“A huge mistake.” “A shot in the dark.” “An audacious move.” Those are just a few of the media’s characterizations of the business partnership agreement between wireless carrier AT&T and media and entertainment firm Time Warner (now known as WarnerMedia). It was the biggest merger of 2016, with $85.4 billion in cash and stock transferring from AT&T to Time Warner, and also one of the most controversial of the year.

The merger would make AT&T the first U.S. wireless company to compete nationally with cable companies by offering an online-video bundle, similar to a cable-TV package, that would include Time Warner networks CNN, HBO, and TNT, as well as Warner Bros. productions. Meanwhile, Time Warner, long tethered to the cords of cable TV, would finally move into the wireless world.

Some analysts believed the move would help both companies grow. But U.S. regulators scrutinized the merger closely, concerned that industry consolidation would reduce competition and raise consumer prices.

We take an in-depth look at the deal and identify key lessons for negotiators facing the prospect of new business partnership agreement.

A business partnership agreement origin story

The first sparks between AT&T and Time Warner were ignited when Hollywood executive Peter Chernin, chairman and CEO of The Chernin Group and a partner with AT&T in an online media venture, met AT&T CEO Randall Stephenson over dinner on Martha’s Vineyard. Chernin, who had recently had a discussion with a high-ranking Time Warner executive, urged Stephenson to look into acquiring the media company for its content.

“That’s when I got it in my mind that these two companies could work together,” Stephenson told Bloomberg News. Facing the market saturation of its wireless business, AT&T was looking for ways to grow. Its satellite-TV service, DirectTV, was threatened by the increase in online and mobile viewing nationwide. Stephenson trusted in Chernin’s sense that Time Warner could give AT&T entrée into new, rapidly developing realms.

Just days after receiving Chernin’s recommendation, Stephenson had an exploratory meeting with Time Warner CEO Jeff Bewkes. The two had known each other for years, as DirectTV distributed Time Warner channels such as TBS and TNT. Within a few hours, the two men decided that a business partnership agreement might make sense.

Throwing them off the scent

During the “whirlwind courtship” that followed, Stephenson and Bewkes went to great lengths to keep the negotiations under wraps, concerned about a backlash from lawmakers and consumer advocacy groups, according to Bloomberg.

At first, a small group of only eight people, including Stephenson and Bewkes, even knew about the talks, which were code-named “Bobtail.” Negotiators from “Lily” (AT&T’s code name, after a character in one of the company’s ad campaigns) and “Rabbit” (Time Warner’s moniker, in homage to Warner Bros.’ Bugs Bunny) met in Washington, D.C.; Dallas; and Nashville, Tennessee to avoid arousing suspicions in New York.

Once bankers were needed to advise on the deal, a small number of representatives from Allen & Company, Citigroup, and other banks were brought in. Even the heads of Time Warner subsidiaries HBO, Warner Bros., and TBS were kept in the dark about the negotiations, according to the New York Times.

A deal emerges

AT&T was well aware that Time Warner’s primary interest in the negotiation was to get a high price. In 2014, the media company had turned down an $85-per-share bid from 21st Century Fox for being too low. Hoping to fend off competing offers from Google or Apple, AT&T was determined to make a bid for Time Warner that “it hoped couldn’t be refused,” Bloomberg reports.

A lesser concern for both parties was the risk that federal regulators would block the deal. The parties viewed their deal as a classic case of “vertical integration”—that is, a partnership between a company and its customer rather than between “horizontal” competitors—and thus unlikely to trigger serious antitrust concerns. AT&T agreed to pay Time Warner $500 million if the deal was blocked by regulators, the Wall Street Journal reports—a relatively small amount for such a significant deal.

By contrast, AT&T was far more concerned that another bidder would emerge to snatch away Time Warner before the deal closed. To reassure the telecom company, Time Warner promised to pay a hefty $1.7 billion so-called breakup fee if it ended up being outbid.

As for the purchase price, the two sides settled on $107.50 per share, well above Fox’s past offer. Bewkes, Stephenson, and a handful of other executives met at an airline hangar in Dallas to shake on the outlines of the agreement, according to the Times.

Eleven days later, the executives announced their merger, framing it as being a business partnership agreement to pursue growth opportunities rather than realize cost savings.

Key issues for a potential business partnership agreement

Reactions to the announcement were mixed, with several pivotal issues attracting attention.

1. The effect on outsiders. At the time, presidential candidates Hillary Clinton and Donald Trump both suggested the merger might be a bum deal for consumers. But Los Angeles Times writer David Lazarus predicted that the Justice Department and Federal Communications Commission would impose consumer protection conditions on the deal to protect AT&T customers, such as requiring that they be allowed to purchase access to individual Time Warner channels rather than packages only.

The issue reminds us of the importance of considering how a potential business partnership agreement is likely to affect parties who aren’t seated at the table, including customers and the public. This is especially true when you’re negotiating within an insular environment, as in the case of an interindustry partnership or a merger between corporate titans who might be inclined to focus first and foremost on the potential impact on their companies’ bottom lines.

Taking time to think about how your partnership will affect others not only should lead you to make more ethical decisions but also will help protect you from a public backlash and scrutiny from authorities.

2. A possible culture clash. Another open question in the merger between AT&T and Time Warner was whether the companies’ very different cultures would mesh successfully. Time Warner subsidiaries such as HBO, whose culture the New York Times characterized as “freewheeling,” could clash with “buttoned-up” AT&T. Stephenson and others at AT&T reportedly reassured the heads of HBO and other Time Warner entertainment divisions that they would retain full creative control of the content they produced and receive the funds they needed to succeed, but some observers were skeptical. “As Time Warner gets swallowed into this bigger enterprise and has to fight for resources, will they be successful or not?” Forrester Research analyst Jim Nail told CNBC. “They can very quickly fall behind.”

