The following question about contingency contracts was posed to Katherine Shonk, editor of Negotiation Briefings and a Harvard Kennedy School and Harvard Business School Research Associate.

Contingency Contracts and Negotiation

Question:

Lately I have been hearing a lot—both in the news and on the job—about companies using contingencies in contracts. Given that I sometimes negotiate deals that entail a lot of risk regarding how future events will play out, I am interested to know how contingencies work and how I might use them.

Answer:

Contingent contracts have, indeed, been in the news recently, and you are correct to view them as a tool for managing risk. Negotiators often try to overcome their differences of opinion about how future events will unfold through persuasion techniques. A more fruitful approach might be to “bet” on your differing views. By adding incentives or penalties based on future performance to your contract, you protect both parties against risk.

When bidding for Groupon late last year, Google tried to hedge against uncertainty regarding the Internet deal company’s future performance by structuring a high percentage of its $6 billion offer as “earn-outs”—payments Groupon would receive only if it hit certain performance targets. Ultimately, this contingency was insufficient to bridge the gap between the two companies when Groupon balked over possible antitrust delays.

Mergers and Acquisitions Negotiations and Contingency Contracts

Here’s another recent high-profile mergers and acquisitions (M&A) negotiation you may have read about. In October 2010, the Paris-based international pharmaceutical company Sanofi-Aventis SA made an $18.5 billion, $69-per-share takeover bid for the American biotechnology company Genzyme Corp.

Sanofi was hoping to boost revenues, as patents on some of its key products were expiring. Genzyme shunned the offer, saying it was too low, and refused to open its books to Sanofi.

In particular, Genzyme felt Sanofi was undervaluing its star pipeline product, a potential multiple sclerosis (MS) drug. Based on an encouraging midstage research trial, Genzyme predicted that Campath, originally a leukemia drug, would capture one-quarter of the $13 billion global MS market. By contrast, Sanofi estimated the drug would sell about $700 million annually, the Wall Street Journal reports.

The differing predictions set the stage for a contingent contract in which Sanofi and Genzyme could bet on Campath’s success in the MS market. Breaking months of impasse, financial advisers for both companies began to negotiate contingent value rights (CVR) that would give shareholders an added benefit if Genzyme hit a future benchmark tied to sales of Campath.

By late December, after unsuccessfully shopping itself to other pharmaceutical firms, Genzyme reportedly was warming to Sanofi’s bid. At this writing, analysts were predicting that Sanofi would raise its bid to about $75 per share. If talks ultimately fail, Sanofi has threatened to pursue a hostile takeover by attempting to replace Genzyme’s board with members who are more friendly to its offer.

When two parties legitimately disagree about future outcomes that affect their deal, they should be willing to bet on their beliefs by negotiating a contingent contract.

Contingency contracts are common in M&A, professional athletics, and building projects. But negotiators in many other realms could benefit from betting on their differing predictions by structuring incentives and penalties rather than resorting to persuasion techniques that have low odds of success.

Have you ever had to Agree to Disagree? Let us know in the comments.

Adapted from “Agreeing to Disagree,” first published in the March 2011 issue of Negotiation.

Originally published in 2013.

The Program on Negotiation at Harvard Law School
and the Future of Diplomacy Project at Harvard Kennedy School
are pleased to present

The 2014 Great Negotiator Award Program

honoring

Ambassador Tommy Koh

Thursday, April 10, 2014
1:30 – 5:00 PM
Ames Courtroom, Austin Hall, Harvard Law School

The event is free and open to the public. No registration is necessary. Refreshments will be served.

Program Details:

1:30 – 3:00 PM – Multiparty Deals: The Law of the Sea, the Rio Earth Summit, and the Future of Large Conference Negotiations

Panelists:  Professor James Sebenius, Harvard Business School & Susan Hackley, Managing Director, Program on Negotiation

3:00 – 3:30 P.M.- Break & Refreshments

3:30 – 5:00 P.M.- Bilateral Deals: Trade and Regional Conflicts

Panelists: Professor Nicholas Burns, Harvard Kennedy School & Professor James Sebenius, Harvard Business School

We invite you to join us Thursday, April 10th,  for a conversation with Ambassador Tommy Koh of Singapore, the recipient of the 2014 Great Negotiator Award. This public program will feature panel discussions with Ambassador Koh and faculty from the Program on Negotiation and the Future of Diplomacy Project.

Ambassador Koh is the eleventh recipient of the Great Negotiator Award, awarded jointly in 2014 by the Program on Negotiation at Harvard Law School and the Future of Diplomacy Project at Harvard Kennedy School. The award recognizes Ambassador Koh for his work as chief negotiator for the United States-Singapore Free Trade Agreement, for chairing the negotiations that produced a charter for the Association of Southeast Asian Nations (ASEAN), for key actions that resolved territorial and humanitarian disputes in the Baltics and Asia, and for successfully leading two unprecedented global megaconferences: the Third U.N. Conference on the Law of the Sea and the U.N. Conference on the Environment and Development, also known as the Rio Earth Summit.

A graduate of Harvard Law School as well as the Universities of Malaya and Cambridge, Ambassador Tommy Koh served as Singapore’s Permanent Representative to the United Nations for a decade, and for six years as Singapore’s Ambassador to the United States. He is currently Ambassador-At-Large at the Ministry of Foreign Affairs for Singapore and Chairman for the Centre for International Law at the National University of Singapore.

To read more about Ambassador Koh’s background and accomplishments, click here for a paper by Professor James K. Sebenius and Laurence A. Green.

For additional information or questions, contact Polly Hamlen at mhamlen@law.harvard.edu or (617) 496-9383.

About the Awardee:

Ambassador Tommy Koh is currently the Ambassador-At-Large at the Ministry of Foreign Affairs for Singapore; Director, Institute of Policy Studies; and Chairman of the National Heritage Board. He is also Chairman of the Chinese Heritage Centre.

Ambassador Koh was the Dean of the Faculty of Law of the University of Singapore from 1971 to 1974. He was Singapore’s Permanent Representative to the United Nations, New York, from 1968 to 1971 (concurrently accredited as High Commissioner to Canada) and again from 1974 to 1984 (concurrently accredited as High Commissioner to Canada and Ambassador to Mexico). He was Ambassador to the United States of America from 1984 to 1990. He was President of the Third UN Conference on the Law of the Sea from 1980 to 1982. He was Chairman of the Preparatory Committee and the Main Committee of the UN Conference on Environment and Development from 1990 to 1992. He was the founding Chairman of the National Arts Council from 1991 to 1996 and Director of the Institute of Policy Studies from 1990 to February 1997. From February 1997 to October 2000, he served as the founding Executive Director of the Asia-Europe Foundation. He was also Singapore’s Chief Negotiator for the US-Singapore Free Trade Agreement.

Ambassador Koh was appointed by the United Nations Secretary-General as his Special Envoy to lead a mission to the Russian Federation, Latvia, Lithuania, and Estonia in August/September 1993. He was also a member of three WTO dispute panels, for two of which he served as Chair.

Ambassador Koh was the Second Arthur & Frank Payne Visiting Professor at the Institute for International Studies, Stanford University, USA, for 1994/95. He is a visiting Professor at Zhejiang University. He serves on the Board of Directors of the Institute for the Study of Diplomacy at Georgetown University. He is a member of the International Council of The Asia Society (New York) and a co-convener of its Williamsburg Conference. He is also a member of the International Advisory Committees of the Korean Federation of Industries.

