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Negotiation 101 – Understanding Brexit Negotiations

Negotiation 101 isn’t a direct comment on the Brexit negotiations, but I’ve written it this week as a bit of background for all those commenting on the Brexit negotiations that don’t seem to have any clue whatsoever about how one goes about conducting a negotiation. There’s been a lot of froth about how the UK civil service lacks the skills to negotiate trade treaties, and to a point this is correct. We don’t have a complete absence of the skills, it’s just that they are rarer than we would like. Many civil servants, including me, have experience in commercial and political negotiating. The trouble is there are probably only hundreds to low thousands of people with the right skill set, and they’re all involved in the business as usual activities of letting large contracts and helping Ministers in other negotiations.

Key Principles for Negotiation

There are some key principles for taking part in a negotiation:

  1. Have a clear objective
  2. Know what you are willing to pay
  3. Develop clear positions
  4. Have a fallback/alternative
  5. Don’t over-share

Have a Clear Objective

This is really an adage for everything, but it is especially true for negotiations. You need to know what outcomes you want from the process. Everything you do should be focused on ensuring that objective is met. Although in negotiations care needs to be exercised in not making you look too desperate for anything. There’s a difference between your internal position and clarity of your negotiators and the public position that the other team sees. In political negotiations (but not in commercial ones) you might well obfuscate your real objective so that the opponents are unclear.

What is most important here is that you know what your interest is from the outcomes. i.e. Why do you want what you want. This helps you bargain better, and is often the best way to ensure you get what you need. Equally, in discussions with the other party, you want to establish what their interest in the negotiations is. Once you know that then you can usually rapidly come to an agreement that delivers both parties what they want. Assuming that is possible (and it isn’t always possible).

Know what you are willing to pay

In commercial negotiations this is straightforward. You will have a budget, usually in a business case. You’ll also have researched what other people have paid for similar things, and whether the opportunity cost of you getting it too is similar (e.g. there’s a major difference in price between software development (very expensive) and getting another instance of that software (very cheap) and configuration of existing software (moderately priced)).

In political negotiations you are probably trading off against things you care less about than the objectives that you hope to achieve. Generally you are researching to find common ground so that you can just agree to do something and everyone can see the benefit. However horse trading happens, and this can often be on matters superficially unrelated to the matter in hand. So the negotiation team needs to consider all the things that might come up and develop conditions where they might offer those up in return for achieving an objective.

Develop Clear Positions

Negotiation is a sort of shell game. So you need several positions (just like a WW1 trench line). In descending order of ask:

  • Opening Position
  • Aspirational Objective
  • Red line

Opening Position

No-one seriously expects the opening position to be held, it is usually an unrealistically optimistic exaggeration of the objective. If the other side accepts your initial position it’s a sign that you haven’t done your research properly. Either you’ve been overly modest, or they are desperate. In both cases you could have had a better outcome.

Taking Brexit as an example, the UK government is taking an opening position that there will be no free movement of people, and we’d have access to the single market without paying. The EU position is the exact opposite, and that the UK should pay its contributions for four years after it leaves to defray the EU’s loss of income. Neither side really believes that this is where the agreement will be, but they are framing the negotiation. The agreement space, if it exists, lies somewhere between these two positions.

Aspirational Objective

This may be more than one explicit position, but generally it’s where you expect to settle, and ideally you’d be somewhere between this and the opening position. In the example above, the aspirational objective may well be for free movement of labour (i.e. you need to have a job before you come here) and that we make a notional contribution (i.e. less than half of our current net contribution) in return for access to the single market.

Red line

A red line is a position that you will not cross. It would be better to have no agreement than to have to cross a red line. These need a lot of care in crafting, to be certain that a proposed deal would make you worse off if it was accepted. It can be useful in negotiation to be clear when a red line is being approached, especially if it is a qualitative one rather than a quantitative. So you wouldn’t disclose a budget limit at the start, but you might disclose that you aren’t interested in increasing immigration.

Again, taking the example above, red lines might be:

  • Not paying more than 75% of the current net contribution
  • Access to public funds for EU/EEA citizens resident in the UK
  • Non-reciprocity for UK citizens in the EU
  • Full access to the single market passporting for financial institutions

Note that the red lines are on very specific issues, and not necessarily general positions. That’s because they need to be specific conditions so that you know where they are. Everything between our red line and the other side’s red line is up for negotiation. If there’s a positive gap between the red lines then we should eventually reach an agreement. If there isn’t a positive gap between them then we can’t possibly reach an agreement.

Having a Fallback/Alternative

This is also sometimes called Best Alternative to a Negotiated Agreement (BATNA). In every negotiation you need to be clear how you benefit. If you aren’t getting the benefit you need then you need to have a credible alternative that encourages your negotiating partner to come back on side. At the bottom line, you need to develop this so that if you have to you can call time on the negotiation and walk away.

Being able to walk away encourages both parties to negotiate in good faith, and to ensure that both sides gain from the negotiation. There’s usually always room in negotiations for both sides to ‘win’. The purpose should be to find the mutually beneficial space and steer the agreement there. Keeping an alternative shows you where you are better off. This is usually why business cases have a ‘do nothing’ option for comparison.

In the Brexit context this is the ‘Hard Brexit’ rhetoric of the government. They’re talking up their best alternative to a negotiated agreement. It might not be a very good alternative, but that’s not its purpose. It’s there to show us that the agreement we get to is better than not agreeing. If the proposed agreement isn’t as good then we know we’re better off just walking away without an agreement.

Don’t over-share

It should be obvious, and I’ve covered it in most of the points above, but the frothers on social media don’t seem to understand this.

Negotiation is about getting to a position where you get what you need but don’t pay too heavy a price for it. If you are too open about what you want, and how much you want it, then you leave yourself open to getting a sub-optimal deal. Every deal has a cost-benefit ratio for both parties, as one increases the other usually declines, and the intent should be to find the point where both maximise the cost-benefit ratio, i.e. the point where the lines intersect in the graph below. (note: the graph assumes that Party B is incurring costs to supply benefits for Party A, which then pays in proportion to the benefit it receives.)

Cost-Benefit cross-over on negotiations (credit: James Kemp)

Specifically you definitely need to keep your compromise positions and trade-offs secret, and you also need to maintain the credibility of your ability to walk away from the negotiation. Anything that acts against that needs to be suppressed for as long as possible.

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