Wise negotiators take time to discuss not only the potential financial synergies of their proposed partnership but also how they will go about combining personnel and assets. Key questions, such as who will lead the new company, whether divisions will remain separate or integrate, whether layoffs and facilities closings will occur, and how the cultures will be merged, need to be negotiated thoroughly.

3. A high level of uncertainty. Given the volatility in the media and communications industries, most observers considered the long-term success of the AT&T–Time Warner merger to be highly uncertain. New York Times technology writer Farhad Manjoo called the agreement “speculative,” a “Hail Mary pass” aimed at doing “something, anything, to get some grip on a rapidly changing future.”

In your own negotiations, you might be able to reduce uncertainty about the future through a contingent contract— an “if, then” guarantee that you will each take certain actions based on how the future plays out. As is typical in mergers and acquisitions, AT&T and Time Warner negotiated contingencies to protect themselves during the time period before the deal’s closing, stipulating the payments they would make in the event that regulators scotched the deal or Time Warner accepted a better offer.

Contingencies can reduce risk and uncertainty not only during the preclosing period but also during the implementation stage of a deal. For example, if you are doubtful that a potential partner will be able to reach an ambitious delivery date for a new product, you could build incentives for on-time completion or penalties, or both, into your contract.

Many people overlook the fact that hiring is a type of negotiation. We negotiate with our colleagues and ourselves about making the right choices, and we negotiate with candidates over expectations. As many people have experienced, however, hiring is anything but straightforward, and we often make mistakes. We spoke to Michael Luca, Lee J. Styslinger III Associate Professor of Business Administration at Harvard Business School, regarding ways to improve hiring practices for better results. The conversation began with a question from a reader.

Q: I run a large sales organization and am hoping to improve hiring practices because we are currently struggling to reduce employee turnover. Is there a good strategy for us to get a better sense of which candidates we should be pursuing?

Is there a better way to make hiring decisions?

A: When you are deciding whom to hire, keep in mind that you are essentially making a prediction. You are predicting who will perform well in the job and who would be likely to quit. When it comes to making predictions, data and algorithms often can be great aids that complement human judgment, which can be biased in several ways.

In recent years, new data sources and advances in empirical tools, especially machine learning, have made algorithmic programs a feasible and practical way to improve hiring practices in many settings. I recently looked at this issue in the context of hiring teachers and police officers. We showed how algorithms could help identify the best candidates in both fields and even help to reduce incidents of police abuse.

Several organizations have begun to experiment with algorithms in the hiring process. It sounds like yours is ready to explore algorithmic hiring, and I advise you to do so with the following three guidelines in mind.

Three ways to improve hiring practices with algorithms

1. Because hiring algorithms are only as good as your ability to develop the right performance metrics, having clear metrics in mind is critical to effective implementation. This is easiest in contexts where you can plausibly measure the performance you care about, such as improving profits or reducing turnover. In your case, it sounds like you would want to use an algorithm to predict turnover. But a word of caution: I would be hesitant to advise you to predict only turnover.

Take stock of all the outcomes you have access to and care about, and include them in your algorithm. For example, you might also consider outcomes such as the number of calls a salesperson makes and the percentage of calls that end in a sale.

2. Hiring algorithms function better when you have more data to feed into them. You have an advantage here, since you said you run a large organization, and each employee is an additional data point. But in the context of hiring algorithms, data includes more than just the number of employees. It’s also important to have a broad set of data about each applicant and current employee. When you read a résumé, you automatically put weight on each piece of information— such as the applicant’s grade point average, degree, and school. An algorithm can augment your intuition with a systematic analysis of the available data that determines how much each of these pieces of information matter. Start by including these different data points, being aware that exploration and intuition will still be required to help you know what data to keep.

3. Once you understand what to predict and what data you have access to, it’s time for implementation. For a large organization like yours, you have multiple options, ranging from developing an algorithm in-house to outsourcing one. Smaller businesses that lack sufficient internal data or resources to create their own algorithm still have options. In the UK, for example, the nonprofit Nesta and the Behavioural Insights Team developed a platform called Applied (www.beapplied.com) to help organizations develop efficient and equitable approaches to interviewing and evaluating candidates that draw on both human and machine intelligence. Options such as this are viable for companies of all sizes. Also, it’s possible for smaller employers to experiment with more formal ways to improve hiring practices, such as using a point system to weight different elements of a résumé, which can be a step toward algorithmic hiring.

A critical step in any negotiation is to evaluate the set of alternative options—in this case, the various candidates you are thinking about hiring. Of course, a good interview process is necessary, but even then, human bias can get in the way. An algorithm, in conjunction with human intuition, can help you weigh your options more efficiently and effectively—and help reduce your turnover rates.

Have you used algorithmic practices in your hiring? How did you approach it?

If you needed a lawyer to help you settle a business dispute, would you prefer (a) one who was completely partisan toward your point of view or (b) one who acted as a mediator and saw both sides of the conflict?

You might assume that the partisan lawyer would work harder for you than someone who sees things from both sides’ perspective. But in fact, the lawyer with a more impartial perspective may give you more objective advice, make more accurate forecasts, and promote more collaborative negotiations, University of Pennsylvania Law School professor Douglas N. Frenkel and University of Connecticut School of Law professor James H. Stark argue in an article in the Harvard Negotiation Law Review.

