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.

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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.

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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.

Faculty: Daniel L. Shapiro

In conflicts and negotiations, emotions are inevitable. Whether you’re hammering out a labor contract, purchasing a new home, negotiating a multibillion-dollar acquisition, or mediating peace with hostile parties,
emotions play a powerful role.

Left unchecked, emotions can turn productive negotiations into unprofitable disasters. Managed properly, however, they can serve as a lever for creating greater value, exerting more control, and achieving better outcomes.

In this fascinating workshop, you will discover a powerful framework for understanding and addressing the challenging emotional dynamics that arise in everyday negotiations and conflicts. Drawing on the latest research in the areas of psychology, neuroscience, and negotiation, this popular one-day session will help you address the emotional obstacles that prevent you from building stronger relationships and obtaining better results. In this highly interactive program, you will:

• Discover how dealing with emotions gives you more power and control, both in negotiations and in relationships
• Learn practical tools to navigate emotional challenges and complex relations
• Examine the five core concerns that stimulate the emotions that arise in negotiations
• Gain an essential framework to better negotiate the emotional challenges you face every day

If you’ve ever owned a cell phone or been issued a credit card, chances are you’ve signed an arbitration agreement. You may also have signed one when you started your current job or a previous one, whether you recall it or not. In 2010, 27% of U.S. employers reported requiring their employees—an estimated 36 million people—to sign arbitration agreements, according to the National Employment Lawyers Association.

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What is an arbitration agreement? It’s typically a clause in a broader contract in which you agree to settle out of court, through arbitration cases, any dispute that arises with your counterpart. Arbitration agreements are common in consumer contracts and employment contracts, but they can be proposed additions to any contract negotiation in which one or both parties would like to head off the possibility of a future lawsuit.

To reduce the costs and improve the efficiency of dispute resolution, businesses often require that their customers and employees to sign an arbitration agreement. Unfortunately, however, because arbitration clauses often appear as “fine print” in lengthy standard contracts, people often sign arbitration agreements without realizing that they are doing so.

What is arbitration?

In arbitration, a trained, professional, and neutral arbitrator acts as a judge who will render a decision to end your dispute. Arbitrators are often retired judges, but that doesn’t mean they follow traditional legal procedures to the letter. Arbitration is actually a highly flexible process whose ground rules are open to negotiation (for more on the differences between arbitration and mediation, read also Undecided on Your Dispute Resolution Process? Combine Mediation and Arbitration, Known as Med-Arb).

Arbitration guidelines tend to be the following, write Sarah Rudolph Cole and Kristen M. Blankley in their chapter, “Arbitration,” in The Handbook of Dispute Resolution (Jossey-Bass, 2005). Together, the parties choose an arbitrator from a list provided by an arbitration firm. The arbitration is held in a private conference room rather than a public courtroom. The arbitrator begins by presenting the ground rules; then each party makes an opening statement, or their lawyers do. Next, each party presents its evidence and, if necessary, brings in witnesses to support its claims. During this time, the arbitrator may ask questions to clarify her understanding of the issues (for more on the pros and cons of arbitration versus mediation as a dispute resolution procedure, see also Mediation and the Conflict Resolution Process).

Finally, the parties deliver closing statements and, in some cases, submit post-hearing briefs that summarize their arguments. Then, within the parties’ deadline, the arbitrator issues a written decision or award, sometimes with an opinion attached. Unlike in litigation, the arbitrator’s decision usually cannot be appealed.

Benefits of arbitration

As compared to a lawsuit, arbitration is relatively inexpensive, brief, and confidential. The courts usually refuse to overturn arbitrated decisions and can step in to make sure they are enforced. This means that arbitrations lead to final outcomes that allow parties to move forward, while also avoiding the public scrutiny that can accompany a court trial.

In addition, arbitration allows for more creative rulings than civil courts can issue. If you sue your former employer for wrongful termination, for example, the court can award you only monetary damages, according to Cole and Blankley. By contrast, in addition to (or instead of) awarding damages, an arbitrator could order the company to reinstate you.

Should you sign an arbitration agreement?

Employers often include mandatory-arbitration clauses in their employment contracts, as do many companies that conduct business with consumers. In arbitration lingo, repeat players are parties that frequently participate in arbitrations to avoid lawsuits, according to Cole and Blankley. By contrast, one-shot players, often individual consumers, have little experience with arbitration.

One-shot players in consumer contract disputes are often at a disadvantage in arbitration, as they may lack the experience and resources necessary to mount a strong case. If you got into a dispute with your cell-phone company over a late payment, for example, you might well be the underdog in any arbitration that followed.

