In occasione del restyling di MondoADR ripubblichiamo alcuni degli articoli più interessanti, ed ancora attualissimi, come l’intervento del Prof. Robert Mnookin dell’Harvard Law School al seminario internazionale organizzato il 15 febbraio 1999 da ADR Center e dall’ICE dal titolo “Cultura negoziale e risoluzione alternativa delle controversie commerciali – Esperienze internazionali e prospettive in Italia”.
Intervento del Prof. Robert A. Mnookin – Samuel Williston Professor of Law, Program on Negotiation, Harvard Law School – Boston
La negoziazione come materia di studio e come professione
(Studying and practising negotiation)
Thank you very much. It is a pleasure to be back in Rome and to see my friend Mr. Guerra again. I feel like a repeat player, because I was here four years ago when Mr. Guerra and Assocorce had the first conference on mediation in Italy. I am very struck by the number of recent developments in your country, showing that there is really an increasing interest in mediation, ADR and negotiation.
I was asked by Mr. De Palo to speak on studying and practicing negotiation. I hope you all have in your packet, pictures of my overhead slides. My English is not too good, but my Italian is much worse, so I thought this might help you follow my thoughts.
The focus of my talk is on negotiation. Negotiation is really the foundation of ADR, because it is only when negotiations fail that cases go to court or there’s a need for mediation or other more formal mechanism of dispute resolution. At the outset what I would like to suggest is that there are three great myths about negotiation. The first myth is “there is no theory”, and that it is just a practical skill that you pick up on your own. In fact, for those who are academics and are interested in interdisciplinary study, negotiation is a wonderful field because it turns out economic theory, various theories in psychology, sociology, political science; all have enormous relevance. No one discipline provides all the answers but in the last ten or twenty years, there has been a remarkable amount of scientific research suggesting and improving our understanding of negotiation.
A second myth, that you’ll hear all the time about negotiation, is that “people learn from their own experience”. My experience is that most people don’t learn from their own experience. In fact, most people as negotiators just develop habits, standard practices that sometimes work for them, and sometimes do not work for them. But they don’t learn from their experience; there’s no feedback mechanism.
The third myth is “negotiation can’t be taught”. Our program at Harvard University has given lie to this myth. For over the last decade we have successfully helped thousands of 
professionals improve their skills. I sometimes think of myself as a coach, not unlike a coach of a swimming team or track team. My view is that I can help anyone become a more efficient negotiator. Like lots of other activities, there are some people that are more naturally skilled than others. Some people have a physique that makes them a better natural swimmer. But in fact, with good coaching, it turns out that people that are most talented can learn the most and improve the most. And even those with less skill can substantially improve their practices. In the next thirty minutes, I’d like to suggest my own theoretical approach to understanding negotiation and tell you a little bit about our methods — how we teach negotiation at Harvard.
Let me begin with the theory. First, it is important to understand that through negotiation value can be created, both sides can be made better off, the pie can be expanded. Secondly, my own theory of negotiation suggests that negotiation requires the management of three tensions. I’ll try to describe to you what these tensions are. And the third aspect, what I like to talk about are some of the special features of legal negotiations.
Let me start with the sources of value creation. Students often believe that the only way you create value in negotiation is when people have common interests. In fact, the most typical way through negotiations people make themselves better off is by exploring differences, and exploiting gains from trade. When a vegetarian trades his pig to a carnivore for some broccoli both parties are better off. There are other sources of value creation. One of the most important aspect of ADR is that you can reduce transaction costs, the costs of disputes, and when you do that both parties can be made better off.
Let me describe the three tensions that I think need to be managed in any negotiation. The first is “the tension between creating value and distributing value”. In a negotiation it is possible for parties by making trades to expand the pie — to create value. But no matter how big the pie gets, it always has to be divided into slices. There is always a distributive issue. What size slice do you get? What size slice do I get? Why is there a tension?
Let me describe two stories to illustrate the tension. The first story is a very famous story about two brothers who were fighting over who should get an orange. Each brother claimed the orange belonged entirely to him. Finally, they compromised and cut the orange in equal halves. One of the brothers walked away, ate the fruit out of his half and threw the peel away. The other brother took his half of the orange back home, scooped out the fruit, threw it away and used the peel to flavor a cake.
