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3-D Negotiation

3-D Negotiation

David A. Lax, James K. Sebenius
2006
T2 294 pages · about 4h 54m to read Open Librarygoodreads

Adds setup and deal design to tactics; the dealmaker's version.

Summary

Lax and Sebenius, both from the Harvard negotiation tradition, argue that most negotiation advice concerns only what happens at the table, and that the more consequential work happens before anyone sits down.

Their three dimensions are stated as distinct kinds of work. Tactics is the first dimension, meaning what happens in the room: interpersonal skill, persuasion, reading the other side, managing the process. Deal design is the second, meaning the substance of the agreement: finding trades across differences in valuation, forecasts, risk tolerance and time preference; structuring contingent payments where the parties disagree about the future; and constructing terms that create value rather than only dividing it. Setup is the third and the one they consider most neglected: deciding which parties should be involved and which should not, in what sequence to approach them, what the alternatives to agreement are for each side and how those can be changed, and what the basic scope and framing of the negotiation should be.

Their practical argument is that a negotiator who arrives at a table with the wrong parties, in the wrong sequence, with a weak alternative and a badly framed scope, cannot recover through skill. Conversely, a well-constructed setup can make agreement nearly automatic. They discuss backward mapping from the target agreement to the sequence of commitments required to reach it, and the deliberate improvement of one's own alternatives before negotiating.

The cases are drawn from corporate transactions, from international diplomacy and from litigation.

The framework is a useful extension of the Getting to Yes tradition rather than a departure from it, and the third dimension is where the original contribution sits. The evidence is case-based and the book is aimed at practitioners rather than researchers.

Key takeaways 7

  1. Most negotiation outcomes are determined by setup decisions made before anyone sits down at a table.
  2. Choosing which parties to involve and in what sequence changes the outcome more than tactical skill does.
  3. A negotiator's alternative to agreement can be deliberately improved before negotiating, which changes the terms available.
  4. Differences in valuation, forecasts, risk tolerance and time preference are the raw material of value creation, not obstacles to it.
  5. Contingent payment structures let parties who disagree about the future both act on their own beliefs rather than compromising.
  6. Backward mapping from the target agreement identifies the sequence of commitments required to reach it.
  7. Excluding a party who would block agreement is a legitimate and often decisive setup move.

Who should read it

Founders and executives negotiating transactions, partnerships or financings who need the work that happens before the meeting.

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Where it sits in the reference 3

Business themes
Business themes
Business themes

Topics

Negotiation and PersuasionBusiness and Management