The benefits of a neutral mediator

The professors based their argument on the results of a 2008 study by University of Nevada, Las Vegas, adjunct professor Randall Kiser and his colleagues that examined the settlement decisions of more than 5,000 California litigators in more than 2,000 contested cases. Kiser and colleagues’ study found that disputants commonly made erroneous settlement decisions, rejecting offers that turned out to be better than those they ultimately achieved in court—regardless of their litigators’ level of experience or the prestige of the law school they attended. However, when one or both lawyers involved in a case had training and experience as a mediator, disputants were significantly less likely to make such decision errors.

Why might lawyers with mediation experience encourage better decision making? Consider that a mediator is trained to take a neutral, unbiased perspective on conflicts. By contrast, when we are placed in a partisan role, as in the case of a typical lawyer advocating for a client, we’re more prone to judgment-impairing cognitive, motivational, and emotional biases.

For example, a lawyer who believes that his client has been wronged may be prone to the confirmation bias— the tendency to seek out information that supports one’s preexisting views and goals and to ignore information that challenges those views. Consequently, the partisan lawyer might become overly optimistic about his client’s chances of winning in court and recommend extreme settlement demands. If the other side rejects those demands, the client may end up losing in court based on a judge’s or jury’s more neutral view of the dispute. Whenever we are placed in competitive roles and conflicts, our judgments are tinged by self-interest— even when we think we’re being fair and evenhanded.

Two de-biasing techniques

A mediator is trained to see both sides of a dispute and to help parties overcome barriers to resolution, including common judgment biases. During private caucuses, mediators often encourage the parties to look beyond their limited perspective and become open to collaborative solutions.

According to Frenkel and Stark, lawyers may be able to adopt this type of objective mind-set by practicing two de-biasing techniques identified by psychologists: (1) considering the opposite and (2) perspective taking.

Considering the opposite involves thinking in detail about why our predictions and decisions might be wrong. In several research studies, prompting participants to consider the opposite of their beliefs and hypotheses led them to make better, less biased decisions.

Perspective taking means putting ourselves in another person’s shoes and actively imagining his point of view, a practice that has been found to counteract bias and enhance objectivity. Perspective taking can reduce bias against members of out-groups, including racial bias, as well as our self-centered perceptions of what would constitute a fair outcome.

It may also guard against two insidious negotiation biases: the anchoring bias, or the tendency to anchor discussions on the first offer made in a negotiation, however arbitrary; and the fixed-pie bias, or the tendency to overlook value-creating opportunities and focus strictly on dividing up a finite amount of resources. In one study, participants who were asked to take their negotiation counterpart’s perspective, specifically by thinking about that person’s BATNA (best alternative to a negotiated agreement) before negotiating, were less susceptible to being anchored by that counterpart’s first offer than were those who were not given perspective-taking instructions, Columbia Business School professor Adam D. Galinsky and London Business School professor Thomas Mussweiler found. And in another study, Galinsky found that negotiators who were asked to try to understand what their counterpart was thinking before engaging in a negotiation simulation were better at uncovering hidden interests, moving beyond a fixed-pie mind-set, and reaching an efficient solution as compared to those who received no such instructions.

An appeal for objectivity

“As important as passion and zeal may be for the modern advocate, objectivity and dispassion are also critically important—for all lawyers,” Frenkel and Stark conclude. They argue that law schools should not only train future lawyers to advocate on their clients’ behalf but also train them to act as a mediator, which would equip them with the skills needed to reach less biased, more accurate judgments on behalf of their clients. Indeed, the type of de-biasing training they recommend is compatible with law schools’ traditional emphasis on fostering critical-thinking skills, the authors note.

For disputants, Frenkel and Stark’s recommendations suggest the value of hiring a lawyer with mediation training and experience who can steer you toward more objective, rational, and rewarding decisions. In addition, both lawyers and their clients would likely benefit from making it a habit to engage in de-biasing techniques such as considering the opposite and taking the other side’s perspective.

Have you worked with a mediator to settle business disputes? How did that work as compared to hiring a more traditional lawyer?

Q: I run a large sales organization and am hoping to improve our hiring process because we are currently struggling to reduce employee turnover. Is there a good strategy for us to get a better sense of which candidates we should be pursuing?

A: When you are deciding whom to hire, keep in mind that you are essentially making a prediction. You are predicting who will perform well in the job and who would be likely to quit. When it comes to making predictions, data and algorithms often can be great aids that complement human judgment, which can be biased in several ways.

In recent years, new data sources and advances in empirical tools, especially machine learning, have made algorithmic hiring a feasible and practical option in many settings. My coauthors and I recently looked at this issue in the context of hiring teachers and police officers. We showed how algorithms could help identify the best candidates in both fields and even help to reduce incidents of police abuse.

Several organizations have begun to experiment with algorithms in the hiring process. It sounds like yours is ready to explore algorithmic hiring, and I advise you to do so with the following three guidelines in mind.

First, because hiring algorithms are only as good as your ability to develop the right performance metrics, having clear metrics in mind is critical to effective implementation. This is easiest in contexts where you can plausibly measure the performance you care about, such as improving profits or reducing turnover. In your case, it sounds like you would want to use an algorithm to predict turnover. But a word of caution: I would be hesitant to advise you to predict only turnover.

Take stock of all the outcomes you have access to and care about, and include them in your algorithm. For example, you might also consider outcomes such as the number of calls a salesperson makes and the percentage of calls that end in a sale.

