us from gambling on unacceptable options. If we are unable or unwilling to accept failures and reframe those failures as unfinished outcomes that we should continue to pursue, we are likely to continue investing in a strategy that allows us to deny the failure. As investment theory contends, the more we invest in a decision, a relationship, or goal, the less we are willing to give it up. Knowing when failure should be assessed and a new direction should be taken is the critical moment of failure promoting success. Trial and error stories help us tell the true stories of success. Failures can move us away from the stagnant manner of negotiating to accommodate new ways of thinking. Experiencing failure allows us to question our perspective. This may project us forward into a newer, better, geocentric worldview for achieving agreement in international business negotiations.

An Example Application of Failure Perspective An example of regional differences in driving can provide a simple explanation of the significance of viewing negotiation from a failure perspective. Negotiating traffic is an informal act that most of us participate in every day. However, few of us consider driving a negotiation process or a cultural interaction. Hopefully, the following example allows us to see the principles of viewing a situation from a failed perspective. I am from a small town in the Midwest where driving and politeness are intertwined. Perhaps you are likely to see the other driver in church, or she is somehow related to your significant other, or perhaps, that is just how you were taught to behave in a car. Typically, in small Midwestern towns when someone is tailgating you, you often pull over and waive for the other to go around you so as not to interfere with where they are going, and to avoid an accident. This action results in allowing the traffic flow to continue without congestion and frustration of those behind you. It works because we know the informal etiquette of the issue. It works because we negotiate from the same perspective and rules that are inherent in our experiences of avoiding a potential failure to successfully navigate our traffic flow. This informal etiquette however, is not shared in Los Angeles. I was recently driving on a two-lane city street in Los Angeles and someone was tailgating me so I used my Midwestern small town etiquette and pulled off the road to let the driver pass me on the left. However, when I was in the

Failures and Negotiation Nightmares 5 process of pulling over to the side of the road, a car was passing me on the berm of the road as though it was a traffic lane and the driver behind me was passing me on the left side. As you can surmise, I was hit by both cars. Luckily, the cars were damaged but not the people. How do we make sense of this? My first inclination was to deny that the failure on my part contributed to the collision. In order to do so, I looked to laws and regulations for validation of my actions. Secondly, I referred to my spotless driving record of proof of my driving competency. And last, I referred to the common stereotyping of California drivers as aggressive and crazy, so the blame is on the other drivers. Now if I view this experience from a failure perspective I then change the focus. I move away from denying my mistake in attempting to pull over to the side to examine what I learned about tailgating in L.A. After considerable reflection on the incident, I now know that my small town Midwestern driving is not appropriate etiquette in L.A. In fact, it is what caused the accident in the first place. I also know that I should look on both sides before lane changing even when the lane next to me is the brim because in L.A. that is considered an acceptable lane when the police are not in sight. And this failure to move over for those who tailgate is acceptable behavior. Tailgating is the accepted norm. The reflection on failure allows me to change my behavior to drive in a way that allows me to get where I am going without an accident. If I had latched on to my regional values of driving, I would have missed an opportunity for adapting to L.A. culture. I also know that I was wrong in my decision to let the driver influence my action without consideration of the context. Perhaps we might look at the options for deescalating the emerging conflict. For example, was accommodation an appropriate style for me to use in this situation or did it contribute to the accident? Did the competitive style of the other drivers to get ahead of me in traffic constitute the best choice in resolving negotiating their position in traffic? All this provides guidance on how to drive in traffic. However, if we examine this from a failure perspective we can see that from each driver’s perspective the negotiation behaviors to drive unharmed down the street vary. What contributed to my collision? My lack of regional/cultural difference in driving patterns? The egocentric view of best driving practices? Or simply poor driving skills? If we can examine negotiations from a failure perspective, or what we prefer to call “dark side” perspective, we may be able to gain insight into why we reach agreement in some situations but not in others. Failure perspective may allow us to move from “a perspective of successful versus loser approach” and in so doing discover the importance of perspectives we have not allowed ourselves to see. The examination of these failures is multi-dimensional. Failures are more than simply non-agreements or deadlocks. They are more than unsuccessful attempts to achieve our goals. Failures move beyond judgments of relationship

6 Failures and Negotiation Nightmares damage into often uncharted territories. The focus of this book is to understand the dynamics of failure as well as the factors or elements that generate failure. As the global international community shrinks we will need to better understand negotiation from many different perspectives of failure. Individuals, organizations, and cultures view failure differently. U.S. culture has a strong aversion for failure. The cultural norm perhaps can best be explained by, “do not mention your own failures but feel free to discuss the opponent’s failures openly and often”. Most people view discussion of their failures as an unacceptable and uncomfortable topic. However, discussing another party’s failures is often a strategy for intimidating the other party. Later in this book we discuss the cultural influences of our approach to failures in negotiation. Going back to our traffic issue example, we can see the failure to understand a regional/cultural difference resulted in collision. If one decides early on that my perspective on tailgate driving is the only way to act then I most likely will miss the opportunity to learn from the collision. It gets lost in the justification of what has worked in the past versus the adaptation of what is helpful in the present and possible future action. We continue to repeat the same failure and the repercussions may accelerate. So, we keep trying to use our reliable method that helped us yesterday, even though today does not look like the day before. We seek similarity in yesterday to describe today and this selective process often results in missed opportunity. Consistency, predictability, and stability are comforting to us, especially in a world of uncertainty. It is human nature to look for consistency at the expense of creating new opportunities. This analogy of my traffic accident is characteristic of how any international negotiation may conclude. Like the traffic example, many negotiations reach agreement without a collision, however, many do not. The road may look the same but the variables are different. I chose to drive in L.A. the same way I drove in small town Ohio, failing to see the difference in the region which ultimately cost me. I missed the regional/ culture difference to successfully drive from point A to point B. A failure perspective allows us to examine the negotiation process from a different road.

The Study of International Business Negotiation Failures Through Storytelling There is nothing better than a good story. A good story is one that we can recall the next day, the next decade and our children can recall long after we are gone. Whether we are using stories to entertain, relay life lessons, teach new skills, share values or simply a method for presenting new information in a memorable format, stories connect us to each other in a meaningful way. Stories provide us with a means to converge or diverge our thinking. They can act as a bridge for ideas and concepts. They can simplify complex issues, communicate core values, and help us establish similarities amongst people, concepts, and events. Stories can help us strengthen relationships

Failures and Negotiation Nightmares 7 with others and move us to new conversations about complicated problems. Sharing stories of failure provides an emotional and engaging means for the discovery of possible solutions to negotiation problems. The lessons we learn from our mistakes are often the ones we remember the most. The stories one shares about mistakes, failures, and embarrassments serve to be timeless lessons, for not only those who fail, but also for any who are fortunate to hear the stories of failure. This book explores failures by specifically considering the fallacies we assume in intercultural negotiations, the strategies we employ, and ultimately the possible nightmare (holistic view) of the negotiation experience. Most stories in the international negotiation scene are success stories. Such themes as “How I negotiated the best deal”, or “How company X successfully negotiated a takeover of company Y”, are good examples of success stories, but provide little long-term recall for those who were not part of the story. We appreciate success stories and may remember key points, but most likely see the information shared from a detached frame. Sharing failures allows individuals to communicate at a much deeper emotional level. The vulnerability of the storyteller to share her failures and mistakes gives the listener an opportunity to relate to the lessons of the story. This vulnerability creates an intimacy with the listener or reader that as humans we immediately identify with. Stories allow us to learn about our future by looking to past failures. Failure experiences offer valuable insight into behaviors and assumptions about ourselves and others. Examining intercultural business negotiation from this perspective allows us to view the negotiation experience from a different approach. Negotiators refer to these failed attempts at reaching an agreement as “nightmares” of international business negotiations. In some stories the failure is a result of not reaching agreement while in others it is missed opportunities to maximize potential outcome. We know that different perspective taking is critical in resolving complex issues. “Walking in another person’s shoes” has provided sound advice for negotiators. In intercultural business negotiations, understanding another’s culture is considered critical for demonstrating respect to the other party and building opportunities for common ground. It is also prudent to gain as much knowledge as you can about another’s perspective in order to select appropriate negotiation strategy for your desired outcome. In addition, many, such as Fisher, Ury, and Patton (1991) suggest that understanding your opponent’s culture, situation, and organization can lead to knowing their “best alternative to the negotiated agreements” (BATNA) and thus increase your power during the negotiation. When we fail to understand another’s culture, we have a future opportunity to become better, more competent negotiators. If we are able to share our failures and discover the missing pieces of successful negotiation interactions we move the needle toward a collaborative global worldview. The following pages contain discussions regarding key components of negotiation and the contribution they play in failed negotiations.

8 Failures and Negotiation Nightmares Examining negotiation from a failure lens is an attempt to view negotiation from a different angle and hopefully this perspective will help us gain a fuller understanding of international negotiations.

References Birkinshaw, J. and Haas, M. (2016). Increase your return on failure. Harvard Business Review. 1–7. Blumberg, S. J. and Luke, J. V. (2016). Wireless substitution: early release of estimates from the national health interview survey. National Center for Health Statistics. Faure, G. O. (Ed.). (2012). Unfinished Business: Why International Negotiations Fail. Athens, GA: University of Georgia Press. Fisher, R., Ury, W., and Patton, B. (1991). Getting to Yes: Negotiating Agreement Without Giving In. New York: Penguin. Harford, T. (2011). Adapt: Why Success Always Starts With Failure. New York: Picador. Matson, J. V. (1991). How to Fail Successfully: A Bold Approach to Meeting Your Goals Through Intelligent Fast Failure. Oakland, CA: Dynamo Pub. Rottenberg, L. (2011). Failure chronicles. Harvard Business Review. Sitkin, S. B. (1992). Learning through failure: the strategy of small losses. Research in Organizational Behavior, 14, 231–266.

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The Role of Perception When I Look Through Your Glasses, Everything is Blurry

Overview Culture influences perception in the negotiation process. The complex nature of individual perception in the negotiation process is an often overlooked dynamic in international business negotiations. We know that perception is influenced by culture and that we individually process and interpret the world around us though our cultural lens. Perception influences how we communicate and these communication experiences are reflected in our thoughts of others and self. The social aspect of social cognitions stems from our cultural experiences in everyday interactions. Yet we often ignore the cultural influence in our conversations. The complex communication process in negotiation, especially international business negotiation, can be better understood once the role that perception may play in the negotiation process is acknowledged. Culture helps shape our perceptions of self and others. Cultures vary in their interpretation or view of different behaviors. If we want to better understand the dynamics of international business negotiation failures we need to look more closely at how perception influences the negotiation process. Specifically, examine how flawed perspectives may lead to the ultimate failure in reaching agreement. We begin with a discussion of perception and the role of perception accuracy.

Perspective: Viewing Ourselves and Others in Conversations Perspective is often used to examine the possible causes of disagreement or conflict. In negotiation, especially international negotiation, cultural perspective is touted as a critical factor in reaching a successful agreement. The school of thought is, if we understand another’s culture we can then better understand their message, their intent, and their strategies and tactics used in negotiating within their culture and in intercultural negotiation settings. Negotiation scholars have encouraged us to move from a self-focused strategy approach to other-focused and then most recently a mutual face approach to international negotiation. The sensitive and expanded view of

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The Role of Perception

possible perspectives has added to negotiation competency but falls short of addressing the complexity of perception and culture. Let’s start with a basic understanding of the intricacy of how perception is reflected in communication interactions. Barnlund (1970, 2008) proposed a six-person communication model as a way to better understand the complexity of communication. His transactional model of communication defines communication as a simultaneous process where the communicators are continually receiving and sending messages. The meanings of these messages are heavily influenced by the individual’s past experiences and culture. Perception is grounded in our experiences and culture. By viewing negotiation from a perception framework, we may appreciate how these perceptions influence message choices and interpretation of other’s messages. As we discuss this six-person model, think about how this plays out in an intercultural interaction such as international business negotiation. The following discussion uses Barnlund’s six-person model. 1 2 3 4 5 6

How How How How How How

you view yourself you view the other person you believe the other person views you the other person views him or herself the other person views you the other person believes you view him or her.

Let’s look at each of these briefly and consider how the international negotiation process is reflected in each of these positional views. How you view yourself is influenced by your past, your current view, and how you think of you in the future. This impacts our self-presentation, our facework strategies, and our communication. Protecting our face via face-saving tactics affects our ability to view the negotiation process objectively. We must consider that verbal and nonverbal messages are a reflection of our self-view. Intercultural intelligence, negotiation competency, cultural sensitivity, as well as various trait and personality tests are assessments aiming to offer us a view of who we are in the intercultural arena. More recently, we have seen the emergence of mindfulness assessment as an important variable in understanding self. Understanding our view of self or becoming self-aware is important for international negotiators because it allows us to see our shortcomings and strengths, and perhaps even more importantly, understand the impact of our restricted view. We will always be limited to assess and contribute to a negotiation outcome by our limited knowledge of our self-view. Our culture influences our status in everyday interactions. Gender, race, age, income, and generational history help formulate the status, the role and the power we have in our culture and in our organizations. In addition, the understanding of our view of ourselves in relation to others also impacts our view of ourselves. Hofstede’s dimensions of individualism/collectivism,

The Role of Perception

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power distance, and masculinity/femininity help us understand how culture influences everyday interactions. The importance of discussing these cultural dimensions here is that they influence what we think of ourselves and are reflected in our message choices during international business negotiations. The potential nightmare in how we view ourselves may be embedded in the cultural layer of influence. How you view the other person can be attributed mainly to our past experiences. We learn about others through a variety of strategies. We seek knowledge about others in negotiation situations as a way of preparing us for the negotiation. Berger and Calabrese (1975) discuss three ways we typically gain knowledge about others we know little about. Our experiences are comprised of active interactive (first-hand interactions), passive (observation), or active (researching information about the other person such as stories about the person shared by others, readings, media, etc.). These strategies give us information about others which reduces our uncertainty about other individuals if we know a little about them. Uncertainty Reduction theorists suggest that when we first meet someone we may use all three general types of strategies to help us gain information about another person and allow us to reduce our anxiety. The information gained is then used to formulate an opinion or view of that person. Berger and Calabrese present a number of axioms to explain how uncertainty about another individual influences the communication interaction experience in initial interactions. In addition, Uncertainty Reduction Theory argues that people seek to increase knowledge of another in order to be able to predict the other’s behavior and thus their own behavior in the interaction. Specifically, when we are negotiating with someone we know very little about, the amount of verbal communication will increase in an attempt to find out information and reduce our uncertainty about that person. We will use information seeking strategies to gain a better understanding of the person. We often engage in negotiation tactics such as questioning, probing, hypothetical inquiry, and even silence as a way of gaining information. If we discover similarities between us our uncertainty decreases. If we find dissimilarities the uncertainty will increase. This increase may reach a level where communication is decreased and a negative impression formed. One of the factors that will decrease uncertainty is the perception that we are similar to the other person. This perceived similarity decreases our uncertainty about another and increases our communication and comfort in sharing information. The perceived similarity in such areas as background, attitudes, and experiences allows us to explain why another uses a certain style of communication or acts in a particular manner. During the negotiation process, parties become more familiar with each other, and if they perceive similarity to the other, they will likely progress from initial superficial information exchange. Perceived similarity leads negotiators to have less uncertainty and anxiety about each other allowing for shared interests to unfold and an open

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The Role of Perception

exchange of information. As we progress beyond the initial stage of getting to know one another, the ebb and flow of communication continues as we seek more specific information about another’s attitudes and predictability of the other’s behavior. This is especially important when we are interested in the incentives that the other party holds for us in reaching an amicable agreement. Nonverbal communication is also influenced by our degree of uncertainty about the other. As we find similarities, our nonverbal affiliative expressiveness is positive. The positive affiliative expressions lead to an increase in perceived similarities. For example, in the U.S. if we find someone similar to us, we will use more eye contact, head nods, pleasant voices and communicate in a liking or affectionate tone. Nonverbal behavior varies by culture and therefore must be perceived cautiously for interpreting meaning. It is also possible that we may perceive dissimilarity, which increases our uncertainty or anxiety about the other. If this dissimilarity is strong, our anxiety increases, often resulting in actions such as withdrawal from the negotiation or disengagement in the conversation. The uncomfortableness of not finding similarity, or common ground is reduced by removing oneself from the situation, or in this case, the negotiation process. As in perceived similarity, dissimilarity influences the nonverbal actions. The negative emotional leakages often result in nonverbal channels such as little eye contact, greater physical distance between negotiators, and angular body position versus face to face. The nightmare may begin when there is a greater likelihood of a negotiation breakdown occurring based on a misperception of the other real or perceived difference. Perception of the other has an impact on our attitude toward the other and ultimately may impact the negotiated outcome. Relationship building is considered an important factor in achieving international negotiation success. Different cultures place greater or lesser value on relationship. Considering the global world we live in and the expense of developing an international business deal, we would be foolish not to consider how our view of others impacts our behaviors and ultimately the relationship needed for a positive outcome. The Perception Sin: Fundamental Attribution Error How we evaluate our experiences with others may lead us down the wrong path of perception—cognitive bias. Often our evaluations of others result in what researchers label “fundamental attribution error”. Fundamental attribution error occurs when we explain others’ behaviors by their personality characteristics and de-emphasize the situational factors that may account for their behaviors. We also have a tendency to over emphasize the situational factors as the reason for our own negative behaviour, rather than a character flaw, and attribute positive behavior to our character traits. This is considered cognitive

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bias in our judgment of behavior. In international negotiations this error can be very costly and result in a breakdown in the negotiation process. Culture can influence how we attribute causes of behaviors. For example, collectivistic cultures tend to attribute causes of behavior to the situation whereas Western cultures tend to look to the person for explaining behavior (Imada, 2012; Rips, 2011). If we rely on stereotyping characteristics of a specific culture which we have obtained through passive knowledge, we will use this knowledge to select a negotiation strategy choice which may or may not be correct. If we have misjudged the action of another by wrongly attributing the other’s behavior, our flawed judgment could result in destructive future interactions. It is essential to avoid missing the opportunity to competently assess others during the negotiation process. To combat fundamental attribution error during negotiations it is best to be in the present moment. Gathering information about another without evaluation keeps us mindful and knowledgeable. Avoiding the pitfall of fundamental attribution error is key to avoiding unnecessary mistakes. For illustration purposes, consider that you are meeting with ABC company to create a joint venture in new educational software technology. You arrive at the agreed upon meeting room 10 minutes before the scheduled time. You realize that you were cutting it close considering back home you would have been here at least 15 minutes ahead of time as this is the standard practice by your organization. The other party representing their organization arrives 15 minutes after the scheduled time. Essentially, you have been waiting for 25 minutes. Your time is valuable, your bill rate is in 15-minute increments back home, so your perception of the late behavior is somewhat unsettling. There are several obvious explanations in your mind concerning why the other party is late. Perhaps traffic was heavy (situational related) or perhaps there was a miscommunication in the starting time (situational related), or perhaps she is lazy (trait focused). The first two possible explanations allow for the negotiation to continue without you negatively judging the other person. Therefore, your communication remains open and your choice to use pro social compliance gaining tactics remains your preferred negotiation tactic because you want to establish a relationship. The next day you meet to continue the negotiation and once again the other party is late. The second time this behavior occurs you attribute this “situational tardiness” as “individual characteristic laziness” (negative trait) on the part of the other party. The negative attribution that you have assigned to the other party’s characteristics leaves you frustrated and your communication is noticeably aggressive. As the negotiation continues over a period of days there is no change in the other party’s late behavior. By this point you have not only concluded she is lazy, but you now believe the late behavior is disrespectful, so another negative attribution is assigned. As humans we have a tendency to want to group positive and negative together without support for our judgements. Positive cognitive

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bias of grouping is referred to as the “halo effect” (King, 2014). Attributing groups of characteristics together based upon one central behavior is likely to impact your behavior and view of the other party. The flaw in your perception is that you are assuming a person has negative personality characteristics based upon a behavior that you perceived as “lateness”. As you can see the potential for grouping negative characteristics together can easily occur. You start to group characteristics, in this instance negative ones together to formulate a perception of the other’s personality. The impact of the halo effect is critical in establishing a working relationship with the other party. The possible perception error has long-term implications for strategy, tactic, and message choice in negotiation. It may impact your motivation and openness to new information and ultimately cause a breakdown in the negotiation process. What can we do to prevent the mistake of fundamental attribution error? First, we must question our attribution assignment to another’s behavior. In this example, we may ask the other party about what time is best for negotiations to begin. Or we may inquire about their transportation issues, allowing for tardiness to be a situational attribution. If you continue to evaluate tardiness as a situational issue—“train ran late” —you would likely have maintained a more neutral view of her. Or we may research further about the national culture or regional culture or organization culture norms for view of time before assigning attribution to the behavior. Second, we need to be mindful of our own attitudes about time. We may realize that our cultural norms work well within our culture but may be influencing us to have an ethnocentric view of time. This can happen quite easily in intercultural situations. If we miss the difference in perception of time (polychromic/monochromic), or cultural difference in transportation we will make an error in attribution. This fundamental attribution error will influence how we communicate with the other party because our view of them is negatively affected. We need to also resist making general judgment about the other party based upon one behavior. Avoiding the halo effect will keep us focused on what we know and allow us to be as objective as we can during the negotiation process. And finally, we may find that the other party is indeed lazy and disrespectful—so what? Learning to “separate the person from the problem” as Fisher, Ury, and Patton (1991) would say, allows us to continue to work collaboratively for an agreement. The impact of our view of others can extend ultimately to how others behave towards us. “Self-fulfilling prophecy” (Rosenthal and Jacobsen, 1968) emerges as our perception of others influences our actions toward them and in turn they are prompted to behave according to our expectations. If you believe that person x is untrustworthy, you behave toward that person as if that were a fact. Your untrusting behavior prompts this person to respond by being standoffish, and or secretive. In international negotiations, for example, my perception of you is that you are trying to take advantage of my collaborative approach. My perception influences my action

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so I begin limiting the information I am willing to share with you and use competitive tactics to protect my position. You in turn, notice a change in my behavior and respond to my action by being less forthcoming in sharing issues. The result is that my perception has set off a series of actions and reactions that ultimately harms the success of the interaction. One must be careful—perception without proof results in confirmation without reason. How you believe the other views you. How I think you view me affects my behavior toward you. In negotiations this becomes evident in the strategy choice selection. Why are we influenced by what we perceive others to think of us? Perhaps Cooley’s Looking Glass Self Theory can be helpful. The Looking Glass Self Theory (Cooley, 1968) explains that our self-concept is reflected in the responses of other people’s view of us. How others view us is reflected back onto us. We communicate with another, they respond back to us and their responses influence how we see ourselves. For example, over the years as a negotiator you have been told by others that you are a “tough negotiator”, and because you value their opinion, you believe this image of yourself. This view of yourself, which was derived from others, determines your current strategy choice. You negotiate using a hard bargaining approach with such tactics as low balling, intimidation, bluffing, and stalling as your preferred method of negotiation. Essentially, others’ perception of you influenced your self-view and ultimately how you behave. The opinion of others we value directly affects our view of self and our actions. Not only does this perception influence how we behave, but our choice in behavior will impact the response we receive from others. This perspective influences our message choice and even affects our attraction to others. We can further see the implication of how we think others view us through a positive lens. Attraction theory suggests that we like those who like us. If I have a positive self-image and you express some form of positive attraction or liking to me, I will in return feel positive about you. The caveat to this is, of course, if you do not have a positive self-image then you will think there is something wrong with someone who would like you. Groucho Marx’s comment—I wouldn’t join a club that would have me for a member—sums this up (Trenholm and Jensen 2013). We can also examine how this principle may influence the other party’s negotiation style. If we are cognizant of negative pre-existing views that others have regarding our reputation in international negotiations, we can act in ways that contradict these stereotypes as a means to discredit the negative barriers. For example if you are aware that you have a reputation of being an “ethnocentric American”, you have an opportunity to choose strategies that are “relationship” focused and show genuine concern for the other party’s issues or concerns. Collaborative and compromising strategies, as well as concessions tactics, are effective ways to demonstrate “otherfocused” messages that aid in changing your image. When we move from being self-focused to mutual focused we allow for change in how others view us. Essentially, you treat the other person’s problems as your problems

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and attempt to help them solve the problems presented. Fisher, Ury, and Patton urged us to “make the other party’s problem part of your problem to solve” as an important factor in reaching a win-win agreement. How the other person views him or herself. The other’s self-awareness improves the communication interaction in negotiation settings. If the other party is highly self-aware and perceives an accurate idea of who they are and what the other party brings to the table, they often operate from a genuine position of power. If however, the other’s view of self is inaccurate, it creates an environment of miscalculations and misunderstanding at the negotiation table. For example, if the other party views herself as an excellent communicator but in actuality you find her difficult to understand, the emotional climate can become one of frustration and miscommunication. If, on the other hand, the other party knows their weaknesses and strengths and adjusts their negotiation strategy to build on their strengths and avoids situations that play to their weaknesses, their awareness helps build a better structure for success. The realistic view of one’s competence and limitations reduces the chances for miscommunication. How do we know how the other views herself? Pay attention to the communication messages and how they are framed throughout the negotiation. Tactics such as bluffing, threats, snow job, belittling, ridiculing, and exaggeration negatively impact the negotiation and the communication processing generally. The individual may view himself as being in a more powerful position than you and opt for a competitive approach. The individual’s sense of her power base influences message choice. Often during hard bargaining situations negotiators will use these tactics as a means of getting as much of the pie as possible for success. In addition, body language may be helpful in determining their perception of self. Facial expressions are perhaps the best indicator of how one genuinely feels about the conversation. Facial expressions are difficult to control in general and are often forgotten during a negotiation. Eye gazing is very much influenced by culture. For example, I was once involved in a multiple party negotiation regarding policy changes. Everyone except one older man who was Korean was leaning forward, ready to interrupt the others. Some had their hands in fist ready to pound on the table, others were glaring intensely. However, this gentleman had his eyes closed as though he was sleeping, his chair turned away from the table and his hands resting on his chair. My colleague on my left jabbed me and whispered, “He is sleeping—how can that be”. Well, he was not sleeping; his eyes were closed so that he could listen without distraction to the content of what was being proposed. His nonverbals were a sign of respect for what was being discussed. The cultural difference in how nonverbals are interpreted is an important consideration. He was demonstrating that he was a good listener through his nonverbals. It is critical that we understand cultural differences in nonverbal messages so that we can accurately evaluate the other party’s view of self. How the other person views you determines your credibility, their strategy choice, and in general, their willingness to work with you. Their attitude

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toward you is often reflected in their verbal and nonverbal cues during the negotiation. If they have a positive view of you as trustworthy, they are more likely to share information about their interests and possibly lead to a mutually beneficial agreement. The significance of having the other view you in a positive or at least not negative light in international negotiations should not be underestimated. Communication messages that demonstrate interest and support in your needs can be seen in tactics such as information sharing, self-disclosure, concessions, and collaboration. If there is a positive relationship emerging, negotiators are more likely to engage in an integrative negotiation process. Cultures where relationship is valued and sought out recognize the importance of forming a positive relationship first and conducting business second. Your reputation is key to the negotiation process. Your credibility as a negotiator is determined by others. Credibility is something that is given to you through others’ perceptions. We can only act in ways that allow an opportunity for others to judge us in a positive light. The ultimate credibility determination is always found in the other party’s view. The ethos of your negotiation competency will carry you through difficult negotiations. How the other person believes you view him or her. At this point you may be thinking—what? Why would I care what the other person believes I think of her/him? There are several reasons why this becomes relevant information when you are involved in international negotiation. We know that attitude and perception contribute to message selection, information disclosure, trust level, and relationship building, as well as a slew of others. Think of it this way. I have a choice in how and what to say to you and that message choice is influenced by perception. The perception I have of what you think I think of you becomes relevant, especially during negotiations where reaching an agreement is essential. For example, I believe that you think I think you are ruthless and deceptive. However, that is not how I really feel about you, but it seems from our past interactions this might be occurring. If I have this perception, and my goal is to develop a trusting relationship, I will attempt to change this view by selecting messages that will contradict that perception. I may say “I appreciate your honesty”, or “Thank you for your willingness to compromise on this issue”, or “I am glad to see we share compassion on this issue”. The point is that I will frame messages that will influence a re-evaluation of this current perception. However, if I am mistaken about how you think I view you, then I may cause confusion and misunderstandings or miss an opportunity to communicate effectively.

How to Combat the Perception Issue in Negotiation Unconscious Bias Organizations recently began to address the unconscious bias effect in the workplace (McCormick, 2016). In 2015 the Wall Street Journal reported that 20% of U.S. companies are providing unconscious bias training. What

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do we mean by “unconscious bias”? Guynn (2015) explains unconscious biases as, “mental shortcuts based on social norms and stereotypes”. Bias can be based on foreign accents, gender, age, weight, height, marital status, sexual orientation, hair color and other categorical schemas that we may have formed as a result of our observation or life experiences. We are not born with biases. They are learned and provide a quick route for us to make sense of situations. That is, these groupings help our brain make quick decisions even if they are inaccurate. The issue for the unconscious bias is that we are unaware that our groupings or categories exist until a situation occurs that calls into question our judgments. The importance of this issue in international negotiation is that we are likely using these unconscious biases to make very important agreements. Failed negotiations may in part be due to our lack of awareness about our own unconscious bias. As we discussed earlier in this chapter, perceptions are subject to judgments that can be detrimental to our effectiveness. What can we do about this? Awareness and mindfulness training can provide insight to who we are. Once we become aware and learn to be fully present in the moment without prejudice, we have an opportunity to fully expand the search for shared interests and collaboration. Awareness of ourselves and others gives rise to the issue of how identity participates in this awakening. Understanding Identity Influence on Perception Two types of identity that impact your role in negotiation are social identity and personal identity. Social identity is the individual’s reference to her membership of a collective group. Deaux (2001) discussed five types of social identity: political affiliations, stigmatized groups, personal relationships, vocations and avocations, and ethnicity and religion. Social identities provide a sense of who we are in regards to others. It provides us with regulatory behavior guidelines indicating normative behavior for in-group and out-group members. Shared group goals, worldviews, rules, and attitudes are defined through our social group identities (Abedelal, Herrera, Johnston, and McDermott, 2009, p. 19). International negotiations are vulnerable to miscommunications and expectancy violations because of different social identities. Such behaviors as greetings, gift giving rituals, and even our level of aggressive communication are directed by the social group category in which we see ourselves. The rigidity of acceptable compliance with these norms is influenced by how strongly we value our group membership or identity. Social Identity Theory (Tajfel, 1978) suggests that our social identity is a critical part of our self-image. Social identity often results in how we see ourselves. The norms of one’s social identity group are internalized and remain at a subconscious level until someone violates the expectation or offends the rules designated by the social identity group. Although social identity often creates a positive

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sense of self, it also creates a we–they perspective. This distinction can often lead to negative views of the out-group members as a way of separating ourselves from those who do not share our rules and normative beliefs. For example, Sue has a strong social identity as an American. Normative behaviors such as greeting others by their first name influence how Sue addresses her interaction during the initial stage of the negotiation. Sue refers to the other party, who is Japanese, by his first name Han. The normative behavior of Americans is that an informal communication style is encouraged as a gesture of relationship building and its underlying value of equality and individualistic nature. Han, however, views this informal first name reference as offensive. Han views formal address as a gesture of respect, whereas Sue views informal address as a gesture of friendliness. This interaction can result in an uncomfortable beginning to the negotiation process. This failure to consider the role of social identity in the negotiation process creates a ripeness for failure or mishap. This breakdown potential may result in a negative view of the other and ultimately influence the outcome of Sue and Han reaching agreement. The impact of social identity is critical in international business negotiations because negotiators’ social identities play a role in self and other perspective taking and action strategies. And we must also recognize that each of us may have several groups that make up our social identity. When we are negotiating we must consider our own social identity bias as well as those with whom we are negotiating. National and regional culture, organizational, gender, and political systems are all potential social identities that influence our interactions, especially in persuasive processes such as business negotiations. Personal identity should also be considered in the negotiation process. Personal identity is based upon the unique characteristics, behaviors, and attitudes that we have. Turner and his associates (Turner, 1982, Turner, Oakes, Haslam, and McGarty, 1994) posit that our personal identities are the characteristics that define us as unique individuals. Although we might want to distinguish personal and social identities as completely separate, one must consider that at least at a minimum, the two identities share some common subset of behaviors or characteristics. That is, as the old saying goes, “No one is an island unto themselves” is a fitting description of the connection of identities. Let’s examine some of the characteristics/traits that may help us better understand the impact of personal identity on perception. Self-Monitoring Self-monitoring is an important personality factor that helps us better understand differences in communication behavior adaptability. One’s ability to perceive the cues that are present in social interactions is influenced by one’s ability to self-monitor. Snyder (1974) defines self-monitoring as a personality trait-like variable that reflects an individual’s ability to adapt, regulate, or control his or her verbal and nonverbal behaviors in social situations. Specifically, he states (p. 536):

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The Role of Perception Individuals differ in the extent to which they monitor (observe and control) their expressive behavior and self-presentation. Out of a concern for social appropriateness, the self-monitoring individual is particularly sensitive to the expression and self-presentation of others in social situations and uses these cues as guidelines for monitoring and managing his own self-presentation and expressive behaviour.