Consumer advocates have fought the corporate practice of requiring consumers to sign arbitration agreements on the grounds that consumers usually aren’t aware they’ve waived their litigation rights and because arbitration decisions routinely favor companies over consumers (for more information on disputes routinely resolved through arbitration-mediation, see also Employee Grievances: Are Most Legal Disputes Resolved in Litigation or Arbitration?). In an examination of 19,000 California mandatory-arbitration cases handled in 2003 by arbitrators appointed by the for-profit National Arbitration Forum (NAF), the nonprofit watchdog group Public Citizen found that companies prevailed over consumers in a whopping 94% of the disputes.

By contrast, arbitrations between organizations that both have strong resources tend to be more balanced, as in the case of a company and a labor union that are trying to resolve a collective-bargaining agreement or two companies arguing over a possible patent infringement.

Should you sign an arbitration agreement? If you agree to engage in a possible future arbitration voluntarily, mutually determine the ground rules of arbitration and agree to choose an impartial arbitrator together, you are likely to find arbitration to be not only inexpensive and fast but also fair. By contrast, if you feel you’re being pressured into signing an arbitration agreement, consult with a lawyer and discuss your options and possible future scenarios.

What do you think about arbitration agreements? Leave a comment.

Related Article: What is Dispute Resolution in Law: The Ins and Outs of Arbitration

For more information on the three basic types of conflict management, see also: What are the Three Basic Types of Dispute Resolution? What to Know About Mediation, Arbitration, and Litigation

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To hear some salespeople and service representatives tell it, difficult customer behavior seems to be at an all-time high. Stories of demanding or confrontational customers circulate widely in the press and on social media, while customers themselves increasingly complain that their needs are being overlooked by companies focused primarily on the bottom line. Executives and managers struggling to determine how best to respond would be wise to start by examining the potential triggers behind this behavior. When customers lash out or make seemingly unreasonable demands, it may reflect business practices that have pushed them to their limits. Understanding what drives these interactions is essential, and often more productive than quickly labeling customers as “difficult.”

In particular, you may be able to increase customer satisfaction by focusing on your employees’ working conditions and training. The following guidelines can help your organization reduce the odds of dealing with difficult people in the first place.

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Give Employees the Tools They Need to Know How to Deal With Difficult Customers

When it comes to handling stressful situations at work, employees may lack the authority, guidance, and skills they need to make appropriate decisions when dealing with customers. Consider the much-publicized forcible removal of a passenger, Dr. David Dao, from a United Airlines flight on April 9, 2017. After Dao refused to give up his seat to a flight crew member, United personnel called in airport security officials, who dragged Dao off the plane, leading him to suffer injuries and be hospitalized, according to his attorney. Video of the incident went viral and provoked outrage from the public.

After initially framing Dao as a difficult customer, United eventually apologized for the incident and announced new policies aimed at preventing similar debacles in the future, such as not requiring boarded passengers to give up their seats, not asking law enforcement to remove passengers overbooking issues, and raising the maximum sum offered to passengers to relinquish their seats from $1,350 to $10,000.

Sometimes customers are unfairly labeled “difficult people” due to inadequate, confusing, or poorly thought-out policies and protocol. By setting clear standards regarding the treatment of customers, managers can help employees better manage challenging situations and ensure that all parties are treated with dignity and respect. After clearly defining policies, managers should empower employees to make wise, humane decisions within those boundaries.

Increase Employee Satisfaction

Customer dissatisfaction can be a natural outgrowth of employees’ dissatisfaction with their work. According to a 2013 study by Shu-Cheng Steve Chi of National Taiwan University and his colleagues published in the Negotiation Journal, the degree to which salespeople enjoy their work has a significant impact on customer satisfaction with the outcome of sales negotiations.

The study examined negotiations over the price of eyewear between salespeople and customers at the stores of a large Taiwanese eyeglasses company. Salespeople who reported high levels of job satisfaction and who spent a relatively long amount of time introducing the store’s products and services achieved relatively high levels of customer satisfaction. In fact, employee satisfaction was more effective than price concessions at promoting customer satisfaction. By contrast, salespeople who were relatively unsatisfied with their jobs were unable to capitalize on the time they spent introducing products and services to customers.

The results suggest that organizations may be able to improve customers’ satisfaction and generate repeat business, by taking steps to improve employee satisfaction, particularly by ensuring they have sufficient time to engage with customers and by training employees in effective communication strategies. The more satisfied a customer is, the less likely she is to engage in behavior that employees find to be difficult.

Teach Employees Conflict Resolution Skills

When it comes to learning how to deal with difficult customers, customer service personnel are often taught to adhere to simple rules of thumb, such as “The customer is always right.” But when dealing with difficult customers, employees need more than just platitudes; they need the appropriate tools.

