Table of Contents The Jossey-Bass Business & Management Series

Title page

Copyright page

Dedication

Preface Researching Culture and Negotiations The Plan of the Book New in This Edition Handling Terms

Acknowledgments

The Author

1: Negotiation Basics Contexts for Negotiation Five Building Blocks of a Negotiation Strategy Combining Fundamentals Evaluating Potential Agreements Moving on to Culture

2: Culture and Negotiation What Is Culture? Three Prototypes: Dignity, Face, and Honor Cultures

A Model of Intercultural Negotiation Planning for Culture’s Effects Moving on to Strategy

3: Culture and Strategy for Negotiating Deals Deal-Making Negotiation Strategy Culture and Negotiation Strategy A Model of Negotiation Strategy Advice for Deal-Making Negotiations Intercultural Negotiations Moving on to Resolving Disputes

4: Resolving Disputes The Difference Between Negotiating Deals and Resolving Disputes Conflict and Confrontation in Dignity, Face, and Honor Cultures Interests, Rights, and Power: Three Strategic Approaches to Resolving Disputes How to Start a Dispute Resolution Negotiation How to Change the Focus from Rights or Power to Interests Using Third Parties in Dispute Resolution Excellent Dispute Resolvers

5: Negotiating in Teams Managing Procedural Conflict in Teams Three Models of Teamwork Using Negotiation Strategy to Manage Task Conflict and Make Decisions in Teams Minimizing and Managing Interpersonal Conflict Skills, Motivation, and Environments Teams Need Guidance

6: Social Dilemmas Prisoner’s Dilemmas and Social Dilemmas Competitive Dilemmas Cooperative Dilemmas Negotiating Individual and Collective Interests in Social Dilemmas

7: Negotiations Between Governments and Foreign Direct Investors

Investors and Governments’ Interests in FDI Predictable Challenges to Foreign Direct Investment Unpredictable Challenges Negotiating Globally with Government

8: Will the World Adjust, or Must You? Why Not to Expect a Global Negotiation Culture Based on the Dignity Model Toward Becoming a More Effective Global Negotiator Why Me? Excellent Global Negotiators

Glossary

Name Index

Subject Index

End User License Agreement

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The Instructor’s Guide for the third edition of Negotiating Globally contains an overall course design as well as chapter-by-chapter resources for both instructors and students, including cases, exercises, questionnaires, and tools. It is available for free at www.wiley.com/college/brett.

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Wiley publishes in a variety of print and electronic formats and by print-on- demand. Some material included with standard print versions of this book may not be included in e-books or in print-on-demand. If this book refers to media such as a CD or DVD that is not included in the version you purchased, you may download this material at http://booksupport.wiley.com. For more information about Wiley products, visit www.wiley.com. Library of Congress Cataloging-in-Publication Data Brett, Jeanne M. Negotiating globally : how to negotiate deals, resolve disputes, and make decisions across cultural boundaries / Jeanne M. Brett. —Third edition. pages cm. —(The Jossey-Bass business & management series) Includes bibliographical references and index. ISBN 978-1-118-60261-4 (cloth/website); ISBN 978-1-118-61150-0 (ebk); ISBN 978-1-118-61158-6 (ebk) 1. Negotiation in business—Cross-cultural studies. 2. Negotiation—Cross- cultural studies. 3. Decision making—Cross-cultural studies. 4. Conflict management—Cross-cultural studies. I. Title. HD58.6.B74 2014 658.4?052—dc23 2013047582

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To all the negotiators who shared their experiences so that others could learn

