Research into the social nature of the brain by David Rock, the founding president of the Neuro Leadership Institute and the author of Your Brain at Work (Harper Business, 2009) has coined a couple of useful models encapsulated by the acronym SCARF which can help negotiators anticipate some of the problems caused by the toxic or negative emotions that too often overwhelm negotiators and prevent collaborative agreements.

SCARF itemizes the particular qualities that the brain perceives as threats.

Threat One: Status problems

Anything that fundamentally threatens the status of the other side will trigger a negative response.

Threat Two: Certainty Challenges

Humans like certainty. It allows us to operate on automatic pilot. Create huge uncertainty and you will trigger a primal threat response.

Threat Three: Lack of Autonomy

A perception of reduced autonomy - for example - can easily generate a threat response.

Threat Four: Relatedness Problems

When humans are cut off from social interaction with their friends and colleagues, threat levels escalate.

Threat Five: Problems of Fairness

Hostility and trust diminishes when a person’s perception of fairness is undermined.

Putting on the SCARF

If you are a negotiator you need to be conscious of offers or positions that undermine perceived levels of status, certainty, autonomy, relatedness and fairness.

The most exciting research to emerge from brain research is the work on pattern recognition. In Human: The Science Behind What Makes Us Unique, Michael S. Gazzaniga, the director of the University of California at Santa Barbara’s SAGE center for the study of the mind, makes the point that the brain may not even ‘think’.

It may be a memory and prediction machine that functions by retrieving and applying patterns learned from the past to new situations. Experts (think master chess players) can recall up to 50,000 past chess games in their heads. When they look at a chess board, they look for a similar ‘past’ pattern. They then select their next move.

In our work on negotiation we have experienced great success by teaching trainee negotiators to read the patterns of success. When up-skilling negotiators, it’s remarkably easy to accelerate progress of experienced managers who have participated in lots of deals. With young graduates, no matter how bright they are, it’s much harder. Young graduates usually don’t have the body of experience that allows for skilful pattern recognition.

One of Maubisson’s insightful comments in his must read book Think Twice (2010) is how to recognise the difference between skill and luck.

Many human activities are a mix of skill and luck. Compare a golfer’s scores over 3 or 4 rounds. An exceptional score over one round is often the result of skill combined with exceptional luck. That’s why exceptionally skilled players triumph over 4 rounds. Great luck rarely holds for four rounds. Over time skill shines through as luck runs out.

If you can deliberately lose a game then skill is the driving factor. If you can’t, it’s luck.

Think of chess. Chess is a game of skill. You can deliberately lose. Roulette by contrast is a game of luck. You can not deliberately lose.

Negotiation is a process of combining skill and luck. However the prime driver of success is skill. It is clearly a game you can deliberately lose.

To lessen the role of luck, negotiators should focus on management of the process. That’s the best way to drive results.

In her book, Beyond Deal Making (2010) international negotiation expert and mediator Melanie Billings-Yun outlines her five step GRASP method for negotiating long-term sustainable relationships.

The acronym GRASP is not just a mnemonic device.  By following the GRASP method you can increase the odds of creating a sustainable agreement.

The GRASP Method

Goals: What do I/they want to achieve or avoid?

Routes: How can I best achieve my goals by supporting theirs?

Arguments: What reasons support my/their routes?

Substitutes: How else could I/they accomplish this?

Persuasion: What’s in it for them?

The GRASP method is practical and easy to follow. Beyond Deal Making offers a fresh innovative approach to negotiation.

How do you judge when a deal is fundamentally rotten?

In exploring different types of compromises and his book, ‘On Compromise and Rotten Compromises‘, Avishi Margalit compares what he called “cockroach in the soup” deals where a rotten clause spoils the entire agreement. ‘Fly in the Ointment’ clauses are where a suspect clause makes a deal flawed but not necessarily worthless.

A ‘cockroach in the soup’ clause infects the entire agreement. The acceptance of slavery in the American constitution was ‘the cockroach in the soup’. In the end it would take a civil war to resolve what the absolutist Lloyd Garrison slammed as an “agreement with hell”.