Now those two people in fact resolved their conflict by dividing an orange in halves, but they absolutely failed to create value. They could have negotiated a better deal where one brother got all the fruit and the other brother got all the rind. They both could have been better off. Why didn’t they? Because they never told each other what their underlying interests and goals were? Out of fear of being exploited by the other side, parties often hide what is really important to them. They don’t disclose their underlying interests for fear of being taken advantage of.
A second story can illustrate why this fear is not entirely irrational . Suppose Mr. Guerra and I are on a desert island. I have an orange tree with many oranges and he has an apple tree with many apples. I approach Mr. Guerra with a bushel of oranges. I am completely open and honest with Mr. Guerra and I said “Nino, the truth is I have many oranges here and I don’t like oranges at all. But I love apples. Can I trade some of my oranges for some of your apples?” If Nino wanted to be strategic with me, he might say to me “Bob, it’s very sad but, I don’t like oranges very much either, and I love apples. I am lucky to have all these apples. I’ll tell you what. I’ll give you one apple for all your oranges”. In other words, because I disclosed to him my relative priorities, he captured nearly all of the gains from the trade. While I am better off with one apple than with all these oranges, in terms of the distribution of benefits, it’s a very one sided deal.
These two stories together illustrate the first tension. To create value and expand the pie requires the exchange of information. But unreciprocated disclosure can lead to exploitation. I have some students at Harvard who think “if there were only decent people in the world, you could always make the pie bigger and there will be no tension”, and I beat them over the head. That’s wrong — no matter how big the pie is, the issue remains of who gets what size slice. There are other students who see the world in what I call “zero-sum” terms. When I win you lose. When you win I lose. Pure competition. I beat those students over the head too, because in my view there are almost always opportunities to create value and to expand the pie. The trick is learning how to manage the tension.
The second tension really relates to psychology, and is what I call a “tension between assertion and empathy”. By assertion, I mean the willingness to stand up and defend and argue for what’s important to you. By empathy, for these purposes, I mean demonstrating to the other side that you understand their perspective. In my experience the best negotiators are people who are very good at persuading, arguing, suggesting the importance of their own perspective, and are also very skilled at demonstrating to their counterpart that they are good listeners and really understood the other side’s perspective. Many law students are terrific advocates and lousy listeners. When they are listening to another person, what they are really doing in their own mind is just putting together their answer. “Yes, but…”. Other students, are very fearful of trying to understand the other side, because they are afraid if they understand the other side’s problems, they no longer will be able to advocate their side’s interests.
The third tension is what I call the tension between “principals and agents”. In most complicated negotiations, a person is negotiating on behalf of someone else or an entity. In other words, one person is an agent on behalf of some other principal. For example, when a lawyer negotiates on behalf of the client, the lawyer is the agent of the client. When a manager negotiates on behalf of the corporation, the manager is an agent for the corporation. When a minister negotiates on behalf of governmental agency, the minister is the agent of the agency. When a union leader negotiates on behalf of the union, the union leader is an agent of the membership.
Why is there a tension? There is a tension because agents have interests of their own. Lawyers are interested in earning a living and in their professional reputation; managers are interested in their careers; ministers are interested in their political future; labor leaders are interested in getting re-elected. The interests of an agent rarely coincide perfectly with those of the principal. This doesn’t mean that agents are bad people. It’s a fact of life. But there is a tension that needs to be managed so that the interests of the principal aren’t sacrificed in the service of the interests of the agent.
Finally, let me said a word about the system of legal negotiation. In even the simplest legal negotiation, there are two lawyers and two clients. On my chart the L stands for “lawyer”, the C stands for “client”. This is the simplest kind of case. What you can see from the arrows is that even in the simplest legal negotiation there are at least four relationships at play. There’s a relationship between the two clients, the arrow between the two Cs’. There’s the relationship between the two lawyers, that’s the arrow between the two Ls’, and each lawyer and client have their own relationship.
What are the implications of the system? For one thing, the quality of these three relationships can have a very direct impact on negotiations. If any of these relationships is very dysfunctional, negotiations can be difficult and even fail. In legal disputes, the relationship between the two clients is often strained and this obviously makes negotiation difficult. Nevertheless if their lawyers have a good relationship with their respective clients, and with each other, they lawyers can sometimes succeed in bringing about a successful negotiation.
