Insights on negotiation strategy for startup founders from Brexit

The Brexit ‘in-out’ referendum promised and delivered by the then Prime Minister David Cameron on June 23 2016, has caused a huge political crisis, and divided the British people. He was dogged by the Eurosceptics in his party who wanted to cut the Gordian Knot of resistance to Britain’s EU membership once and for all, but Cameron’s referendum promise was folly based on no understanding whatsoever of the consequences.

Theresa May inherited this recklessness when she became Prime Minister following Cameron’s resignation after the referendum result.  The subsequent three years have offered insight and learnings on negotiation leadership, strategy and processes to reflect upon from a business perspective.

From the moment of her succession as Prime Minister onwards, May has had the opportunity and the duty to tell it like it was: to explain that the referendum had been based on false premises, that it over simplified the issue of exit; that no government could deliver a clean Brexit and, above all, that Britain would be worse off leaving the EU than staying in.

Instead, she eschewed the obvious reality. Her strident tones and attitude in setting down her ‘red lines’ at the outset were unilateral, likewise the Chequers proposal, containing provisions which would never get consent of the EU partners. Her repeated insistence that Britain could ‘take back control’ of its laws, borders, and finance free from EU interference, while gaining favourable economic relationship with the EU, was simply misguided optimism, or blind ignorance of the reality.

From the beginning, May completely misjudged the nature and complexity of the withdrawal process. She portrayed the discussions as a negotiation of equals, which it never has been, as the four freedoms – free movement of goods, services, capital, and people – are owned and operated by the collective of twenty-seven countries.

As a way of beginning negotiations, May has made sound bite political gestures and jingoistic statements, than laying down a clear, strong strategy. Trying to start the Brexit process to her own timetable, May was trying to pull a unilateral move stating that Britain, as the country initiating the Brexit process was the dominant party. However, the EU was clear on its realities and process, and has remained strikingly united throughout the Brexit process.

In reality, this sort of power play is rarely constructive. If you come into a negotiation acting competitively you are likely to jeopardise initial rapport and relationship building opportunities, which are essential. May also lacked a clear mandate, clarity in her goals, cohesive team and united support to play it so forcefully, and the disharmony from within the UK Government has been palpable to the EC.

The May deal is now off the table, MPs have seized control of the process, the deadline has been extended and we are no further forward. There is even talk of revoking Article 50 or another referendum, two and a half years after the initial vote. All this work may now be nugatory, so what can startup entrepreneurs learn from the Brexit shenanigans and the importance of conducting effective negotiations?

1. Establish your principles It’s vital that you have clear principles and philosophy on negotiating style, and are not simply gunning for your own agenda. For example,

  • Do not start with unilateral moves in an attempt to try and impress the other party with bravado. Trying to overawe the other side is a very risky strategy, it just gets their backs up.
  • Avoid focusing on personalities and personal ambitions and instead look to the task and issues at hand.
  • Enter a negotiation with a willingness to listen to the other side, build relationships and take people with you rather than force them to accept your demands and pacing.

The UK’s Brexit negotiating stance has so far been positional and assertive, mainly pursuing its own interests. It’s characterised by Theresa May’s statement that no deal is better than a bad deal. It signifies confrontation and aggression. This mindset assumes any deal that is acceptable to the EU will be bad for the UK, implying a combative, competitive situation and failing to look for trades that could deliver and expand a win-win.

In a business context, this isn’t the foundation for any meaningful collaborative dialogue.

2. Understand the context of the negotiation The negotiation of differing ideas does not take place in a vacuum, the context is woven from previous experience, competing agendas and immediate needs.

The UK made the decision to leave the EU, yet we seem to be embroiled around what the EU should be offering. In reality, the EU does not need to agree to any of our demands, which has absorbed the time of negotiations, and it is understandable that patience is wearing thin.

When you negotiate ideas, you don’t want to get so caught up in your own red lines that you frustrate the other party, and this is exactly what seems to have happened. We can all get overly attached to our favourite ideas, and relinquishing even a small part of the whole is a psychological challenge. But it’s a necessity where compromise and iteration are inevitable and indeed desirable.

In business, going into a situation with a fixed idea of what you want could result in total rejection. Prepare to adjust and co-create, and yours may still be the idea that wins out. Compromise often brings new insight and a different perspective on understanding each other’s position.