Historical examples aside, every dealmaker should lookout for a ‘cockroach in the soup’ - a clause that makes the deal fundamentally rotten.

‘Fly in the ointment’ clauses cause difficulties but they can be justified and usually resolved over time

The way you negotiate can make a huge difference to the margins you retain in a deal.

A study by Simon-Kucher and Partners of 56 automotive suppliers showed these companies faced price reduction demands from the manufacturers of between 4.7% and 5.1%.

The successful negotiators were able to limit price reductions to just 1.4%. The less successful suppliers had to accept price cuts of 3.8%. The difference of 2.4 percentage points was higher than the margins of most suppliers.

According to Hermann Simon, Chairman of Simon-Kucher and Partners, the successful negotiators paid much more attention to price setting and implementation. By contrast, the less successful attached much more importance to cost-cutting.

To quote Simon, “the successful suppliers put 50% more energy into improving margins that their less successful counterparts”.

“The great enemy of clear language is insincerity. When there is a gap between one’s real and one’s declared aims, one turns instinctively to long words and exhausted idioms, like a cuttle fish squirting out ink.”

The same advice applies to contracts. Mark Twain advised:

“I notice that you use plain simple language, short words and brief sentences. That is the way to write English — it is the modern way and the best way. Stick to it; don’t let fluff and flowers and verbosity creep in.”

My wife and I were watching Who Wants to be A Millionaire while we were in bed.

I turned to her and said, “Do you want to have sex?”

“No!” she answered.

I then said, “Is that your final answer?”

“Yes,” she replied.

Then I said, “I’d like to phone a friend.” That’s the last thing I remember.

The wife in this story gets to have the final say.

In most sales negotiations however, the customer has the final say.

Their threat to “phone a friend (re:competitors)” is always there.

Customers are rarely chained to you by the vows of marriage.

The best and most persuasive evidence of overconfidence and hubris comes from the world of corporate mergers and acquisitions. Empire-building CEO’s have created what is now a multi-trillion-a-year making orgy.

Yet study after study- carried out over the last 30 years - shows up two out of three mergers and takeovers fail. Instead of creating wealth for the buyer, they destroy it.

A prime reason: An overconfident ego-driven buyer paid too much for the acquisition in the first place.

In Ego Check: Why Executive Hubris is Wrecking Companies and Careers and How to Avoid the Trap, author Matthew Hayward says while overconfidence is essential for business success it can also be highly destructive.

Ego Check identifies four sources of overconfidence. The first source is “excessive or exaggerated pride.” The symptoms are needing to impress others and inflating data to exaggerate their achievements.

The second source of destructive overconfidence is “isolation.” The isolated person shuts herself off from negative feedback. Hayward uses former Hewlett Packard CEO Carly Forina as his prime example. In the days before her fall she surrounded herself with protective assistants - who were unwilling to tell her that she was wrong.

The third source of destructive overconfidence is in “selective judgments.” Whenever you get feedback that doesn’t fit in with your view of the world you discount or ignore it.

The fourth source of destructive overconfidence is “underestimating the consequences” of their decisions. Failing to think about tomorrow fuels hubris in decision making today.

If any of Matthew Hayward’s four sources of overconfidence are present in your organisation, Beware.

The opportunity cost of pocketing the dime is $9.90.

Profitable deal making invariably involves opportunity costs — the costs of not landing an alternative deal.

In deal-making, before you even start negotiating, you need to assure yourself you are talking with the right party. If you want to achieve your Best Possible Agreement (BPA) you must talk to the right people.

Too many deal-makers pursue sub-optimal deals with the wrong party. So, instead of ending up with the Best Possible Agreement (BPA) they end up with a Barely Acceptable Deal (BAD).

In a recent webcast I ran with over 200 C level executives, over 60% in an online poll reported over half of their deals could be classified as Barely Acceptable Deals. If you have a high proportion of BAD deals you need to review your dealmaking process now!