Conflict resolution training can be a powerful means of enabling employees to defuse rather than escalate confrontations with angry or otherwise difficult-seeming customers.

Through training in interest-based conflict resolution, employees can learn active-listening skills that will enable them to identify the interests underlying a customer’s anger or frustration. By giving customers an opportunity to express their viewpoints fully, without interrupting them or becoming defensive, employees can gain a deeper understanding of what went wrong and how they can help fix the situation to make the client happy. Customers who make seemingly unreasonable demands could believe it is their only way of being heard. When they find someone who is willing to listen without judgment, they are likely to lower their demands and become a lot more open to searching for shared solutions.

What strategies have you used when deciding how to deal with difficult customers? Share your experiences with our readers in the comments section.

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In early 2022, just as much of the world was beginning to emerge from strict Covid restrictions, Russia’s unprovoked war on Ukraine sent shockwaves across the globe. The Program on Negotiation’s Top 10 Notable Negotiations of 2022 highlight the diplomatic efforts aimed at ending the conflict and mitigating its consequences, along with a range of significant government and business negotiations that shaped the year.

10. Bringing Brittney Griner home. In government negotiations to secure the release of Women’s National Basketball Association star Brittney Griner from Russia, where she was imprisoned for bringing cannabis oil into the country, U.S. president Joe Biden faced wrenching choices. The Kremlin insisted it would trade only Griner for notorious Russian arms dealer Viktor Bout, imprisoned in the States, and would not include former U.S. Marine Paul Whelan, serving 16 years in Russia on espionage charges. In a deal that highlights the challenges of negotiating with ruthless opponents like Russian president Vladimir Putin, Biden opted to bring Griner home.

9. Complicitors in the downfall of FTX. Early in 2022, Sam Bankman-Fried raised $500 million from investors for FTX, his cryptocurrency exchange, by making a “take-it-or-leave-it offer,” the New York Times reports. Without leaving room for negotiation, Bankman-Fried told investors he planned to run the company with little oversight and encouraged them to “support him and observe,” according to one investor who heard the pitch. By the end of the year, FTX had collapsed, and Bankman-Fried had been arrested for wire fraud, money laundering, and other charges. The fact that so many seasoned investors fell for FTX’s claims highlights the risk of becoming complicit with wrongdoing in negotiation.

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8. A surge in strikes. As in 2021, labor shortages gave workers leverage to demand better treatment from their employers. When New York City and several states moved to reduce the persistent earnings gap between men and women by requiring employers to include salary ranges in job ads, numerous companies started doing so voluntarily. Many workers successfully voted to unionize, including employees at 200 Starbucks stores. In addition, strikes were up 39% in 2022 over last year. The University of California reached a tentative agreement to end a strike by about 36,000 employees, promising wage increases of up to 55%. These trends show the power individuals can gain by forming coalitions intent on change.

7. Consolidation is blocked in publishing. In the realm of M&A negotiation, the Biden administration continued its efforts to curb corporate consolidations and promote competition. Most notably, in October 2022, the Justice Department won its bid to block publisher Penguin Random House’s planned $2.18 billion acquisition of rival Simon & Schuster. The outcome had some experts wondering if Amazon would be the next target of the government’s efforts to promote competition in publishing.

6. Elon Musk’s Twitter debacle. Most of 2022 was consumed with the question of whether Tesla CEO Elon Musk would buy Twitter. After he finally did, in October 2022, the rest of the year was taken up with the question of whether Twitter would survive Musk. The leader’s disastrous postdeal moves—from laying off key personnel to crowdsourcing pivotal business decisions in Twitter polls—shine a spotlight on a common negotiation mistake: focusing more on closing a deal than on what will happen when it does.

5. An ambitious global agreement on biodiversity. In December, all nations but two—the United States and the Holy See—approved a sweeping United Nations agreement aimed at safeguarding 30% of the Earth’s land and oceans by 2030 and taking other actions to prevent biodiversity loss. The nonbinding agreement is an attempt to stem a projected extinction of one million plants and animals in the decades ahead as a result of climate change, agriculture, overfishing, pollution, and other factors attributed to humans. U.S. participation was blocked by Republicans, who appeared to view the talks as a win-lose negotiation between business and environmental interests.

4. A rail strike averted. The specter of a strike or lockout loomed over a high-stakes labor dispute between U.S. freight rail companies and their employees’ labor unions. With almost one-third of U.S. freight carried by rail, an interruption in service was expected to devastate the economy. The parties reached a deal, but a majority of union members then rejected it, angered by a requirement that they use unpaid leave to attend medical appointments. Congress swooped in, voting overwhelmingly to impose the agreement and avoid a work stoppage.