3. Set expectations and objectives Preparing both sides for the need to adjust their initial positions is a key tenet to any negotiation situation. It’s rare for an idea to come out of a discussion unchanged, so exploring the mutual aims of both sides will benefit the process and facilitate a way forward.

So in a business context:

  • Allow everyone time to air their opinions. Listen and ask questions to clarify positions and gain understanding of what’s influencing their thinking.
  • Open up individual issues for discussion. Go through discomfort, opening expressions of feeling and don’t rescue the conversation until it becomes stuck.
  • Identify the relative importance of different issues to guide the direction, and generate options where possible.

Today’s geopolitical world demands investment in relationships, both sides’ interests and concerns are too important to be unilaterally compromised.

Likewise, a competing approach is rarely productive within a business negotiation because agreement usually requires several people to work together over a period of time, now and in the future.

4. Create trust The best negotiations rely on the parties involved trusting one another. Britain was off to a bad start from the outset, because people leading the negotiation were not looked favourably upon by the EU. Boris Johnson was a particularly bad choice. The belief was that he would be tough and represent the seriousness of the leave position – but he lacked gravitas due to his flawed personality and outlandish statements.

Both sides in a negotiation want to make a good deal from their own perspective, but you have to trust the other side to actually do and mean what they say. Boris Johnson divides opinion and has said many memorable things that turned out to be false, some offensive, often simply hollow rhetoric or bravado, or extremely difficult to verify, or simply genuinely unhelpful. While this may have made some people chuckle, it undermines credibility, respect and trust.

Britain has also put forward a revolving door of lead negotiators in terms of the Secretary of State for exiting the European Union – a position held initially by David Davis, then Dominic Raab and now Stephen Barclay – further undermining consistency and familiarity. Contrast this to the EU, united behind the solid, sober and serious leadership of Michel Barnier, the Commission’s chief negotiator.

In business, it’s always about people – the respect, rapport and relationship. We would not enter a business arrangement with people we don’t trust.

5. Avoid negotiating under self-inflicted time pressure. Teresa May did not have a clear plan when she initiated Article 50. This gave Britain just two years to negotiate a deal with no starting framework.

Negotiating under a deadline is a recipe for poor decision-making. If you don’t give yourself time to construct a deal, consider your options, to develop trust, to understand the downsides, then don’t expect a favourable outcome.

May’s primary tactical error was to issue the Article 50 letter, activating the withdrawal process, in March 2017. She was under pressure to start the process and to get a move on, but the letter was sent too soon, because she had no formulated strategy or plan for Brexit. Once the letter was sent, the clock started the countdown to automatically leave on 29 March 2019, with or without a deal. The ticking clock put the EU in a very strong position.

In business, there is always benefit to continuing a commercial exchange and open dialogue with transparency, even when there isn’t full agreement, especially not working to an unrealistic, pressurised deadline.

6. Negotiation is a process, not an event Exiting a contract is a process in which the departing entity holds very few cards. So Brexit was always going to be an unequal dialogue, and our position was undermined from the outset as the Government was divided.

Throughout the talks, the UK has done little to earn goodwill, and it is hard to predict what the next stage of the rollercoaster will be. The best negotiating strategies are to act in a considered, open thinking manner, while continuing to develop a relationship and building agreement sensibly and on solid foundations, seeking consensus.

Had May and other politicians acted with a sense of reality, being honest with each other and the public, they should have recognised that for the EU Brexit was not a negotiation, rather a process for a member state to leave the organisation. Instead, May chose to convey messages rather than try to establish dialogues.

In business, we recognise negotiation is a process, and are prepared to ask for what we want, but then reciprocate. You have to be willing to make the ask for what you want. You have to be first to place value on yourself. You have to go in with your goal, and know where your fall back is going to be and what your alternative strategies might be – it is a process.

Brexit is turning out to be a tragic example of bad negotiation. It is complex and complicated for sure, but then so are many business negotiations. Nearly everyone has an opinion on Brexit, but no one can tell the future.

In my experience, no business situation would be so unanchored and lack direction, so volatile and so adrift after such a period of intense and prolonged discussion, such that it offers many lessons on how not to conduct a commercial business negotiation.

