Emotion Matters!

If I had a dollar for every time I’ve heard someone involved in a business conflict say “let’s keep the emotion out of this” I would be a wealthy man indeed. To my amazement, there are plenty of people in the business world who still believe that emotion ought to be locked out of the room when parties sit down to settle a dispute. I’m not sure what’s more amusing: that people believe emotion ought to be kept out of the discussion, or that it can be kept out of the discussion.

In my experience lawyers can be among the most ardent believers in this notion. Most of us were taught early on in law school that the law had little room for emotion. Trial lawyers learn that clients get angry, and that the process flows most smoothly when they are kept insulated from one another. In some instances the first time the parties sit in the same room after the case begins is at trial. Business lawyers, on the other hand, tend to run from emotional negotiations as if the room is on fire.

But the evidence is mounting that what we learned in law school about the need to keep emotion out of decision-making was wrong. Modern neuroscience and related emerging fields like neuroeconomics and behavioral economics are  telling us exactly what many of us don’t want to hear: emotion is not only relevant to decision-making, it is an essential ingredient in the recipe for good decisions. When people in conflict attempt to exclude emotion or pretend it isn’t relevant, bad decisions can result.

What is the basis for this shocking conclusion? It’s the brain, stupid! Read More »

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Tuesday Tirade: Inane Football Forecasting

Have you ever noticed the annoying common thread that runs through football coverage in print, online and especially on television?

I refer, of course, to the ever present Prognostication Segment. You know, where the geniuses on the pregame show make their picks. Never in the history of journalism or entertainment has there been a more transparent and widely employed filler.  Does anyone really care how Terry, Howie, Michael and Jimmy envision the game’s outcome? Of course not. Read More »

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Bill Belichick and Cognitive Bias

This article appeared in the Nashua Telegraph in November of 2009, after a painful Patriots loss to the Indianapolis Colts. Pats fans will no doubt remember the game, and the situation. I will leave it up to the individual reader to decide whether the cognitive bias discussed in the article played a role in Bill Belichick’s coaching in the recent loss to the New York Jets…………

I have to admit that I am a bit obsessed with how people make decisions. In my business I spend a lot of time and energy helping clients make the right choice. When you boil it all down that’s really what I do. I help people make the right business decision.

I have learned over the years that decision-making is a lot more complicated than some people realize. As humans we are hard wired with certain inherent tendencies and biases that can corrupt our decision-making. The end result can be bad choices and negative outcomes. Understanding these tendencies and making my clients aware of them is part of the value that I deliver to them in my practice.

These tendencies and biases are known as “cognitive biases”, and we all have them. Cognitive biases are patterns of deviation in judgment that occur in particular situations. Essentially, they are instances of evolved mental behavior. A simple example of a cognitive bias is the bandwagon effect, which leads to the herd mentality. We all have a natural instinct to go with the flow and side with the majority. But sometimes the herd can be wrong. Read More »

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To Get the Deal Done, Begin with the End in Mind

It’s always frustrating when a deal that looks great on paper turns out to be a loser. Sometimes parties put all sorts of money, time and energy into a deal, only to have it blow up at the closing table. Or, worse yet, a deal that looked great even at closing turns out to be a dud once the dust settles.

It’s true that some deals just aren’t meant to be. As good as they looked at the beginning, in the end they were not going to work. But it turns out that a lot of these deals that fail are inadvertently torpedoed by the parties’ negotiating strategies and tactics. Some of them could have been saved by better negotiating.

Danny Ertel and Mark Gordon are principals at Vantage Partners, a Boston-based management consulting firm that focuses on alliance strategy and relationship management. In a recent Harvard Business Review article entitled, “The Point of the Deal: How to Negotiate When Yes is Not Enough”, Ertel and Gordon write of this phenomenon, where deals fail because negotiators focus too much on getting the deal done, and  not enough on what will happen between the parties after the deal closes.

Their key point is that the ultimate implementation of the deal is often where the value lies, and that how a deal is negotiated can be critical to its ultimate success. Ironically, many traditional negotiation techniques can damage relationships and lead to all sorts of problems for the parties after the closing. Those problems, of course, detract from the value of the deal. Read More »

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Entering the 21st Century – Nashua Telegraph, January 19, 2011

Some of you may recall that early last year I wrote a column in which I complained vehemently about Facebook, LinkedIn, Tweeter and all the emerging social media that were beginning to crop up in my life. In that column, which was published in February, I wrote, “Facebook bothers me. In Facebook, and its obnoxious grown-up cousins Linked In and Plaxo, we have the next phase of techno-torture for lawyers.” Well, at least I took a stand.