Individuals that are low self-monitors tend to be less concerned about their presentation appropriateness and less reactive to other’s expression; whereas, high self-monitors are sensitive to others’ expression and social cues which often results in them adapting and or regulating their behavior. The high self-monitoring individual is more likely to adapt their behavior to the social situation. “To thy own self be true” may be the motto of the low self-monitor and “Give the customer what she wants” may be the motto of the high self-monitoring individual. Cultural differences exist in self-monitoring behaviors. Gelfand and Dyer (2000) found that self-regulating is critical for intercultural negotiations. They contend individuals who can change their behavior to fit within the environment will do better in intercultural negotiation settings (Berger and Calabrese, 1975). Culture plays at least a part in individual’s level of selfmonitoring. Hofstede (1980) contended that individualistic cultures engage in more self-monitoring than collectivistic cultures (p. 27). Some support for this is found in Gudykunst, Yang, and Nishida’s (1987) study. They concluded that individuals from the United States are significantly higher in self-monitoring than Korea or Japan whereas little difference exists between Japan and Korea. Why is self-monitoring important in international negotiation failures? If our perception of how to communicate during the negotiation is based internally without the sensitivity to adapt to the current situation, we may miss important cues for agreement. Our adaptability to adjust to the cues given by the other party allow for “expanding the pie” situations. Self-monitoring may perhaps provide insight as to why some negotiators do better in reaching a deal than others. A negotiator may gain a distinct advantage by continually adapting communication based on this knowledge. Take a moment to complete the Self-monitoring Scale: Self-Monitoring Scale Instructions: The statements below concern your personal reactions to a number of different situations. No two statements are exactly alike, so consider each statement carefully before answering. lf a statement is TRUE or MOSTLY TRUE as applied to you, mark T. lf a statement is FALSE or MOSTLY FALSE, as applied to you mark F. It is important that you answer as frankly and as honestly as you can.

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The Scale 1 I find it hard to imitate the behavior of other people. 2 My behavior is usually an expression of my true inner feelings, attitudes, and beliefs. 3 At parties and social gatherings, I do not attempt to do or say things that others will like. 4 I can only argue for ideas I already believe. 5 I can make impromptu speeches even on topics about which I have almost no information. 6 I guess I put on a show to impress or entertain people. 7 When I am uncertain how to act in a social situation, I look to the behavior of others for cues. 8 I would probably make a good actor. 9 I rarely need the advice of my friends to choose movies, books, or music. 10 I sometimes appear to others to be experiencing deeper emotions than I actually am. 11 I laugh more when I watch a comedy with others than when alone. 12 In a group of people I am rarely the center of attention. 13 In different situations and with different people, I often act like very different persons. 14 I am not particularly good at making other people like me. 15 Even if I am not enjoying myself, I often pretend to be having a good time. 16 l’m not always the person I appear to be. 17 I would not change my opinions (or the way I do things) in order to please someone else or win their favor. 18 I have considered being an entertainer. 19 In order to get along and be liked, I tend to be what people expect me to be rather than anything else. 20 I have never been good at games like charades or improvisational acting. I have trouble changing my behavior to suit different people and different situations. 21 I have trouble changing my behavior to suit different people and different situations. 22 At a party, I let others keep the jokes and stories going. 23 I feel a bit awkward in company and do not show up quite so well as I should. 24 I can look anyone in the eye and tell a lie with a straight face (if for a right end). 25 I may deceive people by being friendly when I really dislike them. Scoring: The following is the scoring key as if answered by a pure high selfmonitor. Compare these answers with your own and give yourself 1 point for every answer that matches this key.

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Give yourself one point each if you answered F to questions 1, 2, 3, 4, 9, 12, 14, 17, 20, 21, 22, 23 Give yourself one point each if you answered T to questions 5, 6, 7, 8, 10, 11, 13, 15, 16, 18, 19, 24, 25 If your score was between 18–25, you are a HIGH self-monitor. If your score was between 11–17, you are in the MID range, having characteristics of both HIGH and LOW self-monitors. Your position in the midrange indicates toward which end you may lean. If your score is between 0–10 you are a LOW self-monitor. Source: From Snyder, M. (1974) Self-monitoring of expressive behavior, in Journal of Personality and Social Psychology, 30. Used with permission by Center for the Study of the Individual and Society. Thank you.

Summary This chapter examined the role of perception and the negative effects it may have on international business negotiations. In order to avoid needless failures in negotiation, especially those in intercultural settings, we need to understand our bias and the role perception plays is achieving success or failed negotiated agreements. The complexity of perception should not be minimized. Scrutinizing the impact of perception and the inaccuracy perception may create allows us to further examine our intercultural communication experience. If we begin with viewing negotiation strategies and tactics as they unfold during the process with mindfulness we may avoid the pitfalls of our culture lens.

References Abedelal, R., Herrera, Y. M., Johnston, A. I. and McDermott, R. (2009). Measuring Identity: A guide for Social Scientists. Cambridge: Cambridge University Press. Barnlund, D. C. (1970). A transactional model of communication. In Kenneth K. Sereno and C. David Mortensen (Eds), Foundations of Communication Theory, (pp. 83–107). New York: Harper & Row. Barnlund, D. C. (2008). A transactional model of communication. In C. David Mortensen (Ed.). Communication Theory (pp. 47–57). New York: Routledge. Berger and Calabrese (1975). Some explorations in initial interaction and beyond: Toward a developmental theory of interpersonal communication. Human Communication Research, 1, 99–112. Cooley, C. H. (1968). The social self: On the meanings of I. In Chad Gordon and Kenneth J. Gergen (Eds), The Self in Social Interactions, Vol. I Classic and Contemporary Perspectives (pp. 87–91). New York: Wiley. Deaux, K. (2001). In J. Worell (Ed.). Encyclopedia of Gender and Women. San Diego: Academic. Fisher, R., Ury, W. and Patton, B. (1991). Getting to Yes: Negotiating Agreement Without Giving in. New York: Penguin.

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Gelfand, M. J. and Dyer, N. (2000). A cultural perspective on negotiation: Progress, pitfalls, and prospects. Applied Psychology: An International Review, 49(1), 62–69. Gudykunst, W. B., Yang, S. and Nishida, T. (1987). Cultural differences in self-monitoring and self-consciousness. Communication Research, 14, 7–34. Guynn, J. (2015). Google’s “bias busting” workshops target hidden prejudices. USA Today. Hofstede, G. (1980). Culture’s consequences: International differences in work-related values. Beverly Hills, CA: Sage. Imada, T. (2012). Cultural narratives of individualism and collectivism: A content analysis of textbook stories in the United States and Japan. Journal of Cross-Cultural Psychology, 43, 576–591. King, L. A. (2014). The Science of Psychology 3rd edn. New York: McGraw-Hill. McCormick, H. (2016). The real effects of unconscious bias in the workplace. UNC Executive Development. Rips, L. J. (2011). Causation from perception. Perspectives on Psychological Science, 6, 77–97. Rosenthal, R. and Jacobsen, L. (1968). Pygmalion in the Classroom. Fort Worth: Harcourt Brace. Snyder, M. (1974). Self-monitoring of expressive behavior. Journal of Personality and Social Psychology, 30, 526–537. Tajfel, H. (1978). Intergroup behavior. Introducing Social Psychology. New York: Penguin Books, 401–466. Turner, J. C. (1982). Towards a cognitive redefinition. In H. Tajfel (Ed.), Social Identity and Intergroup Relations (pp. 15–40). Cambridge: Cambridge University Press. Turner, J. C., Oakes, P. J., Haslam, S. A. and McGarty, C. (1994). Self and collective: Cognition and social context. Personality and Social Psychology Bulletin, 20(5), 454–463. Trenholm, S. and Jensen, A. (2013). Interpersonal Communication. New York: Oxford University Press.

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Emotions Sorting Through the Impact of Emotion on the Negotiation Process

Emotion and its Origins Emotion is defined as, “The complex psychophysiological experience of an individual’s state of mind as it interacts with biochemical and environmental influences” (Lumen, Boundless Psychology). Emotion can further be defined from a physiological perspective. The Collins Dictionary of Medicine states that emotion is: Any state of arousal in response to external events or memories of such events that affect, or threaten to affect, personal advantage. Emotion is never purely mental but is always associated with bodily changes such as the secretion of adrenaline and cortisol and their effects. The limbic system and the hypothalamus of the brain are the mediators of emotional expression and feeling. The external expression of emotional content is known as “affect”. Repressed emotions are associated with psychosomatic disease. The most important, in this context, are anger, a sense of dependency, and fear. The amygdala, located above the brainstem, is key to controlling and producing emotions. Although other parts of our brain participate in the display of emotions it is the amygdala that is central (Adler, Rosen and Silverstein, 1998). As Adler et al explain (p. 166), What is critical to understanding the role of emotion is that the amygdala engages immediately at primitive and powerful levels before the rational mind assesses a situation and decides how to react… Because no two human lives are alike, different stimuli trigger different emotions in people. Despite the differences in our emotional reaction, there is a striking universality to emotions. Emotions are important for social functions and relationship management (Druckman and Olekains, 2008). Emotions can also serve to isolate and reject social relationships. They are stimulated by internal and external cues.

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Our emotions become aroused by situational factors (amount of time we have to reach an agreement), by the behaviors of others toward us (their emotions and/or behavior), and by our own internal cognitions and perceptions (assumptions we make about others, perceptions about self). Emotions often provide us with an impulse or urge to act and they also are the feelings that motive us to act. Shapiro (2004) argues that we are in a perpetual emotional state. Rather than removing emotion from the negotiation, we need to better understand the role it plays in our strategy choices and ultimately its effect on outcome. There are seven basic emotions that are thought to be universal. Ekman (1992) proposed happiness, sadness, fear, anger, disgust or contempt, and surprise, as the key emotions that humans share and are able with a great degree of accuracy to detect in others. He argues that these emotions are biologically based but may be displayed differently depending on cultural constraints. Cultures vary in their display rules, regulation, and intensity of the emotion. Cognitive Connection of Emotion Cognitions and emotions are not distinct; there is an interplay between the processes of cognitive and emotional processes. They occur in the brain area where those operations interact (Olekains and Druckman, 2014; Lindquist et al, 2012). This suggests that negotiation tactics and emotions are integrated and should be considered in combination both in the encoding and decoding of message selection. We do not think and then feel. Rather, we think and feel in an assimilated fashion. Therefore, we need to consider the significance of emotions providing key pieces of information and preferences to ourselves as well as the other party during the negotiation process. The strength of the emotion provides valuable information that enforces the importance or value we place on the issues. Emotions expressed help us signal to our opponent our intentions. Identifying our own emotions provides valuable insight to us regarding how important the issue may be to us or how much we value something. In addition, the emotional layer of a message can encourage us to move the negotiation in a direction. Emotions serve as a coordinating function for the development of social interactions and relationships. That is, sometimes it is the expressed emotion that directs the negotiation agenda in an efficient manner in order to spend more time on what is important to us and less time on other issues.

Emotional Footprints Emotional Contagion. Often one’s emotions during a negotiation are the result of what researchers refer to as emotional contagion effect. That is, the spill over of one’s positive or negative emotion influences the other party’s

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emotions and may set the tone for the negotiation. Emotional contagion occurs at an unconscious level. The subtlety of passing one’s emotions to the other is often a simple transfer of the dominant emotional person to the more passive emotional person. Often you can see the transmission in facial expressions, tone of voice, gestures and other nonverbal cues. Most likely you have experienced emotional contagion in your personal life. For example, you decide to attend a super bowl party even though you are not a fan of either team. Your friends’ team ultimately loses the game. Party goers are angry, upset, and complaining about the referees, the quarterback and there is a general negativity in the room. The party feels more like a jail sentencing than a party. You leave feeling worse than when you came. This is emotional contagion. You “caught’ the negative emotions of others around you. If you know that someone you are going to negotiate with is angry, rude, and generally displays negative emotions, you have to inoculate yourself from this emotion or you too will suffer the negative emotions and run the risk of failing to reach an acceptable agreement. The long-term effect of emotional contagion may ultimately influence outcome and future relationship opportunities. Do you walk away feeling better or worse after interacting with another individual? The answer to this question helps us identify when we have caught someone else’s mood. We suggest that there are several precautionary measures that you may take to reduce the effects of emotions. Emotional Inoculation. Cognitively preparing for the possible negative emotional person will lessen the overall effect. Using an analogy such as immunizations for disease may be a helpful way of thinking about how we can prevent or lessen the impact of negative emotions. Think of the biological model of fighting a virus such as the flu. If you are exposed to a small dose prior to the full-blown virus your immune system has a chance to build a defense against the virus. The impact of the flu is prevented or reduced. By preparing for the negotiation from an interactive perspective instead of a unilateral one, we can take into consideration the best response to a tactic that is offensive without succumbing to the negative emotional impact for which the tactic may have been designed. Although we cannot change the emotion expressed by our opponent, we are able to reduce the effect it has on our strategy choice and emotional well-being. We can plan for the emotions that our opponent may display, and through this planning specifically plan our reaction to successfully prevent their emotions from influencing the desired outcome. Emotional Congruency. Have a good offense. Stay consistent to your emotions or feelings regarding issues over time. It is easy to initially present an emotional blanket that hides one’s true feeling. However, as a negotiation progresses, and the complexity of the issues emerge, our emotions are uncovered in part, because we cannot cognitively keep focused on emotions when we become stressed or when an issue requires new problem-solving cognitive thinking. Our brain simply prioritizes our needs. So, what can we do? Knowing our

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own triggers is critical for emotional congruency. For emotions to be effective they need be congruent with our values and it is best to connect them to the other party’s cultural values as well (Druckman and Olekains, 2008). Educating ourselves about the organizational culture, the national culture and an individual’s personality will help us develop a profile of emotional expressiveness of the negotiator. This preparation aids us in problem-solving and avoidance of the pitfalls of emotional influence. Emotional Leakage. Emotional leakage that may occur during negotiations may provide the other with critical pieces of information that we unconsciously give away. This happens as a result of our emotional display rules and our level of emotional intelligence. Emotional display or expression rules are developed early on in our lives and are culturally based. We are often unaware of our facial expressions in everyday interactions among those that share our culture. Most negotiators try to guard against the display of key expression such as excitement or fear. But, many, especially those who are deficient in emotional intelligence, are likely to “spill” our feelings about an issue inadvertently. Emotional Hangover. Lerner (2005) discusses how emotional hangovers can distort our judgment and negatively influence our decisions. Learner and several colleagues studied the effects of incidental emotion in negotiation settings. Anger and sadness were found to have a negative impact on negotiators’ decisions even though the emotions were not related to the negotiation context. For example, someone steals your brand new purse on your way to work today. You are angry about the theft of your bag. However, you need to get to work to meet with a potential new employee to negotiate her salary. You think that you can objectively participate in the salary negotiation and not let the anger interfere in the negotiation. However, this is not the case. The emotional hangover effect (in this case—anger) will likely influence your judgment and distort your thinking about what decisions to make in reaching an agreement. What can you do? Acknowledging the emotion we feel allow us to make a more rational decision in the future. Give yourself an opportunity to breathe and release the tension. Change the cognitions from negative to positive (i.e.— “[66 not 99] I am so angry” to” I am thankful I did not put my keys in my new bag”). Regulate Your Emotion. Regulating emotion may be viewed as part of a negotiation strategy for influencing a favorable outcome. A critical factor in determining the amount of regulation regarding emotional expression is the authenticity of the emotion. If the expressed emotion is perceived as disingenuous, the negotiation is likely to create mistrust between the parties and an escalation of demands by the observing party. Self-regulation is a key component of emotional intelligence and requires one to be observant of other’s emotions. We can build our emotional intelligence by actively practicing our observation skills of nonverbal behaviors. Ask for clarification regarding their meaning. This act can not only clarify for you the communication, but also makes the other accountable for her actions. Let’s further examine the role of emotional intelligence.

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Emotional Intelligence There is a growing body of research on emotional intelligence and its role in negotiations. (Lewicki, Bruce, and Saunders, 2015; Katz and Sosa, 2015). Emotional intelligence became popular in the general population with Daniel Goleman’s 1995 book Emotional Intelligence. Earlier work by Mayer and Salovey (1997) developed the term emotional intelligence and measurement of emotional intelligence in collaboration with Cauruso. Mayer and Salovey defined emotional intelligence as “the ability to perceive emotions, to access and generate emotions so as to assist thought, to understand emotions and emotional knowledge, and to reflectively regulate emotions so as to promote emotional and intellectual growth” (p. 5). Katz and Sosa (2015) in their article, “The emotional advantage: The added value of the emotionally intelligent negotiator” discussed how emotional intelligence can help a negotiator identify and understand emotions and their impact on our cognitive process during negotiation. This is important for conflict resolution. Ogilvie and Carsky (2002) stated that emotional intelligence is highly influential in every part of the negotiation process and it leads to more accurate processing of information and better problem-solving. Emotional intelligence is of growing interest to those of us who study negotiation failures. Katz and Sosa discuss the importance of self-awareness, self-regulation, social awareness, and relationship management as key competencies in achieving emotional intelligence. The ability to identify your own emotions and interpret them during the negotiation process can help avoid the pitfall of “giving away” the importance of an issue. In addition, when our emotions “run high” and we react with emotional intensity we may be compromising our ability to problem- solve. Research indicates that when we become emotionally aroused, we are activating a region of our brain, the amygdala; whereas, when we are engaging in problem-solving such as in the case of negotiating, we are activating the cerebral cortex part of the brain where decision making function occurs. The activation change that occurs when we become emotionally aroused can compromise our ability to make decisions. Self-awareness of our emotions and our ability to recognize others’ emotions helps us to regulate to some extent our emotional reactions during a negotiation. It is worth noting that our emotions are often related to earlier experiences in our life that are attached to our thoughts or cognitions. The emotional arousal may result in a real or imagined interpretation of the current situation. Therefore, knowing our “triggers” and how they may lead us astray from the actual situation is essential for skilled negotiators. An example of this might be: You are negotiating a deal for the purchase of apples for your applesauce manufacturing business. The other party is refusing to consider the current market value and has interrupted you repeatedly. You are aware that you are becoming angry (high self-awareness) with her continued interruption and her

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lack of reasoning. Should you raise your voice, grit your teeth, tighten your lips or should you regulate the anger so that it is difficult to detect your feelings? The answer is: it depends. It depends if the culture of your opponent views the display of negative emotions as acceptable. It depends if your facial expression which is universally recognized has already been displayed because of its unconscious nature. It depends upon whether you know your triggers. That is, does someone interrupting you trigger a previous experience that intensifies the emotional reaction you are experiencing right now? We need to not only be able to be aware of our emotions but also self-reflect on what triggers may cause us to emotionally overreact to a current situation. It is interesting to note that although we may become quite proficient at regulating our display of emotions, facial expressions are more difficult to hide. This is due in part to the universal interpretation of certain emotions across cultures and its strong relation to the biological instantaneous response without a cognitive evaluation. Facial expression of emotions is thought by many psychologists to be directly connected to biology and therefore little difference exists from one culture to another. However, the display rules of emotions are the sociocultural standards that determine who is allowed to express, as well as, how, when and where we should display our emotions. These rules vary from culture to culture. Given the differences in display rules our ability to recognize another’s emotions, and to act appropriately to manage the relationship, is more complex than we may have considered. This is important in understanding emotional intelligence as it relates to international negotiation and the role it plays in failed outcomes. The role of culture must be considered in determining emotional intelligence, especially in international business negotiations. The inherent nature of cultural impact on how we evaluate emotional intelligence is a limitation that we would be wise to consider in global interactions. The tricky nature of interpreting another’s emotions, especially someone who may have subtle emotional responses, may prove to be difficult.

Role of Culture and Emotion Humanity shares the same set of basic emotions (Adler, Rosen, and Silverstein, 1998). The role of culture impacts the expression, the value, and the acceptance of these emotions. Negotiations are influenced by emotions and the culture influences the impact of emotions (Kopelman and Rosette, 2008; Sinaceur and Tiedens, 2006). For emotional expression to be effective, we need it to be congruent with the cultural values of the other. This universal construct has a genetic base, but the expression and interpretation of the emotion is very much impacted by our culture. There is evidence that cross cultural difference in emotional arousal level exists as well. Western culture is typically considered to display high arousal emotions whereas Eastern culture is low in display of arousal emotions (Lim, 2016). We might think of it as

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Westerners may “wear their emotions on their sleeves”, whereas Easterners may be inclined to “keep their feelings close to the vest”. Hofstede discusses the role of emotional needs for formal structures in cultures. He explains how the role of laws and the variability of the rules in a society vary depending on cultural values. Tolerance for uncertainty fluctuates by cultures and the expression of (or lack of) emotions affects the rules of emotional expressiveness. Hofstede (1997) contends “…even ineffective rules satisfy people’s emotional need for formal structure” (p. 121). The relationship of emotional expression to the acceptability of emotional expression is heavily influenced by the social rules created by societies and their values. How do emotions vary across cultures during negotiations? The rules of expressiveness and views of positive/negative emotions appear to be important factors in how emotions affect negotiated outcomes. For example, in the United States, labor management negotiations are typically emotionally volatile, comprised of insults, anger, unrealistic demands, threats and raised voices. Russia, Israel, Greece, and Spain often view emotional expression as an acceptable and widespread behavior in bargaining. Less expressive cultures such as Japan, Thailand, and Indonesia would find this open expression of negative emotional outbursts offensive and rude. Of course, comfort and tolerance for emotional expression is heavily influenced by family, individual personality, and training (Moore and Woodrow, 2010). Embedded in the role of emotional expressiveness is the issue of emotional control. Emotional control is important in conducting business negotiations (Sanchez-Burks, 2005). Cultures vary in their acceptance and expectation concerning the expression of emotions, especially highly expressive ones. For example, many Asian cultures avoid overly expressive emotions, both positive and negative; whereas Westerners tolerate and expect expressions of anger, especially when negotiating from a hard bargaining perspective. It is important that we do not make assumptions based on culture only, but rather be mindful and open to the party with whom we are currently communicating. Keeping cultural assumptions at bay helps us stay in the present and open to the emotions as they unfold during the negotiation process. Positive and Negative Emotional Expression Failure to reach a negotiated agreement may be a result of expressing emotions that are perceived negatively by the other party, especially in intercultural settings. Positive emotions, although they must be restricted in their degree of expressiveness, tend to result in a better outcome. Below is a brief review of the role of positive and negative emotions as well as specific emotions and their role in influencing outcomes.

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Kopelman and Rosette (2008) concluded that East Asian negotiators are more likely to accept proposals from positive negotiators than negative ones. The role of positive affect expression may be viewed as a positive form of face honoring and facilitates a communication interaction that leads to relationship building and ultimately successful agreement. Kopelman and Rosette found in their study that East Asians rejected 100 percent of the time when their U.S. opponents used negative displayed emotions. Although their sample size was small, 22 negotiations, the importance of not expressing negative emotions during negotiations with East Asians is worth attention. Westerners must take note that positive and negative emotions communicate relationship value. Emotions can strongly impact the face honoring dimension of the interaction. Cultural values impact the role of emotions expressed in a negotiation setting. Kopelman and Rosette (2008) examined Israeli—U.S. and Israeli—Hong Kong negotiations and the role of positive or negative emotions appeared to have no impact on agreement. The authors concluded that once again culture, in this case the Israeli culture’s value of dugri (direct speech use), negates the effects of negative emotions. Luomala, Kumar, Singh, and Jaakkola (2015) studied failed intercultural business negotiations between Finnish and Indian participants. They concluded that Finns experience negative emotions to a greater extent than Indians and that Indians reported feeling neutral, not negative in unsuccessful outcomes. The researchers concluded that this lower emotional volatility difference may be a result of the difference in collectivistic cultures versus individualistic cultures. Specifically, the perspective-taking ability of collectivistic cultures may regulate and lower the emotional volatility of collectivistic cultures, in this case Indians. The authors posited that early on, children may be taught to control negative emotions, which ultimately influences the perspective taking ability of regulating their emotions (p. 554). Positive emotions can lead to cooperation, higher level of joint gains, greater creativity, and increased trust and future relationships (Kopelman and Rosette, 2008; Anderson and Thompson, 2005; Baron, 1990). The ability to generate positive emotions as a strategic move during a negotiation creates greater joint outcomes and positive views of future negotiations (Mueller and Curhan, 2006). East Asian negotiators’ cultural values include respect, humility, and deference (Kopelman and Rosette, 2008) and are demonstrated during negotiations as face honoring behaviors. These highly regarded values result in positive emotions during negotiation. Kopelman and Rosette (2008) found that compared to negotiators from Israel, East Asian negotiators are less likely to accept an offer from negotiators who display negative emotion. Emotional expression is often used to indicate the importance of an issue and also help build relationships. For example, several studies (Moran and Stripp, 1991; Moore and Woodrow, 2010) indicated that when negotiating with someone from the Mexican culture, it is important to understand

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emotions and respect the power of stories to explain the importance of issues. Many Nigerians view showing emotions as acceptable, but negative expression may have an adverse effect on the relationship, so it is important to be respectful and withhold strong negative emotions in favor of a more positive relationship (Moore and Woodrow, 2010). Happiness Emotion Happiness is a positive emotion that when expressed in negotiation is likely to produce such effects as perceived trustworthiness, relationship building for future negotiations, increased joint outcomes, more concessions, creativity in problem-solving, cooperation, optimism, integrative offers, and increased potential for agreement (Kopelman et al, 2006). Happy negotiators were found to be more cooperative and make more integrative offers (Carnevale, 2008). Carnevale went on to report that a negotiator’s reference points can shift and that negotiators use their emotion to guide their behavior (Carnevale, 2008). When happiness is directed at the other person, not the issue, more concessions are granted from the other party (Harinck and Van Kleef, 2012). This is the opposite effect from anger where the emotion is directed at the issue not the person. Happiness in high-priority issues increases negotiators’ engagement in value-creating behaviors (Olekains and Druckman, 2014). However, one should repress happiness when they are winning. This suppression may be viewed by the other party as a demonstration of protecting the other’s face so as not to “gloat” at the expense of another’s loss. Happiness creates a context where communication is often viewed as warm and genuine resulting in trust. However, emotions must be genuine to increase trust in the negotiation. Beware not to “fake happiness” because if it is not perceived as an honest emotion it can have powerful negative effects. Inauthentic or deliberate deception of emotion raises ethical issues and destroys rapport. Expressing happiness can also be detrimental. For example, Van Kleef et al (2004) reported smaller concessions being made to negotiators who expressed happiness than those who expressed anger. Alison Wood Brooks warns us to temper our happiness at the conclusion of the negotiation so as to not let the other feel disappointed in their success. Rather, it is best to control our feelings of excitement and happiness and let the other feel as though they got a great deal. Focusing on possible future relationships and a positive expression of working with the other party is better than focusing on the expressed positive feeling regarding the agreement. Cultural differences regarding the arousal level of happiness are conceptualized differently. Lu and Gilmour (2004) found that Americans express happiness as a high arousal emotion that is upbeat and expressive, whereas Chinese and Japanese (Uchida and Kitayama, 2009) view happiness as a low arousal emotion expressed in a more reserved and solemn manner (Lim, 2016).

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Anger Emotion We may experience anger when we believe we are treated unfairly, or someone has violated a behavioral norm, or when we are frustrated with our current situation. In business negotiations one may become angry because of misrepresentation, excessive demands, overstepping authority, animosity, questioning credibility or authority, or focusing on irrelevant information, (Adler, Rosen, and Silverstein, 1998). Anger can influence concession making. When the negotiation is under time constraints and parties are under pressure to reach closure, anger can elicit concessions (Van Kleef et al, 2004) or make negotiators dig deeper into positional stance. Use of anger in the negotiation setting has received more attention than any other emotion to date. In hard bargaining negotiations, anger can help a negotiator’s gain in outcome (Sinaceur and Tiedens, 2006; Van Kleef et al, 2004; Overbeck, Neale, and Govan, 2010). An extravagant form of expressed anger, “madman’s advantage”, can be used to intimidate an opponent or break impasse (Adler, Rosen, and Silverstein, 1998). It is beneficial to a positive outcome for a negotiator to: a) direct anger toward the issue and not the person, b) ensure the opponent views the anger as justified, c) be certain there is interdependency between or among parties, and d) stress the angry message contains relevant information that aids in agreement (Van Kleef, 2010). Druckman and Olekains contend that it is beneficial when you have interdependent parties who use expression strategically and the anger is perceived as justified (p. 6). Expressed anger is effective when it is used by the higher power person in the negotiation. There seems to be a tolerance for expressed anger when the person has a higher power status, it is a one-time negotiation, and when the other party views the anger as genuine. There is support for the proposition that if we have been the target of an opponent’s anger, we are likely to demand less from them in future negotiation interactions. This longer-term study by Van Kleef et al (2006) refers to this effect as the spillover model. They argue that because you have been a target of the opponent’s anger, you consider them tough and react to this toughness with the expectation of receiving less. This can be viewed as a positive or negative outcome depending on the target of the anger. There are negative consequences to expressed anger during negotiations as well. Anger can cause health related issues, relationship deterioration, and ultimately failed agreements. Intense anger vented during negotiation can lead to further conflict (Allred, 2000). The idea that venting one’s frustration or irritations will allow for the emptying of the tank so that one can continue negotiation and benefit both parties is false. Rather, moderate anger expressed directly toward the problem and away from the other party is acceptable and viewed as valuable information regarding the importance of the issue discussed, particularly in Western cultures.

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Anger can also impede agreement by clouding objectivity, and misdirecting our focus from our goals to emotional retaliation or revenge. It is disruptive and motivates us to communicate negative messages. Adler et al (1998) contend, “Anger motivates us to retaliate when we are attacked and to defend ourselves against those whom we believe are doing us harm” (p. 169). When our anger is met with anger we create an escalating spiral of destruction and create interaction that has few options for constructive problem-solving. That is, once we engage in several anger exchanges we decrease the opportunities for constructive problem-solving tactics and view our options as limited to preserving one’s face and/or attacking another’s face. Either way the negotiation process will end in destructive relationship damage and ultimately failed outcome. Cote, Hideg, and Van Kleef (2013) discovered in their two-part experiment of emotions that surface acting anger defined as unauthentic anger or faking anger is detrimental to negotiations. Faking one’s anger can result in the other party’s dissatisfaction with the negotiation, and they will be less likely to engage in future negotiations and see the other as an opportunistic individual who is trying to manipulate them. In addition, Cote et al reported that observers of fake emotion have little interest in future negotiation and are generally dissatisfied. In addition, they concluded that feigned displays of anger are detrimental to outcome and will increase demands from the other party due to lack of trust. This is contrary to Van Kleef and his co-authors (2006) who reported that negotiators will make larger concessions and lower demands when their opponent is angry (p. 577). However, deep acting anger may serve to increase a perception of toughness and result in larger concessions by the opponent. Culture could be a variable in these reported differences. Responses to expressed anger vary by culture. Olekains and Druckman (2014) found that when anger is expressed during a negotiation the European and American negotiators gave larger concessions, whereas the Asian and Asian Americans offered smaller concessions. Cultural differences were also reported in a 2013 study by Adam and Shirak. They found that Chinese negotiators were more likely than Americans to respond to anger by increasing their persuasive arguments rather than make concessions (Olekains and Druckman, 2014). In addition, expressed anger may prevent construction of coalitions and cooperation that might increase mutual gains. If the anger is focused on the person instead of the issue it can cause a breakdown in trust and escalate into a negative spiral and impasse. This can ultimately lead to long-term negative relationship effects and cause unnecessary damage to one’s credibility. Alison Wood Brooks (2015) in her article “Emotion and the art of negotiation” suggests that one may want to consider reframing anger as sadness. She contends that “Shared feelings of sadness can lead to cooperative concession making, whereas oppositional anger often leads to an

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impasse” (p. 62). If you are successful in this reframing, it is reflected in your emotional display. The change perhaps offers a disclosure to your opponent that is seen as genuine and perhaps more humane than anger. This reframing, whether real or fake, can be strategically helpful in reaching agreement. It is important to remember that as Daly warned, extreme runaway emotions can ultimately destroy multi-billion-dollar mergers. Controlling emotions is worth the work. Anxiety Emotion More anxious cultures tend to be more expressive. Cultures where people find it socially acceptable to raise one’s voice, show emotions and be demonstrative in their actions are considered to be more anxious cultures (Lim, 2016). When we consider the effects of emotions during a negotiation it is important that we consider the early impact that culture has on our physiological responses. Culture not only impacts our physiological response but also our tolerance and judgment of the expression of emotions. Anxiety can trigger verbal responses that may aid us in negotiations or destroy our chances for agreement. A certain amount of anxiety before and during a negotiation is expected in international negotiations. The problem with anxiety is that when it reaches a level that influences our negotiation behavior, it becomes detrimental to our desired outcome. Brooks defined anxiety as “a state of distress in reaction to threatening stimuli, particularly novel situations that have the potential for undesirable outcomes” (p. 59). This feeling of heightened urge to protect or react may cause us to make weaker first offers, motivate us to reach a quick agreement, or create difficulty in processing information. Some research indicates that when people express their anxiety during a negotiation, this provides an opportunity for the other party to take advantage of the distress being displayed. Anxiety can also result in negotiators making poor financial deals (Brooks, 2015). Stress anxiety creates a situation that makes it difficult for clear headed problem-solving and following through on planned strategic moves. When one has reached a certain level of anxiety, thought process moves from the prefrontal cortex area of the brain, where we execute strategic/tactical decisions, to the amygdala area where emotions are regulated. The result is that when emotions become too intense, we may no longer function at a strategic level. Negotiation is a strategic process which requires us to use our ability to problemsolve. The more primitive area of our brain is normally reserved for fight or flight responses, which are hopefully not needed in the international negotiation setting. We conclude this chapter with ten key factors to avoid failure in international business negotiations.