Ambassador Koh received a First Class Honours degree in Law from the National University of Singapore, has a Masters degree in Law from Harvard Law School, and a post-graduate Diploma in Criminology from Cambridge University. He was conferred a full professorship in 1977. In 1984, he was awarded an Honorary Degree of Doctor of Laws from Yale University. He has also received awards from Columbia University, Stanford University, Georgetown University, the Fletcher School of Law and Diplomacy, and Curtin University. On 22 September 2002, Ambassador Koh was conferred an Honorary Degree of Doctor of Laws from Monash University.

For his service to the nation, Ambassador Koh was awarded the Public Service Star in 1971, the Meritorious Service Medal in 1979 and the Distinguished Service Order Award in 1990. Ambassador Koh was appointed Commander in the Order of the Golden Ark by HRH Prince Bernhard of the Netherlands in March 1993. He received the award of the Grand Cross of the Order of Bernardo O’Higgins from the Government of Chile on 3 April 1997. He also received the 1996 Elizabeth Haub Prize from the University of Brussels and the International Council on Environmental Law on 17 April 1997. He was awarded the 1998 Fok Ying Tung Southeast Asia Prize by the Fok Ying Tung Foundation in Hong Kong on 29 May 1998. On 22 February 2000, he was awarded the “Commander, First Class, of the Order of the Lion of Finland” by the President of Finland. On 2 May 2000, he was conferred the title of “Grand Officer in the Order of Merit of the Grand Duchy of Luxembourg” by the Prime Minister of Luxembourg. On 6 August 2001, he was conferred the rank of Officer in the Order of the Legion of Honour by the President of the French Republic. On 5 May 2003, he was awarded the Peace and Commerce Medal by the Department of Commerce, USA.

Founded in 1983, the Program on Negotiation at Harvard Law School is a pioneer in the fields of negotiation, mediation, and alternative dispute resolution.

In commemoration of the program’s 30th anniversary this year, the Program on Negotiation is proud to present a video describing many of PON’s various educational and research activities.

According to Chair Robert Mnookin, at its core the Program on Negotiation is devoted to improving the theory and practice of negotiation and dispute resolution.

PON is also dedicated to educating, training, and fostering future scholars, students, and practitioners of negotiation and alternative dispute resolution (ADR).

Program on Negotiation Chair Robert Mnookin explains that while conflict is inevitable, a fair resolution of such conflict isn’t always a foregone conclusion.

Because conflict is prevalent in human society, the skills and knowledge obtained through the research and instruction provided by the Program on Negotiation have been instrumental in changing how many people think about and approach conflict.

In addition to its academic activities, each year the Program on Negotiation honors an accomplished negotiator for his or her achievements in the field of negotiation and alternative dispute resolution with the Great Negotiator Award.

Professor James Sebenius highlights the diversity of conflicts negotiated by the Great Negotiator Award winners. For example, PON honored George Mitchell’s work leading negotiations between Northern Ireland’s Catholics and Protestants and former Secretary of State James Baker‘s work forming the Gulf War Coalition.

Program on Negotiation faculty member Gabriella Blum describes the Program on Negotiation’s unique approach to conflict resolution as the need for integrative bargaining (win-win) solutions rather than solely distributive bargaining (win-lose) solutions.

What this means is that it is important to keep in mind that negotiation is rarely a zero-sum game; rather, it is a process of collaboration and relationship building in areas of mutual interest.

Tufts University Fletcher School of Diplomacy and PON faculty member Jeswald Salacuse and Massachusetts Institute of Technology (MIT) professor Lawrence Susskind describe the history of collaboration between Tufts, Harvard, and MIT and the unique opportunities  that such an arrangement affords a research program like PON.

In addition to instructing students at Harvard, Tufts, and MIT, the Program on Negotiation also offers executive education courses geared toward training professionals who either currently work in the field of alternative dispute resolution (ADR) or who utilize negotiation as a regular part of their job.

Professor Mnookin highlights that we live in an increasingly interconnected world and that it is essential for us all to learn how to navigate conflict and work with others to achieve a successful resolution:

In the 21st century, what is plain is that peoples all over the world are ever more independent. It is going to be essential that we know how to communicate with and resolve our differences with people who are very different from ourselves. We are no longer isolated. And in fact, in this world, I think the work of conflict resolution and dealing with people fairly and efficiently becomes even more important.

To hear some tell it, we are experiencing an epidemic of conflict avoidance, finding new ways to walk away from conflict rather than engaging in interpersonal conflict resolution. Ghosting, for example—ending a relationship by disappearing—has become common. Numerous tech companies are being criticized for laying off people via email rather than in person. Many people experience the pain of estrangement from family members, which can arise without warning or explanation. And whether you view the documented phenomenon of “quiet quitting” as destructive slacking or healthy boundary setting, it can manifest as avoidance of hard conversations and negotiations about workload.

There are times when avoiding conflict is necessary, such as stepping away from an abusive relationship. More often, though, addressing interpersonal conflict can help repair a relationship—for everyone’s benefit—or bring it to a close with less harm. By better understanding why we avoid conflict, we can grow more comfortable engaging in interpersonal conflict resolution, both at work and in our personal lives.

Why Do We Avoid Conflict?

We choose to avoid conflict for numerous reasons. “A lot of people anticipate that talking about how they feel is going to be a confrontation,” psychologist Jennice Vilhauer told the New York Times. “That mental expectation makes people want to avoid things that make them uncomfortable.” Relatedly, the fear of being emotionally vulnerable with others can lead us to avoid conflict and resist interpersonal conflict resolution.

Some people are especially prone to avoiding conflict. “Conflict avoidance is a type of people-pleasing behavior that typically arises from a deep-rooted fear of upsetting others,” according to Healthline. “Many of these tendencies can be traced back to growing up in an environment that was dismissive or hypercritical.”

Research showing that social anxiety is growing among young people worldwide could also help to explain a recent rise in conflict avoidance. And the lack of accountability created by modern technology may play a role. Whether we are laying off someone, leaving a job, or ending a romantic relationship, texts and emails allow us to avoid having such difficult conversations in real time, face-to-face.

 How Conflict Avoidance Harms Us

Conflict avoidance often harms us and others. When we avoid conflict with those we continue to interact with, we allow it to fester and grow. Imagine that you hear that you hurt a coworker’s feelings with a thoughtless remark. You feel awkward about the situation and unsure about how to bring it up. Conflict avoidance on both sides could lead your work relationship to grow uncomfortable and distant. By contrast, taking the coworker aside to discuss what happened and apologize would likely repair the relationship and set up productive future interactions.

“Avoiding conflict can compromise our resilience, mental health, and productivity in the long term,” writes Andrew Reiner for NBC News. By contrast, one study of over 2,000 people aged 33 to 84 found that those who intentionally resolved daily conflicts reported that their stress diminished. They also experienced fewer negative emotions than others in the study, and their positive emotions remained stable for longer periods of time.

Toward Interpersonal Conflict Resolution

How can we overcome the urge to avoid conflict and move toward engaging in interpersonal conflict resolution more frequently? Here are some guidelines:

Recognize the costs of avoidance. Look beyond the temporary sense of safety and calm that conflict avoidance can bring and recognize what you stand to lose from it—such as broken relationships, a damaged reputation, and strained interactions at work or at home.

Practice on smaller issues. If you’re used to sweeping conflict under the rug, interpersonal conflict resolution can feel deeply threatening. You might try to build your skills and confidence by opening up conversations about relatively small matters with those you trust the most. Positive experiences resolving minor issues, such as household chores that aren’t getting done, can equip you to take on bigger concerns.