Second, hiring algorithms function better when you have more data to feed into them. You have an advantage here, since you said you run a large organization, and each employee is an additional data point. But in the context of hiring algorithms, data includes more than just the number of employees. It’s also important to have a broad set of data about each applicant and current employee. When you read a résumé, you automatically put weight on each piece of information— such as the applicant’s grade point average, degree, and school. An algorithm can augment your intuition with a systematic analysis of the available data that determines how much each of these pieces of information matter. Start by including these different data points, being aware that exploration and intuition will still be required to help you know what data to keep.

Third, once you understand what to predict and what data you have access to, it’s time for implementation. For a large organization like yours, you have multiple options, ranging from developing an algorithm in-house to outsourcing one. Smaller businesses that lack sufficient internal data or resources to create their own algorithm still have options. In the UK, for example, the nonprofit Nesta and the Behavioural Insights Team developed a platform called Applied (www.beapplied.com) to help organizations develop efficient and equitable approaches to interviewing and evaluating candidates that draw on both human and machine intelligence. Options such as this are viable for companies of all sizes. Also, it’s possible for smaller employers to experiment with more formal hiring rules, such as using a point system to weight different elements of a résumé, which can be a step toward algorithmic hiring.

A critical step in any negotiation is to evaluate the set of alternative options—in this case, the various candidates you are thinking about hiring. Of course, a good interview process is necessary, but even then, human bias can get in the way. An algorithm, in conjunction with human intuition, can help you weigh your options more efficiently and effectively—and help reduce your turnover rates.

Michael Luca
Assistant Professor
Harvard Business School

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If you needed a lawyer to help you settle a business dispute, would you prefer (a) one who was completely partisan toward your point of view or (b) one who saw both sides of the conflict?

You might assume that the partisan lawyer would work harder for you than someone who sees things from both sides’ perspective. But in fact, the lawyer with a more impartial perspective may give you more objective advice, make more accurate forecasts, and promote more collaborative negotiations, University of Pennsylvania Law School professor Douglas N. Frenkel and University of Connecticut School of Law professor James H. Stark argue in a recent article in the Harvard Negotiation Law Review.

The benefits of neutrality

The professors based their argument on the results of a 2008 study by University of Nevada, Las Vegas, adjunct professor Randall Kiser and his colleagues that examined the settlement decisions of more than 5,000 California litigators in more than 2,000 contested cases. Kiser and colleagues’ study found that disputants commonly made erroneous settlement decisions, rejecting offers that turned out to be better than those they ultimately achieved in court—regardless of their litigators’ level of experience or the prestige of the law school they attended. However, when one or both lawyers involved in a case had mediation training and experience, disputants were significantly less likely to make such decision errors.

Why might lawyers with mediation experience encourage better decision making? Consider that mediators are trained to take a neutral, unbiased perspective on conflicts. By contrast, when we are placed in a partisan role, as in the case of a typical lawyer advocating for a client, we’re more prone to judgment-impairing cognitive, motivational, and emotional biases.

For example, a lawyer who believes that his client has been wronged may be prone to the confirmation bias— the tendency to seek out information that supports one’s preexisting views and goals and to ignore information that challenges those views. Consequently, the partisan lawyer might become overly optimistic about his client’s chances of winning in court and recommend extreme settlement demands. If the other side rejects those demands, the client may end up losing in court based on a judge’s or jury’s more neutral view of the dispute. Whenever we are placed in competitive roles and conflicts, our judgments are tinged by self-interest— even when we think we’re being fair and evenhanded.

Two de-biasing techniques

Mediators are trained to see both sides of a dispute and to help parties overcome barriers to resolution, including common judgment biases. During private caucuses, mediators often encourage the parties to look beyond their limited perspective and become open to collaborative solutions.

According to Frenkel and Stark, lawyers may be able to adopt this type of objective mind-set by practicing two de-biasing techniques identified by psychologists: (1) considering the opposite and (2) perspective taking.

Considering the opposite involves thinking in detail about why our predictions and decisions might be wrong. In several research studies, prompting participants to consider the opposite of their beliefs and hypotheses led them to make better, less biased decisions.

Perspective taking means putting ourselves in another person’s shoes and actively imagining his point of view, a practice that has been found to counteract bias and enhance objectivity. Perspective taking can reduce bias against members of out-groups, including racial bias, as well as our self-centered perceptions of what would constitute a fair outcome.

It may also guard against two insidious negotiation biases: the anchoring bias, or the tendency to anchor discussions on the first offer made in a negotiation, however arbitrary; and the fixed-pie bias, or the tendency to overlook value-creating opportunities and focus strictly on dividing up a finite amount of resources. In one study, participants who were asked to take their negotiation counterpart’s perspective, specifically by thinking about that person’s BATNA (best alternative to a negotiated agreement) before negotiating, were less susceptible to being anchored by that counterpart’s first offer than were those who were not given perspective-taking instructions, Columbia Business School professor Adam D. Galinsky and London Business School professor Thomas Mussweiler found. And in another study, Galinsky found that negotiators who were asked to try to understand what their counterpart was thinking before engaging in a negotiation simulation were better at uncovering hidden interests, moving beyond a fixed-pie mind-set, and reaching an efficient solution as compared to those who received no such instructions.

An appeal for objectivity

“As important as passion and zeal may be for the modern advocate, objectivity and dispassion are also critically important—for all lawyers,” Frenkel and Stark conclude. They argue that law schools should not only train future lawyers to advocate on their clients’ behalf but also give them mediation training, which would equip them with the skills needed to reach less biased, more accurate judgments on behalf of their clients. Indeed, the type of de-biasing training they recommend is compatible with law schools’ traditional emphasis on fostering critical-thinking skills, the authors note.