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Ten Takeaways to Avoid Failure 1 Self-awareness includes knowing what triggers your emotions. 2 Appropriateness of emotion is influenced by culture, context, and personality. 3 Inoculate yourself against emotional contagion. 4 Prepare, rehearse, and become more familiar with the issue/person/ situation. 5 Look for emotional congruency and inconsistency. 6 Become knowledgeable about cultural rules regarding emotional display in various contexts. 7 Be wary of interpreting silence. 8 Focus on your opponent’s nonverbal cues for emotion information. Emotional leakage occurs in facial and vocal cues. 9 Present several options for them to consider and watch their reactions (Wezowski, 2016). 10 Emotional expressiveness is culturally influenced.

References Adler, R. S., Rosen, B., and Silverstein, E. M. (1998). Emotions in negotiation: How to manage fear and anger. Negotiation Journal, 161–179. doi:0748–074526/98/0400–0161 Allred, K. G. (2000). Anger and retaliation in conflict: The role of attribution. In M. Deutsch and P. T. Coleman (Eds), The Handbook of Conflict Resolution (pp. 236–225), San Francisco, CA: Jossey-Bass. Anderson C. and Thompson, L. L. (2005). Affect from the top down: How powerful individuals” positive affect shapes negotiations. Organizational Behavior Human Decision Process, 95(2), 125–139. Baron, R. A. (1990). Environmentally induced positive affect: Its impact on self-efficacy, task performance, negotiation, and conflict. Journal of Applied Social Psychology, 20(5), 368–384. Brooks, A. W. (2015). Emotion and the art of negotiation. Harvard Business Review, 57–64. Carnevale, P. (2008). Positive affect and decision frame in negotiation. Group Decision Negotiation, 17, 5–63. Cote, S., Hideg, I., and Van Kleef, G. A. (2013). The consequences of faking anger in negotiations. Journal of Experimental Social Psychology, 49, 453–463. Druckman, D. and Olekains, M. (2008). Emotions in negotiation. Group Decision Negotiation, 17, 1–11. doi:10.1007/s10726–10007–9091–9099. Ekman, P. (1992). An argument or basic emotions. Cognition and emotion, 6(1), 169–200. Harinck, F. and Van Kleef, G. A. (2012). Be hard on the interests and soft on the values: Conflict issue moderates the effects of anger in negotiations. British Journal of Social Psychology, 51(4), 741–752. Hofstede, G. (1997). Cultures and Organizations: Software of the Mind, New York: McGraw-Hill. Katz, N. H. and Sosa, A., (2015). The emotional advantage: The added value of emotionally intelligent negotiator. Conflict Resolution Quarterly, 33(1), 57–74. doi:10.1002/crq.21127.

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Kopelman, S., Rosette, A. S., and Thompson, L. (2006). The three faces of Eve: Strategic displays of positive, negative, and neutral emotions in negotiations. Organizational Behavior Human Decision Process, 99(1), 81–101. Kopelman, S. and Rosette, A. S. (2008). Cultural variation in response to strategic emotions in negotiations. Group Decision Negotiation, 17, 65–77. doi:10.1007/s10726– 10007–9087–9085. Lerner, J. S. (2005). Negotiating under the influence: Emotional hangovers distort your judgment and lead to bad decisions. Negotiation, 8(6), 1–3. Lewicki, R. J., Bruce, B., and Saunders, D. (2015). Negotiations: Readings, Exercises, and Cases, (7th edn). New York: McGraw-Hill. Lim, N. (2016). Cultural differences in emotion: Differences in emotional arousal level between the East and the West. Integrative Medicine Research, 5, 105–109. Lindquist, K. A., Wager, T. D., Kober, H., Bliss-Moreau, E., and Barrett, L. F. (2012). The brain basis of emotion: a meta-analytic review. Behavioral and Brain Sciences, 35(3), 121–143. Luo, L. and Gilmour, R (2004). Culture and conceptions of happiness: individual oriented and social oriented SWB. Journal of Happiness Studies, 5, 269–291. Luomala, H. T., Kumar, R., Singh, J. D., and Jaakkola, M. (2015). When an intercultural business negotiation fails: Comparing the emotions and behavioral tendencies of individualistic and collectivistic negotiators. Group Decision Negotiation, 24, 537–561. doi:10.1007/s10726–10014–9420–9428. Mayer, J. D. and Salovey, P. (1997). What is emotional intelligence? In P. Salovey and D. Sluyter (Eds), Emotional Development and Emotional Intelligence: Implications for Educators (pp. 3–31). New York: Basic Books. Moore, C. W. and Woodrow, P. J. (2010). Handbook of Global and Multicultural Negotiation. John Wiley & Sons. Moran, R. T. and Stripp, W. G. (1991). Dynamics of Successful International Business Negotiations. Routledge. Mueller, J. S. and Curhan, J. R. (2006). Emotional intelligence and counterpart mood induction in a negotiation. International Journal of Conflict Management (Emerald), 17(2), 110–128. Olekains, M. and Druckman, D. (2014). With feelings: How emotions shape negotiation. Negotiation Journal, 30(4), 455–478. Ogilvie, J. R. and Carsky, M. L. (2002). Building emotional intelligence in negotiations. The International Journal of Conflict Management, 13(4), 381–400. Overbeck, J., Neale, M. A. and Govan, C. L. (2010). I feel, therefore you act: Intrapersonal and interpersonal effects of emotion on negotiation as a function of social power. Organizational Behavior and Human Decision Processes, 12, 126–139. doi:10.1016/j. obhdp.2010.02.004. Sanchez-Burks, J. (2005). Protestant relational ideology: The cognitive underpinnings and organizational implications of an American anomaly. In R. Kramer and B. Staw (Eds), Research in Organizational Behavior; An Annual Series of Analytical Essays and Critical Reviews, 26, 267–308. Elsevier Science/JAI Press. Shapiro, D. L. (2004). Emotions in negotiation: Peril or promise, Marquette Law Review, 84 (4), 3–8. Sinaceur, M. and Tiedens, L. Z. (2006). Get mad and get more than even: When and why anger expression is effective in negotiations. Journal of Experiential Social Psychology, 42(3), 314–322.

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Uchida, Y. and Kitayama, S. (2009). Happiness and unhappiness in east and west: Themes and variations. Emotion, 9, 441–456. Van Kleef, G. A. (2010). The emerging view of emotion as social information. Social and Personality Psychology Compass, 4(5), 331–343. doi:10.1111/j.1751–9004.2010.00262.x Van Kleef, G. A., De Dreu, C. K. W., and Manstead, A. S. R. (2004). The interpersonal effects of anger and happiness in negotiations. Journal of Personality and Social Psychology, 86, 57–76. Van Kleef, G. A., De Dreu, C. K. W., Pietroni, D., and Manstead, A. S. R. (2006). Power and emotion in negotiation: Power moderates the interpersonal effects of anger and happiness on concession making. European Journal of Social Psychology, 36, 557–581. doi:10.1002/ejsp.320. Wezowski, K. (2016). The secret to negotiating is reading people’s faces. Harvard Business Review. 2–4. Youngston, R. M. (Ed) (2004). Collins Dictionary of Medicine. London: Collins. (Entry on emotion retrieved 26 September 2019 from https://medical-dictionary.thefreedictionary.com/emotion.)

4

Communication Incompetency, Deficiencies and Miscommunication I Hear What You Are Saying, Do You Hear How You Sound?

Listening A generational shift in how we communicate is underway. Millennials are joining the workforce armed with communication skills that are considerably different from their predecessors. Texting, posting, tweeting are the preferred, and soon to be dominant, forms of social interactions. It can be argued that the new “silent generation” or “generation Z”, those individuals born in the mid-1990s to 2000s, is the generation that currently relies almost exclusively on written communication, most often texting. This shift from a dominant verbal communication interaction medium to written information social interaction may be at the expense of our ability to listen. The impact of this shift is reflected in our organizations, the way we conduct everyday business transactions, and how we connect with others in our personal lives. Think about how you spend your work day. Typically, we first check our emails, which can easily take an hour. Then throughout the day we text our colleagues, our bosses, and our subordinates for quick exchange of information or short conversations. We read our twitter account for the latest news and may tweet a few comments to stay engaged in the social media community. We order and pay for our lunch without communicating with another person. We either return to our desk to eat and continue working or we may simply use our phones to watch a funny YouTube video or podcast. We then have a meeting or two where we read power points during the presentation and often the power point is then sent to email, so we can read again to understand what we did not listen to during the presentation. We may end our day by working on a written report for tomorrow’s deadline and finally, on our way home once again check our texts, emails, and tweets just to be sure we haven’t missed anything. It is likely that we will have several days a week where we engaged less than 10 minutes in face-to-face interactions. As organizations move to a “reading based” information sharing format, the office where one would walk down the hall to ask a question or have a conversation without visual aids has become archaic.

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At this point you may be pondering, “Technology makes my day so much more efficient”, or “I am very content with my work day. What is the problem?”. The technological advances we have experienced over the past few decades have resulted in the progression of global trade as well as more efficient processes in everyday business. However, all of these advances may be at the expense of our ability to listen. Listening is a significant component in negotiation. The role of listening is an essential communication skill for effective problem-solving behavior which ultimately affects the negotiated agreement. Negotiated outcomes depend a great deal on listening. The transactional nature of the negotiation process is one in which we are simultaneously relying on verbal and nonverbal cues and adjusting our responses as we listen to the other party. Face-to-face interactions allow us to listen and interpret the verbal and nonverbal messages as they occur during the communication process without the mediated distance effect often present in email, twitter, power points, written reports, and other distance media forms. Listening is one of the least studied communication concepts, especially in the negotiation context. We talk about listening. We tell others to listen. We become offended when others do not listen to us. Yet, the reality is that listening predominantly remains an unpracticed skill. Forbes contributor Glenn Llopis (2013) wrote an article reminding us that “Less than 2% of all professionals have had formal education or learning to understand and improve listening skills and techniques”. Listening is defined as, “the process of receiving, attending to, and assigning meaning to aural and visual stimuli” (Wolvin and Coakley, 1996, p. 69). Listening is a voluntary process that we select to engage in the decoding of messages and interpreting or assigning meaning. Hearing is not listening but rather a preliminary factor in listening. Think of hearing as an involuntary process that is biologically based whereas listening is a psychological cognitive process that involves a voluntary decision (Trenholm and Jensen, 2000). We often think we have listened to another person when we have merely heard sounds and failed to apply meaning. There are several stages involved in becoming a competent listener. The HURIER model developed by Judi Brownell (2006) proposed a six-stage listening model. Hearing, understanding, remembering, interpreting, evaluating, and responding. The first step is selecting what to give attention to—the sounds/stimuli that we choose or select to focus on. Think about when you are having a conversation during a dinner at a crowded restaurant. There is music playing. People next to you are having a conversation. It may be thundering outside. The server may have just dropped a tray, and your friend is telling you about her day. All this is occurring simultaneously. Which sounds do you select to listen to? The attention decision helps move toward listening. International negotiations require us to select which sounds we are going to focus on so that we can decode (understand) the messages we are exposed to and maintain our focus to maximize our chances for successful communication.

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Remembering, the next stage, is a point in the listening process where we can reinforce the message, or we can discard it. If we put the meaning into short-term memory we may only briefly retain the messages. Longterm memory allows us to store the information for later recall. Repeating new information while it is in short-term memory creates a connection that moves the information into our more permanent long-term memory. The trick of repeating someone’s name three times to ourselves when we first are introduced is an example of how repetition places new information from short-term to long-term memory. The information that is shared during the negotiation process may be full of new information to us. It is imperative that we retain the critical pieces of information to strengthen our chances of problem-solving, or at least to minimize the chances of missing out on key opportunities because we failed to retain the other party’s disclosures. One key ingredient to remembering is connecting new information to existing cognitions that we have permanently stored in our long-term memory. The memories are images, feelings, experiences that are stored. The new information obtained through listening is reinforced in our memory by attaching to existing memories. For example, you can remember that your colleague likes sugar in her coffee because when you first observed how she drank her coffee you attached her coffee preference to your aunt Mary’s preference. If that connection is strong, perhaps because you have strong fond memories of Aunt Mary drinking coffee, it becomes a strong connection that is easily recalled. The latter stages of listening, interpreting, evaluation, and responding require us to understand the other’s perspective (see Chapter 2) and then evaluate its relevancy to our interests and critically judge its value as fact, value, or opinion so that we can determine how to ultimately respond to the other’s messages. There are several types of listening that we engage in, depending upon the context. In the negotiation situation, critical and empathic listening may serve as the most helpful in achieving success or failure. For example, if we are listening to be supportive or to understand the emotions another is experiencing we may engage in therapeutic (Wolvin and Coakley, 1996) or empathic (Gamble and Gamble, 2014) listening. The importance or significance of emotions surrounding an issue is often understood if we are engaging in empathic listening. This type of listening allows the other person to express or vent their feelings about an issue without judgment. Relationship is an integral part of the international negotiation. Empathic listening will aid in building the relationship with the other party. It is especially important that we listen empathically when the other party has a negative emotional outburst. Fisher, Ury, and Patton’s (1991) work suggests that we “side step” another’s emotional outburst to maintain a collaborative process. Listening empathically will benefit the negotiation process especially when negotiators lose their tempers and threats are made. It is important during emotional moments that we listen for the meaning behind

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the message to discover the issue. Empathic listening may also require us to demonstrate emotional attunement and responsiveness to the speaker. Recognizing and accurately interpreting the emotions expressed are a critical part of empathic listening. (See Chapter 3 for further discussion of emotions). Why develop empathic listening skills for intercultural business negotiations? This type of listening can build relationships and strengthen a social connection. When we are negotiating with individuals from collectivistic cultures it is important to foster positive relations. Empathic listening aids us in developing these relationships that then provide the foundation for addressing the substantive issues. Effective empathic listening supports the development of relationship building not only for the current negotiation, but also for future transactions. Learning to listen critically is also important in international business negotiations. Critical listening occurs when we are assessing a message to determine whether it is genuine or valid. For example, a seller may state that her competitor is selling an item for 20% more than what she is offering you. Critical listening enables you to evaluate the truthfulness of this messages and determine whether you reject or accept the information. Obtaining specific pieces of information that we can evaluate helps us determine our next move in a negotiation. We may determine through critical listening that the other party is using deceptive tactics. We must then decide on the appropriate tactic to counter their deceptive move. However, if we are not skilled in critical listening, we may miss important information and ultimately fail at getting the best agreement possible. Listening Style Do you have a listening style? There is evidence to support that individuals have trait-like listening styles (Watson, Barker, and Weaver, 1995; Weaver, Watson, and Barker, 1996; Kiewitz, Weaver, Brosius, and Weimann,, 1997; Barker and Watson, 2000). The Listening Styles Profile inventory developed by Watson, Barker, and Weaver (1995) characterized four styles of listening. People-oriented listeners are most interested in other individuals’ emotions, interests and social connection. Action-oriented style tends to be seen in listeners who are focused on getting organized, correct, and concise information from others. Content- oriented style listeners are focused on the intellectual challenge of the messages. They listen for ambiguities and debate type of content. Time-oriented listeners are more interested in being efficient and brief. They prefer concise information that can be delivered to the point with limited time allotted. Please take a few minutes to complete the Listening Styles Profile (LSP-16) developed by Watson, Barker, and Weaver (1995) below. Instructions: Please indicate how well each of the statements applies to you using the following scale: “Always” =4; “Frequently” =3; “Sometimes” =2; “Infrequently” =1; “Never” =0

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1 I focus my attention on the other person’s feelings when listening to them. 2 When listening to others, I quickly notice if they are pleased or disappointed. 3 I become involved when listening to the problems of others. 4 I nod my head and/or use eye contact to show interest in what others are saying. 5 I am frustrated when others don’t present their ideas in an orderly, efficient way. 6 When listening to others, I focus on any inconsistencies and/or errors in what’s being said. 7 I jump ahead and/or finish thoughts of speakers. 8 I am impatient with people who ramble on during conversations. 9 I prefer to listen to technical information. 10 I prefer to hear facts and evidence, so I can personally evaluate them. 11 I like the challenge of listening to complex information. 12 I ask questions to probe for additional information. 13 When hurried, I let the other person(s) know that I have a limited amount of time to listen. 14 I begin a discussion by telling others how long I have to meet. 15 I interrupt others when I feel time pressure. 16 I look at my watch or clocks in the room when I have limited time to listen to others. Scoring: Sum questions items by type to determine your style (People-oriented: #1, #2. #3, #4. Action-oriented: #5, #6, #7, #8. Content-oriented: #9, #10, #11, #12. Time-oriented: #13, #14, #15, and #16) Note: The higher your sum score in each area indicates your listening-oriented style. Watson, K. W., Barker, L. L., and Weaver, J. B. (1995). The Listening Styles Profile (LSP-16): Development and validation of an instrument to assess four listening styles. International Journal of Listening, 9, 1–13. Reprinted by permission of The International Listening Association www.Listen.org. Thank you. Listening Skills in the International Business Negotiation Process Let us look more closely at the potential impact of poor listening skills especially in the business negotiation process. Negotiation is a communication process and how we communicate during the negotiation facilitates or inhibits the solution. Written forms of communication can enhance the messages the speaker is presenting. The idea of verbal and written forms working together creates the strongest chance for successful communication. However, what appears to be emerging is the replacement of the verbal form with written. Although this may expedite simple, clear information

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sharing, it is likely to increase failed communication when more complex issues are concerned. When we are engaged in listening to another person through face-to-face communication, the media richness of messages is significantly increased because we can observe the other’s nonverbal messages as well as their verbal messages. The more channels we have available for decoding a message, the more likely we are to gain an accurate picture of the meaning of the message. We can interpret the message from both a relational and substance meaning. In intercultural exchanges the richness of the interaction enhances the connectedness of successful communication. Media richness is a critical component during intercultural business negotiation. Part of the intercultural communication experience is one’s ability to listen from a culturally sensitive perspective. Nonverbal and verbal communication experiences enhance our ability to accurately interpret messages. Complex issues in most of our international business negotiations are addressed in verbal discussions where listening is a key factor in successful problem-solving. When we consider listening in intercultural contexts additional issues emerge. Intercultural listening is defined as “communication in which the processes of receiving, attending, and assigning meaning are influenced by cultural differences” (Thomlison, 1991, p. 89). Given that we learn to view the world around us through a cultural lens, the way we listen is part of this lens. Early research (Egan, 1986) contended that when cultural influence is strong, the cultural bias in listening will be more prominent. Thus, cultural bias influences how we see messages as they relate to our values and attitudes versus the other party’s cultural perspective. This can ultimately lead to frustration and miscommunication as we often fail to recognize cultural differences in our listening. Most international business negotiations are comprised of teams. Team members have different listening profiles and styles. The variety of listening styles will enhance our opportunity to collaborate in even the most difficult negotiations. The collaboration effort of team members listening from different styles enables us to achieve a depth and breadth of understanding of the other party’s proposals. Cultural differences can act as a road block to the successful message exchange. Some cultures tend to communicate in more abstract, general terms, where the meaning is often found in the context or in the omission of information. Other cultures tend to be concise, factual, linear, and direct in their message meaning. A team comprised of diverse listening styles may have a distinct advantage in reaching an agreement. Listening Factors to Consider in International Negotiations Listening Quietly for the Pronouns in Western Cultures The use of personal pronouns may reveal a sense of self. Pennebaker (2011) concluded that the use of “we” is used to bring the speaker closer to others and at other times it is used to deflect responsibility. The use of the pronoun

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“I” may give a sense of vulnerability and accountability. Negotiation strategists conclude that we when we change from “I” to “we”, we are indicating a problem-solving process versus a competition. Pennebaker suggests the use of hedge phases such as “I think” implies that there are multiple perspectives. Women are more likely to use qualifiers and hedgers in speaking than men. Language that indicates multiple perspectives may allow for room to navigate in international business deals. Use of an Interpreter for Cultural Meaning The meaning of messages is contextual and culturally determined (Imhof, 2004). Therefore, listening must reflect meaning assigned through the speaker’s culture, not our own. Dillon and McKenzie (1998) contend “what one perceives as characteristics of a ‘good listener’ or a ‘good communicator’ is often determined by subtle, yet powerful influences and rules characteristic of one’s own ethnic background” (p. 106). The implications for intercultural business negotiations is that we may be evaluating others by our own preconceived, culturally-based criteria, which reflects an ethnocentric focus that is often inaccurate. Listening to others and interpreting their messages by a measurement that is inaccurate will always result in false conclusions. We may think of it as trying to measure velocity with a ruler. The results are meaningless. Use of Eye Contact as a Message of Listening Interpreting eye contact is culturally sensitive. In Western cultures maintaining eye contact while listening to someone is a sign of honesty and respect. However, prolonged eye contact may be interpreted as a sign of aggression. Westerners usually make direct eye gazing for approximately 45 seconds before they briefly look away. If the listener’s gaze does not return to the speaker, this may be a subtle leave taking sign by the listener. Downcast eye gazing is a sign of attentiveness in Japanese culture (Cambra and Klopf, 1979). This regulation of eye gazing is culturally bound and is not universal. One must consider culture, power, status, and gender in understanding the influencing norms of appropriate eye contact.

The Miss in Miscommunication Miscommunication is often touted as the reason for failed interactions, relationships, and negotiations. How often have you characterized or concluded failed communication as “a miscommunication”, or heard others say, “Our differences were really just a miscommunication”? Perhaps the emphasis on treating failed conversations as “miscommunication” allows the parties to place the blame of failure on the interaction rather than an individual. By refusing to examine the individual party’s

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contribution to a failed outcome we miss an opportunity for growth and competency. Developing skills and understanding of how we can facilitate successful communication interaction is the essential factor in negotiation failure or success. A simple definition of communication is a “shared meaning” experience. That is, we were able to understand another’s position or view with a great deal of accuracy. The more knowledge we have about the other person, as well as shared experiences we have with them, the more we are likely to accurately understand the other party’s messages. As discussed in Chapter 2, perception influences not only our construction of messages, but also our interpretation of messages. A simple example might be the word “family”. A Western culture male may use the word family to mean his immediate family of two children and his second wife, whereas a non Western female may use the word “family” to refer to her five children, mother, father, brother, nephews, grandparents, husband, and in-laws. The distinction of family is culturally determined. If I am unaware of the cultural difference in the meaning of family and I invite you and your family to dinner—how many people will arrive? Was this situation really a miscommunication or was it a failure to understand another’s culture? In international negotiations the cost of failed negotiation is much higher than a larger dinner party expense. How do we avoid this failure? Perhaps reframing the way we view miscommunication is at least part of the answer. What if miscommunication is not the cause of negotiation breakdowns or failures? Failed negotiation may simply be the result of disagreeing with the other’s proposal. “Failure” in U.S. culture has a strong negative connotation. We often soften the failure by reframing failure as a “miscommunication”. This may allow us to distance ourselves from accountability and preserve our image. We contend that miscommunication is frequently given as an “excuse for failure”. Why can’t we simply acknowledge that we successfully communicated, but nevertheless failed to reach agreement? Breakdown in marriages, friendships, and business partners is often the result of clearly hearing the other’s demands, wants, and interpretations, and simply disagreeing with them. Some cultures use the term miscommunication as a face-saving tactic so one can avoid embarrassment or shame in not reaching a successful outcome. That is, some may argue that it is better to say the cause of failure is a result of communication rather than lack of problem-solving skills. It would be to our advantage if we willingly examine our role in failures rather than framing the failure as simply a “miscommunication”. Analyzing failure beyond a miss in our communication allows for the opportunity to investigate the underlying issues or factors that have us stuck at an impasse. Simple clarification around miscommunication is not difficult. For example, consider the following as tactics that help us avoid miscommunication.

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Ask for an example of what the other party means by their proposal. Paraphrase what you think you heard the other say. Seek validation that your interpretation is accurate. Ask the “why” question and then listen. Reframe the proposal to a shared joint issue.

Nonverbal Element of Miscommunication Nonverbal communication mishaps are important components in understanding each other. Early works such as Mehrabian’s (1981) research concluded that nonverbal communication accelerated more meaningful connections than did verbal messages. Context is essential to determine nonverbal meaning. In the international negotiation situation, we must consider who is the other party, what is their cultural identity, why are they negotiating, how do they typically negotiate business deals and what do they hope to achieve in the current negotiation. Acquiring this basic information will aid us in understanding the other party’s nonverbal messages. Let’s examine several key nonverbal communication factors. Specifically, emblems, illustrators, regulators, and adaptors are valuable in effective or ineffective communication in the international business negotiation process. Ekman and Friesen (1969) developed one of the first typology of body movements to help us understand how body movements are functions of communicating. For example, emblems are movements that are equivalent to words. These movements are culturally determined. A wave of the hand in Western culture is a replacement for the greeting hello or goodbye. In U.S. culture we have approximately 100 or so emblems. Illustrators are often used with words to reinforce the meaning of a message. For instance, if you are trying to indicate the location of a city you may draw where you currently are and a line to where you are going. Regulators are perhaps the most confusing interculturally if you are unaware of the cultural differences in regulating communication. Regulators are used to coordinate or regulate the interaction between people. Think of it as how we know when someone would like a turn to speak. In the U.S. we lean forward to indicate a desire to say something. This turn-taking regulation is not interculturally understood. The amount of silence between speaking turns is also a regulator. How do you know when the other is finished with their communication action? In the U.S. we often assume silence is an indicator of the other party’s turn to speak, whereas, in other cultures silence is a necessary part of the turn-taking and is an indicator of listening. Silence can serve as a sign of respect for the other party’s most recent comment. To respond too quickly and not allow silence to exist would be viewed as rude behavior. Talking over or talking simultaneously is considered an acceptable norm in some Arab cultures and rude in others. Consideration of the role of these nonverbal elements is essential in achieving success or failure in international business negotiations.

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Many facial expressions are also culturally bound. Facial expressions can amplify the intensity of or minimize our true feelings. They can communicate our likes, dislikes, and specific attitude toward an individual, idea, or situation. Cultures vary on their facial expressiveness. Facial expressions are normative behaviors that members of individual cultures are conditioned to at a very early age. For example, many people in the U.S. may smile at a passing stranger. This is not considered strange but rather a sign of friendliness. In China, as in many Asian cultures, one would not smile at a stranger; rather one smiles at those she knows. This facial behavior difference is reinforced at an early age so that one may not be aware of the facial normative behaviors until the behavior is questioned or ignored. Paralinguistics refers to the way we use our voice to communicate what we mean. For example, talking softly in a monotone voice might indicate that you are bored with the topic. Or, perhaps you mimic the other party’s tone and accent to converge with the other party. In intercultural contexts such as international negotiations, the paralinguistics of the other party must be interpreted through a cultural lens so that we do not miss the meaning of what is said. Paralinguistics, when correctly understood, provide information about the meaning of the message. This is especially helpful when cultural differences between high context and low context cultures are involved in negotiation. Low context negotiators will often rely heavily upon the actual words, whereas high context cultures find meaning in “how” it is said. Proxemics may influence our communication in intercultural business negotiations. Proxemics can play a key role in establishing appropriate relationship distance. The distance between two negotiators is influenced by our interpretation of how others view us and how we view them. Hall (1959, 1966) identified four distances that are meaningful in U.S. culture. Intimate zone is 0–18 inches, casual personal distance is 18 inches to 4 feet, social distance zone is 4 feet to 12 feet and public is 12 or more feet. In other cultures, these distance zone categories exist but are not the same measurement or distance. For example, Latin countries often have closer conversational space and Chinese culture has less public space. A study published in 2017 in the Journal of Cross-Cultural Psychology which examined 42 different countries found, significant variability in social, personal, and intimate distances across countries. Variability in preferred social distance was predicted by participants’ gender and county’s average temperature, indicating that women and people in colder countries prefer greater distance toward strangers. Furthermore, the variability of preferred personal distance was predicted by participants’ age and gender; older people and women prefer greater distance to an acquaintance. Finally, variability of intimate distance was explained by age and temperature, indicating

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that older people and people in warmer countries prefer greater distance with people they consider close. (Sorokowska et al, 2017, p. 577) How we use physical distance sends a nonverbal message to others around us. Where you sit, how close you sit to the next person and who has clear visual access to everyone at the table are important considerations and provide contextual meaning regarding your power at the negotiation table. Distance and power often go hand in hand in international peace talks. In international negotiations between governments, it can take weeks and sometimes months to establish the table arrangements so that the appropriate distance between parties is established. For example, the Paris Peace Accords negotiators argued over the shape of the table for months. Each party was aware of the significance of the table shape and the nonverbal meaning regarding power positions. It was important to North Vietnam to have a circular table, whereas the South argued for rectangular shape. The distance between the two ends of the table can allow for the image of confrontation, whereas circular lends to conversational, equal power. Eventually, they agreed that the northern and southern governments would sit at a circular table and all other parties would use square tables. Distance and use of space are valuable contextual messages that influence the communication process. Ineffective use of distance may hinder the chances for successful outcome and result in contributing to failure.

Violations What happens when someone violates the nonverbal expectations of communication interactions? Expectancy Violation Theory (Burgoon, 1978 and colleagues (Burgoon and Jones, 1976; Burgoon and Hale, 1988; Floyd, Ramirez, and Burgoon, 1999) describe how we react when our expectations of how others should act both verbally and nonverbally are violated. Expectancy Violation Theory posits that our expectancies “include judgments of what behaviors are possible, feasible, appropriate, and typical for a particular setting, purpose, and set of participants” (Burgoon and Hale, 1988, p. 60). When someone behaves in a manner that is not expected, we can become uncomfortable and unsettled by the unanticipated behavior. For example, during the negotiation a team member starts shaking their head from side to side dramatically while you are presenting to the other team. Typically in Western culture this is interpreted as disagreement. Perhaps you walk into the negotiation and your team members roll their eyes every time you present an idea. These examples can be considered nonverbal violations because these nonverbal behaviors are considered unacceptable behaviors in U.S. negotiations. Typically, members of the same team demonstrate support for one another so that they are viewed as a united front against the other party. Of course, the exception to this norm is if they are using a “good cop,

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bad cop” strategy. Unexpected behavior that is viewed as outside the cultural norms is characterized as a violation. It is also possible to have positive violations. For instance, you present a proposal and the other party gives you a “thumbs up” when you are finished. You are pleasantly surprised by their support considering the current conflict that led you to the negotiation process. Whether the act is positive or negative, the nonverbal behavior is not expected. Our interpretation and judgment of the violation is in part determined by how we feel about the violation and how we feel about the individual who violated the nonverbal expectation. Gender, likability, and power status are all variables in our reaction to the violation. The reaction may be indifferent, offended, or pleased. Awareness of the nuances of cultural nonverbal normative behavior is a valuable part of communicating successfully in international business negotiations. It is also worth taking time to understand when a violation has occurred how to mend the harm that may have resulted. Positive violations may be an effective tactic to create an element of surprise, especially when the other party has a negative view of you. This positive violation may open the door for the other party to reconsider their view of you in a more positive light.