3. Congress passes a gun-safety deal. Against long odds, the U.S. Senate passed a bipartisan gun-safety bill, which Biden signed into law on June 25. In the aftermath of mass shootings in Buffalo, New York, and Uvalde, Texas, 15 Republican senators were willing to make concessions on their party’s steadfast resistance to gun-control measures. The behind-the-scenes maneuvering offers advice to those working on closing the deal in negotiations, including the importance of selling your agreement to constituents and framing the deal for maximum impact.

2. A modest—but critical—agreement between Russia and Ukraine. After Russia blockaded the Black Sea at the start of its war on Ukraine, most of Ukraine’s abundant grain harvest was trapped in silos. Without it, famine and political unrest were real risks in East Africa and the Middle East. A three-month international negotiation process led to a July agreement between Russia and Ukraine to bring more grain to market. Russia briefly withdrew from the deal in October 2023, after accusing Ukraine of using the maritime corridor to stage military attacks, but the parties managed to extend the deal, which has eased food prices worldwide. It was a small sign of hope amid a brutal conflict.

1. The West unites on Russia sanctions. Just days after Russia attacked Ukraine on February 24, the European Union, Canada, the United Kingdom, and the United States announced they would unleash the most punishing sanctions package ever deployed against a single country—the result of feverish negotiations that caused the Russian ruble to collapse. The determination and tenacity of the Ukrainian people and their leader, President Volodymyr Zelensky, inspired the usually fractious parties in the West to come together. Sanctions haven’t stopped Putin’s war, but they have hampered his ability to fight it.

What other negotiations would you add to this list of Top 10 Notable Negotiations of 2022?

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When they think of negotiation, many people imagine a positional bargaining scenario where two people are haggling back-and-forth over the price of an item, both refusing to budge. In positional bargaining, “each side takes a position, argues for it, and makes concessions to reach a compromise,” write Roger Fisher, William Ury, and Bruce Patton in their classic negotiation text Getting to Yes: Negotiating Agreement Without Giving In.

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Positional bargaining may sound like business as usual, but it shouldn’t be. In fact, positional bargaining is typically an ineffective way of reaching an agreement for numerous reasons, including the following three, according to the authors of Getting to Yes:

1. Positional bargaining produces unwise agreements. Negotiators who bargain over positions are typically reluctant to back down. Parties become so interested in “saving face” that they lose sight of what else they might gain.
2. Positional bargaining is ineffective. In positional bargaining, negotiators often try to best their counterpart by opening with an extreme position and then focus only on how to counteroffer without budging. Extreme offers and small concessions can drag out the negotiation process much longer than it needs to be.
3. Positional bargaining harms the relationship. Positional bargaining often becomes a “contest of wills,” with each side trying to pressure the other to back down. “Anger and resentment often result” if one party thinks they have sacrificed too much, according to Fisher, Ury, and Patton.

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Beyond Positional Bargaining

How can negotiators move beyond the natural tendency to engage in positional bargaining and capitalize on the benefits of negotiation in business, while preserving and even improving their relationship? Here are some useful skills needed for negotiation:

1. Move beyond positions to interests. In positional bargaining, negotiators often become so focused on their demands that they forget to explain why they want what they want. Take the classic example of two sisters arguing over a single orange. One sister wants the orange rind for a cake she’s baking, and the other sister wants to squeeze the orange to make juice. A split-the-difference, positional bargaining outcome might result in them simply arguing over the orange and, eventually, reluctantly deciding to cut it in half. Only by revealing the interests underlying their positions could they reach a mutually beneficial outcome—the rind for one sister and the juice for the other. Revealing the interests behind your position is the key to creative dealmaking.
2. Strive to create value, not just claim it. In positional bargaining, negotiators assume that whatever they achieve comes at the other party’s expense, and vice versa. This fixed-pie mindset stands in the way of value creation, which begins with the type of exploration of interests we just described. Returning to the orange example, what if the sisters discussed ways to get more oranges so they’d have more rind and juice to divide? To move beyond a value-claiming negotiation, you will need to view each other as collaborators, not just competitors.
3. Be inquisitive. Opening up about your interests will help you move beyond positional bargaining, but don’t assume your counterpart will be as forthcoming. Explain that you’re looking to expand the number of issues up for discussion in the hope of identifying tradeoffs and improving both parties’ outcomes. Ask questions about their interests; your counterpart will likely ask you questions in return. This type of dialogue is likely to identify issues that one party values less and the other party values more, setting you up for efficient trades—as in the case of one sister giving up the rind to get the juice of the orange, and vice versa.
4. Focus on relationship building. Though some negotiations are one-off interactions, as in the case of a negotiation between a tourist and a vendor at a rug bazaar, negotiations generally tend to be between people who might, or will definitely will, have an ongoing relationship with each other. To ensure you don’t get trapped into positional bargaining, you might tell your counterpart upfront that you hope to build a trusting relationship by ensuring that both parties are satisfied with the final deal. Explain that this doesn’t mean you’re going to make a lot of concessions, but that you see value in working together to explore interests and identify issues—fundamental aspects of negotiation. Taking time to build rapport through “small talk” can also help establish a basis of trust.

