I train professional purchasers & sales people in negotiation, and teach a course on international negotiation to a very bright group of undergrads at NYU’s Shanghai campus. Most people pick up the basics pretty quickly, but the concept of Lose-Lose negotiation always seems less straight-forward.
When I describe Lose-Lose as what happens when Win-Lose goes awry, no one has any problem with the concept. Lose-Lose is simply a mistake that one should avoid. No one would ever engage in Lose-Lose intentionally… or would they?
In fact, Lose-Lose negotiation plays an important role in business under certain conditions — and we can see examples of it all around us. In fact, the entire recent US$700 billion Wall St bail-out can be seen as an exercise in Lose-Lose.
Loss minimization is a legitimate goal
As the bull market fades into memory, it is time for negotiators to change their orientation and revisit their long-held goal systems. Throughout the first half of the decade, Win-Lose was preferred and Win-Win seemed like a bitter compromise as rising markets and falling trade restrictions made profit maximization the only sensible goal. Now that we are in the midst of a global down-turn many negotiators and decision makers are tasked with the unpleasant duty of unwinding agreements that are either unprofitable or unsustainable.
Anyone who has to fire an redundant employee, terminate an agreement, back out of JV or close a sale with an unhappy client may find themselves engaged in Lose-Lose negotiation. You won’t win any advantages from the negotiation, but you can minimize your losses or win some concession that will help you at a later time. The important thing to remember about lose-lose is that it can easilly turn into a bitter personal exchange that closes the door to all future transactions and harms the reputation of your firm –and yourself.
That’s why skillful Lose-Lose negotiation is so important. The job of the Lose-Lose negotiator is to minimize damage and prepare the organization to meet its revised goal-set. Negotiatiors in China who have never seen a down-market may find that their go-go bull-market techniques do not serve them well in this environment.
Lose-Lose negotiating requires more fact-finding, dialogue, transparency and creativity than typical Win-Lose negotiation — and that favors negotiators who can establish honest channels of communication and trust. Highly competitive negotiators often find themselves revisiting counter-parties looking for a loss-minimizing solution only to be greeted with mistrust, resentment and opacity.