Framing Messages Framing is often described as a perception-related mechanism that individuals use to evaluate and understand a situation. We use frames every day regarding events, people or information. Frames influence our behaviors and tactical choices in negotiation. In business negotiations we often use positive frames (gain-frame) or negative frames (loss-frame) when we are persuading the other party to accept our proposal. The research is mixed regarding which frame produces the best outcome for negotiations. Early research suggested that negative frame negotiators did better than positive frame negotiators and were less likely to make concessions. However, research from the 1990s provided support that if both parties are positive framed negotiators they will likely engage in integrative negotiation processes and produce better agreements than paired negative framed negotiators (Bottom and Studt, 1993). De Dreu, van de Vliert, Carnevale, and Emans (1995) reported that how aversive we are to risk influences the potency of the negative frame. They concluded that the loss frame negotiator is more likely to resist concession making and settle less easily than the positive frame negotiator. There is support for the idea that negotiators influence each other and tend to adopt the other party’s frame. This effect is often referred to as the frame matching hypothesis. Communication Accommodation Theory (Giles and Ogay, 2007) posits we change our communication with another to reflect similarity (convergence) toward the other or we use language to separate ourselves from another (divergence). The mirroring of another’s

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frame, language, and even behavior is often used as a strategy in negotiation. This can facilitate agreement or failure depending upon the nature of the frame. The positive and negative comparison effects clarify how negotiators’ communication affects the overall agreement. Framing messages to indicate that we are building a common or shared vision is a powerful method of reaching the maximum potential outcome. Selecting the appropriate frame so that the other party will listen creates an opportunity for both parties to be invested in reaching an amicable agreement. Moving the negotiation from positional to problem-solving occurs when we have created messages that motivate the other to expand upon the ideas presented in order to develop opportunities for possible solutions. We contend that success or failure begins with our ability to frame our thoughts so that others are interested in listening. Once we establish a problem-solving framework, where parties progress from “I” to “we” thinking, the road for agreement becomes paved with benefits for both parties. It is the series of interactions that allows our communication to focus on a common perspective. This attention to a joint outcome can then break down barriers in the negotiation so that we may merge our individual goals into a shared acceptable outcome. It is worth taking time to create messages that are framed for success, not failure, and knowing the difference as the negotiation unfolds. How do we know when our frame is not the failing contributor? There are several key signs that framing may not be the issue. Rejection of another’s proposals may be an indicator that our message is off course and the frame is irrelevant. We can try to frame our message as a gain or loss and if both are met with clear rejection it is time to change the message. “Disguising the wolf in sheep’s clothes” is transparent for most of us. Rethinking the tactic or message and then the appropriate frame is critical after this rejection. What should you do next when rejection is clear? Our advice—change the message not just the frame. For example, you are negotiating the sale of your company’s product—specialized screws for airplanes with Buyer A. You want X dollars and you suggest that “this is a great price because you are willing to honor last year’s pricing for Buyer A (positive frame), if you buy today. Or you can use a negative frame, such as “If you don’t buy the screws today, I am increasing the price tomorrow to reflect the increase in raw materials costs” (negative frame). Both frames are attempts to have Buyer A buy the screws today. However, if we misjudged what Buyer A’s most important interests are in purchasing the screws, we have failed in both frames. Perhaps, Buyer A is most interested in prompt delivery not price, no matter what frame we used—we needed a different message. The point is framing is important but only if your message is relevant to the other’s interests. Questioning, probing, and hypothetical questioning are effective tactics for uncovering relevant issues. Once issues are disclosed then one can effectively frame the offer. If the party is risk averse, and has a low tolerance

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for uncertainty or ambiguity, framing the appropriate message from a loss frame is likely a successful move. Learning the subtleties of cultural framing is one way to avoid failure in communicating with others, especially in international business negotiation. We leave this chapter with one final thought. Failed negotiations are frequently assessed quickly and without the necessary investigation that allows us to learn and succeed from our experiences. The danger in attributing failure to miscommunication is that it will ultimately lead to further negotiation failures. Organizations that encourage dialogue about failure stories will grow and enhance future successes. There is much to learn in a growing global market and having a conversation about our failures and listening to each other’s failure stories are essential for the advancement of future successes.

References Barker, L. L. and Watson, K. W. (2000). Listen Up. New York: St. Martin’s Press. Bottom, W. P. and Studt, A. (1993). Framing effects and the distributive aspect of integrative bargaining. Organizational Behavior and Human Decision Processes, 56, 459– 474. doi:10.1006/obhd.1993.1064. Brownell, J. (2006). Listening: Attitudes, Principles, and Skills, 3rd edn. Boston: Allyn & Bacon. Burgoon, J. K. (1978). A communication model of personal space violations: Explication and an initial text. Human Communication Research, 4, 129–142. Burgoon, J. K. and Hale, J. L. (1988). Nonverbal expectancy violations: Model elaboration and application to immediacy behaviors. Communication Monographs, 55, 58–79. Burgoon, J. K. and Jones, S. B. (1976). Toward a theory of personal space expectations and their violations. Human Communication Research, 2, 131–146. Cambra, R. E. and Klopf, D. W. (1979). A cross-cultural analysis of interpersonal needs. Paper presented at the Speech Association Intercultural Communication Conference, Honolulu, HI. De Dreu, C. K. W., van de Vliert, E., Carnevale, P. J. D., and Emans, B. J. M. (1995) Outcome frames in bilateral negotiation: Resistance to concession making and frame adoption. European Review of Social Psychology, 6(1), 97–125. doi:10.1080/14792779443000021 Dillon, R. K. and McKenzie, L. J. (1998) The influence of ethnicity on listening, communication competence, approach, and avoidance. International Journal of Listening, 12(1), 106–121. doi:10.1080/10904018.1998.10499021 Egan, G. (1986). The Skilled Helper (2nd edn). Monterey, CA: Brooks/Cole Publishing Co. Ekman, P. and Friesen, W. (1969). The repertoire of nonverbal behavior: Categories, origins, usage, and coding. Semiotica, 1, 49–98. Floyd, K., Ramirez, A., Jr. and Burgoon, J. K. (1999). Expectancy violations theory. In L. K. Guerreo, J. A. DeVito, and M. L. Hecht (Eds), The Nonverbal Communication Reader (2nd edn, pp. 437–444). Prospect Heights, IL: Waveland Press. Fisher, R., Ury, W., and Patton, B. (1991). Getting to Yes: Negotiating Agreement Without Giving In. New York: Penguin Books. Gamble, T. K. and Gamble, M. W. (2014). Interpersonal Communication. Los Angeles CA: Sage.

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Giles, H. and Ogay, T. (2007). Communication accommodation theory. In B. B. Whaley and W. Samter (Eds), Explaining Communication: Contemporary Theories and Exemplars (pp. 293–310). Mahwah, NJ: Lawrence Erlbaum. Hall, E. T. (1959). The Silent Language. Greenwich, CT: Fawcett. Hall, E. T. (1966). The Hidden Dimension. Garden City, NJ: Doubleday. Imhof, M. (2004). Who are we as we listen? Individual listening profiles in varying contexts. International Journal of Listening, 18(1), 36–45. Kiewitz, C., Weaver, J. B., Brosius, H., and Weimann, G. (1997). Cultural differences in listening style preferences: A comparison of young adults in Germany, Israel, and the United States. International Journal of Public Opinion Research, 9(3), 233–247. doi:10.1093/ iipor/9.3.233 Llopis, G. (2013). Six ways effective listening can make you a better listener. Forbes, May. Pennebaker, J. W. (2011). The Secret Life of Pronouns: What Our Words Say About Us. New York: Bloomsbury Press. Mehrabian, A. (1981). Silent Messages. New York: Wadsworth. Sorokowska, A., Sorokowski, P., Hilpert, P., Cantarero, K. Frackowiak, T., Ahmadi, K., and Pierce, J. D. (2017). Preferred interpersonal distances: A global comparison. Journal of Cross-Cultural Psychology, 48(4), 577–592. doi:10.1177/0022022117698039 Thomlison, T. D. (1991). Intercultural listening. In D. Borisoff and M. Purdy (Eds), Listening in Everyday Life: A Personal and Professional Approach. New York, NY: University Press of America. Trenholm, S. and Jensen, A. (2000) Interpersonal Communication. Belmont, CA: Wadsworth. Watson, K. W., Barker, L. L., and Weaver, J. B. (1995). The Listening Styles Profile (LSP-16): Development and validation of an instrument to assess four listening styles. International Journal of Listening, 9, 1–13. Weaver, J. B. III, Watson, K.W., and Barker, L. L. (1996). Individual differences in listening styles: Do you hear what I hear? Personality and Individual Differences Journal, 19, 1–7. Wolvin, A. and Coakley, C. G. (1996). Listening (5th edn). Madison, WI: Brown and Benchmark Publishers.

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Introduction A container full of expensive electronic toys is damaged by fire while on a ship bound for the U.S. from China. (A container is roughly the equivalent of a semi-trailer.) This results in a delay of delivery of the toys to the U.S. purchaser, which in turn causes the U.S. purchaser to lose sales and profit. Who is responsible for the financial loss? Is it the carrier, the seller or the U.S. purchaser? The answer to this important question will most likely be answered in the contract documents created between the buyer and the seller. Clear, concise, well-written contract documents that are properly executed by people who have the authority to do so on both sides can result in avoidance of many serious and costly conflicts in international transactions. Contracts, the bane of many, play a vital role in avoiding legal and financial conflicts and in resolving those conflicts when things go wrong. Here we explain the myriad benefits of good contracts and outline the components of good contracts in international transactions. The focus of this discussion is the sale and purchase of tangible goods and services, and protection and licensing of intellectual property rights between private companies. However, the principles of good contracting may apply to any transaction, international or domestic, commercial or retail, and government to government negotiations. I will explore the relationship between contracts and the general rules of law. Agency law deals with individual authority to commit a company or other legal entity to a legal and financial contract. This discussion also involves the basic elements or minimum requirements for a legally enforceable agreement. Different issues arise for transactions involving tangible goods as opposed to services or technology and those differences are explained. How contracts are formed is a widely misunderstood set of concepts which are covered below. Of course, the discussion includes recommended steps to take in negotiating the terms and conditions of international contracts. Once a contract is formed, administration of the contract during the performance phase of the agreement can be a critical

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factor in minimizing or eliminating conflicts. The vitally important issue of breach of contract is fully explored and defined. Intellectual property rights are at the core of international negotiators’ top concerns both in private industry and within the U.S. government. Holders of intellectual property rights have very good legal protection under U.S. law, but other countries, particularly China, do not always respect those rights. This is a vital interest of the U.S. and is at the core of current disputes between the U.S. and China. Finally, I list different types of contracts and provide some recommendations for basic legal terms and conditions for those transactions. Litigation in court as well as various methods of alternative dispute resolution are introduced; however, alternative dispute resolution is discussed in greater detail in Chapter 8. Of course, litigation in court is always the last resort and the overall goal common to all parties is avoidance of that type of contentious outcome. Try to keep an open mind about a topic many people try to avoid. I will demonstrate the strategic and tactical benefits of good contracting practices. Moreover, no matter where your current or future career path takes you, rudimentary knowledge of contracts will serve you well.

Agency Law: Who has Authority to Commit to What? A toy manufacturer stated in its written proposal to the purchaser that the standard lead time is 180 days for certain products that were later contracted for by the purchaser. However, a sales representative for the seller promised the purchaser that these products could be available in 90 days, and thus be available for the Christmas sales season. Unfortunately, the manufacturer/ seller took 180 days to fill the order and perform its obligations. The first question is, what was the legally obligated lead time, 90 days or 180 days? The answer to this ultimate question requires some preliminary answers to other questions. We will talk later about written versus verbal commitments and those effects on the contract. For now, let us assume that the sales representative made this commitment in writing. In order to answer this question we need to know about the sales representative and his relationship with his employer, the manufacturer/seller. Let us assume he has been employed as a sales representative with the company for more than 10 years and is very experienced in his work and he has been the only person who has dealt with the purchaser in this entire transaction. Does that mean that his written commitment to reduce the lead time by 90 days is legally binding on his company? The answer to that depends on his authority. Actual and Apparent Authority of People to Make Legally Binding Commitments There are two types of authority of individuals representing organizations under agency law. The first is actual authority that the company confers on

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the employee or agent to do or say. Some sales representatives have actual authority by their employers to make this type of special commitment to a customer. Many other companies, however, place very limited or zero authority on their sales representatives to make major concessions that are at odds or inconsistent with written policies and procedures such as we have in our example. If you are in the purchaser’s shoes, you will likely never know what the actual authority is of the sales representative with whom you are dealing. This is where the concept of apparent authority comes into play. The purchaser may make the argument that even though the sales representative may not have actual authority within his job description from his employer to change lead times, the sales rep appeared to have that authority, and therefore it was reasonable for the purchaser to rely on his written commitment to reduce lead time by 90 days. Although that is a logical argument to be made, it is most likely a losing argument because, generally speaking sales representatives have very narrow or limited apparent authority to make changes to written policies and procedures in terms and conditions published by their employer or their principal. Therefore, legally, the sales representative may not be backed up by his employer to satisfy the customer/purchaser. The purchaser may be left out in the cold it with no remedy for the “late” delivery. Purchasers always need to beware of the narrow or limited or totally absent authority of individuals to change significant elements or terms and conditions that are published in writing by manufacturers or sellers. Subjects such as product specifications, warranties, and lead times may not be at the discretion of a sales representative to change, even though it is documented in writing. Although our example focuses on a sales representative, the same concept of limited authority also applies to other representatives from a seller including engineers, technical people, IT people etc. For the purchaser to ensure full protection on this changed or amended provision of the contract, the purchaser needs to get the written commitment of the sales representative backed up and supported in writing by someone at a higher level in the organization. A vice president or other officer of a corporation generally has apparent and actual authority to make this sort of special commitment to a purchaser, whereas sales and technical representatives at a lower level in the organization generally do not have the actual or apparent authority to make legally binding special concessions to a prospective purchaser. In order to ensure that legally binding contracts exist and will be supported, the individual persons who represent legal entities must have the actual or apparent authority to legally bind their company or organization to that transaction. Otherwise, the other party risks being mistaken in determining whether or not there is a legally enforceable contract. In the normal course of business, this does not present a problem. Note, however, that when significant changes are agreed to, compared to standard operating procedures which are in writing,

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the authority question becomes vitally important. The lesson here is always negotiate with someone who has the decision-making authority to make special concessions.

How are Contracts Formed? There is an offer to enter into a contract. The offer may be an offer to purchase from the buyer or an offer to sell from the marketer, depending upon the circumstances. Once the offer is accepted by the other party there is a contract. The offer may be made by the seller or the buyer depending upon the circumstances. A prospective purchaser may issue a written request for proposals to prospective suppliers. The legal definition of a request for proposal is an invitation for offers to sell. So when the prospective seller submits a bid or quotation to the prospective buyer, it is generally characterized as an offer to sell the products or services described in the quotation. Only when the purchaser accepts the offer is a contract created. Consideration There must also be legal consideration for a contract to be formed. This is simply something of value that must be exchanged. Legal consideration is the issue when parties may commit to exchanging a nominal amount of money such as $10 or $100 in contract documents. That money represents legal consideration to cement the deal. Legal consideration may take other forms as well. An exchange of promises between the parties may satisfy the legal consideration requirement. Offers and Acceptances Offers to sell or offers to purchase are revocable until accepted by the other party. If you make an offer to sell your motorcycle to someone, but change your mind, you may revoke, or cancel the offer to sell, so long as you communicated that before the buyer accepts your original offer. A counteroffer is a legal rejection of the original offer. If I offer to sell you a desk for $800 and your response is that you will pay $500, your response is a rejection of my offer and a counteroffer and it is up to me to decide whether or not to accept your counteroffer of $500. Of course, by rejecting my original offer, legally that offer is no longer on the table, unless I put it there again by stating that the original offer of $800 will still stand. Conditions There also can be conditional offers and conditional acceptances. I offer to sell you the desk for $800. You may respond by saying I will pay you $800 for the desk on condition that you can deliver it to me by next Friday. That is a

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conditional acceptance. Once conditions are attached to an offer or acceptance communication, there is no contract unless or until the condition is agreed to by the other party. Physical Performance of the Contract Another way contracts are typically formed is by performance, defined as physical activities by one or more of the parties. When you go to a restaurant for lunch and order a bowl of soup and the restaurant serves you the soup and you consume the soup there has been a contract formed by physical performance. Most of the time, once physical performance occurs there is some sort of contract that exists. Physical performance before the contract terms and conditions are agreed upon and signed onto is not recommended because it leaves many unanswered questions concerning what those terms and conditions may or may not be. This may lead to conflicts and disputes and often leads to litigation. Generally speaking, physical performance by actions of the parties should be delayed unless and until the legal terms and conditions are put to writing and signed onto by the parties. Electronic Communications Terms and conditions may include electronic communications. Not too long ago, this would not have been an automatic assumption. However, with the current prevalence of technology most legal systems around the world, including those of the United States, recognize the legal validity of electronic documents and electronic signatures. Verbal Agreements Verbal agreements may become part of the contract without any confusion or uncertainty if the verbal agreements are confirmed in a written memo which is incorporated by reference and made a part of the contract as described hereinabove. Attorneys universally deplore verbal transactions. However, sometimes they are unavoidable and can be very valuable in bringing the parties together. Written confirming memoranda confirming the timing and terms and conditions of the verbal agreements are recognized by the law. An example might be, “This is to confirm the verbal agreement between ABC Company and XYZ Company on January 15, 2019 to have XYZ Company deliver the desk on or before February 1, 2019 at no cost. This verbal agreement was made by and between Jane Doe and John Smith”. The Statute of Frauds Writing Requirement The Uniform Commercial Code, which is the law in the United States for domestic transactions (and also governs many international transactions) for

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the sale and purchase of tangible goods, states that in order for a contract to be legally enforceable for goods valued at more than $500, there must be a written document providing evidence of the existence of the transaction. The Vienna Convention of 1980, also referred to as the Convention on the International Sale of Goods, also contains a writing requirement. The law has concluded that for many situations of importance, a party who contends that an agreement was made must produce documentary evidence of that agreement. Transactions in real estate, for example, have their own statute of frauds writing requirement. If your neighbor agrees to sell you her house in a handshake agreement, and then changes her mind, she is permitted to do that because verbal agreements to sell or rent or lease real estate require a tangible document which usually must be signed by the party to be charged with responsibility for the alleged contract. The title for this legal requirement, the statute of frauds, is descriptive of what the law is aiming to prevent, which is fraudulent representations of the existence of a contract.

What are the Required Elements to Form a Contract? The offer and acceptance must match on certain material elements which the law requires to be agreed upon in order to formulate a legally enforceable contract. Interestingly, the U.S. Uniform Commercial Code, which has been adopted by all 50 states and which governs many international contracts by mutual agreement between the buyer and seller, only requires agreement on two material elements: the product(s) and the quantity of those products. The law makes it very easy to create legally binding contracts for the sale and purchase of tangible goods. The product and quantity must be in a written agreement. There is no legal obligation for a contract involving the sale of tangible goods to be in agreement on the price, the delivery date, the warranties or lack thereof or any of the myriad other issues that normally arise in commercial transactions. Written agreement on the product and the quantity of products that are being bought and sold is all that is necessary to have a legally binding contract. The law will supply other terms and conditions if the parties cannot find agreement on those. Conversely, if the request for proposal calls for 100 widgets and the prospective supplier in their bid or quotation only offers to sell 50 because that is all they have available, there is no contract after that exchange of documents because there is not mutual agreement on how many widgets are being bought and sold.

Service Agreements If the subject matter of the transaction is services, the rules are different. The law requires the buyer and seller to agree on virtually all terms and conditions relating to a service contract. That is why a detailed scope of the work

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section of every document purporting to create a contract for the sale and purchase of services is so important. Professional trainers and consultants assist purchasing organizations in how to write a good scope of work description. This is discussed in greater detail below.

Definition of a Good Contract What is a good contract? A good contract, first and foremost, must clearly describe what is being bought and sold. As an attorney reviewing contracts, that is the acid test for me. Do I as a layperson reviewing a contract understand what is being bought and sold? Many times I do not and that is a sign of trouble. To avoid misunderstandings, disputes, and conflicts, it is best to make sure that both the buyer and seller are on the same page from the beginning regarding the terms and conditions of the agreement.

Applicable Laws Many laws may apply to international contracts. For example, the Vienna Convention of 1980, sometimes referred to as the Convention on the International Sale of Goods, has been adopted by the U.S. and most major trading partners and those provisions do require agreement on warranties in addition to the material elements of product and quantity described above. By definition, international trade involves transactions between two companies or individuals from different countries. The U.S. does not have a monopoly on its laws governing all these international agreements. So laws from other countries may have an impact on international transactions just as much as the laws of the U.S. Every international contract should have a choice of law provision and a choice of venue provision which identifies which law governs the contract and where disputes will be litigated or mediated or arbitrated. This eliminates confusion and conflict when things do go wrong because the contract that is well-written will identify next steps for both parties to follow. A good contract for major transactions or long-term agreements will act as a roadmap for the parties to refer to during the performance phase of the agreement for guidance regarding who is responsible for what and who is not during the performance phase of the contract.

Verbal Agreements are for Friends, Family, Fools, and Lovers This is a point of clarification for terminology used throughout this chapter. The words contract, agreement, and deal are used interchangeably. The words refer to a legally enforceable agreement between two or more parties to buy and sell tangible products or services or license or otherwise transfer technology rights. Of course, there are other types of agreements involving mergers, acquisitions, and the purchase of companies. There are also

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agreements for treaties between and among countries but those are outside of the scope of our discussion. Many legal systems in many countries of the world recognize and enforce verbal agreements, including state laws in virtually all 50 states of the United States. Verbal agreements are legally enforced every day of the week throughout the United States and indeed throughout the world. However, certain types of transactions are subject to the statute of frauds, which requires a written and signed agreement. Real estate transactions throughout the United States cannot be legally enforceable unless in writing. Sales and purchases of tangible goods valued at more than $500 are also subject to a writing requirement, as discussed above. However, in fact many transactions are completed on the basis of verbal agreements only, without any written documentation to provide evidence of the agreement being made and what the terms and conditions of the agreement are. Service contracts do not have a writing requirement in the United States nor in many other countries’ legal systems either. Does that mean that you should not bother with written agreements for service contracts? No, it does not. The problems in relying on verbal agreements are endless. It never ceases to amaze the writer how good, standup citizens and honest family people will lie through their teeth when their money and wealth is on the line. Perjury is lying under oath and it occurs in virtually every legal dispute by someone on one side or the other and many times by both parties. Even in situations where nobody is intentionally lying, people’s memories fade and people have different viewpoints on what happened in a particular meeting or situation. The Standpoint Theory (Rolin, 2009) holds that each of us sees the world through a unique perspective based upon our life experiences from childbirth to the present day. So even if three people are all honest, they may hear and interpret words expressed in a meeting differently. Sworn testimony under oath by honest witnesses invariably contain different interpretations of what was said and done in a given situation or transaction. And of course, unfortunately not all people are honest to begin with. In addition, people may change their viewpoints concerning what was said or done in the past, especially if there has been a long period of time between the meeting or transaction and the present day. Many people believe their current version of what happened in a meeting two years ago is accurate even though they may be completely inaccurate in their recollection. Many people do not lie intentionally, but rather convince themselves of what the truth really is and was because their vital interests are at stake. One focus of this book is to highlight negotiation nightmares or problems that occur as a result of or during negotiations which impact the parties adversely, sometimes well into the future, and to provide some guidance concerning how to avoid that fate. One of the leading causes of disputes

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and conflicts is verbal agreements gone awry. Generally speaking, anything is better than a verbal agreement, especially in international transactions. Any shred of paper, obscure email or written letter or memorandum is preferable to no documentation whatsoever about whether a legally enforceable agreement exists and if so what the terms and conditions for that agreement are. Misunderstandings and miscommunications are rife when verbal transactions are created and implemented. The title for this subsection referring to family, friends, fools, and lovers is really a discredit to the family, friends, fools, and lovers of the world, from a legal perspective. The idea is that one should be able to rely on the honesty, integrity, and relationship among these groups of people so as not to require a written agreement. Indeed, the concept of a written, signed prenuptial agreement is repugnant to most members of the 99 percent population of regular folk. However, it may be a necessity for members of the 1 percent contemplating marriage.

The Contract is King Many people facing a contract dispute pose the initial question, “What does the law say about this?” This is the wrong question. The correct initial question is, “What does the contract say about this?” The contract terms and conditions, with very few exceptions, govern the relationship between the parties, as opposed to the general rules of law. In other words, you can essentially create your own legal rules with the other party in any given transaction by the terms and conditions contained in the contract documents. Those terms and conditions, with few exceptions, will be enforced by courts around the world even though they may conflict with the applicable law. Of course, there are exceptions to this concept, but the general rule is what you should take away from this chapter. Contract terms and conditions are generally more important than the general rules of law. Of course, this serves to heighten the importance of good contracts.

More Verbal Agreement Problems The importance of having a written agreement as opposed to a verbal agreement may be illustrated in a common transaction that many of you may have been involved in or will be in the future. Suppose you want to sell your old car. A prospective purchaser sees your post on auto trader.com or eBay or one of the other online services. She comes to your home to examine and test drive the vehicle and ends up purchasing it from you. She pays you $2,500 cash, you sign over the title to her and give her the title so that she may process it into her own name the next day. You are happy that you have made a quick sale and you anxiously purchase airline tickets for your beach vacation with the dough.

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However, five months later you receive a postcard in the mail from the Ohio Bureau of Motor Vehicles referencing your car that you sold and demanding that you provide proof of insurance to the state effective on the date of the mailing which is three days ago. Whoa! You do not own that car anymore. Ohio, like many other states, requires property and casualty insurance on every licensed vehicle. The state performs random checks such as you just got caught up in demanding that owners prove they had proper insurance on the date of the mailing from the state. Of course, you cancelled your insurance the day after you sold the vehicle five months ago for the $2,500 cash. You contact the Ohio Bureau of Motor Vehicles and they conclude that the vehicle is still in your name. The lady who purchased the vehicle from you never transferred the title into her own name and therefore you are going to lose your driver license as a result of having an uninsured vehicle in your name. Without any documents proving that you sold the vehicle your liability is open and shut. How could this debacle have been avoided? A simple, one-page bill of sale should have been typed up or even handwritten and signed by the purchaser five months ago on the date of sale. The bill of sale should be dated, identify the make and model of the car and the vehicle identification number together with words to the effect that on this date of September 15, 2018 I Jane Doe paid $2,500 cash to Dr. Jill Rudd for the purchase of a 1997 Pontiac Grand Am vehicle identification number 007. It should be signed by both the buyer and the seller and the seller should retain this document in her records for at least four years.

What is “the Contract?” Contracts are usually comprised of more than one document in business transactions generally and in international transactions in particular. The following list of documents may be part of the contract in addition to the standard contract document that is executed by both the buyer and the seller.          

Purchase orders Sales acknowledgments Letters and correspondence Drawings, blueprints, designs, formulae, etc. Industry standards (published or unpublished) Product specifications Request for quotations, bids and other documents from the RFQ process Emails and other electronic documents Warranties Verbal commitments, especially those confirmed in writing.

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It is the responsibility of the purchaser and the seller and their legal counsel to clearly identify in writing which documents are part of the contract and which documents are not part of the contract. Accomplishing this goal is a serious challenge, but is essential to protecting legal rights and maintaining financial control for both parties. Other documents that may or may not be part of the contract include letters of intent, letter agreements, negotiation memoranda and meeting minutes/notes. Letters of Intent Confusion abounds regarding letters of intent. Is a letter of intent a contract? That depends on the context in which the letter of intent is created and the terms and conditions contained in the letter of intent. Generally, it is recommended to avoid letters of intent because of the mass confusion and misunderstandings with regard to whether or not this document creates a legally binding agreement or not. It is better to skip over a letter of intent and go right to the drafting and signing of a contract itself which clearly is a contract and does not carry the confusion of a letter of intent. Nevertheless, letters of intent continue to proliferate. Some of the reasons stated for the utilization of letters of intent include getting in line to obtain the product or service when there is heavy demand for the product and service, but there is a lack of funding or a lack of approval by top management to enter into a formal contract at this time. Other similarly vague and nebulous scenarios are provided as reasons justifying the inherent uncertainties of letters of intent. It may be helpful to explore the history of letters of intent. The full name of letters of intent has been dropped off in recent times. A letter of intent to do what, you may ask? Well a letter of intent is a letter of intent to enter into a future contract. That was the original purpose of the tool, to have an informal yet written understanding that the two companies plan to enter into a future contract. So the original letter of intent was a tool to indicate interest but not to have a legally binding agreement. The question should be obvious however: what if one party backs out of the letter of intent and does not follow through with a contract and the other party is willing and able to consummate the agreement but is left out in the cold? Many courts have found that even though it is merely a letter of intent, in the context and with the wording and what the parties actually do once the letter of intent is executed creates contractual liabilities and responsibilities. This may result in a court determining that violation of the letter of intent is a breach of contract rendering the party liable for financial and monetary damages. What are some factual circumstances that have led to letters of intent being deemed contracts that are legally enforceable? Well, if both parties are fully aware that one of the parties is going to go out and spend $1 million

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based on the letter of intent to build a production line to make a product to supply the purchasing company, then it is a pretty weak argument for the purchasing company to say this was merely a letter of intent to enter into a future contract that we could abandon with impunity. When one party or the other is about to make significant investments based upon the letter of intent, it is folly to assume that the letter of intent does not carry any legal responsibility. Significance of Being in a Contract Relationship It is a whole other world when two companies are merely negotiating a possible future contract compared to once they have signed on the dotted line and voluntarily entered into a legally binding contract. Both parties’ rights, duties, and obligations are defined by the contract now. Letters of intent may muddle up this picture considerably so that one party may believe there is a legally binding contract but the other party thinks not. This is a recipe for serious conflict and financial hardship for one or both companies.

Letter Agreements One of my favorite cases from early England 1000 years ago involved a farmer who wrote a check payable to a merchant for a transaction. This sounds normal and routine. However, this particular farmer wrote the check on cowhide in life-size and delivered the check to the merchant. The merchant rejected the check and demanded a paper document for payment, arguing reasonably that a contract cannot be written on a side of cowhide. The court disagreed with the merchant and upheld the validity of the document and that law is still with us today. There is no magic to what may be a contract document. Legally enforceable contracts have been approved by courts that are written on bar napkins, wallpaper, cardboard boxes and any other media. Agreements in the form of letters are still used, particularly by attorneys who have letter agreements with their own clients for legal representation services.

Negotiation Memoranda Documents created during the pre-contract negotiation phase may become contract documents in certain circumstances. Negotiation memoranda is a generic term which can be applied to any document created during the precontract negotiation phase. There are two avenues by which these precontract documents may become legal documents and may affect the legal status between the two parties. One of these avenues is positive and the other is not necessarily positive.

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Incorporated by Reference and Made a Part of this Agreement One commonly used tool to make such documents part of the contract is by using the magic language, incorporated by reference. For example, detailed drawings for a product or a building may be incorporated by reference and made a part of the contract by utilizing this wording and that is beneficial to both the buyer and the seller. The full legal terminology is “this document is incorporated by reference and hereby made a part of the contract dated January 25, 2019”. The other means by which precontract documents may become part of the contract is not a good thing. When contracts are poorly written and are confusing, ambiguous or unclear in their meaning, attorneys and courts will be forced to look at precontract documents to help understand the true intention of the parties in creating the contract. Ambiguous contracts are a lose proposition for the parties.

Key Legal Terms and Conditions That Should be in Every Contract Although the law makes it easy to create legal contracts by simply agreeing to the product and the quantity of those products, to avoid misunderstandings, ambiguities and conflicts there are other terms and conditions that are vital to understand and include in your transaction agreements. Perhaps the most important is the right to terminate the agreement.

The Right to Terminate the Agreement Many people are under the false impression that they can terminate or cancel a contract whenever they want to. But think about that. If anybody can terminate a contract any time they want, what good is the contract? That is the way the law views it. Contracts are not worth the paper they are printed on if they can be canceled or terminated at will. Many small businesses have faced insolvency due to bad contracts that they cannot cancel or terminate. The general rule is that contracts must be fully performed by both parties to the contract. Neither party may terminate or cancel the agreement early, defined as any time before complete performance of the agreement has been finished, unless the agreement itself gives that permission. After all, if you have a contract to have your new furniture delivered on February 1, what gives you the right to leave town for a vacation on January 28 and be gone for two weeks, rendering delivery impossible. Alternatively, what would give the furniture company the right to change its mind and sell the chair to someone else? The only source of rights to terminate or cancel early, i.e. before the contract is fully performed, is the contract itself. Many parties to legally binding agreements have breached the agreement by attempting to terminate or

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cancel the agreement before it is fully performed. Terminating an agreement before it is fully performed is a breach of that agreement rendering you liable for monetary damages unless the contract provided you the right to cancel early. This includes situations where the other party breaches the contract. Your mother may have taught you that two wrongs do not make a right. That applies in contracts as well. A breach of contract by one party does not permit the other party to cancel. There are two types of termination clauses that proliferate in both domestic and international transactions. One is the right to terminate for any reason or no reason, usually upon providing written notice of the termination. This is the ultimate escape clause. If you have a two-year maintenance agreement with an IT firm to manage your network and related devices, you may want to terminate that six months into the performance phase, without having to explain why. This is called the right to terminate for convenience. There is no obligation to give the IT company the same right but many times that is how contracts end up. If one party has the right to terminate for any reason or no reason, the other party usually insists on obtaining that right as well. Termination clauses also need to be supplemented with explanations of what the effects of the termination are. For example, even though the party has a right to terminate, do they still have to pay for products or services provided up to that date? Those types of details need to be spelled out in the contract. The second type of termination clause is termination for breach of contract. Breach of contract is discussed below in greater detail. For now, let us assume that the service provider has breached the agreement by not meeting minimum performance standards written in the agreement. The purchaser in this scenario should have a termination clause in the agreement stating that it has the right to terminate upon the breach of the supplier of any terms and conditions in the contract or the general rules of law. This is another scenario that is misunderstood by many. Even very experienced business professionals can be under the illusion that if the other party breaches a contract, the victim of that breach can simply pick up their toys and go home by terminating the agreement. This is not the law. As stated above, the law on this point is the same as your mother taught you—two wrongs do not make a right. Just because there is a breach of contract, unless the agreement sets forth the right to terminate on that basis for the victim of the breach, a termination by the victim is also a breach of contract by the victim. So we are left with a situation where both sides have breached the contract. This is analogous to a basketball game where the aggressor shoves or pushes or punches the “victim” who then retaliates with a shove or a punch or a push in retaliation. Invariably, the “victim” is the only one who is caught by the referee and penalized. Every agreement should have escape clauses detailed and in writing to prevent serious and costly conflicts.

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Breach of Contract Breach of contract is a vitally important concept of which everyone in business, especially international transactions, should be cognizant. Many times, people are confused about whether a breach of contract has occurred or not. We will try to take some of that confusion out of the picture for you. In simple terms, a breach of contract occurs when anyone fails to do what they agreed to do in the contract. It is that simple. The list of possible actions or inactions which may amount to a breach of contract are endless. Just as every contract is unique like a snowflake, there may be unique ways to breach a contract. Common breaches of contract may include late performance, or nonperformance altogether, or out of spec material or failure to pay. If the product specification calls for 12 ounces of liquid to be in each container, it is a breach of contract if there is only 11 ounces in a container.