 What other strategies do you recommend for moving beyond positional bargaining?

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A series of eye-popping agreements negotiated among a small number of players in the artificial intelligence (AI) field is raising concerns about the potential risks of so-called circular deals.

In September, OpenAI, the maker of ChatGPT, reached a deal to receive up to $100 billion in investments from chipmaker Nvidia to build data centers. “The partnership can be considered circular,” writes CPA Brian Colello for investment research firm Morningstar, “as OpenAI will likely buy gear from Nvidia, which will reinvest those profits in OpenAI, which will likely use those funds to buy even more Nvidia gear.”

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Then, in early October, OpenAI announced another huge deal with a different chipmaker, Advanced Micro Devices (AMD). In exchange for up to a 10% stake in AMD, OpenAI agreed to purchase AMD’s chips for an undisclosed sum, writes Rob Wile for NBC News. “AMD is selling OpenAI both its chips and itself,” which makes it an “unusual deal,” writes Stephen Council for SFGate.

In such so-called circular deals, “investment money is flowing between companies that also buy from or sell to one another,” according to Council. Circular deals have become common in the AI industry, where a small number of companies are “turning to one another for the vast amounts of capital and computing power needed to drive their breakneck growth,” according to Wile. As he describes: “Nvidia plans to invest in OpenAI, which is buying cloud computing from Oracle, which is buying chips from Nvidia, which has a stake in CoreWeave, which is providing artificial intelligence infrastructure to OpenAI.”

“OpenAI is the many-tentacled octopus in the middle, spinning its achievement of ChatGPT into a blitz of speculative investments,” Council concludes.

Bubble or Sustainable Growth?

Circular deals can resemble “round-tripping,” in which companies agree to buy each other’s goods or invest in each other in order to post inflated revenue—without actually increasing their profits. Such negotiated agreements can raise red flags in the marketplace about the companies’ financial health, and they may also violate regulatory and other laws.

In the AI realm, concerns are mounting that insular growth is contributing to a bubble—“a market not actually supported by real consumer demand,” explains Council—that could burst spectacularly. OpenAI and other top firms in the AI industry will need to “generate huge revenues and profits to pay for all the obligations they are signing up for” while also keeping investors happy, according to OnePoint BFG Wealth Partners Chief Investment Officer Peter Boockvar.

Some of the recent deals, including that between Nvidia and OpenAI, remind investment advisers of those that preceded the burst of the dot-com bubble in 2000, according to NBC News. In a note to clients, Bespoke Investment Group called the Nvidia-OpenAI deal “a troubling signal about how self-referential the entire [AI] space has become,” CNBC reports.

“Anyone scarred by the dot-com bubble bursting is keenly aware of the risks of a circular deal in which firms pass funds back and forth to prop up a business,” writes Colello.

“It’s kind of like having your parents co-sign on your first mortgage,” industry analyst Jay Goldberg said to Bloomberg of the circular arrangements. And short seller Jim Chanos posted on X: “Don’t you think it’s a bit odd that when the narrative is ‘demand for compute is infinite,’ the sellers keep subsidizing the buyers?”

Yet others are less worried about the possibility of a burst AI bubble. “We are keeping an eye on these types of deals, but we’re not yet alarmed by them and think of them as arm’s-length transactions,” writes Colello of Morningstar. The fact that “AI demand is both real and booming” alleviates serious concerns, at least for the time being, he says.

Avoiding the Risks of Circular Deals

Beyond the AI realm, how can business negotiators ensure that they don’t expose themselves and others to the significant risks of circular deals?

First, be sure to seek out deals with a wide variety of partners rather than tying your business’s fortunes to a small circle within your industry. Just as investors reduce risk by diversifying their portfolio, dealmakers can do the same by branching out beyond the most obvious buyers or sellers.

Second, ensure your agreements have real financial value. Try separating investment arrangements from sales negotiations to lessen the possibility that a quid pro quo could drive dealmaking. If the sales part of the negotiation doesn’t make economic sense, that’s a sign that any deal reached could pose significant risk.

Finally, be sure to cover a wide range of issues in your negotiations. The presence of multiple issues can inspire creative brainstorming and beneficial trade-offs that draw on the parties’ differing preferences. This, in turn, could lessen the need for parties to resort to back-and-forth financial favors as a means of getting ahead.

