When amateurs – by which I mean non-lawyers – are obliged to read an actual legal document, such as the recent draft agreement with Iran to limit and defer its nuclear aspirations, they are invariably horrified. So complicated! So dry! So many time periods! So much ado about dispute resolution! These same amateurs often feel free to pontificate about how a particular negotiation should have been conducted. Critics of the Iran deal – even such legal luminaries as Alan Dershowitz — have claimed that too many concessions were made, both in advance and at the table, and that the U.S. displayed a pervasive ignorance of what Dershowitz called “Negotiation 101.”
This focus on the nitty-gritty process of negotiation caused me to reflect on what I’d learned in my own “Negotiation 101” – the practical education in deal-making that I received in the classroom of commercial financing transactions over much of my career. The experience taught me a few key principles that always seem to apply when people come together to attempt to reach a formal agreement about something over which they may profoundly disagree:
Rule 1: Making it personal is always a mistake.
Rarely do negotiators represent themselves; they almost always have a client. Effective negotiators never forget that their client’s goals not only come first, they are the only interests that matter. If personal ego can’t be left at the door, it will inevitably complicate the discussions and may even derail them. It’s a subtle form of malpractice. The accusation that Obama and Kerry were more concerned about Obama’s “legacy” in their conduct of the negotiations than in reaching a better deal is about as damning a charge as one could make to a team of lawyers, regardless of what you think of them as diplomats.
Rule 2: You will not win every point.
People who get to the point in their careers where they are leading negotiations come with a liability: they are not used to losing. They come to expect that they are so persuasive or that their client’s interests are so obviously compelling that they should win every point. But not only does this never happen, it shouldn’t. A counterparty, no matter how weak, who hasn’t been at the receiving end of compromise is going to be a disgruntled and unreliable party to your agreement, and if you believe you should win every point you are probably in the wrong business.
Rule 3: Unless you leave the room believing you could have done better, you haven’t been in a negotiation.
You may have been at a cocktail party or the opening of a play, but not a negotiation. Many of the finest negotiators I met in my career agonized over the points they had to give up, the miscalculations they thought they might have made. This comes with the territory of being a zealous advocate of your client’s interests, and is a product of the fact that agreement invariably requires compromise. Good negotiators always think they could have done better, and the hard part is that they can never know for sure.
Rule 4: Someone who wasn’t there will always second guess the result.
This someone may be your client, or a fellow lawyer who watched from the sidelines, or someone who merely reads about the results in the paper. Second-guessing is always much easier than the task of the negotiator, it always hurts, and it’s always necessary not to let it get in the way of your knowledge of what really happened in that room, and of the reality of Rules 2 and 3.
Rule 5: Reality always supersedes the deal.
This is the diplomatic and commercial equivalent of the military rubric that no battle plan survives the first engagement. Even the most formal agreements have lives of their own, and the parties act their provisions out (or not) in the real world, not in a conference room or in the sub-clauses of a document. This is part of the reason for all those time periods and provisions for dispute resolution. How a transaction plays out in the real world always differs from the letter of the document that embodied it. Not sometimes – always. And how the parties react to that reality, how they behave when confronted with those differences, is far more critical to the success or failure of the transaction than the hard-fought clauses that gave it life.