As a startup, think ‘win-win’ as your negotiation strategy

Detective Constable Endeavour Morse, Scotland Yard’s chief negotiator, picks up the phone. He has established contact with the kidnapper who has barricaded himself and two hostages inside The Old Bookbinder’s Ale House, Oxford.

Morse’s task is simple but challenging: extract the hostages without losing any lives. After a couple of tense phone calls, he knows the protagonist, his motive and his demands. Morse plays it calmly, using a combination of containment, empathy and hostage negotiation tactics.

In face-to-face dialogue over the next two days, Morse articulates to the hostage taker his purpose. He seeks to build rapport and adapts his conversation to the hostage taker’s vocabulary. He’s supportive and encouraging, disarming the hostage taker, He listens, trades concessions, working towards a deadline.

After three intense days of back-and-to negotiations, Morse achieves successful resolution, convincing the hostage taker to come out on his own with as much dignity preserved as possible, hostages unharmed. Crisis over.

You might not think startups have much to learn from Morse and his situation, but there are valuable insights. The stakes are clearly different in startups than in hostage situations, but the techniques researched from the best hostage negotiators will help startups overcome one of their most challenging hurdles – none more so than closing the deal with your first customer.

The negotiation itself is a careful exploration of your position and the other person’s position with the goal of finding a mutually acceptable compromise that gives you both as much of what you want as possible.

Of course, in hostage situations this is often not the case and a standoff arises, whereby one side must give way and compromise if there is to be a resolution. The scale of this can often be regarded as a climb down and a defeat, and the negotiation becomes a confrontation with no goodwill, a battle of attrition often leading to an unpleasant outcome on both sides.

This needn’t be the case In business, a ‘win-win’ position should be sought where ultimately both sides feel comfortable with a solution acceptable to both parties, leaving both feeling that they’ve taken away something positive from the discussion.

So let’s look at three practices from classic hostage negotiations that offer insights and learning for startups – preparation, style & structure, and use of silence.

Preparation

As with any aspect of business, preparation is always appropriate as it strengthens your position by thinking through the key points before you start negotiating:

Set goals – but see the situation from all angles What do you want out of the negotiation, what do you think the other person wants? Prior to the discussion, make sure you are clear on what you want as well as your ‘walk-away’ point – the minimum outcome you’re willing to accept. Try to understand where the other person is coming from and their objectives.

Set your limits before the negotiation begins. You need to prioritise what items are most critical and what you absolutely need to have to make a deal. Avoid playing split-the-difference on the spot.

Consequences & alternatives If you don’t reach agreement, what alternatives do both parties have? How much does it matter if you do not reach agreement? Does failure to reach agreement cut you out of future opportunities? What are the consequences for both parties? Based on all of the considerations, what possible compromises might there be?

Ask for what you want, but what will you trade? Don’t be afraid to explain your objectives and what you’d like as an outcome, but do so in a non-confrontational tone of voice. What do you and the other person have that you can trade? What are you each comfortable giving away?

Plan ahead to ask the right questions Perhaps most importantly when preparing to negotiate in a hostage situation is asking ‘What do I not know?’ and this applies to business. Effective negotiations are rarely spontaneous. Taking time to analyse the situation, and to think through your strategy is critical to negotiating success.

Ask yourself what you’re most worried about. For example ‘What is the question I really hope they don’t ask?’ and start preparing your potential response.

Think win/win, and remember that there is always tomorrow Don’t have a mindset that one must walk away a winner and the other a loser, be open minded to working together to determine ways to meet the needs of both parties. Envisage what this outcome looks like, and see the discussion from the other side of the table. This is key in getting into a dialogue with a hostage taker.

If the discussion heads in a wrong direction and you get to a cul-de-sac, it’s OK to recommend picking up the discussion on another day, after everyone has an opportunity to take a step back, reflect and rethink. Don’t think you need to force an outcome at the first meeting.

Style & Structure

Your strategy of how you intend to conduct the negotiation process is important, to ensure you have both a style of communication and also a structure to progress towards the outcome you seek.

State your purpose It’s crucial to make the other person feel like you’re working with them, not against them. This is hard to pull off in normal hostage negotiations.

Start the discussion by stating an ideal outcome that you consider to be in both parties’ interests, showing immediately you’re striving for a win-win deal – it’s a transparent opening statement of your thinking.