Make a plan. Think through—and perhaps write down—the best way to cope with a conflict before reaching out to the other person or people involved. In particular, to get a broader perspective, consider how your actions—or inaction—might be affecting them.

Get help. A trusted friend or counselor might help you view the conflict more fully and determine the best way to manage it. You might also consider asking a third party, such as your boss, to help mediate the dispute, or consider formal mediation.

Set the foundation for collaboration and honesty. When approaching the person with whom you are in conflict, you might acknowledge the discomfort you feel before explaining why you believe it is important to talk things through. If you believe you have been wronged, rather than lashing out in anger, present your interpretation of the situation, and ask the other person to describe how they see things. If you’ve hurt the other person, take responsibility for your actions and be prepared to apologize before discussing how to move forward.

What other advice do you have for avoiding conflict and moving toward interpersonal conflict resolution?

Sooner or later, every negotiator faces threats at the bargaining table. What should you do when the other side warns they might walk away, file a lawsuit, or try to harm your reputation? Rather than reacting impulsively, it pays to pause, assess the situation, and respond strategically. These negotiation tips will help you navigate those tense moments with clarity and confidence.

Direct counterattacks are rarely the answer. Your threats may not be as powerful or credible as the other side’s, or they could launch an uncontrollable spiral of conflict. Alternatively, you might be tempted to immediately concede to your opponent’s demands, but that would only reinforce his domineering tactics.

Our DEAL approach allows you to respond to threats without conveying weakness or escalating the conflict, redirecting talks toward a focus on each other’s interests. Below are our negotiation tips for using the DEAL method.

Negotiation Tips for Using the DEAL Method

1. Diagnose the Threat
Sometimes threats emerge as overt declarations: “If you can’t follow through on the contract terms, I’ll let the community know what kind of show you’re running.”

Other times they’re more subtle: “You know, I’d hate for this to hurt your reputation.”

Regardless, it’s critical that you seek to understand what provoked the threat, as its cause could determine your response in negotiation.

The first step in effective threat diagnosis is to remove yourself from the situation – physically and/or psychologically. You might suggest to your counterpart that it’s time for a break, or imagine that you’re an outside observer trying to evaluate the threat more objectively. By detaching yourself from the situation, you can calm your emotions and truly hear what the other side is saying.

Next, consider the motivation behind the threat, which may identify the threat issuer as one of these types:

The victim: If your counterpart was feeling frustrated or offended, the threat may have emerged from his basic need to be heard and acknowledged.

The pragmatist: This straight shooter is simply informing you of the real constraints she faces or the strong outside alternatives she has.

The bluffer: He may be brandishing his power due to insecurity or a desire to dominate. If so, the threat may be more ruse than reality.

2. Express Understanding
As customer service representatives have been taught, the best way to handle a “victim” is to listen to his grievances, acknowledge his feelings, and apologize for his troubles. Such moves can be palliative. New York University professor Tom Tyler has shown that when individuals in conflict express their emotions and tell their side of the story, they’re more satisfied with outcomes – even when these outcomes aren’t in their favor. Expressing understanding can defuse tensions and reduce the risk of additional threats, but be careful not to reward tirades with concessions.

3. Ask Questions
A threat issued by a pragmatist may convey legitimate sources of power or important needs and constraints. Spanish writer Jose Bergamin once said, “A piece of advice always contains an implicit threat, just as a threat always contains an implicit piece of advice.” Your job as a negotiator is to discover the implicit advice in the pragmatist’s threat.

By asking questions, you can unearth novel remedies to her concerns and avoid caving in to surface demands. The goal should be to determine the power or the constraints behind your counterpart’s threat. The threat may simply be an expression of her intention to resort to a strong BATNA, or best alternative to a negotiated agreement, in the absence of a satisfactory offer. By inquiring about her needs and alternatives, you can determine if a zone of possible agreement exists. If so, acknowledge her BATNA, but suggest ways you might both better meet your needs at the table.

Imagine that a contractor threatens to sue you, a supplier, over a proposed change in the delivery date of raw materials. You can try to discover the motivation for the threat by asking, “Why would a lawsuit be a better option for you than continued talks?”

If he reveals that he expects the courts to rule in his favor, his threat is based on his sense of real power. But if he says your delays could bankrupt his company, he could be informing you of a realistic constraint.

Finally, by inquiring about the exact nature of the lawsuit he plans to file, you can determine if the threat could cause you real harm or if it is just a bluff. By asking questions, you can assess whether you’re willing to let him pursue it, work within the constraints of his underlying concerns, or offer a settlement that takes into account his objective power.

4. Label the Negotiation Threat
When a threat is nothing more than insidious intimidation, your approach should be quite different. If you sense that your opponent’s bark is louder than his bite, let him know you’re onto his game. You might tell a “bluffer” – “I don’t consider threats very productive. Let’s put our heads together and come up with some viable solutions.”

Labeling a threat neutralizes negative intent and boosts your sense of control. In fact, research by Anne L. Lytle, Jeanne M. Brett, and Debra L. Shapiro in The Strategic Use of Interests, Rights, and Power to Resolve Disputes (1999) demonstrates that process labeling – calling attention to what’s happening – is the most effective way to get a negotiation marred by threats back on track. Labeling the situation gives your opponent the same detachment you achieved through threat diagnosis.

When All Else Fails

That’s not the end of these negotiation tips. Despite your best efforts, sometimes an aggressor will respond only to aggression. In this case, issue a counterthreat to establish your credibility and then immediately shift the focus to identifying each other’s interests, thereby preventing an entrenched battle. Lytle, Brett, and Shapiro have found that this mix of contentious and conciliatory communication can be extremely effective in negotiation.

“I know you think a court could rule in your favor,” you might tell the litigious contractor, “but recent rulings lead us to believe we’d prevail. I think we’d both be better off trying to work out a deal and avoid trial costs.”

Brett, Mara Olekalns of Melbourne University, and Laurie Weingart of Carnegie Mellon University have found that solutions based on identifying interests often don’t occur until after parties have had a chance to signal their own power and assess the other party’s power. When confronted with a particularly aggressive threat, display your strength, but demonstrate your preference for negotiating at the level of interests.

How do you manage conflict during a negotiation? Do you use these negotiation tips? Leave us a comment.

Adapted from “How to Defuse Threats at the Bargaining Table” by Katie A. Liljenquist and Adam D. Galinsky.

Originally published in 2013.

While much of our content explores negotiation theory and the latest research, it can be just as valuable to look at real life negotiations when offering tips and advice. Practical examples help illuminate how these concepts play out when emotions, money, and timing are all in motion. The negotiation that follows is based on bargaining in real estate, a scenario many of us may face at some point in our lives.

 Moving to a New Town

Imagine that you and your family have moved to a new town. You’re living in a month-to-month rental and have finally found the perfect house to buy. Unfortunately, the seller is being unreasonable.

The house is on the market for $600,000, but your research, backed up by your broker’s opinion, tells you it’s overpriced. By your estimate, a fair price would be $500,000, but when you offer that amount, the seller tells you that you are “not even close” and doesn’t counter. You think the seller is in denial about the slump in the housing market, which has affected prices in your town quite a bit.

Sellers are looking at the prices paid for their neighbors’ houses a few years ago, while buyers are looking at comparable transactions from the past few months to try to determine the “fair” price. You might consider creative deal structuring to break through the resulting impasse. Start by noting that the typical house purchase is a very “tight” deal: once the seller commits to a particular buyer, the seller can’t (legally) sell the house to someone else, even if offered a substantially higher price.