Preface

If you must negotiate deals, resolve disputes, or make decisions in multiparty environments, this book is for you. If you have had formal training in negotiations, but no training in culture, the book will extend your negotiating skills and knowledge across cultural boundaries. Be prepared to discover that old familiar negotiation concepts, such as power and interests, take on somewhat different meaning in different cultures. If you have had no formal training in negotiations, the book will introduce you to all the fundamental concepts in negotiation and explain how and why the concepts apply in different cultural settings. Although the book emphasizes negotiations in a global business environment,

its advice is relevant not just to managers and management students who expect to be negotiating across cultural boundaries but also to lawyers and law students, and to government officials and students of public policy who are concerned with economic development in a global environment. Global negotiations occur in multiple legal, political, social, and economic environments. International agencies and national and local government officials are frequently at the table in negotiations that cross cultural boundaries. This book provides advice to help global negotiators navigate these complex environments. Negotiating Globally focuses on national culture, because nation state

boundaries are both geographical and ideological. The ideology or theory underlying a nation’s social, economic, legal, and political institutions affects the way people interact. When negotiators are from the same culture, ideology is the backdrop against which deals and decisions are made and disputes are resolved. When negotiators are from different cultures, each may rely on different assumptions about social interaction, economic interests, legal requirements, and political realities. The book provides insights about when and why to adapt and how to execute an effective negotiation strategy that takes cultural differences into account. In today’s global environment, negotiators who understand cultural differences

and negotiation fundamentals have a decided advantage at the bargaining table. This book explains how culture affects negotiators’ assumptions about when and how to negotiate, their interests and priorities, and their strategies: the way they go about negotiating. It explains how confrontation, motivation, influence, and

information strategies shift due to culture. It provides strategic advice for negotiators whose deals, disputes, and decisions cross cultural boundaries.

Researching Culture and Negotiations Until recently, most of the knowledge about how to negotiate deals, resolve disputes, and make decisions in multiparty environments came from U.S. researchers studying U.S. negotiators negotiating with other U.S. negotiators. The evidence is overwhelming that U.S. negotiators leave money on the table when they negotiate deals, escalate disputes to the point at which costs outweigh gains, and make suboptimal decisions in teams and allow their emotions to interfere with outcomes. Their outcomes also often fall short of the outcomes they could have obtained if they had integrated their interests fully with those of their counterparts across the table. Armed with knowledge about this gap and what can be done about it, my

colleagues at the Kellogg School of Management at Northwestern University and I have worked with thousands of students, managers, and executives who wanted to improve their negotiation skills. In the early 1990s our student population and their interests started to shift. Managers from all over the world began to come to our executive programs. We were invited to teach negotiation in Europe, Latin America, and Asia. Kellogg’s students became decidedly international. We could not avoid dealing with the question of whether what we were teaching applied across cultures. Was the same gap present in other cultures, or was it exclusively a U.S. problem? Would the same skills close the gap in other cultures? What about negotiating across cultures? What adjustments needed to be made to take what we knew about negotiations effectively across cultures? These questions motivated the research that underlies this book. The task was

to determine how culture affects negotiation processes and outcomes in the settings of deal making, dispute resolution, and multiparty decision making. Since 1992, I have traveled widely and worked with scholars around the world, studying how managers negotiate in different cultures and also how they negotiate across cultures. We have talked with managers from many different cultures about their strategies, collected their stories, and shared some of our own. But we have also systematically collected data on their strategies and outcomes, using the same methods that we have used with U.S. managers. These data provide a strong foundation for the insights in the book, its illustrations of

cultural differences in negotiation, and the strategies it recommends. The book is not about how to negotiate in Israel, Russia, Japan, Brazil,

Thailand, Qatar, Spain, India, France, Germany, Sweden, China, Korea—all countries where managers and management students have helped us understand culture and negotiation and where we have done research. Instead, the book focuses on what we know theoretically and empirically about negotiation strategy and culture, how negotiation strategy is practiced in different cultures and why, and what the negotiator crossing cultural boundaries can do to modify strategy so as to realize interests and maintain integrity even when confronted with a very different cultural approach to negotiation. Rather than advice about how to act when in Rome negotiating with a Roman, the book provides practical advice about how to anticipate cultural differences and then manage them when they appear at the negotiating table. It challenges negotiators to expand their repertoire of negotiation strategies, so that they are prepared to negotiate deals, resolve disputes, and make decisions regardless of the culture in which they find themselves.