For disputants, Frenkel and Stark’s recommendations suggest the value of hiring a lawyer with mediation training and experience who can steer you toward more objective, rational, and rewarding decisions. In addition, both lawyers and their clients would likely benefit from making it a habit to engage in de-biasing techniques such as considering the opposite and taking the other side’s perspective.

Clinton vs. Trump. Apple vs. Samsung. The New York Yankees vs. the Boston Red Sox.

Whether we work in politics, business, sports, or another arena, our competitors sometimes turn into fierce rivals. In addition, many sales, legal, and financial firms structure jobs, incentives, and promotion systems in ways that pit employees against one another to increase their motivation.

What happens when rivals negotiate with each other? Do pairs of rivals reach different outcomes than more traditional pairs of competitors? New York University professor Gavin J. Kilduff and his colleagues examined these questions in a recent study and reached conclusions that might alter some of our negotiation practices.

Features of rivalries

Several factors explain why relationships between competitors sometimes escalate into rivalry, according to Kilduff and his team. First, similarities between competitors (such as Coke and Pepsi) can encourage comparisons that foster rivalry. Second, competitors who repeatedly square off may develop stronger feelings of rivalry toward one another over time. Third, when competitions between rivals result in close outcomes, they anticipate similarly tight competitions in the future, and their rivalry intensifies.

Rivalry increases the psychological stakes of a competition, and we are more motivated and perform better when competing against rivals as compared to nonrivals. For example, Kilduff found in a 2014 study that long-distance runners ran faster in races that included their rivals.

The dark side of rivalry

In his new study, Kilduff and his colleagues identified a hidden pitfall of rivalry— namely, its tendency to increase unethical behavior, including in negotiation.

In one experiment conducted online, Kilduff and his team told 101 participants that they would be paired for a negotiation simulation with another participant. (In fact, there were no counterparts, and the study ended before any negotiation began.) Participants were told they would be playing the role of a car dealer negotiating the sale of used equipment to a competing car dealer in the same town. About half of the participants received instructions that portrayed their counterpart as a longtime business rival; the other half were told that the counterpart ran a new business and was not yet a direct competitor.

All the participants were told that they had a low offer of $25,000 from another party to buy the equipment, which they had purchased for $75,000. They were asked how they would communicate information about the other offer to their competitor in the negotiation. Among the participants, 56% in the rivalry condition said they would deceive their counterpart about the offer to gain an advantage, as compared to only 33% of those in the nonrivalry condition.

In particular, those who believed that they would face a rival indicated being far more likely to lie indirectly—for example, by exaggerating the offer’s quality (“very good”) without mentioning a numerical value—as compared to those who thought they’d face a nonrival.

In a similar experiment, participants reported being more willing to engage in unethical negotiation tactics, such as making false promises or intentionally misleading the other side, with rivals than with nonrivals. The prospect of negotiating with a rival heightened participants’ concerns about maintaining their sense of self-worth and status. In turn, these concerns seemed to lead participants to focus so narrowly on performing well that they were willing to cut ethical corners to do so.

Promoting more ethical negotiations

The study’s authors advise managers to take several precautions to reduce the likelihood that rivalries will promote unethical behavior in their organizations:

1. Avoid promoting fierce competition between employees for prizes such as bonuses and promotions. The rivalries that result may increase motivation, but they can also backfire by encouraging unethical behavior.

2. To maintain high ethical standards in external negotiations, don’t encourage employees to view competing firms as rivals.

3. To protect their own decisions in negotiation from being eroded by rivalry, managers should augment intuitive decision making with algorithms and other objective sources of data.

Resource: “Whatever It Takes to Win: Rivalry Increases Unethical Behavior,” by Gavin J. Kilduff, Adam D. Galinsky, Edoardo Gallo, and J. James Reade. Academy of Management Journal, 2016.

This past October, as the United Kingdom (UK) began gearing up for its negotiations to exit the European Union (EU)—a process known as Brexit—scheduled to begin in March, Reuters reported that the EU’s lead Brexit negotiator, former French foreign minister Michel Barnier, had asked for the negotiations to be conducted in French rather than English. English supplanted French as the lingua franca of multinational EU teams about two decades ago, the New York Times reports, so a switch back to French for the Brexit talks would be notable.

The news attracted attention even as Barnier denied its accuracy. “Never expressed myself on negotiation language,” he tweeted. “Work as often in English as French.” He went on to say that negotiators would agree on the “linguistic regime” only after British prime minister Theresa May launches the formal Brexit process, a plan confirmed by an EU spokeswoman.

The story was reported just a day after May attended her first EU summit in Brussels. There, European leaders, including French president François Hollande and German chancellor Angela Merkel, cautioned May to expect the Brexit negotiations to be difficult. Britain would not be allowed to keep profitable parts of its union with the UK, such as access to markets, they warned, unless it adhered to all of the obligations of EU membership, such as open borders.

May responded to reporters’ questions about the issue of the negotiating language cryptically, saying that the Brexit negotiations would be conducted “in the way that is going to make sure that we get the right deal for the United Kingdom.

Why did Barnier’s alleged request to negotiate in French create a stir?