What types of experiences have you had with circular deals?

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Taylor Swift has repeatedly proven to be a negotiation mastermind, as when she took her music off streaming sites in 2014 to prompt them to increase their royalty rates, or bypassed movie studios in 2023 to bring her Eras Tour concert film to big screens. But for years, Swift was continually stymied by her biggest negotiation goal: securing ownership of the master recordings of her first six albums.

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“The Magic’s Not Here No More”

At age 15, up-and-coming Swift signed with Nashville-based record label Big Machine Label Group (BMLG), owned by Scott Borchetta, in 2005, and went on to release six albums with the label. In 2018 contract renegotiations, Swift asked BMLG for ownership of her master recordings, which would give her control over royalty distribution. According to Swift, BMLG offered her only the right to “earn” her albums back, one for every new album she produced.

Swift refused and instead signed with Republic Records, which guaranteed her full ownership of her new music. “I walked away [from BMLG] because I knew once I signed that contract, Scott Borchetta would sell the label, thereby selling me and my future,” Swift wrote in an online post. “I had to make the excruciating choice to leave behind my past.”

“Break Me Like a Promise”

Indeed, BMLG—and Swift’s back catalog—was quickly bought by music manager Scooter Braun’s company Ithaca Holdings. Swift called the sale her “worst-case scenario”: She accused Braun, along with his clients Kanye West and Justin Bieber, of bullying her in the past on social media.

Swift tried to purchase her masters from Braun, but she accused him of bad-faith negotiations. He sold Swift’s catalog in late 2020 to investment firm Shamrock Holdings. Shamrock reportedly offered to sell Swift her masters, but with a string attached that Swift called a “non-starter”: Braun would continue to have a financial stake in her work.

“Somethin’ ’Bout It Felt Like Home”

Beginning in 2021, on the suggestion of singer Kelly Clarkson, Swift embarked on an ingenious way of “taking back what’s mine,” as she put it: She began rerecording her first six albums, note for note, and releasing them with new art, incentives, and previously unheard “vault tracks.” The goal? To render her original recordings irrelevant and “at least partially ensure that profits from the streams, sales, and licensing of her songs will go into her pockets, not Braun’s,” according to Parade.

Between 2021 and 2023, Swift released relatively faithful rerecordings of albums Fearless, Red, Speak Now, and 1989. With their trademark enthusiasm and loyalty, Swifties snapped up these so-called Taylor’s Versions and shunned the original recordings. The rereleases had the intended effect of dramatically diminishing the originals’ financial value to Braun and Shamrock, according to Billboard. “With the help of fans, [Swift] devalued her old music—shorted her own stock—then bought it at a discount,” sums up Tyler Foggatt in the New Yorker.

“This Thing Was a Masterpiece”

In early 2023, Swift embarked on her wildly popular Eras Tour, a 3.5-hour concert odyssey that spanned her catalog and the globe. With $2 billion in ticket sales, it was the highest-grossing tour of all time—and made Swift a billionaire.

Swift’s fans eagerly speculated about when she would drop her final two album rerecordings, Taylor Swift and Reputation. Instead, on May 30, 2025, she announced she had regained ownership of the master recordings of her first six albums. Shamrock reportedly sold them to her, along with related assets, for a reported $360 million—about what it paid for them in 2021, according to Billboard.

In a message on her website, Swift described herself as “Elated and amazed,” writing, “To say this is my greatest dream come true is actually being pretty reserved about it.” She credited her fans’ “passionate support” for enabling her to close the deal.

“I Kept You Like an Oath”

Here are three takeaways from Swift’s pursuit of her negotiation goal:

1. “Time won’t fly”: Play the long game. “People often greatly underestimate how much I will inconvenience myself to prove a point,” Swift said in 2022. Her decision to rerecord her early albums was certainly an inconvenience—but a shrewd and ultimately rewarding one.

Patience, fortitude, and tenacity may be needed to meet ambitious goals. Take inspiration from Swift, and never give up.

2. “You double-cross my mind”: Undercut their BATNA. “To Taylor, the re-records started as a strategic lever that put the hostage holders of her music under the heel of her sparkly stiletto,” writes Sarah Chapelle in her Swift newsletter, Liner Notes. “With each release cutting into profits, her point became more clear and costly.”

In negotiation terms, with each rerecording, Swift worsened her opponents’ BATNA, or best alternative to a negotiated agreement. In the process, she accumulated riches that put the cost of buying back her masters within reach. Some of Swift’s fans joked that, with their ticket and album purchases, they had unwittingly contributed to an elaborate GoFundMe campaign.