As a mediator, I’ve often been involved in disputes where the two lawyers could easily have negotiated a resolution. Both lawyers had a very good understanding of the case. The reason the dispute couldn’t get settled is because one of the lawyers had a weak relationship with his client. One advantage of mediation is that the mediator can bring the bad news to the client, under the circumstances where the lawyer can confirm the mediator’s perceptions but not have to be the one to confront his own client and explain just how bad things are.
What are the implications of all of this? One implication is that I think that the three tensions I have identified have to be managed, they won’t simply disappear.
In legal disputes parties bargain in what I call “the shadow of the law”. What’s going on in a legal dispute is that the lawyers are helping the clients evaluate the litigation’s risks and opportunities. Clients themselves ordinarily don’t have a firm understanding of how strong their legal claims are. They need help from professionals. That’s what lawyers do. Lawyers can also inform them as to how much time it’s likely to take, and what it’s going to cost to pursue litigation. Indeed, in a legal dispute it’s often the lawyer who is managing the game. In the U.S. out of a hundred cases that are filed, judges are deciding only on a small proportion. I was told last night that this is true in Italy as well. The reason most cases settle is quite clear. If the two parties have the same understanding of the opportunities and risks of litigation, it’s cheaper and quicker just to settle. For example, suppose Ms. Scanlon and I have a dispute. I claim she owes me 10.000 dollars as a fee for a speech I gave last year at her firm’s annual meeting. My lawyer thinks that I have a 50% chance of winning and her lawyer tells her that she has 50% chance of winning. If we settle for 5.000 dollars, we both can save the cost of pursuing litigation. Settlement doesn’t require that we have to be certain of the outcome. All it requires is that people have convergent expectations of what their legal opportunities and risks are.
That’s one way law cases are settled all the time. When people have sufficiently convergent notions of what the opportunities and risks are, they save the costs by settling. I call that “table one negotiations” It’s a kind of negotiations that lawyers are very involved in.
There is another approach to settlement, which is really based on the underlying interests of the parties and may have nothing to do with the dispute. The parties explore what their underlying interests are and what other trades they might make. They might be far more valuable and make the dispute go away. For example, Ms. Scanlon has a very important position in the Center of Public Resources. We might decide together we have some interest in jointly providing mediation training and we could do training together. She might decide that she might refer a mediation or arbitration to me that can be worth far more to me than the money that may be recovered by pursuing the lawsuit. We can end up resolving our dispute on a basis that has little to do with the legal opportunities and risks of our dispute because we discover that there are other trades that we can make with each other.
Whether you’re evaluating the legal opportunities and risks or instead pursuing interest-based negotiation, it is possible to approach each as a problem-solver. For example, in terms of conventional litigation, two parties can work side by side with the help of a mediator to really make sure they each have the full understanding of what the legal opportunities and risks are. One of the great promises of ADR is that with a skilled mediator the parties can develop a better sense of what the opportunities and risks of the litigation. A mediator can promote settlement by bringing about convergent expectation and you can avoid the transaction costs and avoid the risks of extreme outcomes. What a mediator can also do is help parties engage in interest-based negotiations as well. A mediator can probe interests and explore what resources both parties have, can look for trades, and can encourage brainstorming and creativity.
Let me give you one example of these two different approaches to mediation and how a mediator can help. Two years ago, I was involved as a mediator in a dispute between two large American electrical utility companies. The stocks of both companies were traded at the NYSE. Company A filed suit against company B claiming 300 millions dollars of damages, because company B had terminated a long-term power purchase agreement. Many years before they entered into 20 year contract in which one company was agreed to sell power to the other company at a fixed price. The market price for electricity in the United States has fallen substantially in recent years, because of technological changes. Understandably, the buyer wanted to get out of the contract. Understandably, the seller wanted to hold the buyer to the contract.
For technical reasons, I won’t bore you with, the buyer claimed that it had a right to terminate the contract; the seller disagreed. They began a legal war.