On the one hand, whether negotiators choose to negotiate in French or English shouldn’t have a strong impact on the Brexit talks. The weighty and complicated substantive issues related to extricating Britain from the EU are likely to be more troublesome than any language barriers that arise. More than the practical implications of the choice of language, it was the signal sent by Barnier’s alleged request that made it notable. Barnier’s asking to flout convention in favor of his own language, if that’s what he did, put the UK on notice that the EU is determined to take an aggressive approach to the Brexit talks. If Barnier wanted to eschew English in favor French, he might have been seeking every advantage to keep the British on edge.

More broadly, the kerfuffle reminds us of the importance of taking time to strategize about and negotiate the process you will follow before talks begin.

How process drives substance

In negotiation, “process drives substance,” write Robert C. Bordone and Gillien S. Todd of Harvard Law School in a past issue of Negotiation Briefings. Decisions related to the negotiation process, such as where and when talks will be held, who will attend, and how decisions will be made, can have a dramatic effect on how the negotiation unfolds. Deciding to negotiate online rather than in person could lead to miscommunication and impasse, for example. Similarly, you and your counterpart might promote an atmosphere where you can freely explore your interests by agreeing not to bring your lawyers to the bargaining table.

Negotiators often overlook the importance of negotiating process issues, to their detriment. Bordone and Todd recommend that negotiators take time to discuss in advance the details of their meeting setup (such as where they will meet and for how long, as well as whether food will be served, and so on), their agenda, the goals they hope to accomplish, and their plans for meeting those goals (for example, by discussing underlying interests and searching for mutual gains).

When you negotiate the process before negotiating substance, you improve your odds of avoiding misunderstandings, surprises, and conflicts. You are also likely to enhance all parties’ ultimate satisfaction with the deal. Our perceptions of the fairness of a negotiation process significantly affect our satisfaction with the outcome, Jared Curhan and Heng Xu of the Massachusetts Institute of Technology and Hillary Anger Elfenbein of the University of California at Berkeley have found in their research.

Key strategy considerations

Opening a negotiation over process issues can help you meet the following three strategic goals:

1. Anchor talks in your favor. Much like a well-considered first offer on price, the requests you make of your counterpart can anchor the negotiation process in your favor. Asking the other party to agree to put a contentious issue on the table, for instance, should dramatically increase your odds of meeting your goals on that issue. For example, a teacher’s union might ask a school district to add the issue of teacher training days to their contract negotiations.

2. Create value through trades. The more issues that are up for discussion in a negotiation, the more opportunities negotiators have to create value through trades. Therefore, adding process issues to the list of substantive issues can be a winwin move for both sides. For example, if your counterparts want to hold talks at their office—and you don’t have a strong preference on the issue—you might grant that minor concession in return for an agreement that talks be wrapped up by a particular deadline.

3. Signal your approach. As we saw in the Brexit negotiations, the requests and demands you make on process issues (perhaps even the mere rumor of a request) can send strong signals about your approach to the upcoming negotiation, such as your intention to be antagonistic or collaborative.

For example, negotiators might signal an aggressive style by asking a counterpart for a significant process concession right off the bat, such as asking to leave an issue off the table or to hold talks in their native tongue.

Returning to the Brexit negotiations, the very choice of Barnier as lead EU negotiator sent such a combative signal to the British. Barnier has been unpopular in the UK since his days as EU commissioner overseeing the City of London financial center, a post he left in 2014. When European Commission president Jean-Claude Juncker appointed Barnier to head the Brexit talks, some British politicians viewed it as an “act of war,” according to the Times.

Signaling toughness comes with significant risks. The other party might refuse to concede on the process issue you raised, potentially leaving you with an uncomfortable choice between backing down and walking away before talks even begin. A hard-line stance also can promote a competitive orientation in the negotiation that follows, causing parties to reach an impasse or leave significant value on the table.

A better approach is to signal your intent to be collaborative while conveying your stance on key issues. If you feel strongly about a particular process issue, try to pair your request with a concession on a relatively low-cost issue. For example, in exchange for negotiating in your preferred language, you might offer to pay for the costs of an interpreter. In this manner, you signal that you will have strong preferences once formal talks start but are prepared to negotiate for them creatively.

This past October, as the United Kingdom (UK) began gearing up for its negotiations to exit the European Union (EU)—a process known as Brexit—scheduled to begin in March, Reuters reported that the EU’s lead Brexit negotiator, former French foreign minister Michel Barnier, had asked for the negotiations to be conducted in French rather than English. English supplanted French as the lingua franca of multinational EU teams about two decades ago, the New York Times reports, so a switch back to French for the Brexit talks would be notable.

The news attracted attention even as Barnier denied its accuracy. “Never expressed myself on negotiation language,” he tweeted. “Work as often in English as French.” He went on to say that negotiators would agree on the “linguistic regime” only after British prime minister Theresa May launches the formal Brexit process, a plan confirmed by an EU spokeswoman.

The story was reported just a day after May attended her first EU summit in Brussels. There, European leaders, including French president François Hollande and German chancellor Angela Merkel, cautioned May to expect the Brexit negotiations to be difficult. Britain would not be allowed to keep profitable parts of its union with the UK, such as access to markets, they warned, unless it adhered to all of the obligations of EU membership, such as open borders.

May responded to reporters’ questions about the issue of the negotiating language cryptically, saying that the Brexit negotiations would be conducted “in the way that is going to make sure that we get the right deal for the United Kingdom.

Why did Barnier’s alleged request to negotiate in French create a stir?