But now it is January of 2011. In the interests of journalistic integrity, (and in my own self-interest in wanting to making a public announcement,) I have a confession to make: I have embraced social media as a means of marketing myself and my business. I am now blogging regularly at my new website, www.scottflegal.com, and I’m making use of Facebook, at least at a minimal level. I am on LinkedIn. Alas, I am even tweeting on Twitter. I am one with the universe, at least in terms of connectedness.

Hate on me if you must, but also hear me out. This transformation did not occur in a vacuum. This was an epiphany, brought about by two conversations, each of which rocked my world. But taken together, they became an undeniable force driving me toward the social media frontier. Read More »

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The Understanding Based Mediation Model

In June of 2005 I attended a five day workshop at the Harvard Program on Negotiation conducted by Harvard PON founder Robert Mnookin and mediation pioneer Gary Friedman.  The workshop provided instruction and training in a mediation model known as the “Understanding Based” Mediation Model.

The model is based on the premise that the parties need to work together in the same room with the mediator if they are truly interested in resolving a dispute and perhaps creating value. Caucuses are generally few and far between in this mediation model.

The Understanding Based Mediation model demands that the mediator be comfortable dealing with the conflict in the room, which can often be heated. In my experience there is generally too much caucusing in mediation.

The pluses and minuses of caucusing are discussed in some detail in an article I wrote for the Summer 2005 edition of the New Hampshire Bar Journal. The article can be found here  http://www.negotiationworks.org/pages/newsroom/Advocating_for_Understanding.pdf.

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Dr. Michael Shermer on Randomness and the Tucson Shootings

There has been a lot of nonsense spewed by the media and by some politicians about the recent tragic shootings in Tucson, Arizona. Most of it s missing the mark, although the President did a nice job in his remarks of helping the nation find a way to heal. This story is really about mental health, and the fact that we have lots of people in our midst who need treatment for mental illness and who for a variety of reasons don’t get it.

Riddle me this Batman: if the shooter had been walking around that college campus with a case of measles, would the college have steered him to treatment? I suspect so. I realize that mental illness is complicated and that we generally avoid involuntary committing folks. But we’ll never know whether some form of intervention by a mental health professional in this instance might have saved lives. We need to do better.

Leave it to Dr. Michael Shermer of the Skeptic Society – one of my favorite organizations – to finally hit the public with the grim reality of why incidents like the one in Tucson will always occur. His excellent article from the L.A. Times can be found here: http://skepticblog.org/2011/01/12/finding-patterns-in-random-noise/

Michael Shermer is the bomb. More on him here: http://www.michael shermer.com.

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Stereotypes and Negotiation

The Negotiation newsletter is a monthly publication of  the Program on Negotiation at Harvard Law School (Harvard PON for short).  This month’s issue contains a fascinating article on snap judgments too often made by negotiators about the other parties at the negotiation. These judgments tend to be based on stereotypes, and can contribute to mistakes and poor decision-making at the bargaining table.

The article focuses on snap judgments we tend to make at the very earliest moments of negotiations about the warmth and competence of the other parties at the table. Believe it or not, researchers have established that warmth and competence make up 80% of our judgment about others.

Read More »

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Gonna wash those thoughts right outta my head

Over the years, some of my best thoughts have come to me in the shower. For some reason, others seem to find that strange.

When I tell people that “I was thinking about this in the shower this morning,” people seem surprised, if not bewildered. When I tell clients that some of my most productive but non-billable time spent thinking about their case was in the shower, they look at me like I must be joking. But I’m not.

Until Monday, I was convinced I might be the only person out there who believed in the amazing power of shower-thinking. But then things changed. For none other than Nassim Nicholas Taleb, brilliant philosopher and author of the amazing book “The Black Swan,” placed his seal of approval on the power of shower-thinking. Perhaps now I might even start billing some lucky clients for the time I spend thinking about their cases in the shower.

Taleb’s latest book is called “The Bed of Procrustes – Philosophical and Practical Aphorisms.” It is a curious follow-up to his seminal work, “The Black Swan,” in which he managed to change the way many of us view the world.