Anticipatory Repudiation of the Contract A purchaser tells her supplier that even though she contracted for 800,000 pounds of resin and she has only received 500,000 pounds, she will refuse all further shipments because she has all she needs. Does the seller need to waste the time and money by attempting to deliver the rest of the resin to the buyer? The answer is no, because the buyer, by saying that she is going to breach the contract, is breaching the contract. The concept is anticipatory repudiation of the contract, which simply means a breach of contract before the actual performance. Saying you will breach the contract amounts to a breach of contract to the astute listener.

Performance and Technical Specifications for Products There are two types of specifications recognized by the law for any tangible product. Failure by a supplier to meet the product specifications is a breach of the contract. From a purchaser’s perspective, both types of specification should be included in every contract for the purchase of tangible goods. Technical specifications are well defined, measurable descriptions of the product. Examples may include the 12 ounce container of liquids mentioned above, in addition to measurable descriptions of the product—it must be less than 8 feet long and 2 feet wide and weigh less than 200 pounds. The product must be made of steel or copper or aluminum. Most technical specifications are relatively easy to identify on the product itself through visual or more detailed methods of inspection. Obviously if the product weighs 204 pounds thus exceeding the weight limit it is a breach of contract. The other type of specification is performance specifications for the product. Even though the product may meet all the technical specifications, if it does not meet or exceed the performance specifications it is a breach of

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contract. Even though the machine is less than 200 pounds and meets the measurement dimensions above, it may still not satisfy the contract obligations of the supplier unless it produces 200 pounds of french fries per minute on the buyer’s production line, provided that performance specification is agreed to and made a part of the contract. Well-written, detailed product and performance specifications are what purchasing professionals strive for to protect their organizations on quality issues for the products they buy. From the seller’s perspective, sellers are encouraged to tout their competitive advantages over their rivals by committing to specifications that their competitors cannot meet. If you are the only company in the world that can produce French fries at 200 pounds per minute, you can use that in your contract to assist you in making sales to customers who have never enjoyed that type of productivity from any other machines. Conversely, if the seller cannot meet certain specifications that the buyer insists upon, the seller may need to move on without entering into an agreement with that prospective supplier. It is better to walk away without a contract than to commit to doing something that you are not capable of performing.

Acceptance or Rejection of Products or Services Once the seller tenders a product for delivery to the buyer, the buyer has only two choices. It may accept and pay the seller or reject and return the product, if there are valid reasons to do so. The buyer cannot keep the product and also keep the money. If the buyer rejects the product or service, the buyer must give written notice of the rejection, stating the reason(s) the product is rejected, and request instruction from the seller regarding return of the product. This can be a very cumbersome and expensive proposition in international transactions. Most parties make arrangements for quality inspections to be made at the seller’s facility or somewhere in the middle of the journey of the products, to identify quality problems. Letters of credit also contain provisions to deal with quality inspections and issues. If there is a breach of the service agreement, services cannot be physically returned, so the notice of rejection of the services becomes even more important.

The Perfect Tender Rule for Tangible Goods The concept of the perfect tender rule is closely related to specifications and warranties. Quality is a key issue for everyone in international business transactions. The quality of the goods and services being bought and sold is usually the biggest concern for everyone. The law provides purchasers significant protection to receive the benefit of the bargain that they made with the supplier in regard to quality issues. This legal protection to quality

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products is embodied in the perfect tender rule for tangible goods. The perfect tender rule requires the supplier to tender for delivery to the buyer i.e. offer to deliver to the buyer a product that meets all legal and contractual specifications and warranties. Failure by the supplier to tender for delivery to the buyer a product that meets all specifications permits the buyer to reject the product and return it to the seller. It also may amount to a breach of contract by the seller.

The Doctrine of Substantial Performance for Service Agreements Compare the perfect tender rule, which is the standard of performance for a seller of tangible goods with the doctrine of substantial performance, which is the standard of performance that suppliers of services are held to. Compare the phrases. “Perfect” versus “substantial performance”. This different legal standard for suppliers of goods versus services is the law’s recognition that tangible goods may be perfect but services rarely are. Therefore, a different legal standard of performance is applied to some providers of service agreements. Think of a general contractor constructing a new home for the young family who is looking at this as their final home that they will live in forever and raise their family and have their grandchildren come visit. They want that house to be perfect. A contract to build a house or other building is a service contract. The general contractor is being paid to facilitate all the subcontractors and material suppliers and coordinate their actions to complete the construction of the building. So we have the buyer expecting and demanding a perfect house and a service provider, the general contractor, who can in most instances never be able to deliver the perfect house. It is a natural situation for conflict. The law protects the is supplier of services by reducing this legal standard of performance to the doctrine of substantial completion. Minor defects in the quality of the new home are forgiven by the law. The question becomes, what is a minor defect. That is where scope of work provisions in a service contract become critically important.

Scope of Work Descriptions in Service Contracts Professional purchasers take pride in their ability to negotiate and draft effective scope of work descriptions in service agreements. Many companies train their purchasers to help develop the skill involved. Purchasers must face the daunting challenge of the doctrine of substantial completion which is the standard of performance the law graciously provides to suppliers of services. To counter that protection the law provides to suppliers, people on the purchasing side try to write accurate scope of work descriptions by which the performance of the supplier may be measured. Try writing a scope of work description for a janitorial service provider for a small office building. How clean must the floors be to meet the

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performance criteria in the contract? It may not be possible to include it as a measurable standard of performance. Therefore, the challenge is to identify performance criteria that can lead to the floors ending up clean if they are complied with. For example, the specifications for performance may include the number of days and hours of the week that are required for the supplier to be on-site and perhaps the number of people they employ to complete the job each day. The specifications may include a certain type of equipment that must be utilized to ensure a standard of performance relating to cleanliness. Try writing a scope of work description for other types of service contracts such as consulting agreements, maintenance agreements for capital equipment, maintenance agreements for computer hardware and software, networks, engineering design services for component parts, equipment repair agreements, and any other service contracts with which you may be involved. It is almost like teaching a child how to cross the street. He should be able to answer the questions who, what, where and when.

What Happens When Nonconforming Goods are Tendered for Delivery to the Purchaser? Once the seller delivers products to the buyer, the buyer has a reasonable time to inspect the products for defects, damages and nonconformities to the contract specifications. What is a reasonable time? In domestic transactions it may be as much as 30 days maximum from the date of delivery. However, with products that may deteriorate or spoil such as food products the time is obviously much less. Once the buyer identifies a nonconformity with the product, the buyer has a legal obligation to provide notice of rejection of the product to the supplier. The buyer has a legal obligation to identify the specific problems with the product. For example, a buyer cannot complain that the product is nonconforming because it is purple, unless there was some color specifications agreed to in the contract between the parties that does not include purple as being acceptable. Generally, the seller who receives a notice of rejection from a purchaser has a legal and contractual obligation to repair or replace the product depending on the circumstances and the terms of the transaction. Generally speaking, the purchaser may withhold payment for rejected goods until the situation is resolved. So the purchaser has tremendous power to reject nonconforming goods pursuant to the perfect tender rule discussed above, but the counterbalance that the law imposes on the buyer is to state the reasons for the rejection with particularity to protect the supplier against unfounded allegations of quality problems. The same general rule applies to service contracts. If the purchaser of services is dissatisfied, it is incumbent upon the purchaser to give written notice of rejection of the services stating with particularity the problems regarding the alleged deficiency and the services provided. In fact, the notice of rejection for services becomes even more important than for

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tangible goods because when tangible goods are rejected and returned to the seller there are usually all kinds of documentation and witnesses to what happened with the product. However, services by definition usually may not be returned to anyone so the written notice of rejection of services is the only evidence of the buyer’s rejection. Failure to provide written notice of rejection may waive the buyer’s rights to complain later.

Written Notice of Breach of Contract If the nonconforming goods or services are serious enough to amount to a breach of contract, the buyer should also consider giving a written notice of breach of contract to the seller. Failure to provide a written notice of breach of contract under the law may waive rights for whoever the victim is. The law requires a written notice of breach of contract prior to commencement of litigation, so that the parties hopefully will resolve their differences without resorting to litigation. It may be a major decision for a company to decide with their legal counsel whether to deliver a notice of breach of contract to the other side. While protecting legal rights, such a notice frequently has a deleterious effect on the relationship between the parties. Although these general rules seem to perform well for buyers and sellers in domestic transactions, the potential costs in international transactions should be apparent. It is rarely a benefit to either party to have quality problems discovered only after the product has been shipped halfway around the world and arrives at the buyer’s dock. To minimize or hopefully eliminate this possible scenario, various steps may be taken by the parties to identify any quality issues sooner rather than later. For example, sometimes purchasers will have their own inspectors on-site at the manufacturer’s facilities to inspect products before they are even shipped from the factory by truck to a railcar and then to a ship. Sometimes the parties will rely on written inspection reports certified by designated representatives at the seller’s facility to minimize the possibility of defects going undiscovered until the product ships across the ocean. Modern technology assists in these issues to a substantial degree. Digital photos and videos may be utilized to improve upon quality monitoring to everyone’s benefit.

Letters of Credit For domestic transactions, the sequence of events usually is as follows. The contract or purchase order is agreed to by the buyer and seller and the seller then delivers the product to the buyer and invoices the buyer for payment and the buyer makes the payment following delivery of the product. However, that basic approach is often not amenable to international transactions. Many sellers do not want to incur the time and expense of making the product, transporting the product around the world and then billing the purchaser and getting paid after delivery. Many sellers want assurances that

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they will be paid upon performance of the contract. Buyers, on the other hand, are reluctant to pay for products until they have possession of them. One of the tools utilized for spreading this risk and allocating the risk to acceptable levels between the parties is a letter of credit. A letter of credit consists of a contract between the buyer and seller and at least one and possibly multiple banks or lenders. The letter of credit provides that the buyer will deliver the purchase price to the bank. The seller shall present to the bank certain defined documents. If the documents meet the criteria in the letter of credit, the bank will release the funds to the seller. If the seller does not produce the documents in a timely fashion, the money is returned from the bank to the purchaser. This tool protects both the buyer and the seller through the use of one or more intermediary banks who contract with the parties to the transaction. Letters of credit are agreements with the bank to deliver money to the seller upon receipt from the seller of certain defined documents which have been agreed to by all parties including the buyer, the seller, and the intermediary banks. The documents may include such things as inspection reports, bills of landing or other transportation and logistics documents to prove that the product exists and has put been put into the transportation system and is at a point in its journey which is agreeable to the parties to guarantee the seller will be paid. It may be at final delivery or at some intermediary waystation. Letters of credit are irrevocable and they are “documents only” transactions. If the seller produces the agreed-upon documents in a timely fashion to the bank the bank will draw down the letter of credit by paying the seller. Every international transaction should also specify the currency of measurement and the currency of payment. For example, if the contract specifies that the price is “US$500” can the buyer pay the equivalent of US $500 in Euros? The answer is possibly because the contract only specified the currency of measurement. The contract should also state the currency of payment very clearly.

US Government Regulations and Laws Affecting International Transactions The federal government regulates international trade involving US organizations. Significant issues dealt with by US laws include intellectual property rights, including patents, trademarks, copyrights, and trade secrets. US export license requirements must be satisfied. Two types of licenses include a general or special license to export products outside the U.S. Import laws require all imports to be legally authorized by federal law and require specific labeling of the products with the country of origin. Tariffs are also in the province of the U.S. government to determine these taxes on imported products to the U.S. As mentioned briefly above, every international agreement should identify the applicable law governing the contract and the location of any

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litigation or alternative dispute resolution transactions. This is called the forum or venue clause and the choice of law provision. An example of a choice of law provision is the following, “The parties agree to exclude application of the United Nations Convention on Contracts for the International Sale of Goods, 1980 from this contract. This contract shall be governed by the Uniform Commercial Code, as adopted by the state of New York”.

Imports to the U.S. Imported products to the U.S. must be labeled with their country of origin. That label must survive until the ultimate purchaser of that product can see the country of origin disclosure on the product itself. Gray market goods are genuine articles imported through unauthorized importers or dealers. They pose a threat to U.S. buyers because the products will not carry any warranties from the manufacturer as they are outside of the manufacturer’s approved distribution network. Counterfeit goods, on the other hand, are not genuine articles but knockoffs of trademarked brands. These are illegal to be imported into the U.S. Many uninformed importers have lost significant investments in counterfeit goods and some have also faced criminal prosecution for this activity. An example of counterfeit goods are the “Rolex” watches that can be purchased on the streets of New York for less than $100.00.

Exports from the U.S. Two government agencies regulate exports from the U.S. One is the U.S. State Department and the other is the U.S. Commerce Department. The State Department is focused on national security interests, whereas the Commerce Department generally is more concerned about promoting business and economic interests. The stated reasons for U.S. laws regulating exports include protecting national security interests, promoting U.S. foreign policy, and dealing with or preventing short supply of critical goods needed in the U.S. Regulated exports include tangible goods and technical data, which is defined as “information of any kind that can be used in the design, production, manufacture, utilization or reconstruction of articles or materials”. Every export requires an export license. This is in many ways a legal fiction because for most exports a general license is all that is required, which is essentially an automatic license. General export licenses are all that is necessary for non-sensitive, non-military and non-dual use goods or technical data that are going to friendly countries who have a good relationship with the U.S. Any goods or dual use goods or technical data that can be used for military applications require a validated license from the U. S. State Department rather than the general license.

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Intellectual Property Rights Intellectual property rights are subject to being lost or stolen when international transactions are undertaken. This is one of the biggest points of contention currently between the U.S. government and the government of China. U.S. businesses and the U.S. government have claimed for decades that China does not respect U.S. patent laws or trademark laws or copyright laws. Of course, other countries have issues as well. Generally speaking, the U.S. and the European Union have the strongest intellectual property protections in the world. However, since 1988 our major trading partners worldwide have adopted the same copyright laws as we have in the U.S. Copyright laws prevent the unauthorized duplication of copyrighted works. This is the Berne Convention of 1989. Patent laws are the gold standard for intellectual property protection. There is no international patent law. Patent holders who are international players invest big money in filing patents in many different countries throughout the world. Again, some countries’ patent laws are strong, while others are not. Trademark law is the subject of gray market goods and counterfeit goods discussed above. Trademarks identify the source of the product or service. When you see the Nike “checkmark”, you know that is a Nike product, whether it is a pair of shoes or a shirt.

Risk of Loss Risk of loss is the subject addressed in the first paragraph of this chapter. What happens if a product is damaged or destroyed or lost while in transit? One of the issues that every buyer and seller should be aware of is who has risk of loss for the products at any stage of the journey from the seller to the buyer. For domestic transactions there are usually two options denoted by the terms FOB shipping point and FOB destination. A contract with the terms FOB shipping point means that the risk of loss due to damage or destruction of the products shifts from the seller to the buyer when the seller loads the goods onto the truck at the seller’s location. Alternatively, if the contract is FOB destination, the risk of loss remains with the seller until the product reaches the buyer’s location safely. This can have tremendous implications when products are damaged in transit. For one, if the risk of loss has shifted to the buyer, then the buyer must pay the seller for the products even though the buyer does not have the products because they were damaged or destroyed. Compare that to the situation where the risk of loss is on the seller at the time of the incident and the seller still has a legal obligation to replace that product for the buyer. For international transactions in goods, there are additional options between the buyer and seller for how to handle risk of loss for the products. There is a multitude of freight terms called Incoterms. International shipments frequently involve multiple modes of transportation such as trucks,

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railcars, and ships and vice versa at the other end of their journey. It is possible for the buyer and seller to negotiate and put in their contract where risk of lost transfers from the seller to the buyer at any time along this journey. The best way to handle this in addition to using Incoterms, which are defined and used worldwide, is to spell out who has risk of loss until what position in the journey in the contract in plain language, so that there are no misunderstandings between the buyer and the seller. You may be thinking, “Well isn’t the carrier at fault in many of these incidents and if so isn’t the carrier liable for replacement of the goods if they were negligent?” The answer is that under both domestic and international law, carriers are not insurance companies and they have limited liability even if it is their own mistakes which cause damage to the freight. The Carriage of Goods by Sea Act and other international laws are similar to U.S. domestic laws in protecting carriers against liability for their cargo. This dates back to the early stages of trade in ancient times. Merchants realized that carriers needed to be free of significant liability for freight, and this is still the law today. If you have ever lost your luggage you may be familiar with this concept, unfortunately. The law protects air carriers on a per piece of luggage basis. When you hear about a movie star or rock star or pro athlete who loses $200,000 worth of jewelry in a bag checked at the airport be aware that the airline is not responsible for that total but only a very small fraction. This is the reason why risk of loss is such a vitally important topic in international transactions. The parties may not just simply point fingers at the carrier and get significant economic relief. So what is the answer to the first question on the first page of this chapter? It depends on the terms and conditions in the contract regarding risk of loss. Who had risk of loss at the time of the fire damage, the seller or the buyer? We must read the contract to find the answer.

Warranties Warranties are contracts. Warranties can be standalone agreements or clauses within the contract document. Warranties are simple and direct, or they can be and should be. Think of it like this – a sales representative says we can deliver your new washer and dryer on Thursday. If you are the purchaser, how do you turn this verbal statement into a warranty? The answer is to get it written into the contract or get a separate writing that supplements the contract expressing the warranty. Anything a seller says or does to induce the buyer to enter into the contract should be put to writing and converted into a warranty. In the above example, it would be translated as “I warrant that your washer and dryer will be delivered on Thursday”. In addition to verbal statements, virtually all product samples, prototypes, videos, photos, advertisements, and written statements of sellers to induce buyers to purchase can be incorporated by reference into the contract to become a written warranty.

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The Two Types of Warranties There are two types of warranties, express and implied. Express means the warranty is expressed in the agreement. Implied warranties only apply under the Uniform Commercial Code for sales of tangible goods. There are two types of implied warranties, the implied warranty of merchantability and the implied warranty of fitness for purpose. The implied warranty of merchantability is general in nature but can be extremely valuable to a purchaser. For example, the implied warranty of merchantability warrants that a bucket will hold water without leaking. It is an automatic warranty providing minimal but significant protection to purchasers. Implied warranties are not expressed in the contract. They are automatic. Sellers may disclaim implied warranties with prominent wording in the contract as prescribed by law. The second type of implied warranty is the implied warranty of fitness for a particular purpose. If the purchaser tells the seller I need gloves that will withstand direct contact with ammonia for four continuous hours without degradation, and the seller sells the gloves to the buyer, the implied warranty of fitness for purpose is present. How can the buyer strengthen this implied warranty into an express warranty? You probably are ready for this. Yes, the buyer should put it into the contract that the seller warrants the product will survive intact despite four hours of continuous exposure to ammonia. This converts the implied warranty of fitness for purpose to an express warranty spelled out in the agreement. Be aware that there are no implied warranties for service contracts. There is no general rule that says the services will be “pretty good”. There is no minimum safety net protection for buyers of services. The only warranties that apply to service contracts are those expressed in the service agreement.

Contract Administration During the Performance Phase A frequently recurring problem that creates much needless conflict, confusion and even litigation in international contracts occurs when the parties sign the agreement and then put the documents away in a drawer or leave it in the computer and never look at it again for the next three years while they do business together. The terms and conditions in the contract are being ignored in that scenario to the risk of both parties. Written contract terms and conditions which do not match what the parties actually do in the performance phase of the agreement are subject to be lost or waived. At a minimum, it creates confusion and uncertainty and ambiguity when the actions of the buyer and the seller do not have any relation to the terms and conditions in the written contract that nobody has looked at lately. This is a big red flag for problems to be created between the parties. The common goal of both buyers and sellers is to ensure, to the extent possible, that the terms and conditions in the written documents match

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what is actually happening on the ground during the performance phase of the agreement. When that is not the case there are two alternatives. One is to change the behaviors/actions of the people to conform to the written terms and conditions of the contract. The other option is to formally amend the contract to match the reality of what the buyer and seller are actually doing in performing their agreement with each other. Most contracts for significant transactions in the international sphere require written, signed amendments to change the terms and conditions. That is a good thing.

Contracts Include Actions and Words Contracts include actions and words. The words are in the written documents comprising the contract. The actions are what people actually do during the performance phase of the agreement. The law recognizes actions as having legal implications. The actions, if consistently inconsistent with the written words, may amend or obliterate the words. Why spend weeks or months or sometimes years negotiating terms of a contract, then not abide by it? This is called course of performance of this contract. The law also recognizes as part of the contract the prior course of dealing between the buyer and seller on other contracts. This is the physical actions of the parties on prior deals. The law also recognizes business custom, defined as what most others in a particular trade or industry do most of the time. These concepts are only relevant when the written agreement is unclear. To avoid these uncertainties, the written agreement should be well drafted and followed by both sides.

Summary Well-written contracts can alleviate or eliminate many misunderstandings and conflicts in international transactions. Whenever possible, negotiate with the highest-level person you can get to. Corporate officers have the greatest level of authority to make special concessions or deals. All agreements should be in writing. Do not rely on verbal agreements or promises, which lead to disputes. Be clear on what is being bought and sold. The contract should identify the products, the quantity of products, the specifications of the products, and the warranties. The contract is king, meaning the contract takes priority over the general rules of law in most situations. For service contracts, a well-written statement of work is essential to ensure both parties are in agreement. All contracts should have termination clauses for one or both sides. The concept of breach of contract is central to understanding contract law. Contracts should also address risk of loss for the products.

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During the performance phase of the agreement, the seller should strive to deliver timely products and services that meet the specifications. Buyers must provide written notice of rejection for non-conforming goods or services and breach of contract if needed. Actions of people should be in conformance to the written terms and conditions to ensure stability and minimize conflicts.

References Rolin, K. (2009). Standpoint theory as a methodology for the study of power relations. Hypatia, 24(4), 218–226.

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Culture Behavior, Beliefs, and Breakdowns—Why Can’t You Just Do It My Way?

Culture and Negotiations Culture is characterized as a set of shared norms, behaviors, beliefs, and rules that a large group of people share over an extended time. We hear it discussed in terms of perception, patterns, behaviors, and values. Culture determines much of the variance in how humans view their world. Our reality is not so much “in the eyes of the beholder” but rather it’s in the confinements of culture. Culture is deeply rooted in our lives. Cultural norms and values are learned early on and our cultural influences are often beneath the surface of our consciousness. Our perceptions provide a window into the effects of culture. Culture influences our judgments and evaluations of people, things, and problems. How we interact with one another is heavily determined by our cultural norms. Culture gives order to our everyday living and connects us to others who share the same cultural experience. It is expressed in art, dance, family, and how we conduct business. Negotiation is heavily influenced by society. The expectation of how we conduct ourselves in business and our expectation of how others will behave can be understood through a cultural lens. Cultural influence does not change because someone is in a business negotiation. If we are looking for a road map for navigating a successful agreement it is wise to consider an intercultural perspective to determine the best road to take. Erin Meyer (2015) states, “What gets you to ‘yes’ in one culture gets you to ‘no’ in another” (p. 76). His words encapsulate the importance of cultural influences in the negotiation process.

Cultural Dimensions Hofstede in 1983 worked for a multinational corporation (IBM). During this time he created a set of four cultural dimensions for comparing cultural differences. These four dimensions are: individualism/collectivism, power distance, uncertainty avoidance, and masculinity/femininity. Since this original work others have expanded the study of culture differences to include

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such factors as hierarchy versus egalitarian (Triandis 1995; Brett 2007), low context versus high context (Hall, 1976, Gudykunst, Ting-Toomey, and Chua, 1988) and monochromic/polychromic time, as well as others. As we begin to understand the underlying premises of cultural difference we have new opportunities to reach out to others who are different from us with an appreciation for our differences. In international business negotiations understanding the cultural effects of behavior allows us to gain insight into others that are different from us as well as creating an opportunity to look introspectively, especially when a breakdown or impasse occurs in the negotiation process. A brief discussion of key differences that are especially important in intercultural negotiations follows. Masculinity/Femininity The Masculinity/femininity dimension of cultural variability is focused on the extent that a culture is attentive to nurturance orientation or achievement driven orientation. Hofstede describes masculinity cultures as cultures where men are characteristically ego boosting, assertive, competitive, materialist, and success focused, whereas women are more modest, tender, display self-control, and nurturing. The distinction between sex roles is clearly defined. Femininity cultures are societies in which gender roles are less clearly defined and overlap of traits often occurs. Both men and women share in a humanity view of helping others and quality of life focus. The significance of these differences affects how one negotiates in intercultural business negotiations and who is seated at the table. When negotiating with highly masculine cultures one should be prepared for issues such as money as critical factors in the negotiation. Economic growth is often a high priority in these types of cultures so one should be prepared to expect preferences of financial gains even at the expense of relationship development. High pay may be considered a sign of success and respect and failure viewed as a significant fault of an individual’s ego and reputation. Do not expect to see women in high level positions and as a majority at the bargaining table. Men continue to receive higher pay and hold higher level management positions. One should be prepared for competitive strategies at the negotiation table in highly masculine culture. Do not be surprised to see threats, insults, aggression, rationalization, and bluffing as acceptable tactics. Feminine cultures are likely to negotiate from a relationship-oriented focus. People and quality of life are important aspects to an agreement. Environmental concerns, fair wages, and flexibility for family matters is often a framework one can expect in negotiations. Difficult factors must be considered when one is deciding whether to honor the culture that is opposite of your cultural experience. Necessary choices may include, “do we change the gender make up of our negotiation team to predominantly male if we are negotiating with a masculine culture

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to make it more comfortable for the other party?” Or “Do we see an advantage for remaining a gender mixed team to honor our culture and use the other party’s discomfort to our advantage?” In addition, it is important for us to consider the role of competitive strategies versus collaborative ones. Collaborative strategies lead us to work together to reach an agreement that is mutually beneficial without harming the relationship, whereas competitive strategies are aimed at winning as much as we can even at the cost of the relationship. Examining our own cultural stance on sex roles and the flexibility of others in our culture is as important as analyzing our opponent’s perspective. It is essential for negotiators to look inward and self-analyze the influence that their culture has on their behavior and message choices. Only through our own cultural self-assessment will we gain the knowledge to understand the disadvantages and occasional failures resulting from cultural vulnerability. Individualism/Collectivism The individualism and collectivism dimensions examine how individuals relate to one another within their culture. The importance of individual versus group goals is a distinction between individualistic and collectivistic cultures. Individualistic cultures place an emphasis on an individual’s goals, whereas a collectivistic culture focuses on the group goal. In collectivistic cultures, individuals are expected to fit within the group goals. In individualistic culture the “I” is considered more important than the “we”, whereas in collectivistic cultures the opposite is true. In individualistic cultures, individual achievements, decision making, and success are highly valued. Collectivistic cultures value people belonging to a group or having a group identity and working toward what is best for the group. Success is important in both individualistic and collectivistic cultures. The difference lies in the focus of whose success. Success for the group is more important than individual success for collectivist cultures, while the opposite is true for individualistic cultures. Individual success should not come at the cost of group success for collectivistic cultures. Members of collectivistic cultures are expected to look out for one another, be loyal, and do what is best for the group. Collectivistic culture members are willing to make sacrifices for each other and do so without hesitation. The influence of group membership also varies depending on cultural expectations. In individualistic cultures individuals often belong to many ingroups such as family, work, religion, friends, recreational clubs, and social clubs to name a few. The impact that group membership has on an individual’s behavior is usually limited to specific social context rather than to an overriding impact on an individual’s general behavior. An individual in a collectivistic culture usually belongs to fewer ingroups which carry a great deal of influence in an individual’s overall behavior. This is the opposite of individualistic cultures. The relationship bond in collectivistic cultures is

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strong and groups of people have a sense of belonging and work together to maintain a sense of order. Members of individualistic cultures tend to care for themselves and their immediate family, but this sense of closeness does not usually extend to people outside their immediate family. The significance of the individualistic –collectivistic cultural difference is important in the international negotiation setting. For example, a colleague once shared her experience in a negotiation involving a partnership between a U.S. company and a Chinese company regarding the production of metal tubing material which was needed for the manufacturing of lighting products. For the sake of confidentiality we will refer to her company as Company U.S. and the Chinese company as Company China. Early contact between the two companies had gone well and progressed to the point that Company U.S. was prepared to go to China to “seal the deal”. The V.P. of purchasing, the head of engineering and the in-house general counsel prepared for their negotiation with the understanding that the deal would determine the V.P.’s success or failure. He was on his way to running the company if the two companies could reach an agreement. The China Company negotiating team was comprised of twice as many team members at Company U.S. It is not uncommon in Chinese culture to include many members on the negotiation team. It is important that all persons that can provide helpful information during a transaction be present to assist the leader of the team (who has the decision-making authority). The negotiation seemed to be going well until Company China requested as part of the agreement that the Head of Engineering stay in China and become part of the company to assure success. This seemed an appropriate request considering that in collectivistic cultures employees willingly forego their own wishes for the sake of the group (in this case the company). To Company China’s surprise, the Head of Engineering replied immediately and said that that was not possible because he had just purchased a new home in the U.S. A breakdown occurred at this point in the negotiation. Why? Let us examine the situation from the individualistic versus collectivistic vantages. First, collectivistic cultures’ normative behavior is to work for the group’s benefit. In this case, the Head of Engineering’s actions demonstrated his priority of his individual needs (staying in the U.S.) over the group’s goals (Company U.S.–Company China partnership). In addition, the Head of Engineering’s rejection of joining the Company China for the welfare of the new partnership, reflected a lack of commitment and loyalty to the partnership and therefore questions of sincerity and trust emerged. From a collectivistic perspective, the Head of Engineering should have simply agreed to the request. It is understood in collectivistic cultures that employees will forego their personal needs for the company needs. In addition, the request by a higher status person in the company is not really viewed as a request but rather a directive.

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From an individualistic culture perspective, we may view the Head of Engineering rejection as an acceptable “right” as an individual who is expected to work toward what is best for himself, even at times when it is not to the betterment of the situation. Could this impasse have been avoided? Demonstrating cultural sensitivity about differences and the ability to remain flexible during times when cultural differences emerge may prevent implosion of the negotiation progress. A simple “we will do everything we can to make sure we have a successful partnership” might have saved the negotiation. Power Distance Hofstede discussed power distances as, “the extent to which the less powerful members of institutions and organizations within a country expect and accept that power is distributed unequally” (Hofstede, 1997, p. 28). The status differences within the group affect the communication amongst members. Hofstede (1983) contended that higher level centralization and autocratic power creates a culture where people understand the power structure and are comfortable within the structure to behave according to their level or status. Individuals who are at the higher level of the hierarchy are the decision makers for those at the low hierarchical level. For example, in cultures in which there is a large power distance, such as China or France, subordinates would likely provide information to their supervisor but would not be involved in the decision. That would be the supervisor responsibility. In a culture such as the United States that is egalitarian or small social power distance, the subordinate is likely to have input and discuss a possible decision with the supervisor. Negotiations between large and small power distance teams can be confusing and lead to breakdowns in communication. It is important for negotiators to understand that in large power distance cultures that authority and decision-making is in the hands of the authority; not necessarily the members who are on the negotiation team. The team members may be there to supply the necessary information to the decision maker. Compare that to small power distance cultures, where team members may be active participants in the decision-making process. Determining the power distance is a key first step when one is attempting to persuade the other party in the negotiation process. It would be prudent to find out early in the negotiation the hierarchical system that each culture is abiding by. Neuliep (2012) offers some examples of small and large power distance cultures. He described small power distance cultures such as Austria, Denmark, New Zealand, Ireland, Sweden, Norway, Finland, Switzerland, Great Britain, and Germany. Malaysia Guatemala, Panama, Philippines, Mexico, Venezuela, Ecuador, Indonesia, India and Brazil are examples of large power distance cultures (Neuliep, p. 76).