In your circumstance, a “loose” deal structure might provide a way forward. Imagine that you make a slightly higher offer (it is, after all, your “perfect” house) of, say, $525,000. Then give the seller 60 days to keep shopping the house. If a better offer comes in during that time, the seller has the right to walk away by paying you a “breakup fee”—say, $25,000 or less.

This deal structure creates value based on the different beliefs about the value of the house. In effect, you are saying this to the seller: “You think the house is worth $600,000, but I think you won’t get a better offer than my $525,000. I’m so confident in my belief that I’m willing to give you 60 days to prove me wrong. If you do find a better price, I’ll keep looking for the perfect house. If you don’t find a better deal, we’ll close in 60 days at my price.”

Negotiation in US vs UK

Although this kind of deal structure isn’t very common in the United States, it’s actually the norm in the United Kingdom. There, a homeowner can formally accept an offer from one buyer but remain open to competing offers up until the moment of closing. The British even have a word to describe what happens when a third party jumps a deal: gazumping. The buyer can even buy “gazumping insurance” against getting gazumped.

As you can see, real-estate sales in the United Kingdom are a free-for-all until the moment of closing. The point isn’t that the British system is better—in fact, gazumping can wreak havoc on people’s lives. But in certain situations, creative deal structuring might break through the impasse.

Do you have any negotiation examples to share? Leave us a comment.

Adapted from “To Break an Impasse, Loosen Up,” by Guhan Subramanian (professor, Harvard Business School and Harvard Law School), first published in the Negotiation newsletter.

Originally published in 2010.

Negotiation research suggests that handling negotiations over email often creates more problems than advantages, particularly when it comes to relationship building, information exchange, and reaching high-quality outcomes in conflict resolution negotiations scenarios. While email can be efficient, the medium also amplifies misunderstandings and makes it harder for trust to take root.

One immediate challenge is the difficulty of establishing social rapport via email. Without nonverbal cues—tone of voice, facial expressions, posture—and with few shared norms governing how email should be used in negotiation, messages can easily come across as curt, inattentive, or even hostile. This absence of visible empathy often leads negotiators to be less polite and less attentive to the other side’s concerns, increasing the likelihood of tension or escalation before substantive issues are addressed.

Email negotiations are also especially vulnerable to misunderstanding because emotion and intent are hard to convey accurately—and because negotiators frequently fail to consider how their messages will be interpreted. Compounding the problem, people tend to be unaware of just how limited email communication can be.

In a study by Justin Kruger of New York University, Nicholas Epley of the University of Chicago, and Justin Parker and Zhi-Wen Ng of the University of Illinois at Urbana-Champaign, participants were asked to communicate statements expressing sarcasm, seriousness, anger, or sadness to either a friend or a stranger. The messages were delivered via email, over the phone, or face-to-face.

Across conditions, individuals consistently overestimated how accurately recipients would interpret their intended tone. This overconfidence was present whether the recipient was a friend or a stranger, but it was strongest in email communication. As a result, email negotiations often suffer from reduced information exchange, higher rates of impasse, and less efficient agreements compared with negotiations conducted in person or even by phone.

How Do You Grapple with Concealed Information in Business Negotiations?

In our related conflict resolution article, Concealed Information in Business Negotiations, we discuss a negotiation role-play simulation, Bullard Houses. Business negotiators not only learn how to deal with counterparts that are concealing information at the bargaining table, but also how what, and when to reveal critical information during tense, real-life negotiation scenarios.

Drawn from the latest in bargaining research, Bullard Houses is part of the Teaching Negotiation Resource Center’s set of negotiator’s role-play simulations developed to perfecting bargaining and negotiation skills.

Bullard Houses can be run as a one-on-one negotiation simulation between two negotiators or it can be expanded into team building exercises pitting two groups of competitive negotiators against one another in a contentious housing dispute.

The following themes are addressed by Bullard Houses attorney/client relations:

• A negotiator’s best alternative to a negotiated agreement (BATNA)
• The role of confidentiality in business negotiations
• Information exchange and strategic disclosure
• The use of agents in negotiations
• Interpreting and analyzing counterpart messages
• Grappling with misrepresentation and intentional obfuscation
• Evaluating objective criteria
• The impact of political and organizational constraints
• Managing negotiations involving undisclosed principals

Together, these lessons highlight why negotiators should be cautious about relying too heavily on email—especially when trust, nuance, and complex information are at stake.

Do you have any stories to share about negotiations over email? How have they worked out for you?

Originally published in 2012.

This advanced course is designed for experienced mediators seeking to deepen their skills, refine their strategies, and confidently navigate complex, high-stakes disputes. Through a blend of theory, practice, and case-based learning, participants will learn how to mediate power imbalances, implement impasse breaking techniques, structure the mediation process to suit the specific needs of the parties, and mediate across cultures.

Participants will engage in intensive simulations, receive feedback from seasoned professionals, and leave with actionable strategies to enhance their effectiveness in complex mediation environments. Ideal for legal professionals, HR leaders, executive coaches, and certified mediators ready to take their practice to the next level.

Agenda

DAY ONE

8:00 Registration and Breakfast Buffet

Mediating Power Imbalances
Day 1: 9:00–12:30
Faculty: Audrey Lee

Mediators routinely encounter situations where one party may feel intimidated or disadvantaged—whether due to formal structures (i.e., a reporting relationship between colleagues) or other factors, such as an asymmetry in knowledge, expertise, communication styles, status or comfort with mediation. These imbalances can impact not only mediation outcomes but also how parties participate in mediation or if they choose to participate at all.

Can a mediator “correct” for a power imbalance between parties? Given the mediator’s charge to be impartial, is it appropriate for a mediator to do so—and if so, how? In this session, participants will explore the complex realities of power imbalance, which can manifest in different ways in mediation. Through an interactive presentation, small group discussion, and role play simulation, participants will:

• Identify and assess potential power imbalances
• Reflect on their own default approaches (e.g., Are you more likely to intervene or remain ‘hands off’?)
• Explore when and how to make effective adjustments to your practice
• Practice strategies to prepare for mediating cases where such imbalances exist

Participants will leave with strategies to ensure all parties have meaningful opportunities to express their perspectives, make informed decisions, and achieve desirable outcomes—even in the presence of significant power differences.

Day 1: 1:30–5:00
Impasse Breaking Techniques
Faculty: David Hoffman

This session offers a practical guide to breaking impasse in mediation across family, business, and employment contexts. Participants will explore how to prevent impasse before it arises through thoughtful pre-mediation planning, negotiation coaching, and attention to emotional dynamics. Drawing on diverse mediation styles—facilitative, evaluative, and transformative—the training equips mediators with tools to identify and address the roots of conflict.

In this session you will:

• Examine process interventions like metaphor, silence, humor, role reversal, and reminders of common interests, alongside substantive strategies such as reality testing, range bargaining, mediator’s proposals, and structured settlements.
• Address psychological barriers, including cognitive biases, ambivalence, and fear of losing face.
• Learn how to tackle common challenges and pitfalls, such as inadequate settlement authority, high stakes posturing, and breakdowns in trust.
• Reflect on the ethics and mindset of effective mediators—emphasizing authenticity, tenacity, and candor.

Through case studies and interactive exercises, attendees will leave with a practical “Swiss Army knife” of impasse-breaking techniques to apply immediately in their practice.