The Plan of the Book If you are already an experienced negotiator, having closed deals, resolved disputes, and even taken a negotiation course or workshop, the basics in Chapter One should be familiar. Chapter One describes the different contexts for negotiation: deal making, dispute resolution, multicultural and team decision making, social dilemmas, and negotiations between government and foreign direct investors. It introduces the five fundamental building blocks of negotiation strategy: parties; issues; positions, interests, and priorities; power; and targets. It describes how to develop a negotiation planning document and how to evaluate the quality of a negotiated agreement. Chapter Two introduces a new way of categorizing culture that goes beyond

the familiar East-West divide of individualism-collectivism that is the basis for most international management books. The book discusses negotiation in the Middle East and Latin America, areas of the world where little prior negotiation research has been done. Chapter Two discusses three cultural types: dignity culture, familiar as Western culture; face culture, familiar as East Asian culture; and honor culture, which characterizes cultures in the Middle East, North Africa, and Latin America. The chapter compares and contrasts these cultural prototypes with respect to the nature of self-worth, power, sensitivity to insults,

confrontation style, trust, and mindset with the purpose of generating insight and understanding as to why negotiators in these cultural types use strategy similarly or differently. It provides the model of intercultural negotiations familiar from previous editions and discusses the environment in which global negotiations occur. The chapter ends with a new section focused on planning for cultural differences. Chapter Three is all about negotiation strategy to create joint value in deal-

making (buying and selling) negotiations in a global environment. After explaining why creating value is important, it describes two forms of negotiation strategy widely used around the world. One, called Q&A for questions and answers, is all about gathering information that can be used to reach agreements. The other, called S&O for substantiation (influence attempts) and offers, is all about using persuasion and making offers to close deals. With this basic understanding of the two fundamental negotiation strategies, the chapter turns to culture. It explains how trust, whether based on interpersonal relations or institutional surveillance and sanctioning, affects whether negotiators use Q&A or S&O strategy. It describes how mindset, linear and analytic as practiced in the West versus holistic and context sensitive as practiced in East Asia, can affect whether negotiators are able to generate insight from the S&O strategy. The chapter ties this understanding of culture and negotiation strategy together in a model and then turns to advice for negotiating in high and low interpersonal trust environments, for using offers including MESOs and contingent contracts—all geared toward generating the information negotiators need to create value. There is a new section of this chapter focused on reviewing what we know about intercultural negotiations, what to expect in terms of strategic dominance, and how to accommodate to a counterpart’s strategy without compromising your own interests and integrity. Chapter Four begins by explaining the differences between negotiating deals

and resolving disputes: independent versus linked BATNAs, maximizing gains versus minimizing costs, emotions. It then turns to explain the differences between direct and indirect confrontation. (In direct confrontation the claimant tells the respondent what the claim is and what to do about it; in indirect confrontation the claimant leaves it to the respondent to identify the claim and what to do about it.) The chapter discusses which type of confrontation is preferred in dignity, face, and honor cultures and why, and then introduces three approaches to resolving disputes: interests, rights, and power. For each approach there is advice about how to uncover interests, rights, or power positions, and

how to use each of the three approaches effectively to resolve disputes. The negotiation section of the chapter ends with advice on how to start such a negotiation and how to move strategically between and among interests, rights, and power approaches to see agreement. The chapter includes a shortened version of the third-party chapter from the 2007 edition of Negotiating Globally. This third-party section, like the old stand-alone chapter, distinguishes between third parties with authority to resolve disputes and those without that authority. It first describes the arbitration process, and provides advice on selecting an arbitrator and some insight into how culture might affect arbitration decisions. It then describes the mediation process, gives advice on selecting a mediator, and briefly reviews research on how differently mediation is used around the world. Chapter Five focuses on using negotiation strategy to make decisions in teams