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Low Context/High Context Communication Cultures also vary in their communication processes. High and low context communication is largely related to individualistic and collectivistic cultures. Individualist cultures tend to be low context cultures such as the U.S., whereas collectivistic cultures such as South Korea tend to communicate from a high context form. Hall, in 1976, described high context messages as finding the meaning of the messages “in the physical context or internalized in the person, while very little is in the coded, explicit, transmitted part of the message” (p. 79). Compare that to low context messages where the information is “vested in the explicit code” (p. 70). Individualistic cultures pay attention to the communication content (the content meaning of the message), whereas collectivistic cultures pay attention to the setting, the nonverbal communication, how something was said (the relational part of a message) and the power distances between the communicators. Individualistic cultures value written contracts that are detailed with defined dates, commitments, and legal liability if the contract is broken. Collectivistic companies often view contracts as an intent to behave, or commitment but with an understanding that life sometimes gets in the way and therefore there is flexibility embedded in the contract although this is not explicitly stated. The role of silence is interpreted differently in different cultures. Silence is associated with virtue and wisdom in high context cultures. However, in low context cultures it is associated with anger or low competence or sometimes agreement. In low context cultures many individuals assume that if one remains silent when a proposal is offered, it is a sign of acceptance. In high context cultures such as Japan, silence may mean disagreement because it would be rude to verbally reject another’s offer. Silence can act as a facesaving tactic in collectivistic cultures. If there is confusion about the silence during a negotiation it is prudent to ask follow up questions to ascertain the intentions of the other party. Silence is not easy to interpret even within one’s culture. It is best to seek out confirmation of your perception of silence to avoid miscommunication. Clarity is key. So, what should we consider when negotiations are between low context communicating cultures and high context communicating cultures? First, we must understand where the meaning of message lies and study the cultural influences that help us unlock the intention of the messages. To understand high context cultures’ communication processes it is best to review the cultural variability in language. For example, Haru Yamada (1997) points out in his book Different Games Different Rules, that “American English and Japanese encode time differently: English verbs divide time into three, past, present and future, but Japanese verbs divide time into two, past and ongoing present, because Japanese verbs do not distinguish between the present and the future” (1997, 27–28). Yamada offers an example of a potential conflict emerging as a result of this difference. The story goes something like this. A Japanese company middle manager writes to an

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American senior Vice president regarding their joint venture firm. In his email he uses the clause “This [figure] meets our target as agreed in our 1994 contract”. The American is very upset by this statement because he had just met with the Japanese company about the problem of them not meeting the projected figures at their current trend. So, the American saw this statement as someone trying to “pull a fast one over on him”. However, the American’s assistant was Japanese, he could clarify what the statement meant. The assistant pointed out that Japanese people may write future events in the present tense i.e.—“this meets the requirement” instead of “this will meet the requirement”. The Japanese see meets and will meet as interchangeable. This situation was deescalated once the American gained an understanding of the cultural difference in meaning (Yamada, p. 27). The nuances of language and sentence structure is often an overlooked phenomenon. One way that companies can avoid the unnecessary pitfalls of communication is to have input from someone who shares the culture of the other party, especially during the deal-making process.

Cultural Intelligence As the world moves toward a predominantly international marketplace the need for individuals to understand and participate in international settings is a necessity not a luxury. Negotiations require a level of intercultural intellect to succeed in the global economy. The importance of cultural intelligence is now and will continue to be essential to achieve successful intercultural negotiations. Cultural intelligence is a person’s ability to function or adapt successfully to multiple cultural settings (Earley and Ang, 2003). Cultural intelligence is typically discussed as a multidimensional concept made up of four factor concepts: metacognitive CQ, motivational CQ, cognitive CQ, and behavioral CQ (Ang and Van Dyne, 2008). A brief description of each follows. Metacognitive CQ is described by Ang and Van Dyne (2008) as a factor that deals with a person’s level of cultural awareness during intercultural interactions. They describe it as “promoting active thinking about people and situations in different cultural settings, ….it drives individuals to adapt and revise their strategies so that they are more culturally appropriate and more likely to achieve desired outcomes” (p. 5). Mindfulness plays a key role in awareness. Being present without judgment allows negotiators to listen to the other party and be open to possible shared interests. Recently, mindfulness has gained momentum in being recognized by Westerners as an important factor in successful communication. For centuries, many Eastern cultures have embraced the practice of mindfulness as a part of their cognitive processing during conversations. Knowledge of and cognitive adaptability to various society differences allows the negotiator to be flexible and responsive in a manner that strengthens their connection to others. This connection increases a shared level of understanding and hopefully promotes opportunities for common ground at the negotiation table.

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Motivational CQ is the energy and attention given to a cultural situation. Without the desire and action to move the likelihood of successfully communicating with others who are culturally different from us is minimized. It is the drive to understand other cultures and the desire to gain new knowledge that creates the positive force for successful intercultural social interactions. It is important that we realize how stress may affect our motivation. Negotiations that are comprised of parties with highly diverse backgrounds can be difficult and exhausting. Difficult negotiations occur even when parties are from similar backgrounds. In intercultural negotiations, parties are required to listen carefully. Listening and accurately interpreting information requires a great deal of energy. If we are not careful to measure our stress under these conditions our motivational CQ can plummet. Take time to re-energize so you can return to the negotiation setting driven to succeed. Cognitive CQ is reflected in our personal experiences and knowledge gained about other cultures that influence our behaviors and an increase appreciation for cultural differences. The socio-linguistics of other cultures help us view the differences and similarities of our global world. As discussed in the previous chapters, the rules of expression are important considerations if we want to reach agreement. Cultural knowledge includes not only historical knowledge, but also political, economic, legal systems, values, and customs as well as the arts. This information is essential for meaningful communication. Cultures direct us where to look to find the richness of our words and actions. Remember, the meaning lies often in what is not said. Behavioral CQ is the appropriate interaction utilizing both verbal and nonverbal messages in intercultural settings. Behavioral CQ is especially relevant to negotiation failure or success. Intercultural communication competency (Gudykunst, 2004; Landis, Bennett, and Bennett, 2004) is reflected in an individual’s behavioral CQ and is an essential aspect of negotiation failure or success. Intercultural communication competency can be described as our ability to communicate appropriately (meeting expectation of social rules and expectations) and effectively (achieving the goal or intended outcome of the message). If negotiators are intercultural communication incompetent the negotiation process can become a cultural minefield for navigating a meaningful conversation with others who are culturally different. The appropriateness and effectiveness of our messages reflect our level of competency in communicating with others. The appropriateness of our messages is elementary to the foundation of intercultural communication. Cultural norms and rules define what we view as appropriate message selection. How something is said, when it is said, and linguistic choices we make to create messages, are part of the constraints in message choice. Culture gives us the framework for constructing symbols and meanings to communicate and connect with those around us. As Parks (1985, p. 197) pointed out,

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Culture: Behaviour, Beliefs, and Breakdowns Competent communicators have a vested interest in maintaining the rules of social conduct because they realize, however dimly, that their ability to pursue their own goals depends on the freedom of others to pursue their goals. Personal control, then, is more often an ally of social appropriateness than its enemy.

Effectiveness is defined by Spitzberg and Cupach (1989) as “successful goal achievement or accomplishment” (p. 7). In business negotiations we want to maximize our potential gains while minimizing our losses. Selecting tactics and strategies during the negotiation process requires an understanding of choices that will aid in reaching our goals. One of the issues intercultural business negotiators face is identifying strategies and tactics that may be culturally sensitive. Evaluating the best strategy or tactic for our desired goal is always influenced by the cultural variability of the negotiators’ culture. Kim and Wilson (1994) stated, “Different cultural groups have drastically different ideas about what constitutes an effective strategy” (p. 229). We should not assume that what is an effective strategy in our own society will be as effective or appropriate in another. For example, in highly masculine, individualistic, low context cultures, negotiators often choose a competitive strategy to effectively meet their goal. This same competitive strategy would be considered highly ineffective in a feminine, collectivistic high context culture. Part of our success or failure in intercultural social interactions is our adaptability to the “cultural variabilities” (Gudykunst, 2004) of various cultures. Communication is the framework for connecting with others and establishing a process for reaching an agreement. Marcel Pikhart (2012) reported the “Intercultural company communication strongly affects levels of company efficiency in the global market” (p. 327). Intercultural communication competency is high when one can encode and decode messages held by the other party’s schemata system. Companies benefit from intercultural communication competent employees. Not only are such companies more efficient in the global marketplace but they are more productive inhouse. Chaisrakeo and Speece (2004) found in their study of salespeople’s negotiation styles and culture that these are influential factors. Intercultural communication competency is an “essential factor affecting sales negotiation style….People who are good at communicating interculturally have high cultural awareness and sensitivity, and learn how to act effectively when in contact with a new cultural environment” (p. 281). Intercultural communication competence is critical to the outcome of reaching agreement in a global economy.

The Third Culture Third cultures emerge when individuals are willing to communicate with others who are different from themselves and are open to new meanings

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(Broom, 1991). Intercultural communication experiences are an opportunity for two individuals from different backgrounds to construct an interdependent meaning that is the product of their successful communication. The presence of a third culture exists when persons engage in culture that transcends the culture of the individuals. Third cultures emerge as a result of individuals from diverse backgrounds sharing their own perspective, who are also willing to adapt that perspective because of the interaction. It is not giving up on your culture of origin but rather a recognition and acceptance that there are many different perspectives and world views for us to embrace beyond our past experiences. The third culture is a bridge building opportunity for societies to come together, creating a shared world view. The global citizen phenomenon is here and holds great potential for successful negotiations. How can we increase our chances for agreement in the international marketplace? The “third culture kids” may be an untapped source for enhancing our success at the negotiating table. Third-culture kids (TCK) is a term that can be traced back to Ruth Useem’s 1950s work as a sociologist. She found that children who had accompanied their parents to a foreign country for a significant portion of their developmental years were different. The combination of exposure to other cultures during a stage of development such as in the adolescence years created an environment for this group of children to be influenced by the cultural norms of both cultures (parents and exposed foreign culture) making their reference framework reflective of both their cultures. Third culture kids (adolescents) tend to be less attached to any specific culture (Useem, 2001). Selmer and Lam’s article “Thirdculture kids: Future business expatriates?” reported, “TCKs tend to show a general consideration for the surroundings and people outside of their own personal social circle” (p. 433). Feeling a sense of belonging to the world, openness to cultures and new ways of thinking, tolerance for different people, and tolerance for others are often characteristics of TCKs (Selmer and Lam, 2004; Sutherland, 2000; Useem, 2001). These distinct characteristics are consistent with what is considered primary indicators of cultural intelligence. If we look back at our discussion on cultural intelligence and intercultural communication competency, we can see the expertise that TCKs may inherently possess because of their experience. Selmer and Lam propose that “former TCKs are a recruitment source to internationalizing firms for business expatriate candidates with considerable potential for successful international careers for international mobility” (p. 441). TCKs may offer a bridge builder for embracing cultural differences as we move toward a global market. A Story of Technology and Culture Identity Although the dimensions discussed so far in this chapter are helpful in comparing cultures, the pace of the global market and the influence of technological advancements are changing the rate of cultural change. The

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following is an example of how international companies are influenced by culture and how they are changing cultural norms at a fast pace. A Wall Street Journal article titled “Amazon reinvents itself for booming rural India” by Eric Bellman (2018) offers an example of how culture and technology intersect and require flexibility for international market growth. Companies that originate in a high technology culture are often not prepared for entering new markets that may not share the same technological approach for sales transactions. Amazon faced major cultural challenges in India. Amazon had to integrate a business model that adjusts the process of e-commerce in its home culture (U.S.) to a system that worked within the boundaries of the host culture (India). Bellman explains the issue Amazon.com Inc. is facing in order to tap into India’s rural shoppers which is estimated at more than $400 billion in sales. Many Indians who live outside of cities do not have access to smartphones or clearly marked addresses for delivery. Many also lack credit card or debit cards for payment. These cultural realities presented Amazon with a need to develop a system that reaches these small towns such as Jorhat in Assam. Amazon has set up learning centers, local delivery businesses and payment plans where customers may pay in cash and refunds can be received electronically to buy online or pay electric bills. Amazon’s adaptation of their e-commerce technology-based business model to accommodate the rural countryside of India reflects how companies are able to react and adjust to cultural difference, and experience success. Amazon as well as other e-commerce companies may face hurdles such as the Confederation of All India Traders as they attempt to restrict foreign retailers from entering the Indian market. Outsider e-commerce organizations such as Amazon need to develop and nurture stronger intercultural relationships with the mom and pop stores to allow for mutually beneficial profits.

References Ang, S. and Van Dyne, L. (2008). Handbook of Cultural Intelligence: Theory, Measurement and Application. London: Routledge. Bellman, E. (2018). Amazon reinvents itself for booming rural India. The Wall Street Journal. December, A 1 and 10. Brett, J. M. (2007). Negotiating Globally: How to Negotiate Deals, Resolve Disputes and Make Decisions Across Cultural Boundaries (2nd edn). San Francisco: Jossey-Bass. Broom, B. J. (1991). Building a shared meaning: Implications of a relational approach to empathy for teaching intercultural communication. Communication Education, 40, 235–249. Chaisrakeo, S. and Speece, M. (2004). Culture, intercultural communication competence, and sales negotiation: A qualitative research approach. Journal of Business & Industrial Marketing, 19(4), 267–282. doi:10.1108/08858620410516745. Earley, C. and Ang, S. (2003). Cultural Intelligence: Individual Interactions Across Cultures. Stanford Business Books, California Press.

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Gudykunst, W.B., Ting-Toomey, S., with Chua, E. (1988). Culture and Interpersonal Communication. Newbury Park, CA: Sage. Gudykunst, W. B. (2004). Bridging Differences: Effective Intergroup Communication (4th edn). Thousand Oaks, CA: Sage. Hall, E. T. (1976). Beyond Culture. Garden City, NY: Doubleday. Hofstede, G. (1980). Culture’s Consequences: International Differences in Work-related Values. Beverly Hills, CA: Sage. Hofstede, G. (1983). National cultures in four dimensions: A research-based theory of cultural differences among nations. International Studieadds of Management and Organization, 12(1–2), 46–74 Hofstede, G. (1997). Cultures and Organizations: Software of the Mind. New York: McGraw-Hill. Kim, M., and Wilson, S. R. (1994). A cross-cultural comparison of implicit theories of requesting. Communication Monographs, 61, 210–235. Landis, D., Bennett, J. M., and Bennett, M.J. (Eds). (2004). Handbook of Intercultural Training (3rd edn). Thousand Oaks, CA: Sage. Meyer, E. (2015). Getting to si, ja, oui, hai, and da. Harvard Business Review, 93(12), 74–80. Neuliep, J. W. (2012). Intercultural Communication: A Contextual Approach. Los Angeles, CA: Sage. Parks, M. R. (1985). Interpersonal communication and the quest for personal competence. In M. L. Knapp and G. R. Miller (Eds), Handbook of Interpersonal Communication (pp. 171–201). Beverly Hills, CA: Sage. Pikhart, M. (2012). Current intercultural management strategies: The role of communication in company efficiency development. In Proceedings of the 8th European Conference on Management, Leadership & Governance, Paphos: Neapolis Univeristy Press. 325–331. Selmer, J. and Lam, H. (2004). Third-culture kids: Future business expatriates? Personnel Review, 33(4), 430–445. Spitzberg, B. H. and Cupach, W. R. (1989). Interpersonal Communication Competence. Beverly Hills, CA: Sage. Sutherland, A. (2000). Are you a global nomad? Available at http://globalnomads.associa tion.com. Triandis, H. (1995). Individualism and Collectivism. Boulder, CO: Westview. Useem, R. H. (2001). TCK “mother” pens history of field. Newslinks: The Newspaper of International School Services. Yamada, H. (1997). Different Games, Different Rules: Why Americans And Japanese Misunderstand Each Other. New York: Oxford University Press.

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Strategies and Other Failed Plans Exploring Strategy and Tactics from an Intercultural Perspective

Background Negotiation research has predominantly focused on examining negotiation process from an integrative versus distributive framework. Integrative negotiation is a collaborative process which is largely made up of cooperative strategies and tactics in attempts to achieve a win-win solution. Integrative negotiation process is also often referred to as “expanded pie negotiation”, “collaborative negotiation”, “principled negotiation” and “win-win negotiation”. The premise of integrative negotiation process is parties working together to reach an acceptable, amicable agreement where both parties maximize their potential gains without harming the other party. Distributive negotiation is as a competitive process where the goal of the parties is too gain as much as possible, resulting in a win-lose outcome. A key factor in determining which negotiation approach and strategies to use is often related to the importance of the substantive goal and the importance of the relationship goal. Clearly, if one’s main concern is achieving their substantive goal with little regard to the relationship, then distributive negotiation process may be preferable. However, if the relationship is important as well as the substantive goals, perhaps because of future negotiation opportunities, then integrative negotiation process may be the preferred choice. The integrative versus distributive negotiation processes framework has provided a foundation for better understanding how specific strategies and tactics play out in negotiation processes. The negotiation literature has relied heavily on the dual concern model of conflict strategies and styles for analyzing the negotiation process. Thomas and Kilmann (1977) presented five styles that have dominated the negotiation and conflict resolution field. Collaborative, compromise, competitive, accommodate, and avoid are the five foundation styles that comprise negotiation tactics. The cluster of tactics creates the negotiation strategy and ultimately may influence style. We can think of negotiation style as a general approach and negotiation strategy as a pattern of focused behaviors. Somewhat confusing for the novice negotiator is that the five conflict styles are also used to describe strategy. Tactics are

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specific behaviors, verbal and nonverbal, used to carry out a strategy. You may think of the relationship of these concepts as: tactics are specific communication messages that are determined by a negotiation strategy which is often selected as a result of a person’s negotiation style. The issue with this framework is that it offers a limited view of the negotiation process, especially in international business negotiations. The complexity in the international business context, especially the cultural factor, plays an important role in negotiation failures. Given that culture is a critical factor in how the negotiation process is conducted, one must consider a more inclusive perspective. Negotiation is a communication process and communications are culturally based. Therefore, viewing the intercultural business negotiation from an Intercultural communication competency approach may prove helpful. This chapter examines international business negotiations from an intercultural communication competency framework. Rudd and Lawson (2007) discussed critical components of intercultural communication competency (ICC) in global business negotiations. Building upon their work, the following discussion presents a negotiation framework based on key intercultural communication competencies. The competencies are mindfulness, empathy, face honoring, appropriateness, effectiveness, knowledge, and adaptation. Strategies and tactics are presented under each of these factors as a context for achieving success or failure in international business negotiations. Examining global business negotiations from an intercultural communication perspective may provide insight into successful strategy selection. A brief review of each ICC factor is discussed followed by strategies and tactics that promote the individual ICC component.

Mindfulness Mindfulness involves being open to new information, allowing for an awareness of the other party’s perspective. Langer (1989) contends that mindfulness involves creating new categories. Negotiators practicing mindfulness can create these new categories or schemata which expand our problem-solving abilities, leading us to ultimately create opportunities for agreement. Being fully present in the moment allows us to focus on the other party’s communication without judgment or evaluation, resulting in an opening for creativity that did not exist. The ability to imagine new solutions and creative, amicable agreements is essential in most negotiations and is especially important in international business negotiations. Perhaps the Chinese word “ting” best describes mindfulness. Ting-Toomey and Kurogi (1998) describe ting as “listening with your ears, eyes and one heart” (p. 204). It is essential that during times of impasse where failure is knocking at our door that we practice mindfulness, creating an opportunity for the integrative process to emerge.

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Mindlessness often has the opposite effect in problem-solving processes such as the negotiation context. Characteristics of mindlessness can be seen when we are thinking or constructing our counter argument to the other party’s proposal while they are explaining it. It is when we tune out what another is saying because we think we already know what they are going to say. Therefore we do not need to engage in active listening. Mindlessness often occurs when you rely on previous scripts that you have used in the past. Scripts cemented in our minds through repetition do not require us to problem solve in the communication. For example, most of us have a script for greetings. In the United States, when someone says hello we do not have to think “oh, what should I say or do”, we have been taught early on to respond by stating “hello” in return. This exchange requires no active problem-solving or creative solution. We passively respond without an actual conscious thought. Scripts are helpful for us to navigate through our everyday interactions and cultural rituals. They allow us to reserve our cognitive energy for solving new or complex problems. We would be exhausted if we had to actively problem solve every interaction we encounter each day. Can you imagine what your life would be like if you had to create a message for every time someone greeted you? The key is knowing when scripts serve us well and when they act as barriers. Intercultural business negotiations are complex and culturally sensitive. This unique context requires us to be present and not rely on the scripted behaviors of the past. Unfortunately, some negotiators develop early learned scripts for negotiating and fail to see the advantage in practicing mindfulness and resist passivity of scripts. Failure can be avoided by practicing mindfulness, especially during complex and difficult negotiations. In addition, being present in intercultural interactions will prevent us from making judgments about the other party’s behavior and allow us to openly observe and listen to others without an ethnocentric ear. Below is a list of tactics reflective of mindfulness behaviors. These tactics can be especially helpful in the intercultural negotiation business context where being present can significantly impact our chances for success. Collaborative-mindset. Collaborative mindset strategies are strategies that are focused on problem-solving. Collaborative mindset includes tactics such as expanded prior joint focus. An emphasis on this tactic is clearly communicating that you view the other party as a partner resolving the issue, not as an opponent. An example of a collaborative mindset tactic is “Let’s find a possible outcome that we both can live with” or “I think we can make this happen if we just put our heads together”. The focus is on the personal pronoun “we”, with an emphasis on problem-solving versus problem-blaming. Open ended questioning. Asking questions that allow the other party to help us understand their interests is a tactic that creates an opportunity for discovering information that we may not be privy to or have even considered. Simply asking, “why” or “how” or “why not” offers a chance to learn

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about the other in more detail. An important part of using the open ended questioning tactic is the ability to listen actively (see Chapter 4) so that we may gain new information as well as measure the importance of the information shared. The significance of the content portion of the message is often reflected in the nonverbal portion of our messages. Remember, emotional leakage often occurs through how something is said rather than what is said. Asking an open-ended question and listening without judgment creates an opportunity to mindfully engage in the negotiation process. Probing. Probing tactics such as, “What if….”, Or “Can you explain further about how your proposal would work” or “Please describe further what you mean by that” are examples of probing for additional information and disclosure by the other party. Probing requires us to listen carefully to responses and be open and present to the response. The suspension of judgment as we listen to the other person’s response creates opportunities for new avenues to open in the problem-solving process. Bridging. Creating new options that meet the needs of each party’s interests allows potential agreement to be reached. Critical for using this tactic is an understanding of the other party’s interests and needs so that one can invent opportunities that address both parties. Silence. Silence is one of the most powerful and ambiguous tactics used in negotiation. The major reason is that silence can be interpreted in a variety of ways. If we are using silence as a tactic for mindfulness moments, then silence is reflecting internally what is happening in the negotiation process. Silence allows time for parties to engage in thoughtful reflection. It also may demonstrate that one is being respectful of what the other party has just said and indicates a respectful tactic that suggests you are giving credibility to the other party’s thoughts, words, proposals etc. Silence can also be used to encourage the other party to continue to talk. This is particularly helpful when you would like the other to expand on their idea or on their concession. Knowing how and when to use silence is culturally sensitive. Hypothetical questioning. Hypothetical questioning tactics may be used to create an image of a bigger picture or possible outcome that is currently not being discussed. This tactic may serve as a visionary prompt to get parties to move toward a resolution that both can commit to. Examples of hypothetical questions are, “What do you think our joint venture would look like if we were able to reach an agreement with blank in mind? Or it may be, “What if we decide not to do X and instead considered Y, how do you think that would address the issues at hand?” Hypothetical questions allow us to frame our issues differently without making a formal proposal. They can provide us with an indication of where there is room for movement in making a possible settlement. Be cautious of how this tactic is framed so that the other party does not view your hypothetical as an offer but rather an exploratory discussion. The focus is on listening to the response with an open mind.

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Active listening. Active listening is being present as the speaker is communicating their thoughts. It is a nonjudgmental act that allows for us to genuinely attempt to understand the other party’s communication without concern for our response or evaluation. Active listening is often confirmed when we respond to another party by paraphrasing or asking for clarification so that we can ensure we have understood the other person’s message. Self-disclosure. Self-disclosure of information regarding your interests can be viewed as a gesture of openness and trust. The disclosure should be limited in magnitude but clearly indicate a gesture for engaging in the problem-solving process. This tactic involves a degree of vulnerability and sensitivity that draws the negotiation parties into an awareness of the present. An example of a self-disclosure can be as simple as, “I am interested in the distribution more so than the price” or “I have only been with the company for a short time and feel a little unsteady about this offer”.

Empathy Empathy is an affect feeling that enhances our connection to another person. Being able to feel empathy in an intercultural setting requires us to cognitively understand the other culture and react empathically to another party who is culturally different from us. Cultural knowledge, motivation to express our feelings, and skills to demonstrate empathy are important components in intercultural negotiation experience. Empathy gives us an opportunity to connect to and demonstrate compassion for another person. Critical to feeling empathy in the intercultural setting is not only having the knowledge of the other’s culture, but more importantly, having the ability to view the other’s experiences through their cultural lens. For example, company A recently hired a new graduate who is a 25-year-old woman from the U.K. She is excited to work at her first professional job as a buyer. She is sent to negotiate with company B. A very experienced, mature 70-year-old Japanese male is willing to meet with her to negotiate a new contract between companies A and B. The British negotiator greets her counterpart with a hug and calls him by his first name. The Japanese negotiator is uncomfortable with this greeting and embarrassed by the lack of respect for his status. Can you empathize with either one of the parties? Maybe you feel embarrassed for the English negotiator’s lack of cultural knowledge, or maybe you empathize with the Japanese feeling of disrespect and face threat. How one shows empathy needs to honor or be framed in the culture of the person you are empathizing with. If you observe this interaction, what are your options to show empathy? As a North American you might be inclined to verbalize your empathic feelings directly to the Japanese negotiator by saying how inappropriate the British negotiator was. If you take this direct approach, you run a high risk of insulting him further. Rather, consider the Japanese culture in how to best show empathy.

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Perhaps you offer a face-saving remark or behavior such as; bow lower when introduced to show status difference, address him by his formal title, or give him the power position seat at the table. Acknowledging the faux pas would only add insult to the face injury. Opening ourselves up to experiences that are different from us can create an affective feeling moment for humans to connect and build relationships that are beyond the substantive issues. It is through empathy that negotiators may give recognition to others and provide a sense of enlightenment that fuels transformative agreements. The inability or unwillingness to show empathy in international business negotiations can be costly, if not devastating to deal making. Some may argue that feelings such as empathy are irrelevant to the negotiation process; rather, it is the substantive issue that counts. There is little support for this when we consider the intercultural variability of expression of emotion. Cultures vary on emotional expressiveness. Latin American cultures are considered more emotionally expressive, whereas, Chinese culture is less expressive. The ability to communicate appropriate empathy with the culture you are interacting with can be a valuable component in relationship building. As we know from our discussion in previous chapters the international negotiation process is inclined to be a long-term relationship building process. Missing the opportunity to demonstrate culturally appropriate empathy can do permanent harm to reaching an agreement. Tactics that Facilitate Empathy Step to Their Side. This tactic is based on Fisher, Ury, and Patton’s (1991) work. They recommend that we do not react to another’s outburst, anger, or attack, but rather listen and attempt to find agreement with the other party. When the other party attacks you, pause and separate the emotion from the content and look past the anger toward areas where common ground exists. Reframing. Reframing occurs when we provide a different perspective on an issue or idea. Often negotiators will reframe an original concept to facilitate a constructive conversation when the parties are stuck, or a misunderstanding has occurred. Reframing is also done to remove or reduce the negative impact of the original message. For example, reframing the statement “you are lying” to “you and I have different cost information” allows the discussion to focus on the costs, not the character of the person. Empathy. Empathic tactics are a genuine demonstration of concern for other’s feelings, conditions or experiences. Putting yourself in the other party’s situation instead of keeping the focus on self can be viewed as an empathic behavior. An example of practicing empathic tactics might be when you realize that the other party is frustrated with the offer you presented and you comment, “I understand your frustration at this point with my offer. I know that when I am frustrated I just need a moment. Would you like to take a break?”

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First Move Concession. The party that is willing to make the first concession as a gesture of trust toward working together can have a significant impact in demonstrating a concern for the other’s position. For example, when parties are at an impasse early in the negotiation, you can offer a concession first as a tactic for trust building. Human Connection. The human connection tactic can be several different gestures or acts of kindness that are related to all of us belonging to humankind. Human connection tactics are tactics that are not related specifically to the negotiation but rather the connectivity of humanity. For example, it can be a simple gesture of helping another person with their coat. It can be offering the other party something to drink or eat. It can be sharing a pencil or a gentle pat on the back at the end of the day. Human connection tactics are simple yet meaningful acts of respect for the other party. Culturally Sensitive Nonverbal Message. Nonverbal messages or behaviors that indicate you are honoring or respecting the traditions, norms, and behaviors of the other party’s culture can also be considered empathic tactics. Do not hold a meeting on Good Friday for Italian Roman Catholics, and you do not talk business at dinner in Mexico. Learn another’s language enough to greet and say thank you.

Face Honoring Face is a positive image or positive social impression we want others to have of us. In international business negotiations face is very much connected to culture. For example, in China there are two types of face, lian and mian. Hu (1944) defined lian as “representing the confidence of society in the integrity of ego’s moral character, the loss of which makes it impossible for him to function properly within the community” (p. 45). Mian or mianzi (image), means the prestige or status one receives for success in life (Hu, 1944; Oetzel et al, 2001). Japanese refer to face as mentsu or taimen. Mentsu refers to social status and success and taimen is one’s self-presentation to others (Morisaki and Gudykunst, 1994). Arab cultures view face as personal dignity and integrity. Like the Chinese and Japanese culture, the Arab culture highly values avoiding situations that may cause embarrassing situations. Face in the U.S. is individualistic, simply a positive impression of self. Goffman (1967, p. 10) argued of face, it is only on loan to him from society; it will be withdrawn unless he conducts himself in a way that is worthy of it. Approved attributes and their relation to face make of each man his own jailer; this is a fundamental social constraint even though each man may like his cell. Goffman’s words remind us that our face is always interrelated to the society or culture in which we live.

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Three specific types of face orientations become relevant to the negotiation process: other face, self-face, and mutual face. Self-face is concern for one’s own image. Other face is concern for the other party’s face, and mutual face is concern for both self and the other party (Ting-Toomey and Kurogi, 1998). Cultures vary on the importance of face orientation. U.S. tends to be self-face focused, whereas many collectivistic cultures such as Japan or Latin America are mutual or other face oriented. Global business negotiations are vulnerable to damaging face communication messages because of these cultural difference in face. Face Threatening Strategies Face threatening strategies are strategies that attack the other party’s image. In negotiation the strategy is implemented during distributive negotiations as a way of offending or discrediting the other party to gain power or dominance. The following are several verbal aggressive messages that are face threatening tactics. Competency attack. These are messages that are focused on the other party’s ability or inability to do something (Rancer and Avtgis, 2006). For example, in international negotiations where one party’s native language is French, and the other party’s native language is Russian, the Russian negotiator comments to the French negotiator, “Your Russian is terrible. Let me talk with someone who can actually speak Russian”. The attack is meant to attack the French negotiator’s competency or skill in speaking Russian, ultimately attempting to make the French negotiator feel inadequate. Character attack. Character attack tactics are designed to attack the other party’s character. This is frequently used to hurt or embarrass the other party. An example of a character attack is “You are a liar and a cheat”. Ridicule. Ridicule messages are words or acts that “evoke condescending laughter directed at another person” (Rancer and Avtgis, 2006, p. 23). In negotiation settings, parties may use ridicule in the form of scoffing or laughing at the other party’s proposal. Profanity. The use of obscenities or vulgarities or epithets are often used to demonstrate anger and intimidate the other party. There is cultural variability regarding what is considered profanity. Shout. Sometimes negotiations raise the speech volume as an aggressive act to intimidate or bully the other party. The acceptability of raising one’s voice is culturally influenced. It is more accepted in cultures that are considered high arousal emotions than cultures that are low arousal emotions (Lim, 2016). Western cultures tend to be more emotionally aroused and expressive, whereas Eastern cultures tend to be lower in arousal emotions and less expressive. Culture influences the level of appropriate expressiveness of emotions. Therefore, this tactic must be interpreted through a cultural lens.

100 Strategies and Other Failed Plans Face Renovation Strategies Face renovation strategies are behaviors or messages that repair damaged face. The self or other face damage has already occurred and the renovation tactics create an opportunity for credibility or trust to be restored. If the restoration is successful, the negotiation can continue without long-term damage Self-face renovation occurs when the individual who has experienced damaged face attempts to repair the damage. An example of this is when the damaged face party seeks to have another person who is highly valued by the other negotiator to speak on his or her behalf. Another example might be when the damaged face individual offers an explanation that deflects from the individual personal characteristics to an explanation based on situational causes. This allows the “blame to be deflected from the face to the situational variable instead. A negotiator lying about the cost of a product who gets caught in the lie might offer a statement such as “What was I thinking, I meant to say ____, it must be the lack of sleep, etc.” Other face renovation tactics could involve another party offering an explanation or justification for the damaged face party. The lying buyer above may be rescued by the opposing party saying something like, “you must be tired.” Face Protection Strategies Face protection strategies are designed to protect self-face or other face from possible damage. Tactics that may facilitate face protection during the negotiation process are listed below.    

Other face protection tactic. A message that is designed to protect or prevent damage to the other party’s face. Face Bolstering. Bolstering the other’s competency or trustworthiness is considered a face protection tactic. Ignoring. This tactic is defined as pretending or not acknowledging the other’s embarrassing behavior or statement. Deflection. Deflection tactic is when one offers a rationale or justification for circumstances that deflect embarrassment or shame away from the other person. For example, you may assume the blame for the other party’s tardiness by saying, “I forgot to tell her to take the A train instead of the C train. This is my fault.”