On the one hand, whether negotiators choose to negotiate in French or English shouldn’t have a strong impact on the Brexit talks. The weighty and complicated substantive issues related to extricating Britain from the EU are likely to be more troublesome than any language barriers that arise. More than the practical implications of the choice of language, it was the signal sent by Barnier’s alleged request that made it notable. Barnier’s asking to flout convention in favor of his own language, if that’s what he did, put the UK on notice that the EU is determined to take an aggressive approach to the Brexit talks. If Barnier wanted to eschew English in favor French, he might have been seeking every advantage to keep the British on edge.

More broadly, the kerfuffle reminds us of the importance of taking time to strategize about and negotiate the process you will follow before talks begin.

How process drives substance

In negotiation, “process drives substance,” write Robert C. Bordone and Gillien S. Todd of Harvard Law School in a past issue of Negotiation Briefings. Decisions related to the negotiation process, such as where and when talks will be held, who will attend, and how decisions will be made, can have a dramatic effect on how the negotiation unfolds. Deciding to negotiate online rather than in person could lead to miscommunication and impasse, for example. Similarly, you and your counterpart might promote an atmosphere where you can freely explore your interests by agreeing not to bring your lawyers to the bargaining table.

Negotiators often overlook the importance of negotiating process issues, to their detriment. Bordone and Todd recommend that negotiators take time to discuss in advance the details of their meeting setup (such as where they will meet and for how long, as well as whether food will be served, and so on), their agenda, the goals they hope to accomplish, and their plans for meeting those goals (for example, by discussing underlying interests and searching for mutual gains).

When you negotiate the process before negotiating substance, you improve your odds of avoiding misunderstandings, surprises, and conflicts. You are also likely to enhance all parties’ ultimate satisfaction with the deal. Our perceptions of the fairness of a negotiation process significantly affect our satisfaction with the outcome, Jared Curhan and Heng Xu of the Massachusetts Institute of Technology and Hillary Anger Elfenbein of the University of California at Berkeley have found in their research.

Key strategy considerations

Opening a negotiation over process issues can help you meet the following three strategic goals:

1. Anchor talks in your favor. Much like a well-considered first offer on price, the requests you make of your counterpart can anchor the negotiation process in your favor. Asking the other party to agree to put a contentious issue on the table, for instance, should dramatically increase your odds of meeting your goals on that issue. For example, a teacher’s union might ask a school district to add the issue of teacher training days to their contract negotiations.

2. Create value through trades. The more issues that are up for discussion in a negotiation, the more opportunities negotiators have to create value through trades. Therefore, adding process issues to the list of substantive issues can be a winwin move for both sides. For example, if your counterparts want to hold talks at their office—and you don’t have a strong preference on the issue—you might grant that minor concession in return for an agreement that talks be wrapped up by a particular deadline.

3. Signal your approach. As we saw in the Brexit negotiations, the requests and demands you make on process issues (perhaps even the mere rumor of a request) can send strong signals about your approach to the upcoming negotiation, such as your intention to be antagonistic or collaborative.

For example, negotiators might signal an aggressive style by asking a counterpart for a significant process concession right off the bat, such as asking to leave an issue off the table or to hold talks in their native tongue.

Returning to the Brexit negotiations, the very choice of Barnier as lead EU negotiator sent such a combative signal to the British. Barnier has been unpopular in the UK since his days as EU commissioner overseeing the City of London financial center, a post he left in 2014. When European Commission president Jean-Claude Juncker appointed Barnier to head the Brexit talks, some British politicians viewed it as an “act of war,” according to the Times.

Signaling toughness comes with significant risks. The other party might refuse to concede on the process issue you raised, potentially leaving you with an uncomfortable choice between backing down and walking away before talks even begin. A hard-line stance also can promote a competitive orientation in the negotiation that follows, causing parties to reach an impasse or leave significant value on the table.

A better approach is to signal your intent to be collaborative while conveying your stance on key issues. If you feel strongly about a particular process issue, try to pair your request with a concession on a relatively low-cost issue. For example, in exchange for negotiating in your preferred language, you might offer to pay for the costs of an interpreter. In this manner, you signal that you will have strong preferences once formal talks start but are prepared to negotiate for them creatively.

“A huge mistake.” “A shot in the dark.” “An audacious move.” Those are just a few of the media’s characterizations of wireless carrier AT&T’s acquisition of media and entertainment firm Time Warner, announced on October 22 of last year. As of November, it was the biggest merger of 2016, with $85.4 billion in cash and stock transferring from AT&T to Time Warner, and also one of the most controversial of the year.

The merger would make AT&T the first U.S. wireless company to compete nationally with cable companies by offering an online-video bundle, similar to a cable-TV package, that would include Time Warner networks CNN, HBO, and TNT, as well as Warner Bros. productions. Meanwhile, Time Warner, long tethered to the cords of cable TV, would finally move into the wireless world.

Some analysts believe the move will help both companies grow. But U.S. regulators are likely to scrutinize the merger closely, concerned that industry consolidation would reduce competition and raise consumer prices.

We take an in-depth look at the deal and identify key lessons for business negotiators facing the prospect of new partnerships.

The glimmer of an idea

The first sparks between AT&T and Time Warner were ignited this past August, when Hollywood executive Peter Chernin, chairman and CEO of The Chernin Group and a partner with AT&T in an online media venture, met AT&T CEO Randall Stephenson over dinner on Martha’s Vineyard. Chernin, who had recently had a discussion with a high-ranking Time Warner executive, urged Stephenson to look into acquiring the media company for its content.

“That’s when I got it in my mind that these two companies could work together,” Stephenson told Bloomberg News. Facing the market saturation of its wireless business, AT&T was looking for ways to grow. Its satellite-TV service, DirectTV, was threatened by the increase in online and mobile viewing nationwide. Stephenson trusted in Chernin’s sense that Time Warner could give AT&T entrée into new, rapidly developing realms.