5:00–6:30 Cocktail and Networking Reception

DAY TWO

8:00 Breakfast Buffet

9:00–12:30 and 1:30–5:00
Personalized Performance Feedback
Faculty: David Seibel

Individualized feedback helps practitioners understand exactly what they did well and what they need to improve. This accelerates learning and development and is one of the most common requests we get from advanced practitioners.

This session will offer you the opportunity to gain valuable insights tailored to your specific needs. During this immersive day, you will receive constructive feedback that empowers you to elevate your practice. Through engaging role plays, dynamic demonstrations, interactive exercises, and rich discussions with PON faculty and experienced classmates, you’ll hone your craft by sharing your observations and insights with peers.

Expect to leave with at least three actionable ideas to refine your approach, a key area of theory or skill you wish to delve deeper into, and a bolstered network of like-minded professionals to support your growth.

In this session, you will:

• Receive personalized feedback from PON faculty and experienced peers.
• Identify customized advice tailored to improve your individual practice; and
• Share your insights and observations with classmates.

You will leave with:

• At least 3 specific ideas or actions to improve your practice.
• At least 1 area of theory or skill you want to explore further; and
• A stronger network of learning partners.

DAY THREE

8:00 Breakfast Buffet

9:00–12:30 and 1:30–5:00
Strategic Process Design for Complex Mediation
Faculty: Susan Podziba

Complex multi-party, multi-issue conflicts often seem chaotic to mediators, diplomats, executives, and disputants. Process design is the strategic infrastructure that enables large, diverse groups to resolve complex conflict. The numerous inter-related moving parts of parties, issues, interests, power relations, history, dynamics, and constraints create configurations that require uniquely tailored process designs.

By understanding the basic building blocks of process design and learning to refine and sequence process mechanisms, mediators and managers can effectively use the opportunities created by complexity for successful conflict resolution.

In this session you will:

• Analyze dynamics of complex, multi-party, multi-issue conflicts
• Understand the basic building blocks of process design
• Practice the application of core principles to design and reflect upon process infrastructure
• Apply tailored process design strategies to unique groups and conflict scenarios
• Sequence and refine process mechanisms in response to conflict and complexity
• Recognize how to tailor process mechanisms to specific dynamics, barriers and challenges
• Develop strategic thinking practices for addressing complex systems

5:30–7:00 Cocktail and Networking Reception

DAY FOUR

8:00 Breakfast Buffet

9:00–12:30 and 1:30–3:00
Mediating Across Cultures
Faculty: Alain Lempereur

In mediation, parties and neutrals often come from different cultures, not only nations and regions, but organizations and professions. The above combination shapes multiple cultural profiles and worldviews at the table, which in turn impacts behaviors, attitudes, norms, and values.

Culturally sensitive mediators determine what is appropriate or not. They avoid mishaps and initiate breakthroughs. They grasp how each party communicates; approaches and prioritizes relationships, process, and problem solving; perceives and resolves conflicts.

This session asks mediators to probe their personal worldviews, and invites them to understand, and navigate across, parties’ various worldviews. In brief, mediators are equipped with more cultural awareness and tools. In this session you will learn:

• How mediation operates across nations, regions, organizations, and professions
• How behaviors, attitudes, norms, and values build diverse cultural profiles in mediation
• How a mediator probes their own worldview
• How mediators understand, and navigate across, parties’ worldviews

Eligibility Requirements

This advanced program is ideal for experienced mediators, lawyers, and judges who already have foundational mediation training and seek to further deepen their skills and expertise. It is also well suited for professionals who currently oversee or regularly participate in mediations—whether in legal, corporate, healthcare, education, or non-profit settings—and wish to refine their approach to handling complex, high-stakes disputes.

Applicants should have completed a 40-hour training, the Harvard Mediation Intensive, or an equivalent program. The class welcomes globally diverse participants from various industries who are committed to continue to enhance their mediation techniques and strategies.

To maintain a highly interactive and rigorous learning environment, enrollment is selective and limited. Proficiency in English is essential, as the course is conducted entirely in English through intensive simulations and discussions. While proof of English fluency is not required, a strong command of the language is necessary for active participation. Applicants may be contacted to assess communication skills and fit for this advanced training.

This program is strictly limited to 48 people.

Our Faculty

Our team is comprised of world-renowned faculty from across Harvard, MIT, and Tufts.

Expert Faculty:

Audrey Lee

Lecturer, Mediation and Diversity & Dispute Resolution, Harvard Law School
Senior Mediator, Boston Law Collaborative, LLC

A specialist in workplace mediations, Audrey Lee is a Lecturer on Law at Harvard Law School where she teaches courses on Mediation and Diversity & Dispute Resolution. She is a Senior Mediator at Boston Law Collaborative, LLC, and has served as a mediator for the U.S. Equal Employment Opportunity Commission and the Massachusetts Commission Against Discrimination. Audrey has served as affiliate faculty at PON since 2016, currently as a lead faculty for the Harvard Mediation Intensive.

In her consulting practice, Audrey works with clients to increase their effectiveness in difficult workplace conversations and negotiations. In recognition of her professional development work with lawyers, Audrey was invited in 2018 to become a Trusted Advisor for the Professional Development Consortium, the national association for individuals responsible for the professional development of lawyers at law firms, law schools, government agencies, and corporations.

Drawing on her experience as a mediator and conflict management consultant, Audrey has worked with clients ranging from lawyers at Am Law 100 firms, to mediators at the Australian Fair Work Commission, and musicians at the League of American Orchestras. Audrey has been featured in Harvard Business Review’s “Insights” series on Leadership and Managing People and in the BBC Capital’s Work Ethic column, and her writing on mediation and dispute resolution has appeared in the Harvard Negotiation Law Review and Pepperdine Dispute Resolution Law Journal, among other publications.

David Hoffman

David A. Hoffman is the John H. Watson, Jr. Lecturer on Law at Harvard Law School, where he teaches three courses: Mediation; Legal Profession: Collaborative Law; and Diversity and Dispute Resolution. David is also an attorney, mediator, arbitrator, and founding member of Boston Law Collaborative, LLC, where he handles cases involving family, business, employment, and other disputes. Prior to founding BLC in 2003, David was a litigation partner at the Boston firm Hill & Barlow, where he practiced family law, employment law, and general litigation for 17 years. He is past chair of the American Bar Association Section of Dispute Resolution, a Distinguished Fellow of the International Academy of Mediators, and a recipient of the Lifetime Achievement Award from the American College of Civil Trial Mediators. David has published three books (including “Bringing Peace into the Room,” with co-editor Daniel Bowling) and more than 100 articles and book chapters on law and dispute resolution. David is a graduate of Princeton University (A.B. 1970, summa cum laude), Cornell University (M.A. 1974, American Studies), and Harvard Law School (J.D. 1984, magna cum laude), where he was an editor of the Harvard Law Review. David’s TEDx talk about “Lawyers as Peacemakers” can be found here: youtube.com/watch?v=JKXv1_Sqe_4. David lives in a cohousing community in Acton, Massachusetts with his wife, Leslie Warner, who is a career coach. Together they have five adult children, an adolescent cat, and a rescue Golden Retriever from Serbia. Links to his publications and his bio can be found here: blc.law/team/david-hoffman.

David Seibel

David Seibel is an expert in negotiation, communication, mediation, and dispute resolution. He wears many hats as a trainer, consultant, mediator, and professor. The former president of the Harvard Mediation Program, Seibel has mediated a wide range of criminal and civil disputes on behalf of clients all over the world, ranging from Fortune 500 companies to Iraqi Parliament members.