Adaptation Adaptation can be described as an adjustment or adaptation to an unfamiliar or new situation. In intercultural settings such as international business negotiations, adaptation to another’s culture is essential for understanding

Strategies and Other Failed Plans 101 the other party’s position. Adjusting one’s behavior during international business negotiations requires knowledge of appropriate tactics for reaching agreement within the other’s culture setting. The flexibility of negotiators to communicate in a manner consistent with the other’s culture facilitates possible agreement. Negotiators need to have a diverse repertoire of tactics. Y. Kim’s (2001) work on intercultural communication competency can be applied to the negotiation setting. Adaptation and eventually integration is the process for truly building lasting business relationships. The global market is a long-term relationship context. The time and cost of conducting business internationally require a higher level of knowledge and acceptance than negotiations within culture. The “third culture” negotiator is one who has successfully integrated her identity beyond her culture of origin with other cultures she has experienced. It is not uncommon to have international negotiators who are members of the “third culture” citizen group. The identity shift occurs because of interactions in intercultural situations. Intercultural competence is adapting nonverbal and verbal messages to the appropriate cultural context (Neuliep, 2003). The adaptation in communication behavior allows the negotiators to mutually adapt and move forward. The continued growth in international business creates the opportunity for adaptation to advance to integration phase, ultimately resulting in transformation of how we conduct business in the global marketplace. Several tactics are especially influential in demonstrating adaptation during an international business negotiation. They are listed below. Questioning. Asking open-ended questions leads to better understanding of the intent of another’s message or position. This enables parties to consider new information that they were not privy to before. As a negotiator gains new information utilizing the question tactic, she can change her perspective to accommodate the newly acquired knowledge. Listening. Active listening is an essential tactic for achieving change. Listening as a tactic in negotiation, especially in intercultural negotiations, is an important element in the interaction process for problem-solving. Opting to listen to the other party without judgment, evaluation or interference is one of the most powerful tactics for change. Hypothetical questioning. Although hypothetical questioning is discussed under mindfulness it is also relevant to adaptation when it is used to facilitate movement away from position. Flexibility in creating a joint outcome by asking the other party to respond to an imagined outcome creates possible change in another and serves to promote adaptation.

Effectiveness Effectiveness is defined by Spitzberg and Cupach (1989) as “successful goal achievement or accomplishment” (p. 7). We come to the negotiation table because we want something—a product, a service, or action. We often

102 Strategies and Other Failed Plans negotiate because it is quicker, less costly, and easier than other methods of obtaining what we want. In the negotiation process, we attempt to maximize our gains and minimize our costs of doing business. An important part of effectiveness in Western cultures is efficiency. That is, Westerners want success and want to achieve it quickly. Many nonwestern cultures do not view efficiency as a critical component of effectiveness. This difference between many nonwesterners and Westerners is in part due to a time perspective difference. Polychronic cultures view time in a more abstract manner whereas monochronic cultures view time as linear and incremental measurable units. This difference often emerges when effectiveness is being measured. We might compare this to measuring in inches or liters. Tactics listed below have been divided based upon short-term effectiveness and long-term effectiveness. Short-term effectiveness tactics are used when the negotiator is most interested in achieving her goal even at the expense of long-term relationships or consequences. In addition, shortterm tactics can be used when the party has considerable advantage over the other party and or has a strong BATNA (best alternative to the negotiated agreement). Long-term tactics work best in negotiations where parties are interested in long-term business dealings and have the flexibility to compromise for potential future gains. Of course, there are times when negotiators will fluctuate between short- and long-term tactics because of the fluidity of the intercultural business marketplace. Short-Term Effectiveness Tactics Good cop/bad cop. This tactic is named after an interrogation technique used by police. The use of this tactic in negotiation is that negotiation teams have one member who acts as the “bad cop” who acts tough, uses threats, intimidation, and may engage in verbal attacks as attempts to unnerve the targeted person. This bad guy is then followed by another team member who acts as “good cop”. This person attempts to reason with the other party and offers a quick close or compromise to reach agreement. As Hilty and Carnevale (1993) concluded, the good cop/bad cop tactic can be somewhat translucent, it can lead to concessions and negotiated agreements. An example of this is buying a car. The good cop is the salesperson and the bad cop is the manager. The salesperson states he or she would love to sell you the car for X dollars, but the manager will not agree. Take it or leave it. This tactic is typically used in distributive negotiations as a technique for offering the other party the current offer or reject it and the negotiation is over. This tactic is an “all or nothing” stance for reaching an agreement. If the targeted party’s BATNA is less than the current “take it or leave it” offer the targeted party should take the offer or wait to negotiate until his or her BATNA improves. Bluffing. Bluffing tactic is a deceptive tactic that often takes the form of a threat, exaggeration, or misrepresentation of the truth. The party bluffing

Strategies and Other Failed Plans 103 has no intention to or sometimes no means of follow through on the bluff. Bluffing is often used in poker to mislead the other players regarding the cards they have in their hand. Bluffing in negotiation, especially in international business negotiations can be very risky. Credibility and trust can easily be broken if someone calls your bluff. A breakdown in negotiation over a bluff is costly. An example of a bluff is “If you are not able to agree on the price, I will move on to Company X’s offer instead”. Company X has not offered you a deal. Threats. Threats are aggressive tactics that are explicitly intended to do physical or psychological harm or injury to another party. For example, in negotiations, a party may threaten the other party by stating, “If you do not agree with my terms, I will make sure you never work in the industry again”. Limited authority. The tactic of limited authority is used to indicate that a party does not have the power to make the decision that is currently on the table. Most often limited authority tactics are used to delay or defer the decision without causing damage to the current negotiator. An example of limited authority is when one party states “I do not have the authority to go above 2.5 million on this deal, I will have to talk with the CEO”. Lowball/highball. Lowball/highball tactics occur when a party either offers an absurdly low or high offer that they know they will not be successful in achieving. The intent of this offer is to create question in the other party’s mind about his or her offer. The lowballing or highballing tactic is successful if the other party re-evaluates their own offer and changes it based on this tactic. Split the difference. This tactic is a technique used to quickly reach a deal by offering to split the difference between the two offers on the table. For example, negotiator A offers 20 euros for an apple pie, negotiator B wants to sell the apple for 40 euros. A suggests that they split the difference and settle for 30 euros to close the deal. Ultimatum. This tactic is a demand which is typically backed by a threat if the other party refused to comply with the demand. If the ultimatum is rejected, negotiations are ended. Exploding offer. The exploding offer tactic is described by Robinson (1995) as a tactic that is arbitrarily time sensitive. “This offer is only good through the end of the day” is an example. More often than not the deadline is not real. Long-Term Effectiveness Naming. Naming the tactic or behavior of the negotiating partners is a direct method of moving the negotiation process forward. For example, if you are about the make a concession to the other party you may want to say, “I am going to make a concession on the X issue, here it is….” Labeling or naming the behavior can expedite the process because there is clarity about the actions being taken. You can also name the behavior of the other

104 Strategies and Other Failed Plans person as a method for controlling the process in a productive direction. For example, if the other partner is bluffing and you are aware of the bluff you may want to say, “I think you are bluffing on this condition”. Ping pong concessions. This tactic is based on the reciprocal nature of concession making behavior. One party offers a concession and then waits for the other party to offer a concession of equal value until an agreement is reached. This is sometimes referred to as the step ladder approach. Logrolling tactic. This requires the parties to have more than one issue that they can agree to trade off so that one party attains an outcome for a highly desired issue and the other party achieves the preferred outcome on the second issue. The issues must be of lower significance for one party and highly important for the other party for the logrolling tactic to be successful. The concept is based on the relative value of the trade-offs. I will give you something worth more to you than me and you will do the same. Name dropping. This tactic is used to create a positive association. For example, seller A is negotiating a deal with buyer B and seller A mentions that she is good friends with buyer B’s CEO. This association may influence buyer B’s behavior to act more favorably toward seller A. Disassociation. This tactic is used to differentiate from a lesser valued product or individual in the hope of creating a more valuable stance with the other party. For example, if one is attempting to negotiate the sale of steel and is aware that his competitor is under investigation for defective products, the negotiator can use this information about his competitor and explain how his products are different from these of his competitor. Subject change. Change the subject tactic is helpful when parties are at an impasse about a specific issue or item being negotiated. For example, if neither party is willing or able to concede on an issue, one party may introduce another topic that is part of the negotiation so that parties can continue the negotiation process and return to the impasse item later. This tactic can also be used as a way of distracting the other party away from a potential loss at your end. Agreement in principle. This tactic is often used when parties are unable to reach an acceptable agreement on important issues that threaten a breakdown in the negotiation. Lewicki, Saunders, Barry, and Minton (2004) argue “agreement in principle is desirable when other options are blocked, it still takes a great deal of work to turn such an agreement into one that contains specific details and action proposals” (p. 160). This tactic provides an opportunity to continue the process by first focusing on what parties can agree on before moving to more detailed and often difficult agreement terms. It is listed here as a long-term effectiveness tactic because it facilitates continued dialogue on issues, rather than the costly expense of a breakdown. Summarizing. Summarizing may facilitate movement at impasse moments by bringing attention to the progress of the discussion that has occurred during the negotiation. This tactic is also helpful when many issues have been discussed and summarizing can clarify the direction and issues remaining.

Strategies and Other Failed Plans 105 Slicing. Slicing tactics are messages that address one item at a time before going onto the next issue or item for negotiation. Individualistic cultures view this tactic as an efficient tactic for maintaining movement in the negotiation. This may hold true in individualistic cultures, but tends not to work well in collectivistic cultures. For example, U.S. negotiators assume that once an item has been agreed upon it is no longer on the table. This, however, is not necessarily a shared assumption by many other cultures, such as Japan, China, and Indonesia. The more collectivistic cultures view taking one item at a time as a process for communicating, but not reaching agreement. That is, everything remains on the table until the final agreement is reached. This can be a costly and ineffective tactic if one does not realize the cultural differences. Ask for the sky and settle for the moon. This tactic involves asking for something the other party is highly unlikely to agree to. You know that the other party will reject your request and so you then follow this rejection with a smaller, more reasonable request. The underlying assumption is that individuals do not enjoy saying no and therefore are more likely to give in to the second request to avoid having to say no again.

Conclusion This chapter presents an intercultural communication competency framework for understanding negotiation tactics and strategies in international business negotiations. International business negotiations are an intercultural communication experience. Becoming a skilled negotiator begins with becoming a competent communicator. Five key intercultural communication competencies guided the discussion of negotiation strategy and tactics choice. In addition, the chapter focused on specific tactics that are important in global business deal-making. I urge the reader to consider what it takes to be a successful communicator in the international setting and select tactics and strategies that promote a level of competency that lead to successful negotiated outcomes. In summary, this chapter offers another view of examining the negotiation process through an intercultural communication competency lens in the hope that a better understanding emerges to aid in international business negotiations.

References Fisher, R., Ury, W., and Patton, B. (Eds). (1991). Getting to Yes, Negotiating Agreement Without Giving In (2nd edn). New York: Penguin. Goffman, E. (1967). Interaction Ritual. Garden City, N.Y.: Anchor Books. Hilty, J. A. and Carnevale, P. J. (1993). Black-hat/white-hat strategy in bilateral negotiation. Organizational Behavior and Human Decision Processes, 55, 444–469. Hu, H. C. (1944). The Chinese concepts of “face”. American Anthropologist, 46, 45–64.

106 Strategies and Other Failed Plans Kim, Y. Y. (2001). Becoming Intercultural: An Integrative Theory of Communication and Cross-cultural Adaptation. Thousand Oaks, CA: Sage. Langer, E. (1989). Mindfulness. Reading, MA: Addison-Wesley. Lewicki, R. J., Saunders, D. M., Barry, B., and Minton, J. W. (2004). Essentials of Negotiation (3rd edn). New York: McGraw-Hill. Lim, N. (2016). Cultural differences in emotion: Differences in emotional arousal level between the East and the West. Integrative Medicine Research, 5, 105–109. doi:10.1016/ j.imr.2016.03.004. Morisaki, S. and Gudykunst, W. B. (1994). Face in Japan and the United States. In S. Ting-Toomey (Ed.), The Challenge of Facework: Cross-cultural and Interpersonal Issues (pp. 47–94). Albany: State University of New York. Neuliep, J. W. (2003). Intercultural Communication: A Contextual Approach (2nd edn). Boston: Houghton Miffin. Oetzel, J., Ting-Toomey, S., Masumoto, T., Yokochi, Y., Pan, X., Takai, J., and Wilcox, R. (2001). Face and facework in conflict: A cross-cultural comparison of China, Germany, Japan, and the United States. Communication Monographs, 68(3), 235–258. Rancer, A. S. and Avtgis, T. A. (2006). Argumentative and Aggressive Communication. Thousand Oaks: Sage Publication. Robinson, R. J. (1995). Defusing the exploding offer: The farpoint gambit. Negotiation Journal, 11(3), 277–285. Rudd, J. E. and Lawson, D. R. (2007). Communicating in Global Business Negotiations: A Geocentric Approach. Los Angeles: Sage. Spitzberg, B. H. and Cupach, W. R. (1989). Handbook of Interpersonal Competence Research. New York: Springer-Verlag. Ting-Toomey, S. and Kurogi, A. (1998). Facework, competence in intercultural conflict: An updated face-negotiation theory. International Journal of Intercultural Relations, 22(2), 187–225. Thomas, K. W., and Kilmann, R. H. (1977). Developing a forced-choice measure of conflict-handling behavior. The MODE instrument. Educational and Psychological Measurement, 37, 390–395.

8

Alternative Dispute Resolution (ADR)

Introduction Litigation is generally defined as the filing of a complaint in a court of law and service of that complaint with a summons on the defendant by the court ordering the defendant to answer the complaint. Most companies and individuals involved in international transactions generally have an aversion to litigation due to the uncertainties, costs, delays in business transactions and bad publicity which may result from litigation. Contrary to domestic litigation in U.S. state and federal courts between two American companies, litigation involving international transactions has added uncertainties such as which country’s court system will handle the litigation and which country’s laws shall govern the litigation process and results. Language barriers may also create additional problems for one or more parties. Alternative dispute resolution (ADR) methods are widely utilized when conflict arises in international transactions. The definition of ADR may simply be stated as any method of resolving conflicts or disputes other than litigation in court. There are three major methods utilized for ADR and a couple of others that are not utilized very often. The three most common methods are conciliation, mediation, and arbitration. The other ADR methods used less frequently include the concepts of rent a judge and jury or variations thereof. All these ADR methods are discussed below.

Why ADR? There are two major issues always to be considered when disputes or conflicts arise. One is the substantive issues that have created the conflict. Examples of these are endless. Product and service quality issues may arise. Disputes erupt over increased or changed costs that unexpectedly affect the performance of the contract between buyers and sellers. Missed deadlines and breach of contract as discussed in Contract’s Role in Chaos Prevention (Chapter 5 of this book) are other substantive issues that may crop up in international transactions.

108 Alternative Dispute Resolution The second major issue to be addressed is the relationship between the parties. Although some major corporations may be large enough to be involved in extensive litigation while simultaneously continuing to conduct business with each other, such as Apple and QUALCOMM, most parties involved in litigation will have poisoned the relationship at least in the short term and possibly the long term as well. ADR procedures offer the opportunity to maintain or salvage the relationships which may have future benefits to one or both parties. In addition to the problems with litigation mentioned above, significant legal questions that may not be suited to a simple resolution may arise in international litigation. Jurisdiction of the court is a major issue in many of these disputes. There are two types of jurisdiction of courts. One is jurisdiction over the subject matter of the dispute and the other is whether the court has personal jurisdiction over individuals or companies that are party to the transaction. For example, in U.S. court litigation, the general rule is that the court in which the defendant resides or does business must be the court having jurisdiction over the subject matter and the parties. For example, an Ohio resident is generally not subject to the jurisdiction of a New Mexico Court unless that Ohio resident has been physically present or conducted business or had a residence in the state of New Mexico. A New Mexican plaintiff desiring to file suit against an Ohio resident generally must do it in Ohio. Jurisdiction issues can become extremely complex. There is an entire course in jurisdiction in most law schools where students spend the entire semester just studying this topic. Jurisdiction issues can be simplified with contract provisions where both parties agree to the proper jurisdiction of courts and these agreements are generally legally enforceable in courts in the U.S. and other countries. For example, a contract between a U.S. purchaser and a supplier from South Korea may expressly identify a choice of law and venue provision such as, “The parties to this agreement consent to the jurisdiction of the U.S. state and federal courts in the state of California to resolve all differences that may be subject to litigation. Both the buyer and the seller agree that all litigation that may arise regarding this agreement shall be filed in the Los Angeles County California courts subject to the laws of the State of California, which shall govern any legal dispute”. Venue defines the location of the dispute resolution or litigation and choice of law identifies which laws shall govern that litigation or dispute resolution. ADR methods of conflict resolution are private, which is another major reason ADR is preferred by many involved in international transactions. The very fact that arbitration or mediation or conciliation may be happening can be withheld from the public in most situations. Litigation in court is not subject to those privacy controls. Another major advantage of conciliation and mediation which will be discussed in detail below is that the parties maintain some level of control over the outcome of the dispute. Court litigants have relinquished control

Alternative Dispute Resolution 109 of the outcome to either a judge or jury. There is generally no such thing as an open and shut, or black and white case where one party will clearly win and the other party will clearly lose. The risk of losing is always present in litigation. Arbitration shares this loss of control with court litigation. The reason this chapter progresses from dealing with conciliation, to mediation, and then arbitration is that these ADR methods are on a spectrum of control by the parties going from more control to less as the conflict progresses. See Figure 8.1. Litigation that is not resolved through negotiation usually results in a winner and a loser as decided by the judge or jury. The loser is usually not satisfied with the outcome or the process in these situations and the relationship between the parties will also tend to suffer based on the bad feelings of the loser. To use Fisher and Ury’s terminology, litigation and arbitration result in a win–lose resolution of the conflict most of the time. Fisher, Ury, and Patton (1991). Of course, no system of dispute resolution is perfect, including ADR. One of the biggest concerns is the possible waiver of rights to go to court. Many ADR clauses in contracts require one or both parties to agree never to bring a court case, with arbitration being the sole method of dispute resolution. The courts in the United States treat mandatory arbitration provisions in contracts with express waivers of the right to go to court differently than courts in other countries, which are much more hesitant to allow parties to lose the right to litigation in court. This issue will be thoroughly discussed below in the arbitration section of this chapter. Another downside to ADR is that contrary to U.S. court decisions, as well as those of many other countries, ADR resolutions do not set a precedent for the future that can be relied upon by anyone else or the parties themselves in future transactions. Critics of arbitration frequently allege that the system is fundamentally unfair, especially for consumers and smaller companies who are sometimes required to enter into arbitration agreements whether they desire to or not. Despite the drawbacks, ADR is utilized extensively when conflicts arise in international transactions. We shall address below, in descending order of control, how parties implement the various ADR methods, beginning with conciliation, then mediation and finally arbitration. See Figures 8.1 and 8.2. Low

Arbitration

High

Mediation

Conciliation

Litigation

Figure 8.1 The Parties’ Level of Control over Dispute Outcome (Self-determination)

110 Alternative Dispute Resolution

Conciliation Conciliation seems at times to be the forgotten child of ADM. Many textbooks skip over it completely or only give a passing reference to conciliation. However, parties involved in international transactions utilize conciliation frequently. Conciliation is a valuable tool that every negotiator should look at first and foremost as a preferred option to resolve conflicts. The Merriam-Webster law dictionary defines conciliation as “The settlement of a dispute by mutual and friendly agreement with a view to avoiding litigation”. Unlike mediation and arbitration, conciliation does not require a third-party intervention. Conciliation should be the first step in attempts by everyone to resolve conflict. Conciliation is simply good faith negotiations by the parties themselves to avoid the need for third-party intervention. Many domestic and international contracts contain a legally binding commitment by both parties to engage in conciliation prior to mediation, arbitration, or litigation. Many of these contracts do not utilize the term “conciliation”. A typical contract clause calling for good faith negotiations to resolve conflict (conciliation) may be something like this. In the event of a conflict between the parties to this agreement, all parties agree to engage in good faith settlement communications at the level of manager or director of each company, respectively, to try to resolve the conflict. In the event that the managers and directors are unable to resolve the conflict, both parties hereby agree that corporate officers at the level of vice president or above shall communicate promptly with each other in good faith to attempt to resolve problems before any additional conflict resolution processes or procedures are implemented, such as mediation, arbitration, or litigation. The goal of such a commitment is obviously to maintain control by the parties to the agreement in finding a solution to the dispute themselves before any third parties become involved. This contract commitment to engage in conciliation is a valuable tool in helping the parties resolve conflicts quickly and privately to prevent escalation of the disagreements. Most parties involved in international transactions will look to the tool of conciliation before escalating conflict, whether or not there is a conciliation clause in the agreement. One of the main reasons to include this commitment in the written agreement is to ensure that, especially in large organizations, the left hand knows what the right hand is doing regarding this particular transaction or series of transactions. Corporate officers at the level of vice president or above generally have unlimited authority and power to make amendments to existing agreements or take action to resolve conflict immediately. This makes sense from a business as well as legal standpoint. The higher-level executives may have big picture information that the lower level people do not in resolving disagreements with their trading partners.

Alternative Dispute Resolution 111 Although some third-party involvement has been labeled conciliation, Moore (2003), most view third-party intervention in conflict resolution as involving mediation or arbitration, both of which are discussed in detail below. Conciliation is recommended in virtually every situation and transaction in the international realm. Regardless of whether a contract clause requires conciliation, common sense dictates this should be the first step to avoid litigation and even perhaps third-party interventions involving mediation or arbitration. Conciliation is the method of conflict resolution most likely to result in mutually acceptable substantive solutions to the problems at hand. Conciliation also is the best tool to enhance the relationship of the parties in the quickest and most cost-effective manner. Conciliation reinforces the parties’ rights to control their own destiny with possible outcomes they may freely accept or reject.

Mediation Mediation is a method of dispute resolution utilized in situations from schoolchildren in their schools to international transactions and negotiations involving war and peace and everything in between. Mediation of international disputes of all kinds has proliferated in recent decades. As illustrated in Figure 8.2, a mediator has no decision-making authority. Judges and juries have full decision-making authority, only exceeded by arbitrators because arbitrators are not subject in most situations to appeal or review of their final decisions. Arbitration is discussed in more detail below. The goal of a mediator is to assist the disputing parties in finding solutions themselves to resolve their substantive conflict, or in some instances to assist the disputing parties in resolving their relationship issues. Voluntary Process Mediation is a voluntary process. Absent a contractual commitment to engage in mediation, if either side rejects entreaties to mediate, no mediation will occur. The parties have control over the contract terms and conditions they ultimately agreed to; therefore, even contractual obligations to mediate are freely made or rejected. Examples of mediation being a purely voluntary process abound in domestic situations. Individuals who have filed a complaint with the U.S. Low

Conciliation

High

Mediation

Judge/Jury

Figure 8.2 Decision-Making Authority of Third Parties

Arbitrator

112 Alternative Dispute Resolution Equal Employment Opportunity Commission (EEOC) alleging illegal discrimination based on race or religion or age or disability have the opportunity to engage in mediation if the employer agrees. The EEOC itself provides the mediator. However, frequently one or both parties reject the offer of mediation in which case the process is not utilized. Mediation is also utilized in state and federal court civil cases, family law courts, labor disputes involving unions, in addition to schools and neighborhood groups. There are some mediation organizations dedicated to local conflicts, such as the Cleveland Mediation Center in Cleveland, Ohio. This well-established, long-standing organization assists with mediation efforts to resolve conflicts between friends, family, neighbors and anyone else who will freely submit to entering into the mediation process. Look for a local organization in your city or town if you have conflict that may be capable of resolution through third-party mediation. Focus on the Mediator The mediator plays a vital role in the success or failure of the mediation process. Mediators should be fair, independent, unbiased and have no interest in the outcome of the mediation. Ethical standards for mediation are very stringent. Many domestic U.S. courts have formal mediation programs to refer litigants in civil litigation. Family law courts also use extensive networks of mediators to streamline and minimize litigation costs for disputing couples. Many courts have formal programs for mediation and also for arbitration programs once court cases are filed. Most arbitrators in such processes are attorneys or retired attorneys or judges or retired judges. However, other individuals with different types of education and experience may play the role of mediators as well. Technical disputes may merit a mediator who is an engineer or has specific training and experience and expertise in a particular type of construction in construction disputes. Anyone can act as a mediator. You may recognize one or more mediators in your family or one of your friend groups. Grade school and high school mediation programs sometimes employ the students themselves to be third-party mediators to assist other students in attempting to resolve their problems to avoid violence. Mediator Goals Prior to commencement of the mediation process, the mediator should have certain goals. The mediator should attempt to communicate with the parties prior to commencement of the formal mediation process, if that is possible. The initial contact between the mediator and the parties is important to establish a baseline of trust and respect between and among the parties and the mediator. The mediator will decide initial issues such as whether the two parties involved in conflict can sit in the same room

Alternative Dispute Resolution 113 together to discuss the matter with a mediator. If that is not an option due to the poisoned nature of the relationship, the mediator may decide to engage in “shuttle diplomacy” whereby the mediator meets with one party alone and then meets with the other party alone before attempting to have the parties communicate directly face to face. The goal of gaining the trust of both parties is a universal goal of mediators prior to actual commencement of the mediation sessions. This may be accomplished through informal discussions during which the mediator attempts to find common ground with the disputants. Another method is to disclose the education and expertise and experience of the mediator to try to assure the parties of the mediator’s qualifications and experience. The mediator must ensure, to the extent possible, that the mediator has no bias for one party over the other. The mediator will try to ensure that the parties believe that the upcoming mediation process will be a fair procedure. Hopefully, both parties will agree upon completion of the mediation process that the process itself was fair. Parties to mediation who believe the deck is stacked against them may not be willing or able to disclose information pertinent to the resolution of conflict, or may not complete the process. Trust Let us assume you are representing your company in a mediation session. You have had a couple of informal discussions over the phone with the mediator and your impressions of the mediator are generally positive at this point. You show up at the mediation session in the mediator’s office only to find the mediator engaged in conversation with the opposing party. They are both smiling and laughing as you enter the room. The mediator quickly explains to you that she has just discovered that the opposing party representative was born in the same town in Germany as the mediator. How will you react? How should you react? Should you react at all? Trust is a major issue in mediation. Early on, even prior to the commencement of the mediation sessions, the mediator should attempt to accurately determine the trust level between the conflicting parties as well as try to gain the trust of both parties herself. The higher the level of trust between and among the mediator and the parties, the higher the likelihood of success in the mediation process. It is not possible to overestimate the importance of the concept of trust in mediation. A lack of trust or broken trust can be lethal for the mediation effort. Remember, mediation is a voluntary process. Unfortunately, it is not a rare experience for one party in mediation to terminate the mediation process based on a perception of an unfair process or a lack of trust in the mediator and the other party. So, what are the answers to the questions posed above by the German native scenario? Are there any right and wrong answers to those questions?

114 Alternative Dispute Resolution It is suggested that every situation is unique, as is every relationship and therefore, there is no right or wrong answer to the questions of how you should respond or not to the above scenario. However, some suggestions are in order. Two factors concerning the scenario are the pre-existing levels of trust between you and the other party and between you and the mediator. If, prior to walking in on this jolly session, you had a high level of trust in both, that may ameliorate your concern about possible bias by the mediator in favor of your opponent. On the other hand, if you were suspicious of the goodwill and intentions of the mediator prior to this session, that obviously does not bode well for the upcoming mediation session and your comfort level with it. If this scene creates serious doubts and emotions in your mind, it is suggested that those concerns should be addressed immediately either with the mediator in private or then and there in the presence of both the mediator and the opposing party’s representative. You have the option of terminating the negotiation before it even starts and requesting a new mediator. That may be a rational and effective solution to the concerns you have which would appear to be valid. At the other extreme, this common family birthplace between the mediator and the opposing party’s representative may not concern you in the least. It may not even be worth discussing. This could also be a rational and effective approach to the problem. Levels of trust are not constant. They may fluctuate over time during the mediation process. It is not uncommon for one party to be suspicious of the fairness of the mediator repeatedly or consistently during the mediation process. That opinion may be correct as a matter of fact. We all as human beings bring baggage to whatever endeavor we pursue. Judges, jurors, mediators and arbitrators are no exception to this. If a mediator cannot leave his prejudices or biases outside of his service as a mediator, he should not accept the role or should resign that role if necessary. Mechanics of the Mediation The mediator, along with the disputants, must do some rudimentary planning, even for small-scale mediations involving rather simple conflicts. For mediations involving more complex and important issues, obviously more planning will be necessary. Issues such as the date, location and ground rules for the mediation can be of vital importance. In international mediations these issues may be even more critical and difficult and significant. For example, is it feasible to have a mediation where the parties are not in the same room or even in the same country? The use of technology greatly expands the opportunities for mediation processes. Sometimes these issues may be defined in the contract between the parties that forms the basis for the mediation.

Alternative Dispute Resolution 115 There are four basic options for the location of the mediation. One is a neutral location, that is a location other than either party or the mediator’s location. A second is a location at the offices of one of the parties. A third option is the mediator’s facility or location. And finally, of course is the option discussed above relating to virtual video sessions where both parties can be in their home offices. There are pros and cons to each of these possible solutions. Many times, a party or the party’s attorney may desire to conduct the mediation session in their own office i.e. in their home court to obtain home-court advantage. On the other hand, it can serve to improve trust if one of the parties consents to conducting the mediation session in the other party’s offices. A benefit to the visitor who consents to having the mediation session in her opponent’s offices is that any documents which may be available and requested during the session may be obtained directly and immediately rather than later after the mediation session has ended. Other mechanics issues include the room set up and any extra equipment that may be necessary to aid in an efficient operation during the upcoming mediation sessions. Some mediators create a detailed plan for mediation prior to commencement of the mediation sessions. In addition to some of the mechanical issues mentioned above, the detailed planning by the mediator may encompass such issues as who will be involved in the mediation, what witnesses may be necessary or helpful if any, what are the rules or guidelines and how those will be communicated to the parties. Moore (2003). Mediator Tactics and Strategies It may be apparent to the reader that although the mediator has no decision-making authority in regard to the substantive or relationship issues involved, the mediator does have significant impact on the negotiation process and the parties’ involvement in that process. The skill and expertise of the mediator may be a primary factor in determining the success or failure of the mediation process. We will discuss below what a successful mediation process consists of. Of course, the mediator has no direct control over success. There are other variables. This is a discussion of things the mediator can say and do to hopefully contribute to a successful, productive, and efficient mediation. These tactics and strategies may begin in the pre-negotiation planning stages and continue throughout the mediation process itself, right up until the process is concluded. These tactics and strategies are designed to contribute to a fair mediation process as recognized by all the parties, as well as facilitation of a mutual agreement between the parties to resolve their differences and hopefully resurrect or maintain the parties’ relationship.

116 Alternative Dispute Resolution Pre-Negotiation Planning The mediator should plan to interview the parties privately prior to the actual mediation session if the importance and complexity of the substantive disagreement merits that type of preparation. The experienced mediator may have a set procedure he or she follows in virtually all situations. The relevant issues include procedures for conducting the interviews, the method of questioning the parties, identifying critical issues leading to the substantive or relationship conflict, and assessing the truthfulness of the parties, if possible. Procedures for conducting pre-mediation interviews are determined by the mediator. One method that may yield significant information on identifying issues is to ask the parties the same questions while in private sessions with each party. This method may reveal different perspectives that each party has on the nature of the conflict and also highlight areas where there are mutual interests and compatible viewpoints to build on later during the mediation session. Mediators should be adept at asking the proper type of questions depending on the situation and the goal of the mediator. Open-ended questions generally reveal more information than closed questions. Closed questions are cross-examination type questions that attorneys use to attempt to elicit a yes or no response from the witness. Closed questions may be effective for cross-examination by attorneys; but may not be effective as a tool for mediators to use, at least in the beginning of the process. Obviously, if a party is untruthful during the mediation process, it may be necessary for the mediator to engage in closed cross-examination type questions to elicit the truth. Open-ended questions do not call for a yes or no response, but rather encourage the person to explain and elaborate in their answer. Compare these two questions: Did you have a business relationship with Mr. Jones? This is a closed question calling for a yes or no response. The next question is, “Please describe your relationship with Mr. Jones.” The key to eliciting more information is to utilize open-ended questions. This is also less intimidating than asking closed, cross-examination type questions. The main goal of the mediator at this stage of preparing for the mediation session is to get the parties to divulge information to the mediator. Increasing the volume of information divulged by the parties serves many valuable purposes. First, it facilitates development of a rapport between the mediator and the party. As stated above, it allows the mediator to identify the true interests at issue for each party to the mediation. Successfully encouraging the parties to talk will also assist the mediator in determining the parties’ willingness to divulge sensitive information or, alternatively to withhold that information. The willingness or reluctance of a party to divulge information may indicate the method of negotiation the party intends to pursue.