Many negotiators recognize the value of improving their own BATNA but overlook the possibility of worsening their counterpart’s BATNA—a strategy that can be just as valuable. Notably, these are often “away from the table” moves carried out before a negotiation gets underway.

3. “It was rare, I was there”: Enlist your allies. The rerecordings were not just a “zero sum game” or a waste of time, according to Chapelle. For both the artist and her supporters, the re-releases became “emotionally tethered” to the Eras Tour in a way that was “transformative and healing and valuable”—as anyone who belted out the 10-minute Taylor’s Version of her song “All Too Well” in a stadium experienced.

Moreover, “Taylor’s battle was always much bigger than her,” writes Rob Sheffield in Rolling Stone. “She’s taking on the whole issue of artists controlling their own work”—a negotiation goal that artists as big as Prince and Paul McCartney struggled to meet.

While some labels are now making it more difficult for artists to rerecord their work, Swift says new artists are telling her they’ve negotiated ownership of their masters “because of this fight.” Other musicians are reclaiming older work through rerecordings. That’s a real legacy to leave.

What other lessons do you see in Taylor Swift’s pursuit of her negotiation goals?

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Since the Taliban moved in to fill the power vacuum created by the U.S. withdrawal from Afghanistan in 2021, the rights of women and girls have severely eroded in the country, said activist and Nobel Peace Prize–winner Malala Yousafzai at a March 23 Program on Negotiation (PON) event at Harvard Law School. Today, Afghan women are largely forbidden from working outside their homes, and girls older than 11 are not allowed to attend school.

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Yousafzai was visiting PON for a screening of Bread and Roses, a documentary she produced with actor Jennifer Lawrence that shows how the lives of three Afghan women have narrowed since the Taliban regained power. After the screening, PON Faculty Chair Guhan Subramanian interviewed Yousafzai and Gaisu Yari, a policy manager at Yousafzai’s nonprofit, the Malala Fund. (The interview can be watched here.) Subramanian noted that Yousafzai and her husband, Asser Malik, are graduates of one of PON’s negotiation courses, which they signed up for without fanfare.

An advocate for women and girls’ rights from a young age, Yousafzai survived an assassination attempt by the Pakistani Taliban at age 15.

Since retaking control of Afghanistan in 2021, the extremist group has issued more than 230 decrees targeting women and girls, according to Yari. “They are trying to make Afghan women and girls invisible,” she said. The Malala Fund is working to make the type of gender apartheid practiced by the Taliban a crime against humanity under international law.

The fund also supports the education of Afghan girls in secret schools, which are often run by Afghan women in exile. The girls receive lessons on the radio, on TV, and online. “We’re trying everything,” said Yousafzai. Girls are passing on their newfound knowledge to other girls in their communities, acting as “students and teachers at the same time.”

A Call for Support

Yousafzai noted that “women have been excluded from peace talks between the Taliban and the United States. The Taliban demanded that women could not be in those rooms, and the world accepted that.”

She called on international negotiators to make women’s rights and girls’ education a nonnegotiable condition in any conversations with the Taliban and to ensure that Afghan women and girls are represented at the negotiating table. “You cannot determine the future of a country when half of the population is held back,” she said.

The Taliban’s infringements on women’s rights are often treated as a cultural or religious issue. But, noting that other Muslim countries do not impose such restrictions, Yousafzai asserted that there is “nothing Islamic” about the Taliban mindset: “It’s their patriarchy, their misogyny.” She encouraged other governments to treat the Taliban’s negotiating conditions as a human rights issue, not a religious one.

Governments contribute to the problem when they ignore it, according to Yousafzai. When the Taliban foreign minister visited India, she noted, his delegation excluded women journalists from a press conference. “They aren’t just making Afghan women invisible,” she said. “The more we look away from it, we normalize it.”

“Afghan women are very brave, resilient, and courageous, but this is a call for more support and global solidarity,” said Yousafzai. “Afghan women should not be alone in this.”

Standing Up for Human Rights

“Your support is way more powerful than you can imagine,” said Yousafzai. “So, let’s challenge ourselves to protecting human rights.”

Students, lawyers, and others can educate themselves about the Taliban’s erosions of women’s and girls’ rights online at the Afghanistan Justice Archive. The archive documents Taliban decrees and how they affect women and girls. In addition, those seeking to help can lobby policymakers to “center the voices of Afghan women and girls,” Yari said.

Subramanian asked Yousafzai what Afghan men were doing to try to stand up for women’s rights. It’s challenging for men to come forward, she said, as they can be punished for not “controlling their women.” Further, because there is no judicial system in Afghanistan, citizens cannot defend themselves against unjust charges. But some men, she said, were finding ways to speak out through storytelling, art, and music.