In addition to teaching, Seibel is also the co-founder and president of Insight Partners, a training and consulting firm that helps companies, governments, and individuals negotiate and communicate more effectively. He also leads Insight Collaborative, a nonprofit dedicated to resolving conflict and improving relationships around the world, and the Insight Peace Education Project, which teaches conflict management skills to youth in postconflict regions.

Susan Podziba

Susan Podziba is a world-renowned mediator and process design expert. For more than 30 years, she has designed and mediated scores of cases across the policy spectrum for clients including the United States Departments of Commerce, Defense, Education, Labor, Health and Human Services, Housing and Urban Development, Interior, and Transportation, as well as for the U.S. Environmental Protection Agency, U.S. Senate, U.S. Institute for Peace, United Nations, The World Bank, British Council, Netherlands Organization for Applied Scientific Research, Emilia Romagna Regional Authority of Italy, and the Negotiation Strategies Institute of Jerusalem. Most of her projects involve working with senior leadership of governments, stakeholders, civil society, and the general public.

Ms. Podziba is Lecturer at Harvard University Graduate School of Design, an expert for the course, Religion and Conflict Transformation, which is organized by SwissPeace at the University of Basel, and has served as a Fulbright Senior Specialist in Peace and Conflict Studies at the University of Amsterdam in the Netherlands. She is author of Civic Fusion: Mediating Polarized Public Disputes and Our Cities: From Corruption to Participatory Democracy as well as numerous book chapters and journal articles.

She has provided process design training to seasoned mediators from around the world privately, at Harvard Program on Negotiation senior executive seminars, for World Bank and European Investment Bank mediators, and United Nations special envoys. Her process designs have resulted in agreements that have affected the lives of hundreds of millions of people.

Alain Lempereur

Brandeis University Alan B. Slifka Professor at the Heller School for Social Policy and Management
Program on Negotiation at Harvard Law School Affiliate Faculty and Executive Committee Member
Harvard Humanitarian Initiative Core Faculty and Negotiation Lead for the UN Global Executive Leadership Initiative

Alain Lempereur promotes his “responsible negotiation” framework worldwide and applies it to leadership, mediation, and humanitarian challenges. He has published a dozen books, including The First Move: A Negotiator’s Companion and Mediation: Negotiation by other Moves. And contributed to more than 100 articles and book chapters.

After getting a research doctorate in law from Harvard Law School and degrees at the Universite Libre de Bruxelles, Lempereur spent 25 years consulting and providing executive training for international organizations, national governments, global consulting firms, and corporations in 70 countries. He founded negotiation and leadership initiatives in Africa, the Middle East, and Europe and was the founding director of IRENÉ – a European negotiation institute he led for 15 years at ESSEC Business School.

If you take part in international negotiation, your chances of success increase dramatically when you study how others have navigated similar challenges. By examining real-world examples, you can gain valuable insight into strategies that bridge cultural gaps, manage conflicting interests, and foster lasting partnerships. To that end, here are 10 well-known international business negotiation case studies that offer practical lessons and inspiration for negotiators around the world.

10. Apple’s Apology in China

When Apple CEO Timothy D. Cook apologized to Apple customers in China for problems arising from Apple’s warranty policy, he promised to rectify the issue. In a negotiation research study, Professor William W. Maddux of INSEAD and his colleagues compared reactions to apologies in the United States and in Japan. They discovered that in “collectivist cultures” such as China and Japan, apologies can be particularly effective in repairing broken trust, regardless of whether the person apologizing is to blame. This may be especially true in a cross-cultural business negotiation such as this one.

9. Bangladesh Factory-Safety Agreements

In this negotiation case study, an eight-story factory collapsed in Bangladesh, killing an estimated 1,129 people, most of whom were low-wage garment workers manufacturing goods for foreign retailers. Following the tragedy, companies that outsourced their garment production faced public pressure to improve conditions for foreign workers. Labor unions focused their efforts on persuading Swedish “cheap chic” giant H&M to take the lead on safety improvements. This negotiation case study highlights the pros and cons of all-inclusive, diffuse agreements versus targeted, specific agreements.

8. The Microsoft-Nokia Deal

Microsoft made the surprising announcement that it was purchasing Finnish mobile handset maker Nokia for $7.2 billion, a merger aimed at building Microsoft’s mobile and smartphone offerings. The merger faced even more complexity after the ink dried on the contract—namely, the challenges of integrating employees from different cultures. International business negotiation case studies such as this one underscore the difficulties that companies face when attempting to negotiate two different identities.

7. The Cyprus Crisis

With the economy of the tiny Mediterranean island nation Cyprus near collapse, the International Monetary Fund (IMF), European Central Bank (ECB), and the European Commission teamed up to offer a 10-billion-euro bailout package contingent on Cyprus provisioning a substantial amount of the money through a one-time tax on ordinary Cypriot bank depositors. The move proved extremely unpopular in Cyprus and protests resulted. The nation’s president was left scrambling for a backup plan. The lesson from international business negotiation case studies such as this? Sometimes the best deal you can get may be better than no deal at all.

6. Dissent in the European Union

The European Union (EU) held a summit to address the coordination of economic activities and policies among EU member states. German resistance to such a global deal was strong, and pessimism about a unified EU banking system ran high as a result of the EU financial crisis. The conflict reflects the difficulty of forging multiparty agreements during times of stress and crisis.

5. North and South Korea Talks Collapse

Negotiations between North Korea and South Korea were supposed to begin in Seoul aimed at lessening tensions between the divided nations. It would have been the highest government dialogue between the two nations in years. Just before negotiations were due to start, however, North Korea complained that it was insulted that the lead negotiator from the South wasn’t higher in status. The conflict escalated, and North Korea ultimately withdrew from the talks. The case highlights the importance of pride and power perceptions in international negotiations.

4. Canceled Talks for the U.S. and Russia

Then-U.S. president Barack Obama canceled a scheduled summit with Russian President Vladimir Putin, citing a lack of progress on a variety of negotiations. The announcement came on the heels of Russia’s decision to grant temporary asylum to former National Security Agency contractor Edward Snowden, who made confidential data on American surveillance programs public. From international business negotiation case studies such as this, we can learn strategic reasons for breaking off ties, if only temporarily, with a counterpart.

3. The East China Sea Dispute

In recent years, several nations, including China and Japan, have laid claim to a chain of islands in the East China Sea. China’s creation of an “air defense” zone over the islands led to an international dispute with Japan. International negotiators seeking to resolve complex disputes may gain valuable advice from this negotiation case study, which involves issues of international law as well as perceptions of relative strength or weakness in negotiations.

2. An International Deal with Syria

When then-U.S. Secretary of State John Kerry and his Russian counterpart, Sergey Lavrov, announced a deal to prevent the United States from entering the Syrian War, it was contingent on Syrian President Bashar al-Assad’s promise to dismantle his nation’s chemical weapons. Like other real-life negotiation case studies, this one highlights the value of expanding our focus in negotiation.

1. A Nuclear Deal with Iran

When the United States and five other world powers announced an interim agreement to temporarily freeze Iran’s nuclear program, the six-month accord, which eventually led to a full-scale agreement in 2015, was designed to give international negotiators time to negotiate a more comprehensive pact that would remove the threat of Iran producing nuclear weapons. As Iranian President Hassan Rouhani insisted that Iran had a sovereign right to enrich uranium, the United States rejected Iran’s claim to having a “right to enrich” but agreed to allow Iran to continue to enrich at a low level, a concession that allowed a deal to emerge.