Be honest, but direct Playing with the truth can quickly backfire. From a practical standpoint, if the hostage-taker feels he’s being patronised or manipulated from the outset, he’s not going to cooperate. Speak with respect, directness, authenticity and integrity.

You should be transparent about compromises you’re offering. Concessions often go unappreciated and unreciprocated, so highlight their value. On the flip side, don’t pretend an easy-to-make compromise will be hard, as it will stop being believable if you make every concession seem huge.

Also, don’t misrepresent your terms or oversell your product. The prospect could easily uncover your lies with a little digging.

Build genuine rapport Creating rapport is essential, after all a prospect is far likelier to become a client if they feel a connection with. You’re going to have a much easier time negotiating with someone who respects and trusts you.

Build rapport the way hostage negotiators do by matching the other person’s way of speaking. That means using the same words and phrases, talking at a similar pace, and echoing their style to create a genuine connection.

Be an active listener You may think good negotiators spend most of the conversation talking, but it’s the opposite, they spend the majority asking questions and listening. Learn to listen. Ask probing questions to reach deeper understanding of the other person’s position. The real art of negotiation is to build trust and rapport, listening means you’re gathering information. Spend more time listening than talking to understand intent.

Be prepared to ask for what you want, but then reciprocate You have to be willing to make the ask for what you want. You have to be first to place value on yourself. You have to go in with your goal, and know where your fall back is going to be and what your alternative strategies might be.

Honesty is how to negotiate everything. It is important to lead with honesty so you can start to figure out what that person wants. Be transparent about what success looks like for you, but then follow this up immediately with a reciprocation that balances with what you see as a positive outcome for the other party. Make them feel comfortable so that they know you are clear in looking out for both parties’ interests.

Develop relationships, not conquests Win-win is the key to longevity of a business relationship. Long-term positive outcomes are achieved when everyone is fully committed to implementing a negotiated agreement so ensure the other party knows two things – firstly, you care about their interests – just as you care about your own, and secondly, you respect them.

Stay calm Hostage takers are usually unstable emotionally, but the negotiator must stay completely calm. Reacting only pushes a hostage-taker further over the edge. The more emotional you become, the more clouded your own thinking will be, and whenever you show emotion, you tell your prospect they’ve struck a nerve.

The person who stays calm and composed usually gets the upper hand, so controlling your physiology is key. If breaking for five minutes to ‘get some air’ isn’t possible, then shift the focus. For instance, if you’re getting frustrated haggling over a specific item, move to a different point and offer to return to it later in the conversation.

Embrace conflict quickly. Often in our discomfort with conflict, we procrastinate talking about divisive issues. In the meantime emotions escalate, making it inevitable that when we finally open up the dialogue it will degenerate into negotiating games rather than collaborative problem solving. You can minimise unnecessary escalation by engaging sooner rather than later.

Using Silence

Perfecting the art of silence in negotiations can give a serious advantage if used wisely. We live in a world of noise where silence has almost ceased to exist to an extent that silence becomes awkward. We also live in a world of growing impatience. We do not pause enough.

Silence is uncomfortable for many people. They expect words from you more than silence. Most people cannot actually resist silence, and so in negotiations it can be a way of putting the other person off their stride.

In some instances, silence pushes the other person to fill in the void, share more information and show their position in greater detail than planned. Against this, silence empowers you, Be silent or let the words be worth more than silence as Pythagoras said. People talking too much may give the impression of justifying themselves. The less you talk, the deeper you look.

Silence gives attention to your words and creates impact, it is important to have pauses to follow your sentences. Silence between sentences gives more clarity to your speech. Silence can also help gain or regain more attention when someone is monopolising the conversation. As Mark Twain once said The right word may be effective, but no word was ever as effective as a rightly timed pause.

Master the art of silence and play this subtle game. Speaking too much and not at the right time can weaken your position. Silence helps you to keep control. In hostage negotiation situations, silence can unnerve the other side such they lose the focus on their strategy.

For me, the bigger picture for a startup negotiating its first customer contract is about building, nurturing and forging valuable relationships. This first opportunity may be right to close, it may not be. Opportunities come and go, so It’s about reaching bona-fide, transparent agreement, finding solutions to tough problems, and learning to get what you want and need for yourself whilst creating value and success for your prospect. Being an effective negotiator helps you find and keep balance – and isn’t that what we all want to be happier and healthier at work?