In the Classroom II

Connecting in Chaos: Persuasion and Negotiation for Turbulent Times

After JPMorgan Chase took over Bear Stearns in March, Morgan CEO Jamie Diamond made a trip uptown to talk to the top executives of the acquired firm. The executives had just been through one of the most harrowing times of their lives. The Federal Reserve had stepped in to broker the deal and keep the company from going under, averting the spread of broader panic across financial markets. Instead of immediately laying out his plans for reorganizing, Diamond first took the time to connect with the Bear Stearns executives.

"The first thing he said was that you don't deserve this and no one can understand what you are feeling," says Mario Moussa, academic co-director of the Strategic Persuasion Workshop: The Art and Science of Selling Ideas and co-author (with G. Richard Shell) of The Art of Woo: Using Strategic Persuasion to Sell Your Ideas. "He simply described the situation in those terms. One of the most important things a leader can do in this environment when people are fearful is to make them feel understood. You can connect to them, and use emotional intelligence to understand their perspective. Perspective taking is at the heart of influence and persuasion."

Moussa notes that, in contrast, some CEOs when they acquire a firm ask for letters of resignation from all the top executives. The letters are put in a drawer, but the managers know they are on probation for the first months in the new company. This approach can quickly fan fears and erode a sense of connection.

"One of the biggest challenges is fear," Moussa says. "We know that people have a much stronger reaction to fear and loss than the opportunity of gain, so you have to know that some people may be overwhelmingly anxious about losing their jobs, losing their house, etc. To the extent that they are anxious, it will be hard for them to hear you. It is important to sustain a feeling of connection with them as you are asking them to make a dramatic change."

Concrete Actions and Credibility

In shifting environments when words can be lost in the intensity of the changes, executives also need to take concrete actions. For example, when Andrew Witty took over as chief executive of GlaxoSmithKline in May, he faced serious challenges. Not only was he in the midst of a broad economic downturn but the blockbuster model that had driven growth and profits in the pharmaceutical industry was losing steam. The world was changing and he needed to shake things up. "Industry observers agree that the pharma model is broken, so when he took over he needed to ease GSK out of the blockbuster era," says Moussa.

Witty ordered GSK executives, who had occupied offices in an "ivory tower" top floor of the company's UK headquarters, to move down a few floors with an open office plan that put them in the middle of the action. "He was not just talking about change, but he was also demonstrating what it would mean to them. It is important to take action to show people you are serious," Moussa says. He notes research that indicates half of all change initiatives fail because people stop paying attention to them. "Getting and maintaining attention is critical during turbulent times."

Finally, effective persuasion depends upon credibility, so leaders need to quickly establish their credibility. For example, U.S. Secretary of Treasury Henry Paulson, former chairman and CEO of Goldman Sachs, brought great credibility to the job. This credibility was crucial when he had to make dramatic and controversial moves. "Paulson was perfectly positioned to make tough decisions and take a very activist role because no one could question his credentials as a free marketer," Moussa says. "People believed in him. When it is hard to know which shoe will drop next in the financial sector, it is important to have that trust."

While it is a good idea to develop that credibility before a crisis hits, it can be established in the midst of the crisis, as Fed chairman Ben Bernanke did. "If you don't have it, you have to demonstrate your competence," says Moussa. "Many saw Bernanke as a theorist and there was a lot of doubt about whether he could hold his own. But he took dramatic steps and demonstrated his competence in a very difficult situation. Credibility is all, particularly during a difficult time. People are going to want to know that you can actually do what you are saying."

Negotiating in the Midst of Intense Pressures

Negotiations also face new pressures in a difficult economic environment. "On every side of the competitive circle, there are pressures," says G. Richard Shell, legal studies professor, who co-directs the Strategic Persuasion Workshop and serves as academic director of the Executive Negotiation Workshop: Bargaining for Advantage^®. Managers drive their suppliers to cut prices of inputs, push customers for price increases, and squeeze employees to do more with less.

Tough economic times, for example, can lead to battles between front-line operations personnel and back-office cost-controllers. At a recent running of the Executive Negotiation Workshop, Shell notes, an airline manager recounted how recent fuel price increases have led to clashes between pilots and airline management over how much fuel to carry on flights and how to conduct landings to maximize fuel efficiency. With rising emotions, pilots have made it clear that they do not need anyone telling them what to do "in the cockpit." Yet the reality of sharply rising costs is not going away. What's needed? "A way," says Shell, "to conduct respectful dialogues that can produce better outcomes than either side could produce on its own."

"In an economy where everyone is trying to figure out how to be more efficient, turf is invaded when the efficiency guy tries to persuade operations to be more efficient," Shell says. "To be more effective, you need to separate the issues from political turf and ego. Maybe the airlines picked the wrong messenger. It might have been better received if a pilot had delivered it. There are a lot of political mechanisms that we teach in both the strategic persuasion and negotiation programs that can help."

Bad economic times can also yield some paradoxical shifts in bargaining leverage. Even negative events such as bankruptcy can strengthen a company's negotiating position. Companies use bankruptcy or the threat of bankruptcy to void contracts with employees and suppliers. "As terrible as it sounds, and it is not a place you want to be, bankruptcy improves your leverage. "When it gets so bad that you are about to go into bankruptcy, you have nothing to lose anymore, so banks, unions, and suppliers will necessarily have to become more cooperative."

To sum up, the pressures of a tough and turbulent environment make finely honed negotiation and persuasion skills even more important than in less stressful times. "Whenever there is organizational turmoil, it raises the stakes in all the situations in which strategic persuasion and negotiation skills are needed," Shell says. "People who are better prepared and who have sharpened their skills are going to be more successful in this environment."