A President’s View of the Art of Negotiation

Jamil Mahuad

The 2016 CFA Institute Middle East Investment Conference will take place in Bahrain on 13 April 2016, bringing together international thought leaders, policymakers, industry experts and key market participants from across the region to consider MENA’s Role in the Global Economy.

It isn’t often that you get a chance to listen to a former president discuss the art of negotiation, and it is rarer still that you learn negotiating secrets from a leader whose peace treaty helped to end an intractable conflict and garnered him a Nobel Peace Prize nomination. Such was the case at the 2014 CFA Institute Middle East Investment Conference, where Jamil Mahuad, former president of Ecuador, and co-negotiator of a peace treaty with his nation’s enemy, Peru, shared words of wisdom.

In laying the foundations for negotiation, you must first know what negotiation is. Mahuad stated that negotiation is a process, taking place between two parties, in which both parties agree to a method to search for an agreement. That method is dialogue.

Interestingly, the former president reminded the audience that they must first negotiate with themselves. That is, those interested in negotiating an end to a conflict must first know what they want and for what changes they are negotiating. Otherwise, discussions are likely to fail.

On the subject of change, Mahuad identified three types of change:

  • Predictable change: An example is an upgrade cycle for a new software package.
  • Adjustable change: An example is the evolution of the relationship between business partners.
  • Directional change: Here the change is unpredictable, and consequently, it leads to the most friction and the largest emotional responses.

Negotiations always take place because of directional changes. Furthermore, the most intractable changes are about changes of identity. In every situation among two or more people, each party has a unique narrative of events. When the stories are about identity, such as the old conflict between Ecuador and Peru, then negotiation is very difficult.

So what can be done? A third narrative must be created. This narrative borrows elements from each of the parties’ stories to create a new story that can serve as the basis for negotiation and conflict resolution. Mahuad states that every good negotiation/treaty must contain four elements:

  • a deal for each party to the negotiations, so that they can offer the deal and the story of the deal to their interested parties;
  • two legislative bodies that are ready to sign the deal;
  • two militaries that agree to respect the deal; and
  • two populations that must agree to the deal.

Mahuad stated that all good negotiations use the rational mind to plan, but the emotional mind must recognize five important things, or negotiations will fail. Namely:

  • You must find appreciation for the other party. This is because the need to be understood and honestly appreciated is a universal human trait.
  • You must build affiliation with the other party. Here you recognize your interconnectedness with the other side of your negotiation.
  • Further, you must respect the other side’s autonomy. You cannot force or cajole others to bend to your will.
  • Acknowledge the status of the other person, independent of your own need for status. In other words, do not compete for status. Instead, first recognize the inherent qualities of the other party.
  • Last, each party to the negotiation must feel fulfillment with the preceding four necessary ingredients.

If each of the conditions described are present, it is likely you have a good negotiation under way. However, there are several other tips offered by the ex-president. First, always separate the person from the problem. Problems that need to be negotiated are very complex, often have long histories, and are not the sole responsibility of a single individual. Consequently, you must, according to Mahuad, be tough on the problem, but be nice to the person.

Last, you must always separate the interests from the positions. To explain this final point, imagine a last remaining orange in a family with a sister and a brother fighting over the orange. A peacemaking father comes in and cuts the orange in half and then precedes to remove the skin from the orange. Much to the surprise of all involved, the sister takes the orange peel and not her half of the orange. It turns out that her interest was in the skin so that she could make an orange cake, whereas the brother wanted to eat the orange. Here the orange was the position, but the interests were the peel and the orange slices.

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