I was asked to mediate the dispute. In the mediation I told the lawyers and the executives about my theory that there are two different kind of negotiations: one where the parties evaluate their legal opportunities and risks and a second kind where parties probe their underlying interests and look for trades. I called those “table one and table two”. In the mediation, we spent one day in table one negotiations. The litigators representing each company presented their arguments to the other side, and we spent the whole day with the presidents of the two companies evaluating the legal opportunities and risks. The litigators were a little reluctant initially to admit there were weaknesses in each side’s case, but we were able to expose very easily the uncertainties they both faced in the litigation.
On day two, the mediation continued without the litigators but with the in house company lawyers and executives. The two companies talked about what their strategic objectives were in the coming years, and what other kind of trades the two companies might make, if there were any opportunities they could make business together in other areas. To make a long story short, after about seven or eight months of work not only did the case settle, but the two companies announced a strategic alliance. To reach that resolution required both kind of activities: an understanding of the legal opportunities and risks, and also an exploration of the possibilities that they may be able to make other kind of trades which can be very valuable to both.
Let me say a few words about the special challenges of legal negotiations, challenges we face in the U.S. and challenges that I’m sure you all face in this country too. The big challenge really has to do with culture. Although the legal culture in the U.S. shows signs of change, many lawyers have “a zero sum ‘mindset’: ‘when you win I loose,’ ‘when I win you loose’.” Lawyers are used to operating with a script that is highly adversarial. Indeed clients in the US, when they go to a lawyer expect their lawyer to be a zealous advocate that fight with the other side, not to solve the problem. One of the great challenges of legal negotiations, I think and one of the challenges of mediation and ADR too, is to help moderate that culture. My own experience is that lawyers can be marvelous problem solvers, but for lawyers to do this often requires that they develop the right sort of relationship with their client and that the client change its expectations about what a lawyer is supposed to do. I’m sure that in the United States as you’ll hear, there has been an explosion of interest in mediation and ADR.
I can report that the demand initially did not come from within the legal profession. Mediation in the US really took off when large companies got interested in reducing the costs and the time commitment of dispute resolution. The legal profession in the United States is coming along and there are now some ADR departments in law firms. Large law firms now brag about how sophisticated they are in terms of dispute resolution, how effective they are in helping parties resolve their disputes efficiently. And it’s true many firms are in fact very interested in this, but they weren’t the initiators of the change. The change came from business. Legal negotiations are also challenging because of their complexity.
In closing, let me say a few words about what’s going on at Harvard University with respect to negotiation and mediation. I know in Italy there is still an issue of whether mediation and negotiation should be taught in law schools — whether these are proper subjects. What I can report is that in the United States it’s viewed as a very appropriate subject. There is a great interest in American law schools. In fact at Harvard, negotiation courses are taught at the Law School, at the Harvard Business School, at the Kennedy School of Government, and in the continuing education courses of various sorts. At the Law School our negotiation workshops are constantly over subscribed. When I was in law school, negotiation wasn’t taught at all. Now hundreds of students enroll each year. We teach the course in a workshop format that combines some lectures and several small working groups. It is active learning in which students do a variety of exercises. There are a lot of simulation exercises, where they actually are engaged in negotiations. We use videotapes, and have teaching assistants to give feedback.
Our educational aim is to provide students with an intellectual framework for understanding negotiation. And we try to increase their self-awareness and improve their interpersonal skills. The most effective negotiators are people that are very self-aware. They know very well when their “buttons” are being pushed, and they understand their own strengths and weaknesses. We try to give our students an opportunity to learn from experience.
In closing, let me return to where I began. First there is a great deal of theory that can reinforce practice. In the last few minutes, I suggested to you some of the elements of my own theories of legal negotiation and the tensions in negotiations. I believe that interpersonal skills can be taught and that an increased self-awareness can contribute to professional success. Traditionally, legal education focused on doctrine not on skills except perhaps writing skills. I think that in the United States we now have a much broader concept of what professional education can encompass. To learn from experience requires that a student be taught how to review his own experiences in the context of an intellectual framework. I am very deeply committed to the fact that lawyers can be problem solvers and that effective negotiation can allow lawyers to create value for their clients. In the United States, as I suspect is true in Italy, lawyers are often criticized as parasites who simply get rich over the problems of others. I think lawyers can help clients structure relationships in productive ways, organize enterprises and resolve dispute effectively, thereby creating value. It is through the creation of value that we can justify earning a good living.
Thank you very much.