when multiple parties are likely to have both different approaches to teamwork and different ideas about what the team’s decision should be. The chapter begins by explaining procedural conflict in teams and introduces three models of teamwork: in which a subgroup or individual dominates; in which there is a hybrid, but stable process melded from members’ different approaches; and fusion, when members’ different approaches are used simultaneously or in sequence. The difference between fusion and hybrid is primarily in terms of stability. Hybrid teams have stable processes; fusion team processes are more dynamic, responding to the changing elements of the team situation. The chapter then turns to using negotiation strategy to manage task conflict and make decisions in teams. This section applies familiar strategy including using negotiation concepts to evaluate team decisions, using negotiation strategy to generate information, and using negotiation strategy to integrate information and reach decisions. In doing so it addresses language, structural barriers of virtual teams, and psychological barriers to information sharing. It addresses issues, interests, and priorities in the multiparty environment, it discusses BATNAs for the team and individual team members, and talks about decision rules, setting norms, and considering second agreements. There is an important section of advice for minimizing and managing interpersonal conflict, and another for team leaders to consider the skill set, the motivations, and the environmental support that teams need to reach high-quality decisions. Chapter Six focuses on social dilemmas—those ubiquitous multiparty

extensions of the famous Prisoner’s Dilemma (PD) situations in which self- and collective interests are in conflict. Social dilemmas are special cases of team decision making. Teams with members representing many different nations are

currently struggling with dilemmas concerning global resources, including forests and fisheries, air, and water. The chapter starts with the more familiar PD to explain the challenge of balancing self- and collective interests. It then introduces two types of social dilemmas: cooperative, in which the public interest is for the parties to cooperate and their private interests are to compete, and competitive, when the public interest is for the parties to compete but the parties’ private interest is to cooperate, as in a cartel. The best-known example of a cartel is OPEC, which is untouched by law because it is a cartel of nations. But the chapter provides many up-to-date examples of cartels that are illegal, such as the one in which Apple was found to lead by coordinating with publishers to fix prices for e-books and break Amazon’s domination of the market. This section of the chapter includes advice for competitors on signaling within the law, based on research in game theory. The major portion of the chapter is devoted to using negotiation strategies of interests, rights, and power to foster cooperation in dilemmas in which the public interest is for the parties to cooperate but their private interests are to compete. These dilemmas can be taking dilemmas, for example harvesting of fisheries and forests, or contributing dilemmas, such as paying taxes of free riding on teams. Throughout this section are examples; discussion of cultural differences in the application of interests, rights, and power strategies; and advice for generating cooperation. Foreign direct investment (FDI) is a major engine of globalization, economic

development, and cultural change. Chapter Seven focuses on negotiations between foreign direct investors and the governments in which they are investing. It begins by outlining the interests of the investors, to make money via access to resources or technology, cheap labor, or extension of markets, and the interests of governments, which turn out to be quite different from those of other private companies with which the investor is likely to have had the most experience negotiating deals. Governments tend to be interested in infrastructure they otherwise cannot afford, technology that they otherwise lack access to, and jobs that they otherwise cannot create domestically. But they want all this without compromising their political power, their national security, and their cultural hegemony! Where at first glance FDI seems like a great opportunity for creating value, a deeper understanding of parties’ interests, which Chapter Seven provides with many up-to-date examples, shows that FDI may not always be the best approach to create shareholder value, much less the solution to pressing government problems. The chapter addresses the predictable challenges of FDI, including protecting legal rights, especially in nations where the rule of law is

weak; facing corruption and having your own personal ethical standards; navigating and negotiating with complex layers of government bureaucracy; keeping employees safe; and avoiding entanglements in human rights abuses. These are challenges that the foreign direct investor should be able to anticipate and be prepared for. These challenges are not easy to negotiate, but they are at least to some extent controllable. More vexing are the unpredictable challenges of political and economic instability. The final chapter addresses why you should not expect a global negotiation

culture based on the dignity model and then goes on to reprise some of the advice throughout the book for adjusting strategy without compromising outcomes or integrity when negotiating globally.