Just days after receiving Chernin’s recommendation, Stephenson had an exploratory meeting with Time Warner CEO Jeff Bewkes. The two had known each other for years, as DirectTV distributed Time Warner channels such as TBS and TNT. Within a few hours, the two men decided that a merger might make sense.

Throwing them off the scent

During the “whirlwind courtship” that followed, Stephenson and Bewkes went to great lengths to keep the negotiations under wraps, concerned about a backlash from lawmakers and consumer advocacy groups, according to Bloomberg.

At first, a small group of only eight people, including Stephenson and Bewkes, even knew about the talks, which were code-named “Bobtail.” Negotiators from “Lily” (AT&T’s code name, after a character in one of the company’s ad campaigns) and “Rabbit” (Time Warner’s moniker, in homage to Warner Bros.’ Bugs Bunny) met in Washington, D.C.; Dallas; and Nashville, Tennessee to avoid arousing suspicions in New York.

Once bankers were needed to advise on the deal, a small number of representatives from Allen & Company, Citigroup, and other banks were brought in. Even the heads of Time Warner subsidiaries HBO, Warner Bros., and TBS were kept in the dark about the negotiations, according to the New York Times.

A deal emerges

AT&T was well aware that Time Warner’s primary interest in the negotiation was to get a high price. In 2014, the media company had turned down an $85-per-share bid from 21st Century Fox for being too low. Hoping to fend off competing offers from Google or Apple, AT&T was determined to make a bid for Time Warner that “it hoped couldn’t be refused,” Bloomberg reports.

A lesser concern for both parties was the risk that federal regulators would block the deal. The parties viewed their deal as a classic case of “vertical integration”—that is, a partnership between a company and its customer rather than between “horizontal” competitors—and thus unlikely to trigger serious antitrust concerns. AT&T agreed to pay Time Warner $500 million if the deal was blocked by regulators, the Wall Street Journal reports—a relatively small amount for such a significant deal.

By contrast, AT&T was far more concerned that another bidder would emerge to snatch away Time Warner before the deal closed. To reassure the telecom company, Time Warner promised to pay a hefty $1.7 billion so-called breakup fee if it ended up being outbid.

As for the purchase price, the two sides settled on $107.50 per share, well above Fox’s past offer. On October 11, Bewkes, Stephenson, and a handful of other executives met at an airline hangar in Dallas to shake on the outlines of the agreement, according to the Times.

The parties viewed the deal as a classic case of “vertical integration.”

Eleven days later, the executives announced their merger, framing it as being about pursuing growth opportunities rather than realizing cost savings.

Key issues for would-be partners

Reactions to the announcement were mixed, with several pivotal issues attracting attention.

1. The effect on outsiders. At the time, presidential candidates Hillary Clinton and Donald Trump both suggested the merger might be a bum deal for consumers. But Los Angeles Times writer David Lazarus predicted that the Justice Department and Federal Communications Commission would impose consumer protection conditions on the deal to protect AT&T customers, such as requiring that they be allowed to purchase access to individual Time Warner channels rather than packages only.

The issue reminds us of the importance of considering how a potential partnership is likely to affect parties who aren’t seated at the table, including customers and the public. This is especially true when you’re negotiating within an insular environment, as in the case of an interindustry partnership or a merger between corporate titans who might be inclined to focus first and foremost on the potential impact on their companies’ bottom lines.

Taking time to think about how your partnership will affect others not only should lead you to make more ethical decisions but also will help protect you from a public backlash and scrutiny from authorities.

2. A possible culture clash. Another open question in the merger between AT&T and Time Warner was whether the companies’ very different cultures would mesh successfully. Time Warner subsidiaries such as HBO, whose culture the New York Times characterized as “freewheeling,” could clash with “buttoned-up” AT&T. Stephenson and others at AT&T reportedly reassured the heads of HBO and other Time Warner entertainment divisions that they would retain full creative control of the content they produced and receive the funds they needed to succeed, but some observers were skeptical. “As Time Warner gets swallowed into this bigger enterprise and has to fight for resources, will they be successful or not?” Forrester Research analyst Jim Nail told CNBC. “They can very quickly fall behind.”

Wise negotiators take time to discuss not only the potential financial synergies of their proposed partnership but also how they will go about combining personnel and assets. Key questions, such as who will lead the new company, whether divisions will remain separate or integrate, whether layoffs and facilities closings will occur, and how the cultures will be merged, need to be negotiated thoroughly.

3. A high level of uncertainty. Given the volatility in the media and communications industries, most observers consider the long-term success of the AT&T–Time Warner merger to be highly uncertain. New York Times technology writer Farhad Manjoo called the agreement “speculative,” a “Hail Mary pass” aimed at doing “something, anything, to get some grip on a rapidly changing future.”

In your own negotiations, you might be able to reduce uncertainty about the future through a contingent contract— an “if, then” guarantee that you will each take certain actions based on how the future plays out. As is typical in mergers and acquisitions, AT&T and Time Warner negotiated contingencies to protect themselves during the time period before the deal’s closing, stipulating the payments they would make in the event that regulators scotched the deal or Time Warner accepted a better offer.

Contingencies can reduce risk and uncertainty not only during the preclosing period but also during the implementation stage of a deal. For example, if you are doubtful that a potential partner will be able to reach an ambitious delivery date for a new product, you could build incentives for on-time completion or penalties, or both, into your contract.