The ban on girls’ education and work for women in Afghanistan should serve as a “wake-up call  to reflect on how few protections there actually are for women and girls” worldwide, said Yousafzai. The Malala Fund gives grants to local education organizations in many countries, including Pakistan, Nigeria, Ethiopia, and Brazil. “We have changed laws in so many places, increased the budget in so many places, and reduced dropout rates.

“I believe in the power of one voice starting a change,” said Yousafzai, “but I believe even more in the power of collective work and activism. We can really shift the narrative when we join hands.”

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When considering how to manage difficult staff, leaders often fall back on generational stereotypes, both positive and negative. Baby boomers (born 1946–1964) are often characterized as self-absorbed and technophobic but hardworking. Members of Generation X (born 1965–1980) tend to be viewed as independent but, at times, disengaged. Millennials (born 1981–1996) have been stereotyped as tech-savvy and ambitious but less loyal to employers.

Now the newest generation to enter the workforce, Generation Z (born 1997–2012), is receiving its own round of tough feedback. In June 2023, ResumeBuilder.com surveyed 1,344 managers and business leaders about their perceptions of Gen Z employees, and the results suggested room for improvement. Nearly three-quarters (74%) of those surveyed said they found these younger employees more difficult to work with than older colleagues. Almost half (49%) said they found it difficult to work with Gen Z employees all or most of the time.

Managers attributed these struggles to perceptions that Gen Z workers lack technological proficiency (39%), effort (37%), and motivation (37%). Some respondents also raised concerns about communication skills and described Gen Z employees as overly sensitive to constructive feedback.

At the same time, many leaders pointed to Gen Z’s strengths. Some praised these employees as innovative and adaptable, and others said they valued their commitment to diversity, social justice, and ethical concerns in the workplace.

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A Historic Setback

If some Generation Z employees appear to fall short of older colleagues on certain professional traits, this may reflect broader forces rather than individual failings. Most notably, many Gen Z workers entered the workforce during the Covid-19 pandemic, often onboarding remotely and starting their careers without the benefit of in-person training or informal mentoring.

As journalist Daniel de Visé writes in the Hill, these workers “lacked face time and human contact at a foundational moment in their careers.” The pandemic-era disconnect, he suggests, may have left some younger employees professionally stunted, at least temporarily.

“You learn a lot by being onsite in the early years of your career,” ResumeBuilder.com chief career adviser Stacie Haller told The Hill, including “how to interact on a team, how to accept positive criticism, how to give positive feedback.” Employees who began working during the pandemic likely received less of this guidance than previous generations. They also experienced fewer spontaneous interactions with colleagues, the kind that quietly build confidence, judgment, and rapport.

What’s more, this pattern is not new. Millennials, now often preferred by managers, “struggled with some of the same ennui now afflicting Generation Z,” according to de Visé. A 2016 Gallup report, found that only 29% of millennials—then largely in their twenties—felt engaged at work, and many reported feeling misunderstood. Today, those same employees, now more established, are among the leaders trying to make sense of the next generation.

For leaders wondering how to manage difficult staff, it’s worth remembering that the most common challenge facing newcomers is one that tends to resolve itself over time: inexperience.

Wondering How to Manage Difficult Staff?

If you’re trying to figure out how to manage difficult staff and your most challenging employees tend to be new to the workforce, consider the following strategies:

• Get them the training they need. What looks like a lack of effort or poor communication may reflect inadequate training rather than unwillingness. Many younger employees missed out on foundational workplace learning due to remote onboarding and limited supervision during the pandemic. It’s not always easy to remember what it felt like to be new, but doing so is essential if leaders want to help employees succeed. In particular, consider investing in training that helps employees build communication, collaboration, and conflict-resolution skills. These capabilities are essential for managing difficult conversations and can strengthen the organization as a whole.
• Avoid overgeneralizing. When dealing with difficult staff, it’s tempting to rely on generational shorthand. Doing so, however, risks marginalizing employees based on age rather than behavior. “Bias against younger workers is unacceptable and no different than the ageism that we typically see against Baby Boomers,” Haller has noted. Instead of viewing an employee as a stand-in for an entire generation, consider the specific circumstances they’ve faced, such as starting a career during a global crisis.
• Try “reverse mentoring.” In her book, Reverse Mentoring: Removing Barriers and Building Belonging in the Workplace, Patrice Gordon makes the case for pairing senior employees with junior ones in two-way learning relationships. Reverse mentoring allows younger employees, particularly those from historically underrepresented groups, to share perspectives on issues such as technology, inclusion, and workplace culture. These programs can spark productive, sometimes difficult conversations across generations and levels of experience. They also reinforce an important truth: everyone has something valuable to contribute.

What other advice would you offer to leaders who are wondering how to manage difficult staff?

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