What international business negotiation case studies in the news have you learned from in recent years?

Learning how to negotiate effectively in cross-cultural settings can feel like a daunting challenge—and with good reason. Negotiating across cultural boundaries adds an additional layer of complexity, from language differences and varying interpretations of body language to distinct expectations around dress, etiquette, and how satisfaction or disagreement is expressed. Many negotiators worry that even a small misstep could jeopardize an important deal or lead to unnecessary embarrassment.

Fortunately, a few fundamental negotiation skills can go a long way toward easing these concerns. By approaching international negotiations with curiosity, preparation, and cultural awareness, negotiators can better interpret unfamiliar signals, avoid common misunderstandings, and build stronger relationships. With the right mindset and strategies, it becomes possible to redefine what successful negotiation looks like in a global context and navigate cross-cultural interactions with greater confidence and respect.

Adapt to New Processes

Getting accustomed to different processes in a negotiation can be challenging, but a willingness to embrace your counterpart’s way of doing business can be essential. This is especially true when a negotiator is visiting their counterpart in their home country. While this can feel overwhelming, it is important to remember that we negotiate in cross-cultural situations all the time. For example, any businessperson who negotiates with another business has prepared for that negotiation by studying their counterpart’s company “culture.” That culture has the same set of rituals, preferences, priorities that can or cannot be negotiated.

Preparing for a cross-cultural negotiation requires the same careful preparation, and done properly, preparation and a willingness to adapt to new processes can help a negotiator get to the fundamental issues of a negotiation without obsessively thinking about the process. For example, the Paris Climate talks in 2015 were reportedly structured using a South African process called indaba as their framework. Participants were aware of the process, and many had never negotiated using it before, but by preparing for the negotiations with the fundamentals in mind, negotiators from across the world reached an agreement.

Negotiate Important Issues Separately

Understanding the importance of negotiating respectfully with a counterpart should be paramount in any situation. When preparing for how to negotiate in cross-cultural situations, the same rules apply, but for that reason, they need not overwhelm one’s preparation. Negotiation comes down to reaching a mutually acceptable agreement over issues that matter to all of the parties, and that means getting to the issues. Sometimes it also means separating them out and negotiating each one distinctly.

In the 2015 United States-Iran Nuclear Talks, it became clear to the lead negotiators that a host of issues were in play, from the political to the technical, and all of them were of the utmost importance. Instead of trying to negotiate them in the same fashion, the two teams agreed that the technical issues of nuclear physics should be negotiated by experts from both sides, away from the table where the political issues were being negotiated. While the two sets of negotiations informed one another, separating out the issues created space in which negotiators could focus on the most important elements of a deal without distraction. Where issues and positions can quickly become indistinguishable from one another in a cross-cultural negotiation, separating the issues can be an effective way to get to the best outcome.

Listen to Your Interpreter

Being able to speak the language of a counterpart can seem like a tremendous advantage in a challenging negotiation, and sometimes it is. Yet language can also be deceptive, leading a negotiator to believe they have a window into the other side that may not be as clear as we might think. Precise language is the key to creating lasting agreements, and attempts to speak the language of the other side can undermine that precision with misunderstanding. Negotiation experts often advise having a trusted interpreter at your side instead.

Interpreters can provide valuable information and can interpret critical information more quickly from the other side. When negotiating the creation of the Gulf War Coalition, former Secretary of State James Baker grew frustrated with a counterpart, forcefully closed his notebook and prepared to stand up and leave. At that very moment, his interpreter told him to wait, and that his frustration had moved his counterpart. Sure enough, within moments, an hours-long negotiation came to an end and Baker got what he wanted, but it would never have happened without a trusted interpreter at his side.

Break Bread Together

American negotiators prize the idea of “getting down to business,” and negotiators from other countries around the world do too, but not always. In many cultures, tackling the issues of a negotiation head-on neglects an important social element that is just as necessary for creating a lasting deal. As the United States builds closer ties with Argentina, President Obama found himself in just such a situation at a state dinner with his counterpart in Buenos Aires in March.

As part of the dinner, Obama and the other guests were treated to a tango, and suddenly the President was asked to join in. He quickly obliged, to the amazement of the onlookers. As much as any potential deals between the United States and Argentina, this simple act of participating in a respectful bridging across cultures had an immediate, and significant impact on the relationship between the two countries.

You Can Still Say No

Understanding how to negotiate in cross-cultural situations requires constant learning, curiosity, and respect, but the rewards can be immeasurable. Perhaps the most challenging aspect to prepare for is how to manage a negotiation where you do not reach an agreement. There is an added feeling of pressure to reach a deal when one goes to great efforts to reach out to a potential counterpart, but going into a negotiation with this in mind can be the most valuable asset, because a respectful no can become “not now,” and lead to unexpected agreements down the road instead. By using these five approaches to cross-cultural negotiations, you can begin to forge those kinds of relationships and the lasting agreements that come with them.

Have you experienced cross-cultural situations during negotiations? Leave a comment.

On August 3, 1981, roughly 12,000 members of the Professional Air Traffic Controllers Organization (PATCO) went on strike after negotiations with the federal government over wages, hours, and working conditions broke down.

President Ronald Reagan responded with an uncompromising ultimatum: return to work within 48 hours or face termination.

On August 5, 1981, true to his word, Reagan fired 11,359 controllers who had not returned. The federal government also decertified PATCO and barred the striking controllers from federal service (a ban lifted years later).

Many observers view Reagan’s follow-through as a defining moment of his presidency—an example of aggressive negotiation tactics reshaping labor relations in the United States.

Whether one views the move as principled or punitive, the episode highlights an enduring truth:

Threats can dramatically alter the course of a negotiation.

What Is a Threat in Negotiation?

In negotiation, a threat is a conditional warning: it specifies a demand and communicates the costs of noncompliance.

Even when unspoken, threats often hover in the background of bargaining. Every negotiator has a BATNA (Best Alternative to a Negotiated Agreement), and the power to walk away is, in effect, a latent threat.

But explicit threats—particularly aggressive ones—raise serious strategic risks.

A wise threat should:

• Advance your broader interests
• Target what the other side values
• Be credible and executable
• Avoid unnecessary escalation

Issuing a threat may feel satisfying in the moment. But it can also lock you into a costly course of action.

Three Questions to Ask Before Making a Threat

Before resorting to aggressive negotiation tactics, pause and assess whether the threat truly serves your goals.

1. Is the Threat Emotionally Driven?

Threats made in anger are rarely strategic.

Research on emotion in negotiation consistently shows that anger reduces information processing, increases risk-taking, and impairs judgment. A useful rule of thumb:

Never make a threat you didn’t plan in advance.

Effective negotiators anticipate potential impasses and prepare conditional responses ahead of time.

2. Will the Threat Provoke a Counter-Threat?

Threats often trigger retaliation.

Escalation spirals are common in labor disputes, commercial conflicts, and international negotiations. Before issuing a threat, ask:

• How might the other side respond?
• Are they capable of imposing greater costs on me?
• Am I prepared for an extended standoff?

The danger is not just retaliation—but disproportionate retaliation.

3. Who Bears the Greater Cost?

A threat should serve your interests—not merely punish the other side.

Negotiators sometimes escalate simply to “teach a lesson.” But if carrying out the threat harms you more than your counterpart, the tactic becomes self-defeating.

Reagan’s strategy worked in part because he was prepared to endure significant short-term disruption to enforce a broader policy stance. Many negotiators are not prepared for similar follow-through.

Credibility matters.
But so does cost tolerance.

