Don’t be a victim – Negotiate to win!

Don’t be a victim – Negotiate to win!

With the Greek elections having taken place last Sunday, it’s a good time to reflect again on the actions and the negotiation process around the Greek crisis.
During the negotiations for the financial assistance program I was wondering if Mr. Tsipras had a negotiation advisor. While the beginning of his negotiation looked promising, it became clear later on that he was not or badly advised.

A short review of the causes that led to the negotiation: When Greece was allowed to introduce the Euro in 2002 the decision was based on healthy budgets which later turned out to be manipulated. To be fair we should also mention that the EU member states were highly interested in having more parties joining the currency union and might have deliberately not done their due diligence as they should have. This effect is common also in M&A deals. There, we call it deal fever.
In 2003 the federal deficit was 4.2%. With the following governments, nepotism and corruption the deficit rose to 7.2% in 2009 and continued to rise to culminate in deflation, an unemployment rate of 26% and a gross debt of over 316 billion Euros in 2014. Beginning of 2015 the government changed. SYRIZA came to power and Alexis Tsipras became the prime minister. Mr. Tsipras and his minister of finance, Yanis Varoufakis, continued the negotiations for the austerity program and the financial assistance with the European Commission, European Central Bank and the International Monetary Fund representing the troika.

The primary aim of SYRIZA was to change the conditions of the austerity program that was agreed by the former government. Both Mr. Tsipras and Mr. Varoufakis used a series of negotiation tactics that were more or less successful. Let me describe some of these tactics and assume why or why not they achieved their intended goal.

Power play

During the election campaign Mr. Varoufakis made clear that he would not agree to the current austerity programs and stated to the French Newspaper La Tribune: “whatever Germany says or does, at the end, they will pay extra…”. He was promoting the immediate ending of the program and a haircut for Greece. His grins, confident of victory, and his refusal to cooperate with the troika altogether after the election and during the negotiation process in January, led to astonishment and a loss of trust and respect for the Greek negotiators. However, it also created a level of power that Mr. Tsipras and Mr. Varoufakis did not have before. By these actions (that unfortunately also contributed to the further decline of the financial market in Greece) the Greek politicians raised themselves to eye level with their negotiating counterparts.

There are a few vital steps in the beginning of every negotiation. One is to establish an environment of trust and credibility, another is to demonstrate power. If you are not at the same level of power with your counterpart you need to raise yourself to it. With continued forceful and strategic negotiation Varoufakis and Tsipras could have used this momentum to force the troika for further concessions. The best alternative to a negotiated agreement (BATNA) with the troika was the exit of Greece from the Euro Zone, a scenario the troika wanted to avoid and the rest of the Euro Zone feared because the outcome of such an exit was unpredictable. Greece did not manage to use their power and (at that time strong) BATNA effectively presumably because of poor preparation and the following bad tactics.

Good/bad guy routine

While Mr. Varoufakis talked about refusal to honor contracts, Mr. Tsipras ensured that there would be no breach with the investors. They played the classical routine of creating fear and giving comfort.   This tactic is very often observed in business and in politics and I find it quite amusing. Nobody falls for a good/bad guy routine unless he/she is a delinquent in a TV criminal story. This tactic can be stopped immediately and is very ineffective. Yet, it can do much harm if used. Inconsistent messages will lead to distrust or give the feeling that there is misalignment within the other party which weakens their credibility.

Threats

The EU replied to Mr. Varoufakis’ threat to refuse to work with the troika with a threat on their part – to force Greece out of the Euro Zone (which, legally would not have been so easy as it turned out in the subsequent days..). In my experience threats should be used as a lastresort only. Once announced they have to be executed, otherwise the party or person who announced the threat loses all credibility and needs to be exchanged for another negotiator.

After many months of negotiation for a divestiture of an asset for one of my past employers, the other side wanted to change already agreed topics in the purchase agreement. We refused and thereon the other side threatened that they would stop the process. As a consequence I let the chairman of the company who was a negotiator of the other side know that given his actions we had decided to end the discussion and to continue negotiations with another party. The chairman was furious, mentioned that his reputation was at stake and accepted all prior agreed topics and all outstanding issues (which originally we were willing to further negotiate) and signed the contract a few days later.

Calculated delays & withdrawals

Mid of February 2015 when the assumed showdown was taking place in Brussels, both Mr. Tsipras and Mr. Dragasakis, the vice prime minister, asserted that they could live with the current version of the bail-out agreement. But shortly after the Euro-group had dissolved the consent was withdrawn. It was clear that a new meeting had to be held many days later while the Greek banks were running dry. The answer to this tactic from the EU came quickly. The EU started to work on contingency plans for a Grexit and deconstructed Greece’s negotiation power. A negotiation partner who does not adhere to timelines at all and withdraws concessions is cumbersome, hard to control and unreliable. Such a party is not a serious partner and will either loseout against other parties in a (auction) processes or be turned down.

Personal attacks

Also around mid of February 2015, Wolfgang Schäuble, the German minister of finance was cartooned in the political paper of SYRIZA. He was wearing a Nazi uniform saying: “we insist to make soap out of your fat” and “we only discuss about fertilizer out of your ashes”. He was also depicted as a Nazi on election posters for the referendum that followed later. Threats and personal attacks are emotional reactions to confrontations that clearly show a lack of preparation and strategic planning. Negotiators who use these tactics lose professionalism and credibility. This tactic does not work in the favor of the one who uses it. All it does is create distrust and hatred that will make constructive, principled negotiation impossible.

Lock-in tactics

By this time Greece had lost control of the negotiation and destroyed its power. In a last attempt to force the EU to subordinate to Mr. Tsipras conditions, the Greek parliament decided to hold a referendum and vote if the nation should agree to the demands of their creditors. Once the referendum was announced it was hard, almost impossible to stop. The lock-in tactic and all of the others mentioned here have been described in “Getting to YES” by Fisher and Ury. It is the example of two dynamite truck drivers driving toward each other on a single-lane road. Suddenly one of the drivers pulls of his steering wheel and throws it out of the window such that this can be seen by the other driver. The other driver now knows that his counterpart has completely lost control and the only way to save himself is to give in. The Greek people voted with Ochi (no). Greece exchanged his negotiator Mr. Varoufakis, but the banks were closed, the nation was going bankrupted. The EU just had to wait and used the time to its advantage. Greece had lost all negotiation power and had to finally accept the conditions from the troika.

While there are some very effective negotiation tactics, I don’t believe the latter ones belong to it. One of the best methods to not become a victim during a negotiation process is to prepare sufficiently beforehand: Prepare the process, a negotiation strategy, your alternatives and plan ahead for your reactions to dirty tricks and improper tactics.

Having said all of this, I hope that the Greek people manage to form a strong government with their election choice and that their economy experiences an upswing soon to ease the burden that the common people in Greece have to carry.