Sunday, September 9, 2012

I See You: Face-saving Helps Negotiators Understand Each Other

We just completed a long education for executives for a World Fortune 500 corporation. The program included some negotiation exercises, and we talked to the participants about them afterwards. They found the negotiation stressful, and especially because the emotions were so strong when negotiating within the corporation and the same culture (all of them were from the same nation; I prefer not to say which one). It would have been easier to negotiate with outsiders, and even foreigners, they said.

It struck me as interesting that these managers were relatively unfazed by cross-cultural negotiation compared to negotiating with their compatriots. But, I should not have been surprised, because there is still much we don't know about negotiation. This is definitely odd given its importance for business. To take one example, the potential $34 billion merger between diversified commodities firm Glencore and mining firm Xstrata has been a long saga of negotiations between the two firms, as well as with large shareholders including some sovereign wealth funds. Currently, the tie-up seems to hinge on whether the Glencore can agree with Xstrata shareholder Quatar Holding on the price of Xstrata shares. One can imagine the stakes when representatives of these firms meet.

A key task in negotiations is to come to a common understanding of the situation – a mental model. When the parties even disagree on what is true and what is relevant and important, it is hard to even know how to negotiate, let alone reach an agreement. This is one of the key challenges in cross-cultural negotiations, where the gap in mental models is greater. It is one of the reasons I was surprised to hear managers express comfort with that situation. It turns out that we can explain who is more successful in reaching common understandings. In recent research, Liu and coauthors found that a concern for face-saving (for oneself and the other) helped negotiators get to a better common understanding and shared mental models. This was true for Chinese and US negotiators. Concern for face-saving also gave higher creation of value through finding win-win contracts, and higher satisfaction with the process.

It is easy to explain these findings, and to apply them. Face-saving means that the individual is paying attention to the concerns that the other is expressing, because face-saving in negotiations is something both sides have to collaborate to accomplish. Attention to the other also helps understanding and value creation. Concern for face-saving differs between cultures, but individuals also differ in face-saving within the same culture. In order to benefit from this knowledge, managers putting together negotiation teams need to be aware that the most assertive negotiators may be ineffective in inter-cultural negotiation: that style is the opposite of what a face-saving negotiator will use, and it risks destroying value.