How to Frame a Threat Strategically

If you conclude that a threat is necessary, the way you frame it matters enormously.

A threat can function as either:

• A punishment
• A motivator

The latter is almost always more effective.

Rather than emphasizing the pain of noncompliance, frame the threat around mutual gains and future opportunity.

Consider a dispute between a handheld computer company, Jansen, and a community hospital, Riverside.

Jansen hoped to expand into the health-care market. Riverside needed specialized software to avoid financial distress. After installing an information management system, the parties disagreed about whether customized software was included in the deal.

Riverside could have threatened Jansen bluntly:
“If we can’t reach an agreement, you won’t get paid.”

Instead, it reframed the situation strategically:

“If we’re forced into bankruptcy, your entry into this promising market may stall. But if we reach agreement, you could become a leader in the health-care technology space.”

This approach reframed the threat as a reminder of shared upside.

By tying compliance to Jansen’s long-term interests, Riverside increased the chances of an integrative agreement.

When Are Threats Effective in Negotiation?

Threats tend to work best when:

• They are credible and enforceable
• The issuing party can absorb the consequences
• They are delivered calmly and strategically
• They are tied to legitimate alternatives (strong BATNAs)
• They are framed around interests, not revenge

Threats are weakest when they are:

• Emotional
• Vague
• Unrealistic
• Disproportionate
• Purely punitive

In many negotiations, a carefully articulated alternative (“We will pursue other suppliers”) is more effective than a dramatic ultimatum.

The Bottom Line on Aggressive Negotiation Tactics

The 1981 air traffic controllers strike demonstrates that threats—when carried out—can reshape negotiations and even industries.

But most negotiators do not operate with presidential authority or institutional backing.

In everyday business, workplace, and commercial negotiations, threats are blunt instruments. They may secure compliance, but they often damage trust, reduce flexibility, and foreclose creative solutions.

Used sparingly and strategically, threats can reinforce credibility.

Used impulsively, they can destroy value.

Before making one, ask yourself:

Is this advancing my long-term interests—or merely satisfying a short-term impulse?

What negotiation tactics have you found most effective? Have you ever used a threat successfully—or regretted it later?

Here are some key negotiation skills that support productive dialogue and clear communication at the bargaining table. As you prepare, consider the following questions you might ask about your negotiation situation:

• “What happened?”
• “How did a pleasant discussion turn sour?”
• “Why did the deal unravel at the last minute?”

If you’ve ever come away from a negotiation asking yourself questions similar to this, poor communication may be the reason why, writes Roger Fisher, William Ury, and Bruce Patton in their landmark book, Getting to Yes: Negotiating Agreement Without Giving In (2nd Ed., Penguin Books, 1991).

The two authors warn readers not to fall into the common negotiation trap of action and reaction:

“If the other side announces a firm position, you may be tempted to criticize and reject it. If they criticize your proposal, you may be tempted to defend it and dig yourself in… In short, if they push you hard, you will tend to push back.”

To head off this negotiation cycle, the authors promote a method that they like to call negotiation jujitsu. As in the “martial arts of judo and jujitsu, avoid pitting your strength against theirs directly; instead, use your skill to step aside and turn their strength to your ends.”

Negotiation jujitsu means breaking the vicious cycle of escalation by refusing to react negatively during a negotiation. Resistance should be channeled into other activities such as “exploring interests, inventing options for mutual gain, and searching for independent standards.”

How can negotiation jujitsu work in practice? In the 1990s, a technology start-up was seeking $10 million in financing from the Soros organization. Initial negotiations led to a stalemate. Nine months later, the Soros group returned to the negotiation table and said it was ready to work out a deal. The start-up proposed financing at a price of $1.25 per share; the Soros group countered the offer with a price of $0.50 per share. At this point, the start-up’s partners said to each other, “Here we go again. They’re not serious. Let’s move on to other funders.”

Instead of giving up, a negotiator at the start-up decided to “look behind” the Soros group’s position. Realizing that Soros doubted his company would achieve its ambitious business plan, he proposed breaking the financing into four stages of $2.5 million each, with performance targets at each stage. As a start, he proposed, the Soros group would invest $2.5 million at its preferred $0.50 per share price. Then, if the start-up met its targets, the Soros group would invest its next $2.5 million at $1.00 per share, followed by investments at $1.50 per share and $2.00 per share when subsequent milestones were met. Thanks to this exercise in negotiation jujitsu, the financing deal went through.

Which negotiation skills make you feel like a bargaining master? Share your techniques with our readers in the comments section below.

Related Negotiation Skills Article: Conflict Resolution and Opportunities for Mutual Gains

Originally published in 2010.

Adapted from “Can You Break the Cycle of Bad Communication?” by Susan Hackley, Managing Director, the Program on Negotiation at Harvard Law School for the Negotiation newsletter.

In their book Difficult Conversations: How to Discuss What Matters Most (Penguin Putnam, 2000), authors Douglas Stone, Bruce Patton, and Sheila Heen explain how to engage in the conversations—professional and personal—that most of us would rather avoid. By examining a practical case study in conflict management, they show that tough, honest conversations are not just unavoidable but essential.

For managers, these conversations are especially critical. Whether the task is changing group culture, managing conflict within a team, delivering a negative performance review, disagreeing with colleagues, or offering an apology, avoiding the conversation rarely makes the problem go away. More often, it makes it worse.

The “Third Story”: A Better Way to Begin

To set the stage for a productive discussion, the authors recommend opening a difficult conversation with what they call the Third Story. The Third Story is the version of events that a neutral observer—such as a mediator—might tell. It’s not your story or their story, but a framing of the situation that both sides can recognize as legitimate.

“The key is learning to describe the gap—or difference—between your story and the other person’s story,” Stone, Patton, and Heen write. “Whatever else you may think and feel, you can at least agree that you and the other person see things differently.”

A Simple Workplace Example

Consider a familiar workplace scenario. Two regional sales representatives share responsibility for sending weekly updates to their manager. Brad always submits the reports on time. Frank, however, frequently turns them in late.

If Brad opens the conversation by saying, “Frank, you’ve turned in the sales reports late again,” Frank is likely to feel accused and put on the defensive. The conversation stalls before it even begins.
Instead, Brad tries a Third Story opening:

“Frank, you and I seem to place a different value on deadlines. I want to explain why meeting them is important to me, and then I’d like to hear your perspective.”

This framing acknowledges a difference without assigning fault. As a result, Brad learns something important: when Frank is faced with a choice between pursuing a promising sale or stopping to complete the report, he prioritizes the sale.

Armed with this insight, Brad proposes a creative solution. When it’s Frank’s turn to complete the report, Brad will handle it—provided Frank gives him two hours’ notice and agrees to share any commission earned from continuing to pursue the lead. The arrangement respects both priorities and turns a point of friction into a workable agreement.

Why This Approach Works

The Third Story works because it:

• Reduces defensiveness by avoiding blame
• Signals curiosity rather than judgment
• Creates space for problem-solving instead of argument
• Helps uncover underlying interests that invite creative solutions

Rather than debating who is “right,” the conversation becomes about how to move forward together.

What conflict management approaches have you found most effective when conversations get uncomfortable?

Related Conflict Resolution Article: Conflict Management Skills When Dealing with an Angry Public – Here is some negotiation advice drawn from a case study of conflict management dealing with an angry public.

Adapted from “How to Say What Matters Most,” by Susan Hackley (former managing director, Program on Negotiation), first published in the Negotiation newsletter.

Originally published in 2010.