Adapted from “How Short-Term Focus Contributes to Future Disasters,” first published in the December 2008 issue of the Negotiation newsletter.
You can’t control the U.S. financial markets, but you can take these three steps to make sure your deals don’t contribute to a predictable surprise in your own home or organization:
1. Weigh long-term matters.
As you prepare for your next negotiation,take time to think about how the issues at stake could play out down the road, advises professor Kimberly A. Wade-Benzoni of Duke University. (See “Give outsiders a voice” for a list of questions to ask yourself.) Bring up these concerns when you meet with your counterpart,and remind her of the value of reaching an agreement that will stand up over time. At any point in the negotiating process, you might also make a decision tree that charts the likely long-term results of various options. In the case of the mortgage crisis, both buyers and lenders of subprime mortgages failed to realistically assess the likelihood that the buyers would be able to keep up with their mortgage payments in the months and years ahead—and the consequences of loan defaults.
2. Challenge broken systems.
Because our cognitive biases are so deeply ingrained, simply talking about future concerns isn’t enough to ward off predictable surprises.You’ll also need to evaluate whether certain groups and structures in your organization are promoting short-term thinking at the expense of the future.
Perhaps your company’s board of directors focuses myopically on short-term earnings reports. Maybe Your company spends too much on lavish retreats. (AIG General, a subsidiary of American International Group, spent $442,000 on a retreat for top sales agents just a week after the U.S. government saved the insurance giant from bankruptcy with an$85 billion loan.)Brainstorm ways to fix the system and then lobby influential others to support your ideas.
3. Negotiate in stages.
Negotiators often get into trouble when they implement long-term contracts for complicated, risky ventures. That was the case in 1998 when the U.S.spy satellite agency, the National Reconnaissance Office (NRO),awarded Boeing a $5 billion, five year contract to build two different complex satellite systems. Six years later and billions of dollars over budget, NRO fired Boeing for failing to deliver. The lesson: Negotiate One project at a time, and insist on incremental progress before awarding additional work.