As the title implies, the new book is a simple book of aphorisms. An aphorism is defined by Merriam Webster as “a concise statement of a principle.” I will leave it to those of you interested enough in Taleb’s work to buy the new book to decipher the significance of its title. Suffice it to say, it provides a powerful metaphor for Taleb’s basic premise: that we humans just don’t do a great job dealing with the unknown.

I had just begun to read the book when there it was, right on the bottom of page 5: “Your brain is most intelligent when you don’t instruct it on what to do – something people who take showers discover on occasion.” I was floored. None other than Nassim Nicholas Taleb had confirmed what I always suspected. There is value in shower thinking. Read More »

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Sides in Pennichuck deal deserve kudos

Were you surprised when you heard the news that the city of Nashua had settled its dispute with Pennichuck Corp.? I suspect not.

After all, the statistics say that more than 98 percent of cases filed in court settle prior to final judgment. But kudos to both sides for taking matters into their own hands and settling the case without further court involvement. It could not have been easy.

Like all negotiations, this case contained structural barriers that had to be overcome for the parties to come to agreement. There were a number of constituencies whose interests needed to be accommodated before a settlement could occur.

On the Pennichuck side of things, shareholder interests were an obvious concern. But regulatory obligations also complicated the picture, and that makes negotiating tougher. These obligations involved not only state issues associated with the New Hampshire Public Utilities Commission, but federal issues involving Pennichuck’s status as a publicly traded company.

From the city’s perspective, there may have been even more structural barriers to overcome. The current mayor inherited this situation from her predecessor. She had to carve out a position on the issue that respected the work done so far on the case. She also had to find a way to balance the interest in preserving the autonomy of her office with Right-to-Know law issues and keeping the Board of Aldermen informed and engaged. Given that most negotiators prefer to negotiate privately, this had to be a significant challenge. Finally, of course, the negotiating team also had to keep at the forefront of their efforts the interests of the real stakeholders here: the citizens of Nashua.

Most negotiations also contain interpersonal barriers to agreement that need to be overcome, and this negotiation was no exception. There was a lot of history here. The parties had done business together for decades. There have been relationships between Pennichuck management and the city that have flourished, and others that have died. The Pennichuck board of directors is still populated mostly by local community leaders, many of whom have had a stake in this relationship for years. That sort of board composition in a public company is pretty unusual. What did this uncommon familiarity breed as this conflict wore on? Maybe not contempt, but it probably didn’t accelerate the settlement process either.

Despite the fact that these challenges have been overcome, I would be remiss if I failed to point out that there were also characteristics present in the dispute that suggest that it might have been settled sooner. First, it was at its core a dispute between a customer and a supplier. That dynamic, believe it or not, creates more opportunities for forward progress than disputes between suppliers, or between customers. Meaningful trade opportunities existed that might have been leveraged early on in the process to generate settlement momentum.

Even more importantly, there was an economic reality in play here that suggested that a sale of Pennichuck to the city in one form or another was inevitable. Simply put, the city of Nashua could afford to pay more for Pennichuck than any other likely suitor. Businesses in private industry do not have municipal bonding capability and the access to cheap capital that the city of Nashua had in this case. In the end, that no doubt helped the parties close the gap between them.

Nonetheless, like so many cases, this one played out in court for years before the parties were able to resolve their differences. Might it have been settled sooner with less expense? Not without a major commitment of resources by both sides to collaboratively solve the problem. In addition to a change in the mindset of the parties, it would have required third-party intervention. A mediator with experience mediating large public disputes could have been the deal advocate needed to drive the settlement process faster. MIT professor and Harvard Program on Negotiation executive Larry Susskind might have been able to pull it off. He was right down the road in Cambridge. But for the reasons cited here and no doubt many others, the parties didn’t see third party intervention as a viable option.

Was this a good deal for the city of Nashua? Truthfully, it cannot be fairly evaluated for years. The sunken costs associated with this process are enormous, and they are not over yet. Getting this deal to closure will no doubt entail thousands more in legal fees. Remember too that the out-of-pocket costs incurred by both sides here arguably impact the value of the deal. What percentage of Pennichuck rate increases over the past few years were related to the dispute with Nashua? This has already been an expensive transaction for Nashua citizens. Will the benefits of ownership be sufficient to overcome those costs, and others that may arise down the road? Only time will tell.

In the meantime though, we should be thankful for the leadership of both parties for having the common sense to commit to resolving this dispute without further court involvement. That, we can be sure, was in all of our best interests.

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