Decision Leadership by Don A. Moore

Author:Don A. Moore
Language: eng
Format: epub
ISBN: 9780300259698
Publisher: Yale University Press

Leading Value Creation within Your Organization

Imagine you are spending a Friday evening with your significant other, who happens to be named Terry. You haven’t made any plans but decide that a restaurant followed by a movie is a fine idea. Terry suggests Restaurant A, which you reject and counter with Restaurant C. Both being reasonable people, you compromise on Restaurant B. You agree that the meal is good but not great. Over dinner you discuss movie options. Terry proposes Movie 1, and you counter with Movie 3, which Terry rejects. Again, both of you are reasonable, so you compromise on Movie 2. Like dinner, the movie is good, not great. On the way home it becomes clear that Terry cared more about the restaurant choice, you cared more about the movie choice, and you both would have preferred the combination of Restaurant A and Movie 3 over what you chose, Restaurant B and Movie 2.

In this trivial example of negotiations within the “organization” of your partnership, you failed to make trade-offs across issues. If you had, each party could have gotten what they wanted on the issue most important to them. The value of finding such trade-offs may be the most important lesson from the entire field of negotiation. A well-prepared negotiator should know how important each issue is to their own side and should be thinking about how important each issue is to the other side. Wise agreements make the most of the potential benefits of trade by conceding on relatively unimportant issues in return for more important ones. Identifying what you care about and learning about what the other side cares about allows you to create value based on these differences. If they care about an issue much more than you do, let them have what they want. But don’t give it away; instead, trade it for something that you care about more. If you actually care about the other side’s well-being, you have all the more reason to create value. To be clear, creating value is not just a nice thing to do; it’s what negotiators should do to increase the size of the pie that the parties have to divide.

Value creation is generally more complex in the negotiations that occur within organizations. In particular, leaders have a responsibility to coordinate value-creating trades between individuals, groups, and divisions in their organization. That essential leadership function—to get troops marching in the same direction—grows complicated when the troops are at odds with one another. Internal conflict is especially likely in conglomerates whose divisions operate autonomously.

General Electric is one of the more successful modern conglomerates. Indeed, it was the world’s most valuable company (as measured by market capitalization) in 2000.5 From its flagship product, the electric lightbulb, GE expanded into markets as diverse as financial services, jet engines, health care, and electric power generation. Such diverse divisions can easily operate at cross-purposes, and this internal warfare can be enormously costly for organizations. Leaders must negotiate the terms of constructive cooperation.

When we teach students about intraorganizational negotiation, we often use negotiation simulations.

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