New in This Edition I hope you find the third edition of Negotiating Globally a somewhat slimmed- down refinement of the second edition. It keeps the structure of the previous edition. In particular, Chapter One introduces negotiation basics and holds off from addressing culture, first addressed in Chapter Two. A major change in content, but not in structure, comes in Chapter Two, which introduces the dignity, face, and honor framework of cultural prototypes. This frankly is a big intellectual change for those like me who have focused on cultural differences between the West and East Asia for so many years. But once into this framework, it becomes more comfortable because dignity characterizes familiar Western culture and face characterizes familiar East Asian culture. It is only honor culture that is all new to us, but so important because it characterizes so many understudied parts of the world. Give the framework a chance, and I think you will see that it really helps to understand why people in different parts of the world use negotiation strategy differently. Beyond Chapter Two the old structure continues, though slimmed down, with

one chapter on deal making, Chapter Three, and one chapter on dispute resolution, Chapter Four. Both the chapter on deal making and the chapter on dispute resolution are newly organized and review new research, but at the same time cover all the old content. Chapter Five reprises the research on using negotiation strategy in teams and has been enhanced by some new research on negotiating teams. Chapter Six, on social dilemmas, retains its old structure but gains many new examples. Chapter Seven, on the negotiations between foreign direct investors and governments, retains its content and also focuses on new

examples. I’m still not convinced that there is likely to be a global negotiation culture any time soon, if ever, and Chapter Eight again makes this point.

Handling Terms Between the language used to talk about negotiation and the language used to talk about culture, there are an awful lot of terms in this book that have specific meaning in the context of negotiation. Part of becoming a better negotiator is learning negotiation strategies. Unfortunately, all these strategies have names. Do not get annoyed by terminology—there is a glossary in the back! The sooner you learn negotiation terminology, the sooner you will be able to manage planning and executing your own negotiations strategically.

Acknowledgments

Since the 2007 edition of Negotiating Globally, I have had the privilege of continuing to do research with former collaborators and the opportunity to do research with new ones. The third edition of Negotiating Globally tries to distill for the global manager the state of what scholars know and managers have experienced about culture and negotiation. There is still much we don’t know, and I look forward to future collaborations with scholars around the world who are studying culture and negotiation, as well as with managers who come to us with their stories, frustrations, and insights. Several new collaborations have had an important impact on the third edition

of Negotiating Globally. The major redirection of this edition is to move from viewing culture from an East Asian–Western perspective, which assuredly leaves out much of the world, to the expanded perspective of dignity, face, and honor, which includes the Middle East, North Africa, Southern Europe, and Latin America. This change I owe to the influence of Soroush Aslani. He introduced me to this way of conceptualizing culture and then took a major role in a multiyear research project to compare and contrast negotiations in honor (Qatar) and dignity (United States) cultures, to which we later added data from a face culture (China). I owe huge thanks to all the members of this research team: to Soroush, to be sure, but also to Jimena Ramirez-Marin, without whose three trips to Qatar there would have been no study. To long-time collaborator Laurie Weingart, who arranged for data collection in Qatar, and to Starling Hunter, who welcomed Jimena to his classes and encouraged his students to participate. To Cathy Tinsley, who is always our fiercest intellectual critic and who has read and commented on draft after draft, and also supported some of the research financially. To Wendi Adair, who always keeps the team grounded in solid methods and stronger logic, and for introducing Zhaleh Semnani-Azad to the team. To Zhaleh, who always knew all the latest literature and made sure we did! To Zhixue Zhang, who invited me to teach at Guanghua School of Management, Peking University, in the spring of 2012, making it possible to add face culture data to the study with the excellent support of Jing Jing Yao. Jing Jing and Jimena collaborated on data analysis; Soroush is our major writer and presenter. It has been a special pleasure for me to work on this project with long-time collaborators, Wendi, Laurie, Cathy, and Zhixue, and share with them the

training of and the learning from Soroush, Jimena, Zhaleh, and Jing Jing. It …

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