Alternative Dispute Resolution 117 Identifying the parties’ preferred method of negotiation will assist in the mediator’s preparation for the upcoming mediation sessions. A willingness of a party to divulge information in order to facilitate successful problem resolutions in the mediation may indicate that the party is planning to utilize Fisher and Ury’s principled negotiations or interest-based negotiation method of conflict resolution Fisher, Ury, and Patton (1991). Parties who are reluctant to share information may be indicating that they intend to utilize power negotiation methods, commonly called hard bargaining, or positional bargaining, or power negotiation tactics and strategies. The earlier the mediator accurately identifies the negotiation methods of each party, the more effective the mediator’s planning can be for the upcoming sessions. If both parties or all parties involved in the mediation are willing to share information with their opponents and are planning to pursue principled negotiation methods espoused by Fisher and Ury, the mediator can take that information and run with it in planning the sessions. She can capitalize on that shared information and focus on the interests of the parties in attempting to facilitate a win–win resolution of the conflict. If both parties want to engage in hard bargaining as opposed to principle-based negotiations, that information is valuable for the mediator as well. The mediator may experience a difficult time converting all parties or both parties to the principled negotiation method of resolving this situation. The mediator may conclude that it is futile and plan the mediation sessions assuming that both parties will continue to utilize power negotiation or hard bargaining tactics and strategies. Finally, if one party is willing to share information and the other is not, the mediator may undertake tactics and strategies of her own to convince the recalcitrant party to reciprocate and increase sharing of their information to facilitate a successful outcome. Identifying the underlying interests of the parties is a main goal of the mediator. There are three major categories of interests as defined by Fisher, Ury, and Patton (1991). The first is conflicting interests. These are the interests which may be most visible to the parties themselves as well as the mediator. These conflicting interests may be the major reason the parties are in mediation in the first place. The second category of interests are shared interests. These are not apparent to anyone, including the parties themselves sometimes. However, shared interests which are identified can form the basis for successful negotiation strategies and tactics. Shared interests form the basis for conflict resolution. A good mediator will help identify and uncover shared interests that the parties may have and utilize those shared interests as a foundation on which to build. An example of shared interests among groups that may not be readily apparent is the interest that hunters and tree hugging environmentalists have in preserving natural habitats for animals. Perhaps even more important than shared interests is the third category referred to as complementary interests. Complementary interests between the parties may result in concessions that are mutually advantageous to both parties. The concept is that I am willing to give to you something that you

118 Alternative Dispute Resolution place a higher value on than I do in exchange for something that I value more than you do. I was involved in an arbitration involving a homeowner who had filed suit in court against the builder of his new home. The court referred the matter to arbitration. There were structural problems with one of the walls of the home. The homeowner had an expert witness report indicating that to repair the problem would cost more than the price the owners had paid to have the home built less than two years previously. The builder contended that the repair costs would be minimal, only a fraction of what the homeowner believed. Does anyone recognize the complementary interests yet? This case was resolved by the builder repurchasing the house at the same price the owner had paid to build it. This was a win–win situation because the owner was free to go out and buy a new home or build a new home with the money they received from the builder and the builder was able to make the minor repairs and resell the home for more money than he paid for it. The owners thought the house was worthless and the builder placed a high value on the house so it was a natural conclusion to reach that the builder would simply repurchase the house. The activity level of the mediator is a major issue for both the mediator and the parties. As stated above many times, mediators have no decision-making authority. However, the level of persuasion that they utilize may well affect the outcome. This also gets into some ethical issues for the mediators. Let us assume that a party involved in the mediation is lying to the mediator and to the other party, which is of course a common occurrence. What is the mediator to do if she knows for a fact that the party is being untruthful? It is difficult to provide an answer in absolute terms because much would depend upon the details of the situation at the time. However, I would posit that the mediator should address the lies directly with the party, albeit perhaps in private session; not in the presence of the other party. Furthermore, the mediator may need to assume a more aggressive approach with the liar than with the other party. What if the parties in a mediation are willing to reach agreement to resolve the conflict but one party appears to have overwhelming power visà-vis the other party? This scenario creates a very difficult set of questions and circumstances for the mediator. Should the mediator encourage the weaker party to reject the proposed settlement? Or is that beyond the realm of the role of a mediator? These questions go to the very heart of the purpose for mediation in the first place. And here we can address the question, “What is the definition of a successful mediation?” One of the criticisms of mediation is that there is a tendency for mediators to consider the process a failure unless the parties settle their differences on their own with the facilitative help of the mediator. Too much weight is put on the value of reaching a settlement according to some critics Ury (2000). I would agree that defining success in mediation for a particular case should not be based on whether or not the parties reach agreement, but rather whether or not parties reach a wise agreement, as defined by Fisher,

Alternative Dispute Resolution 119 Ury, and Patton, (1991). A wise agreement is a win–win agreement for the parties as well as the public or other communities. A mediation which results in a settlement agreement between parties who have a great disparity in power will likely be advantageous for one and terrible for the other party. Can this properly be categorized as a success? Nevertheless, many believe that if the parties are willing to reach a settlement on their own with little or no input or participation or activity by the mediator, they should be permitted to do so. The argument is that the mediator should not undermine the true intentions of the parties to amicably resolve their differences even though it may be a one-sided resolution. This discussion is contained in the pre-negotiation section of the chapter because early on the mediator may need to determine how active a role she is going to play in the process. Moore (2003) identifies different mediators and their roles as being orchestrators at one end of the spectrum and dealmakers at the other end of the spectrum. Dealmakers are mediators who assume a strong role in effecting the outcome of the negotiation and may be more inclined to rescue or save the weak party from accepting an agreement based on the power difference with the other party. An orchestrator, on the other hand, would be more inclined to let the parties make their own agreement even though there is a power disparity. There are powerful arguments for both sides of this debate about the mediator’s role. We have emphasized that mediation is a voluntary process premised on the concept of a third-party mediator assisting the conflicting parties in reaching a mutually agreeable resolution of their differences on their own. The mediation process itself as defined may be damaged whenever a mediator discourages parties from reaching their own decision rather than supporting that conclusion. After all, the weaker party may indeed know exactly what their situation is and is still willing to make concessions to resolve the problem and move on. Mediators who act as orchestrators may tend to focus on the substantive issues and the resolution thereof. The dealmakers, as depicted in the above example may be more focused on addressing and resolving the relationship issues between the parties rather than being satisfied with the parties’ own resolution of the substantive issues. Moore (2003). Conducting Effective Mediation Sessions The stage is set. Lights! Action! So, if the mediator and the parties followed all the recommendations above, the mediation sessions themselves should be a breeze. Everybody is utilizing good faith, telling the truth, divulging and sharing information and assuming the associated risks in doing so. Everybody trusts the mediator and each other. The mediator is utilizing good communication skills in guiding the parties to a successful resolution of the substantive issues and maintaining or improving the relationship between and among the parties. This should happen, right?

120 Alternative Dispute Resolution Well, despite all the positive steps outlined above there is never a guarantee of a resolution at the end of the tunnel. Let us skip to the end of the mediation process. Possible Mediation Outcomes Yes, the parties may reach a settlement. In the international sphere, and indeed in most situations, the parties should put their new agreement in writing in the form of a contract that is executed by authorized representatives of each company or organization or individual. (Executed means signed.) However, there are many alternative conclusions that the parties may reach. Frequently, in international transactions involving ADR contracts, if mediation fails then the parties are required to move to the next phase of ADR which is arbitration. Arbitration is discussed in detail below. However, suffice it to say right now that arbitration takes the power of decisionmaking away from the parties and puts it in the hands of the arbitrator, so therefore this is an important next step from both a legal, financial, and business standpoint (see Figures 8.1 and 8.2). There may be a mutually acceptable agreement on some issues but not others. This is not uncommon, and the agreed-upon issues again should be put in writing and executed by the parties. The parties may simply agree to disagree and walk away from each other. In some situations, this may be best for both parties. Fisher and Ury’s concept of a wise agreement includes a conclusion of no agreement when that is in the best interest of both parties (Fisher, Ury, and Patton, (1991). International Mediation The International Bar Association, (IBA) headquartered in London, publishes the IBA Rules for Investor–State Mediation. These are voluntary rules for mediation of disputes involving private companies on one hand and a government or state on the other side. The parties may agree to exclude or change any of the rules at any time. The rules require independence and impartiality of the mediator. Article 9 calls for a mediation management conference among the mediator and the parties. The rules are very brief and basic.

Arbitration Arbitration is the most prevalent form of ADR in the U.S. and most likely worldwide. Arbitration’s roots in the U.S. date back to the Federal Arbitration Act of 1925, enacted by the U.S. Congress. In recent times both state and federal courts throughout the United States have issued judicial opinions supporting the legality and enforceability of contracts containing arbitration clauses. Every person reading this book is likely to be a party to an arbitration agreement, whether you know it or not. Arbitration

Alternative Dispute Resolution 121 agreements are everywhere. Many employees are forced to execute arbitration agreements at the risk of losing their jobs. Nevertheless, the courts say those are legally enforceable agreements. If you have a bank loan, or a bank account, or investment accounts, you are party to arbitration agreements. Many purchase agreements for goods, services, and technology contain arbitration agreements. Many major large corporations based in the U.S. resisted utilization of arbitration agreements for a long time, because they feared losing their right to go to court and have their day in court if necessary. Their initial experimentation with arbitration agreements was in dealing with international trading partners, where they viewed the risks of arbitration to be preferable to the risks of having to litigate in foreign courts under foreign laws. That situation has evolved in recent decades. Presently, many of the largest and wealthiest corporations based in the U.S. utilize arbitration agreements in every type of transaction conceivable, whether domestic or international. Basic Overview of Arbitration Arbitration is an ADR process in which a single person or a three-person team serves as arbitrator to make decisions regarding who wins and who loses what between two or more disputing parties. Contrary to mediators, arbitrators have ultimate authority to make decisions. In many ways, arbitrators have even more power than judges in courts because judges are subject to having their decisions appealed by the losing party to a higher court. There used to be two forms of arbitration—binding and nonbinding. Nonbinding arbitration, as defined in a contract between the parties, declared that an arbitrator’s findings and conclusions were not legally binding on the parties. Parties dissatisfied with an arbitrator’s findings could proceed to litigation in court, essentially starting over. However, I have not seen or heard of a nonbinding arbitration agreement for many, many years. Virtually all arbitration agreements now expressly state that they are legally binding and legally enforceable in any court of law. In other words, the vast majority of arbitrator decisions are not subject to appeal to a court or any higher authority. Thus, the power of arbitrators is undeniable. Further details on the finality of arbitrators’ decisions are discussed below. Arbitration agreements can be part of other contracts or standalone contracts. Certain categories of arbitration agreements involving certain types of consumer transactions in some states of the U.S. allow the consumer of the product to rescind or cancel the arbitration agreement if done so within a short period of time, usually 30 days. The reason for this ray of light of consumer protection is based upon the obvious concern that arbitration agreements, when enforced, waive and extinguish the parties’ rights to go to court, which is a powerful legal right in any democracy. In other words, the aggrieved party to a binding arbitration contract has two options; either initiate an arbitration complaint or do nothing.

122 Alternative Dispute Resolution Benefits and Detriments of Arbitration There are many perceived and actual benefits of arbitration as opposed to court litigation. Arbitration is almost always a private process in which only the parties involved are aware of it, except for witnesses who may be called to testify. Arbitration proceedings take place in office buildings rather than court houses. Avoiding the publicity of litigation can be a major benefit to many parties that agree to arbitration. Historically, the costs of arbitration were significantly less than court litigation. However, that cost saving has been shrinking as arbitration proceedings become more formal, albeit private. Some arbitration conflicts may now exceed or match the costs of court litigation. Many large corporations include in their retail or employment arbitration agreements waivers of the right of the other party to join in a class action lawsuit against the corporation or its officers, directors, and representatives. This version of arbitration agreement thus not only waives the right to litigate in court, but also waives the right to join a class action if you are defrauded for small amounts of money. It is virtually impossible to successfully and economically litigate a claim against a large corporation, or anyone for that matter, for any claim less than $10,000 or more. For major corporations, that figure may be 10 times higher. Class actions historically have served the purpose of protecting individual consumers or small companies against major fraud and illegalities perpetrated by larger corporations where the financial damages for each individual victim are small, too small to litigate on a piecemeal basis. Consider Wells Fargo Bank ripping off tens of thousands or even hundreds of thousands of people for only $100 apiece. Do the math. The Wells Fargos of the world can reap millions of dollars of revenue with no costs. Is anyone reading this going to file a lawsuit against Wells Fargo Bank for $100 even assuming it was clearly fraudulent behavior and illegal? The numbers tell it all. The U.S. Supreme Court in the case of Varela v. Lamps Plus, Inc. 587 U.S. ______(2019), held that arbitration clauses which waive the right to join a class action are legally enforceable against groups of employees and consumers, even if the clauses are ambiguous. An earlier U.S. Supreme Court case held that anyone who is subject to an arbitration agreement that is silent on the issue of joining class actions is barred from being a member of a class. The diminution of employee and consumer rights continues unabated. It is difficult to recommend anything other than that people should avoid entering into any arbitration agreement if they have that as an option. Read your purchase agreement for your next car which may contain an arbitration clause regarding claims against the manufacturer if the car turns out to be a defective lemon. If you have the right to opt out of the arbitration agreement you should do so. Another benefit of arbitration is the speed of decision-making compared to court litigation. Many court cases last multiple years. Private arbitration

Alternative Dispute Resolution 123 proceedings, by contrast, can be completed in much less time, although this advantage has been shrinking over time as well as the cost advantage. Many arbitration proceedings between and among major corporations not only take more time than they used to, but also have high costs. Some of the detriments of arbitration in addition to those noted above for consumers and employees include losing the constitutional right to go to court, the right to discuss the pending arbitration proceeding with the press, and the right of appeal. A major problem with arbitration is that arbitrators, most of whom are attorneys, have subtle but clear pressure and economic incentives to rule in favor of companies that may have another arbitration dispute next month or next year on which the attorney might serve as arbitrator. Arbitrators are usually selected upon joint agreement of the parties. In contracts calling for a team of three arbitrators the selection process is a little more complex, but generally requires the approval of both parties on the identification and selection of the arbitrator. An attorney who rendered a decision against a company six months ago in a prior arbitration proceeding most likely will not be approved by that company now to serve as an arbitrator in a new dispute. This negative aspect of arbitration is not widely recognized or discussed. When serving as an arbitrator for the American Arbitration Association I experienced this first hand. This problem is not created by the American Arbitration Association or any other organization providing arbitration services. It is a systemic problem with the arbitration system. One inescapable consequence of arbitration is that decisions do not set a precedent for future parties or situations. Written opinions by judges in court set a precedent for future cases in our legal system. This cannot happen in arbitration proceedings because they are private and not published. Moreover, most arbitration agreements prohibit the parties from publicizing their dispute. Undoubtedly, large companies may view this as a positive benefit of arbitration, whereas consumers and employees likely view it as a huge problem and no benefit at all to them. The net effect of this prevalence of arbitration agreements is that fewer court cases are brought against large companies by consumers. One might respond by saying, “Well certainly there has been an increase in arbitration complaints brought against these large companies by consumers.” However logical, that is not correct. The practical effect of these mandatory arbitration clauses is that most consumers who may have otherwise valid claims against major corporations do not do anything to assert their rights in any forum. Another major detriment to arbitration previously discussed includes the loss of control of both parties. The outcome of any arbitration is decided by an arbitrator, not the parties to the proceeding. Please see Figures 8.1 and 8.2 which indicate that arbitrators have more power than judges and the parties have fewer rights and alternatives under mandatory arbitration agreements.

124 Alternative Dispute Resolution Finality of Arbitration Decisions The finality of arbitration decisions has been emphasized above, in the discussions regarding the lack of appeal rights. Under U.S. law, the long-held standard is that the only right of appeal for binding arbitration decisions is to successfully attack the arbitrator himself and successfully allege and prove that the arbitrator committed fraud or otherwise committed egregious ethical violations. Needless to say, the number of arbitration decisions that have been reversed or successfully appealed with this standard are practically nonexistent. If you lose an arbitration and subsequently discover that the arbitrator who ruled against you is the brother-in-law of the opposing party, that is a sound basis for challenging and appealing the decision of the unethical arbitrator. Further discussion of this topic is found below under the International Arbitration section of this chapter. The Tale of the Engineer/Arbitrator Many years ago when I was a rookie attorney, I represented a company in an arbitration proceeding, my first such endeavor. The subject matter of the arbitration involved alleged defective construction of a building. Arbitrators do not have to be attorneys. Anyone can be an arbitrator so long as the parties involved in the case approve of that individual. The rookie attorney was up against an experienced attorney on the other side. Both attorneys agreed to consent to an engineer to be the arbitrator. This made sense at the time because the dispute involved rather technical structural and engineering issues. The arbitration meeting was a disaster for the rookie attorney and his client. The experienced opposing party attorney was rude, crude, and socially unacceptable. He interrupted almost every sentence the rookie attorney attempted to complete. He interrupted the rookie attorney’s witnesses, supplied his own witnesses with answers to his questions before asking them and generally dominated the session. The rookie attorney, being a rookie, made some feeble objections and repeatedly requested the engineer/arbitrator order the other attorney to stop this nonsense, but the engineer/arbitrator never did so. Clearly, the engineer/arbitrator did not have the knowledge, experience or training to recognize what was happening and to control it or correct it. He lost control of the session. The lesson taken away by the rookie attorney was to be extremely wary of selecting or consenting to arbitrators who are not attorneys. Despite the bad raps that attorneys receive in general, no attorney would have permitted the outrageous actions that the opposing counsel got away with in that session. International Arbitration The International Bar Association based in London has an Arbitration Committee which has over 2,300 members from over 90 countries and

Alternative Dispute Resolution 125 membership is increasing steadily. The committee, through its publications and conferences seeks to share information about international arbitration, promote its use and improve its effectiveness. The Arbitration Committee has four subcommittees, including the Rules of Evidence subcommittee, the Investment Treaty Arbitration subcommittee, the Conflicts of Interest subcommittee, and the Recognition and Enforcement of Arbitral Award subcommittee. In addition, the Arbitration Committee has two task forces, one addressing attorney ethics in arbitration and the other entitled the Task Force on Arbitration Agreements. The International Bar Association has also published Guidelines on Party Representation in International Arbitration (IBA 2013) and Guidelines on Conflicts of Interest in International Arbitration (IBA, 2015). There are two categories of arbitrations in the international sphere. One is commercial arbitration which is generally comprised of disputes between private companies over commercial trade transactions or technology transfer disputes. The second type of international arbitration is investor–state arbitrations. These entail conflicts between a private company and a state or a government entity. For example, when Germany made a conscious decision to scale back its nuclear power program, at least one private company from another country initiated investor–state arbitration against the state of Germany for its lost investment. These two types of international arbitration proceedings have different issues which are discussed in greater detail below. There are also different approaches for enforceability or a court’s right to set aside or annul an arbitrator’s decision in the international arena compared to the straightforward policy of recent years by U.S. courts as illustrated above. There are two alternative approaches to initiating and conducting international arbitrations. One is to work through an existing institution which provides arbitration services and rules and guidelines. The other is referred to as ad hoc arbitration where the parties simply agree on identification and selection of a mediator and proceed ad hoc without the structure of any third-party institution. These issues are discussed below. Commercial Arbitration Versus Investor–State Arbitration In the provocative article entitled “Arbitration in a post–truth world: Perception v. reality”, Nedden and de Jong (2018) bemoan the public’s negative attitude toward arbitration and the public’s questions concerning arbitration’s validity and legitimacy. The authors state, “In essence, post-truth seems to encompass the widespread practice of accepting conclusions founded on unsubstantiated claims, cherry picked data and superficial analysis—conclusions that are, at the very least, indifferent to the truth, and which are sold to the wider public through appeals to emotion”. Nedden and de Jong (2018), p. 166. The authors explore whether arbitration as a tool for conflict resolution may be caught up in the post-truth world in which we live.

126 Alternative Dispute Resolution Nedden and de Jong, (2018) admit that they are involved in arbitration as professionals and supporters of arbitration processes and procedures. A major complaint of people who do not trust arbitration is that it is private and hidden from public view. This is one of the benefits for many private companies involved in arbitration and a major reason why arbitration is favored by many companies over litigation in court which is public in most countries. The authors allege that many of the detractors of arbitration are part of the anti-globalization movement and do not have their facts straight. The authors call on professional members of the arbitration community to help defend arbitration as valid and legitimate. Nedden and de Jong (2018) cite statistics indicating that 36 percent of concluded state-investor arbitration cases in 2015 were decided in favor of the state while 26 per cent were decided in favor of the investor. This is an attempt to counter the alleged favor arbitration provides to private companies as opposed to governments. The authors also point out that steps are being taken to publicize more investor–state arbitration information and suggest that privacy is a major necessity and component of commercial arbitration, whereas privacy may not be a necessity in investor–state arbitrations. Nedden and de Jong (2018). The authors correctly point out that transparency in investor–state arbitrations should be improved, but that privacy in commercial arbitration between two companies should be maintained and continued. Nedden and de Jong (2018) also point out that commercial arbitration is growing worldwide and that many courts around the world are moving into the international arbitration arena, including the Netherlands, Singapore, Dubai, and the Paris Court of Appeal. Please see below for other institutions providing arbitration services and support. Ad Hoc Versus Institutional Arbitration As mentioned above, there are two options available to disputants in international arbitration. One is to simply hire an individual or a team of individuals to serve as arbitrators and essentially work with the arbitrator to create the policies and procedures to be followed for this particular arbitration proceeding. This is referred to as ad hoc arbitration. The other category of arbitration is institutional arbitration, in which the parties work through an existing institution that provides arbitration services, policies, rules, and regulations, as well as the arbitrators themselves. Examples of these organizations include the International Chamber of Commerce (ICC), Rules of Arbitration International Centre for Dispute Resolution, the London Court of International Arbitration, the American Arbitration Association (AAA), The Hague, and the Hong Kong International Arbitration Center.

Alternative Dispute Resolution 127 Court Review of Arbitration Decisions There are two major types of issues involving courts that may arise after arbitrators render a decision. One scenario is the prevailing party in the arbitration may file a case in a court to request the court to issue an order of judgment to enforce the results of the arbitration tribunal. The other scenario involves the loser of the arbitration filing a court case against the prevailing party requesting the court to vacate or annul the arbitration decision. As mentioned repeatedly above, the general rule is that arbitration decisions are legally binding and not subject to appeal. However, in the international arena other countries’ courts are very reluctant to enforce contract provisions that waive a party’s right to file an appeal following an arbitrator’s decision. It appears that other countries’ legal systems are more concerned about the loss of the parties’ rights to enter the court system than our current American courts. Many countries refuse to enforce the contractual provisions waiving rights to appeal to court. Courts are particularly skeptical of waivers of the parties’ rights to seek annulment of an arbitrator’s decision or to otherwise set aside the arbitrator’s decision. For an excellent in-depth article addressing this topic worldwide see Bratic, (2018), who concludes that in some circumstances parties should be permitted to opt out of the setaside waivers post arbitration. Ethics and Conflicts of Interest The International Bar Association in London has an abundance of information regarding international arbitration, including, “Guidelines on Conflict of Interest in International Arbitration”, published October 23, 2014 and updated August 10, 2015. This publication sets out a rather elaborate set of guidelines to ensure to the greatest extent possible that arbitrators who have even a potential conflict of interest are required to disclose that possible conflict of interest to the parties and let the parties decide whether or not they want to have the arbitrator serve or continue to serve in the matter. The guidelines have a color-coded array of detailed situations to guide the arbitrators and parties to the dispute. The two key issues regarding arbitrator conflicts of interest are whether the arbitrator must disclose potential conflicts and whether the arbitrator may participate at all. The green list is a non-exhaustive list of specific situations where no appearance and no actual conflict of interest exists from an objective point of view; thus, the arbitrator has no duty to disclose situations falling within the green list. The orange list is a non-exhaustive list of specific situations that, depending on the facts of a given case, may, in the eyes of the parties, give rise to doubts as to the arbitrator’s impartiality or independence. The orange list thus reflects situations that require the arbitrator to disclose such situations and let the parties decide whether there is a conflict or not.

128 Alternative Dispute Resolution There is also a red list of situations and the red list consists of two parts. A non-waivable red list situation forbids the individual from serving as an arbitrator due to obvious conflicts of interest. A waivable red list situation requires the proposed or actual arbitrator to disclose the situation to the parties and requires the parties to waive their rights to object to the arbitrator’s service in writing before the arbitrator may proceed.

Mini-Trials and Rent-a-Judge The final ADR category is rarely used and only by large organizations, because the costs are high. For very important potential or actual conflicts, that may have serious repercussions for the company or organization, it may be worthwhile to hire a retired judge and conduct an in-house trial. This is not ADR, technically, because the other party is not involved. This “minitrial” is to help the company decide whether to proceed with, and if so how far to take the dispute. If the mini-trial indicates the company has a strong position, the company may be more aggressive in pursuing the matter. The inverse is true if they “lose” in the mini-trial.

References Bratic, C. (2018). “The parties hereby waive all recourse…but not that one”. Why parties adopt exclusion agreements and why courts hesitate to enforce them. Dispute Resolution International, 12(2), October, 106–116. Fisher, R., Ury, W. and Patton, B. (Eds). (1991). Getting to Yes, Negotiating Agreement Without Giving In (2nd edn). New York: Penguin. IBA (2015). Guidelines on Conflicts of Interest in International Arbitration. London: International Bar Association. IBA (2013). Guidelines on Party Representation in International Arbitration. London: International Bar Association. IBA (2012). Rules for Investor-State Mediation. London: International Bar Association. Moore, C. W. (2003). The Mediation Process. San Francisco: Jossey-Bass. Nedden, J. H. and de Jong, A. (2018). Arbitration in a post-truth world: Perception v reality. Dispute Resolution International, 12(2), October, 166–172. Ury, W. L. (2000). The Third Side. New York: Penguin. Varela v. Lamps Plus, Inc. 587 U.S. ______(2019)

9

OOPS! Opportunity, Outcomes, People, and Success

This book began with an argument for examining negotiation through failures. It is our hope that we have allowed moments for you to reflect on your own journey in searching for a better understanding of the negotiation process—especially in the international business context. Throughout this book we have asked you to consider negotiation from different angles. Our stories, discussions of concepts, applications, and suggestions of possible options to consider when negotiating, are intended to assist those who have found the formulated success equation insufficient. Failures and successes help us define who we are and how we connect with those around us. The negotiation process allows us to reach across the table to those who may be culturally different from us, but similar in our desire to find common ground to work together. Negotiating is part of our ancient history and has allowed cultures to find paths for co-existing. When we fail, we have a unique opportunity to re-examine our behaviors and reflect on the interactions that lead to disagreement. Advancement of technology, shrinking natural resources, and migration of people have increased our exposure to individuals different from ourselves and led to a growth in interdependence of our lives. The negotiation process provides a communication structure for successfully navigating relations with peoples and cultures once considered far away strangers. Business negotiations are a place where we have seen success and learned from failure. International business negotiations have allowed cultures to “dip their toe in the water” safely without giving away one’s cultural identity.

Opportunities Exist when Failures Arise Opportunities are often the options that we fail to recognize in our pursuit of reaching our goals. Negotiations are based on parties pursuing desired outcomes that are dependent on others. Often, people prepare for the negotiation process by defining what they want rather than why they want it. The difference between one’s position (the what) versus the interests (why) is of paramount importance. If the negotiation is collaborative, the interests are shared, and the negotiation becomes a problem-solving process. If, however, the negotiation focuses on the “what” or takes a positional

130 Opportunity, Outcomes, People, and Success stance, the negotiation becomes distributive and maximum gains are often lost (Fisher, Ury, and Patton, 1991). Looking beyond the failed experience into missed opportunities may allow us to find creative moments to achieve an agreement when we thought all was lost. Impasse occurs in the negotiation process when parties have reached a breakdown in options. We can think of it as when there is no room left on the dance floor. In this case the dance floor is cluttered with unsuccessful negotiation offers and counteroffers to the point that the negotiators don’t see any room for advancing the conversation. Parties perceive they have reached their bottom line and may opt to retreat to revisiting their BATNAs (best alternative to the negotiated agreement). At impasse, negotiating parties reassess the negotiation and must determine whether to find a way to continue the negotiation or look toward other options for reaching their goals. The cost of failure to move forward in the negotiation in international negotiations can be exponential. The transactional costs are high (travel, time dedicated to the project, outside consultants, costs for translators, legal). The cost of lost options (companies that one chose not to seek a partnership with) and the negative cost of your reputation associated with a failed outcome (international business community, partners, and competitors) can be significant. If we change our perception of impasse from a failure lens to an opportunity lens we may see new opportunities for success. What if we change our perception of impasse? What if negotiators view impasses as an “opportunity curve”? Opportunity curve is the period when the negotiation transforms from a “science” approach to the “art” form of negotiation. Just because we cannot see the next step does not mean it does not exist. Impasse is real. It is the moment when parties feel they have reached a point in the negotiation process where concessions are exhausted, and no other options are readily available. It is at this exact point where opportunities come to light. Why at impasse? Perhaps when we have diligently followed our negotiation plan, offered moves and countermoves that followed our strategy, and weighed the possible costs of committing beyond our bottom line, we have engaged in the science of negotiation but come up short. It is at this point when the science portion of negotiation has been exhausted; that the “art of negotiation” can emerge. Negotiators often describe a moment in a difficult negotiation where they refer to “following their gut”, or “listening to their intuition” or “experience the ahha moment”. We refer to this experience as the art of negotiation process. The art of negotiation is the creative decision-making process where new creative options come to light that were not previously identified. It often occurs at a time when negotiators are completely present at impasse. Free your mind to think in different creative ways to resolve the situation.

Opportunity, Outcomes, People, and Success 131

Outcome Focus Limits Our Success Much of the negotiation literature has focused on negotiation outcome, particularly successful outcomes. It is interesting that the measurement for success or failure rests with agreement or no agreement as the basis for measurement. In the beginning of this book we urged the reader to view negotiation through a failure lens. If one genuinely wants to improve her chances for success, she must examine the failures before understanding successes. Outcome is the measurement for evaluating the negotiation. The focus on outcome for determining success or failure is a culturally biased framework. This frame is predominantly a Western framework. Cultures that are monochronic, linear decision makers are more likely to view processes like negotiation with a clear beginning and ending, with the emphasis on the ending. The ending is defined and evaluated by outcome or results. Failure occurs when there is no agreement. The contract is not signed, parties walk away from the table, negotiation process breaks off with no intent of continuing and negotiators move on to their BATNA or change directions. Other cultures view the negotiation process as a continual conversation until all parties are satisfied. Some married couples continue talks until resolution is found. Business negotiators sometimes take this approach. Time orientation is polychronic and the decision-making process is circular in nature. This allows for parties to move at a pace that is needed rather than by predetermined time constraints. The circular nature of the decisionmaking process allows for increased free flow of ideas. If one is encouraged to tolerate and participate in a truly open communication process rather than using the response and reaction mode of communicating, the emphasis moves from outcome focused to process focused. That is, negotiation is evaluated on the conversation, not the agreement. By focusing on “the conversation” rather than “the agreement” we can change the meaning of failure and success.

References Fisher, R., Ury, W., and Patton, B. (Eds) (1991). Getting to Yes, Negotiating Agreement Without Giving In (2nd edn). New York: Penguin Books.

Index

3rd culture 88 acceptance 57, 69 accommodate seven, 92 active listening 96 adaptation 100 agency 54, 55 alternative dispute resolution 107, 108, 109 anticipatory repudiation 68 arbitration 108, 109, 120–128 authority 55, 56 avoidance style 100 Barnlund six person communication model 10 BATNA 7, 130 Behavioral CQ 88 breach of contract 64, 68, 72 bridging 97 cognitive CQ 89 collaborative 40 communication competency 40 competitive style 92 compromise style 92 conciliation 109–112 condition 57 consideration 57 contract administration 54, 77 contracts include actions and words 60, 78 counterfeit goods 74 country of origin 74 cultural identity 89 cultural intelligence 86 culture 80, 92 culture and negotiation 92 culture collectivistic 88 culture dimensions 81

distributive negotiation 92 doctrine of substantial performance 70 effectiveness 101 emotion and anger 32, 34 emotion and anxiety 35 emotion and cognitive connection 25 emotion and culture 29 emotion and happiness 32 emotional congruency 26 emotional contagion 25 emotional hangover 27 emotional inoculation 28 emotional intelligence 26, 27 emotional leakage 27 emotions 26 emotions seven basic 25 empathy 96 Expectancy Violation Theory 49 face honoring 98 face protection strategies 100 face renovation strategies 100 face threatening strategies 99 FOB 75 framing 50 Fundamental Attribution Error 12 halo effect 14 hypothetical questioning 96 incorporated by reference 66 INCOTERMS 75 individualism/collectivism 82 integrative negotiation process 92 intellectual property 75 intercultural communication competency 87

Intex legally enforceable agreement 59 letter agreements 65 letter of credit 72 letters of intent 64 listening 39 listening skills in international business negotiation 43, 44 listening style 42 Looking Glass Self Theory 14 low context/high context 83 masculinity/femininity 11 metacognitive CQ 86 mediation 114–120 Mindfulness 93 miscommunication 45 motivational CQ 87 negotiation memoranda 65 nonconforming goods 71 nonverbal communication 47 offer 57 open ended questioning 101 paralinguistic 48 perception 9, 12 perfect tender rule 69, 70 performance 58, 68 power distance 84 probing 95 product 58, 59

quantity 59 rejection 66 request for proposal 75, 76 right to terminate 66 risk of loss 75, 76 scope of work 60, 70 self-disclosure 96 self-fulfilling prophecy 14 self-monitoring 19 self-monitoring scale 20, 21 service agreement 59 service 54, 59, 69 silence 95 Standpoint Theory 61 statute of frauds 58, 59, 61 tangible goods 68, 69 technical specifications 66, 67 termination for breach 66, 67 terminate for convenience 66, 67 terms and conditions 54, 58 Thomas and Kilmann 92 Uncertainty Reduction 11 unconscious bias 17 verbal agreements 58, 60–62 warranties 59, 63, 76 written notice of breach of contract 72

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