Negotiating Styles: Zero-sum vs. Win/Win

October 2010
by Steve Gillen

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Right after John Wiley & Sons acquired the book division of Bloomberg, Joan O’Neil, VP and executive publisher at Wiley, sent a letter that began:

Dear [Author],

. . . It is my pleasure to welcome you to our Wiley community of authors. . . . We are pleased to inform you that we will be paying your royalties on the net amount received. . . .

The problem was that many of the Bloomberg authors to whom the letter was addressed had contracts in place that paid royalties based on the retail list price, so a change to payment on net receipts would be, in effect, a 50 percent pay cut.

O’Neil’s letter went on to discuss other changes to the Bloomberg terms that, at least arguably, would have an adverse impact on the Bloomberg authors. The letter closed with:

We are sending you two copies of this letter, one for your files and one to be signed by you and returned to Wiley in the enclosed self-addressed envelope.

Below O’Neil’s closing signature was a line for the author’s signature, under which was printed:

AGREED.

It should come as no surprise that the Authors Guild responded with a press release castigating Wiley for its letter. The headline read: “Wiley’s Deceptive Letter to Bloomberg Press Authors: ‘We are pleased to inform you’ that we will be slicing your royalties up to 50%.”

Wiley responded, in turn, with a too-little/too-late public rationalization that might have avoided damage to its credibility had it been offered up front rather than after the fact.

Welcome letter, indeed. Wiley’s message was more like a Trojan Horse contract amendment, with Wiley attempting (or appearing) to disguise the fact that this was actually a negotiation—that a Bloomberg author had the option of saying “No” or even “Yes, but . . .”

On the plus side, it provides a vivid object lesson in negotiation styles.

The Negotiating Style Spectrum

Any well-handled negotiation generally happens in two stages, regardless of the negotiation style employed. The first stage is about collecting information on the strengths and weaknesses of the other side, through independent research, through direct discussions with its people, and through the negotiation process itself. The second stage is about reaching agreement on deal points.

If you are more successful than the other side in stage one (i.e., you know more about them than they know about you), you will be more powerful when you get to stage two.

Wiley certainly had a leg up in the information exchange, but there are good reasons for publishers to take an approach to negotiating with their authors and others that is less competitive and more cooperative.

All manner of negotiating styles can be arrayed on a continuum, from purely competitive to completely cooperative.

At the competitive end is a style known as distributive negotiation, sometimes called zero-sum bargaining or hard bargaining. This approach concentrates on maximizing payoffs in situations in which one party’s gain is the other party’s loss. Information is aggressively sought from, and only reluctantly released to, the other side. The participants typically set target points for what they hope to achieve and resistance points for what is minimally acceptable.

In this approach, the participants hope to find overlapping ground between their resistance points (the bargaining zone), and the process focuses on conflict management aimed at compromise.

Although there are circumstances where an approach along the lines of the distributive method is most appropriate, it is not conducive to building positive and continuing relationships among the parties because it is competitive and because one party’s gain comes at the expense of the other. This approach might be appropriate when you have a one-off negotiation with a party and when you will not have a continuing relationship with or dependence upon that other party.

However, it is probably counterproductive for most publishing contracts because of the continuing relationship and need for post-closing cooperation among the parties (e.g., manuscript development and acceptance, marketing and promotion, and perhaps eventual revision).

At the cooperative end of the spectrum, the integrative approach presumes that the goals of the parties are not mutually exclusive and that it is possible for participants to achieve joint gains (a derivative of this approach is known as win/win or principled negotiations). Advocates of this approach believe that a good negotiation should create, rather than merely distribute, value.

In the integrative approach, parties start from preset positions; but through information sharing and creative problem solving, they make trades based on complementary interests that increase the size of joint gains for both parties. Communication is essential to this process.

The ultimate goal in this approach is not to get the best of someone, but to reach a wise and mutually beneficial deal. The win/win approach is the better choice when the parties will have a continuing relationship or dependency (sole-source supply contracts; sales/service contracts; and joint agreements to commercialize assets that are not finite in nature—e.g., intellectual property rights).

In negotiations over intellectual property rights, the pie is potentially limitless; the object should not be to keep the other side’s piece small, but instead to make sure that the rights end up in the hands of the party best positioned to exploit them. You cannot effectively accomplish this objective without sharing some information with the other side.

Insights from a Game

Empirical support for the relative effectiveness of distributive versus integrative negotiation styles is lacking. The research is largely anecdotal and case-driven. There is, however, one study based on a survey of 2,500 lawyers. It asked them to identify negotiators they perceived as effective. Sixty-four percent of those identified as effective were also described with the following characteristics: ethical, trustworthy, realistic, communicative, fair-minded, accommodating, and agreeable. Only 36 percent of those identified as effective were also described as demanding, assertive, tough, firm, stubborn, argumentative, and a bluffer

A role-playing exercise that I use in negotiations classes further exposes the limitations of the distributive approach under circumstances parallel to those in negotiations over book rights.

The class is divided into groups of five, with each group sitting around a small table. In the middle of each table is a pile of 20 poker chips. The objective is to end the game with more chips than any other player at any table. The game is played in 15-second rounds. During a round, any player may take chips out of the pile for a personal account. At the end of each 15-second round, if there are still some chips left in the pile, a banker will add a matching amount, and that table will get to play another round. If a round ends with no chips left in the pile, that table is eliminated from the competition; the game continues with successive rounds until a round ends with no chips left on any table.

There is one other rule in this game—the players at each table are not permitted to communicate with one another during the game.

The game invariably ends after one round or a couple of rounds, and a winner is declared. But despite having bested every other player in the game, the winner will not have maximized gains, which could have continued to accumulate if the players had worked out a mutually beneficial and cooperative arrangement to allow each of them to take chips out while ensuring that some chips remained to be matched for successive rounds.

Because the rules of this game precluded communication, the players could not cooperate. But a publisher and an author can choose to communicate, and thus to cooperate, when they negotiate the terms of a publishing contract. And like the bottomless bank in the negotiation game, the full and ever-evolving spectrum of channels, formats, and media for commercializing a literary work tends toward the infinite. Cooperation and information sharing can enable the parties to find the negotiated solution that permits each of them to maximize their respective gains and feel good about each other in the process.

If Wiley had been more forthright in its welcome letter—explaining what it sought, describing the authors’ options, and making a fair case for its requests—it might have accomplished more of what it sought at a lower, less public cost.


Steve Gillen is a partner in the intellectual property firm of Wood, Herron & Evans L.L.P. and has focused his practice on publishing and media matters for 30 years.

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