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Getting To Yes With The Founders’ Dilemmas and Interests
Negotiation Skills and High Potential Companies
By Samuel (Mooly) Dinnar
What negotiation skills are required to lead a high-growth company, or deal with one? In this age of high uncertainty and flat organizations where managers are required to invest a majority of their time negotiating to get the resources and support that they need, how can we learn from the experience of others?

Negotiation can raise negative connotations in our culture. In many pop culture examples negotiation is portrayed an extension of fighting or fleeing, an image that is further perpetuated by sporting events and some of the current political divides. It is perceived to be either a battle of power among strong-willed individuals, or something to be done only if you can’t overcome your “opponent” by manipulation and force. Yet the reality is that we all negotiate, everywhere, and all the time:  At work, with our neighbors, while shopping, while travelling, and at home. We negotiate across the spectrum, from strangers on the phone who represent various entities, to our closest friends and family members.

In business, negotiation is ever present and many times critical to success.  Conducting business activity requires coordination, communication and teamwork. Negotiation skills are at the core of those activities.  A founder’s relationship with investors, co-founders, hired employees, vendors, and customers, all require a series of negotiations over terms and conditions. These all forge the culture of the organization, which will carry on for many years to follow. Effective negotiation skills can make or break a venture.

What negotiation skills are required to lead a high-growth company?  What aspects of negotiations are important to pay attention to when dealing with such a company as a potential partner? How to prepare for a dialogue with a founder, or with the hired executive of such a target company? The continuous study and research of this emerging field over the last couple of decades has yielded some interesting lessons.

Much of this research has centered around the Program On Negotiations (PON) at the Harvard Law School, based on the 1981, Roger Fisher and William Ury seminal book “Getting to YES: Negotiating Agreement Without Giving In”.  Probably the most influential book ever written on the topic, Getting to YES is on it’s third edition (with Bruce Patton added as a co-author) and it continues to introduce readers to negotiation as a principled activity in which both (or all) participants can benefit by creating mutual gains. The great Roger Fisher passed away this summer in August 2012, and his legacy and culture live on with the growing number of dedicated academics and practitioners who continue to develop this exciting field.

The mutual-gains vision that Fisher and his colleagues promoted is in contrast to the typical “old” view of negotiation as a “zero-sum” activity in which two or more parties battle for gain at the other’s expense.  The best “bargainers” used to be those who succeeded in obtaining the largest slice of a pie, with little attention paid to whether the pie could be made larger. This old school approach celebrated the ego satisfaction that comes with gaining more (or even losing less) that the “opponent”. Fisher and Ury suggested that the most successful negotiators will focus on interests rather than positions, and may be better off with a slice of a much bigger pie (or several different slices from various pies, as opposed to just the original one that was considered).

There are several insights from Getting to YES about successful negotiation skills:

–         Separating the people from the problem.  Treat the situation as a joint problem solving exercise, without personal attribution.

–         Use subjective metrics, for example recent comparable deals or some other fair market value technique.

–         Consider via preparations both parties alternative possibilities to reaching a deal, to determine your, and their, BATNA (Best Alternative To a Negotiated Agreement), which will influence the “walk-away” threshold.

–         Explore for the true interests that are beneath the positions. These may uncover unforeseen mutual-gains opportunities (such as one side needing cash sooner while the other cares more about the total price announced publicly).

Naturally, distributive issues (who gets what piece of the pie) still, and will always, exist. In many negotiations, the parties never reach the level of trust that is required to be able to truly benefit from these techniques. The above principles have been widely used in creative deal-making agreements, by lawyers and executives who have been trained and who are practicing these principles, yet still – it is not uncommon to see many agreements that could not detach from the “who has more power” element, and that have “left a lot of value on the table” (or in other words missed opportunities).

There are several barriers to reaching positive value-add creating agreements. Two examples are the Dealmaker’s Dilemma that is based on the famous Game-Theory Prisoner’s Dilemma, and the psychological effect of reactive devaluation (“I cannot accept their offer, since if they are willing to make it, then there must be more I can get”). Researchers and practitioners in negotiations and mediation have offered many proven theoretical and practical tools to deal with these barriers.

When looking at the playing field of negotiations in the business world, all these factors take on particular meanings. When preparing for negotiations with high-growth or high-potential companies we have to pay close attention to all the many due-diligence aspects such as technology, revenues, market segment, competitive landscape, etc. The holistic view will not be complete without the required special attention to the people aspect – namely, the relationships, culture and underlying interests of the individuals involved. If the particular company is one that is still led by the founder, or where the founder is still a member of the board or the management team, then we need to recognize their ability to influence many of the participants and the outcome, and thus pay very close attention to the founder’s interests.

In a negotiation, there is sometimes a need to have Difficult Conversations that some or all parties may rather avoid. Active communication techniques that are genuinely applied will help by uncovering true underlying interests, by revealing other interests that were not communicated, and by exploring creative options. The use of active listening, reframing and empathy can help a negotiator recognize overseen opportunities in collaborative deals, as well as uncover unforeseen opportunities in situations where the parties are in conflict.

Whether one is a founder of a company, works with a founder or is trying to negotiate with a company that has a founder – there is a need to be able to understand what interests to look for, and to consider them while thinking about options and alternatives to agreements. As I mentioned many of these are often not discussed, or are even considered non-discussable. For example, consider the founder-CEO who is working 60 hour weeks, recruited the company team in person, knows all the customers, came up with the innovative idea, invested some own funds, delivered on all the development milestones and thus achieved a super-star status. Who would want to be one initiating the discussion about the need to replace this CEO with an external hire?

While approaching such a situation we should use the tools that “Getting To Yes” teaches us: treat such as issue as a joint problem-solving situation, use some subjective metrics for reference, explore the core interests of the relevant individuals, help think through the consequences of the alternatives, and most importantly – try to separate the particular person’s position from the discussion of the particular situation. So, instead of the founder-CEO hearing the surprise “It’s time for you to go”, the negotiators can focus on the founder’s interests which will likley include both identity elements as well as recognition and financial benefit for their contributions and accomplishments, and negotiate a joint problem-solving process and an outcome with the founder-CEO to secure a successful transfer of leadership.

One useful approach is to use the book “The Founder’s Dilemmas: Anticipating and Avoiding The Pitfalls That Can Sink A Startup” to help us understand these situations and to provide us a broad qualitative and quantitate reference point for discussion. In this book the author, Professor Noam Wasserman of the Harvard Business School, examines the decisions by entrepreneurs that can make or break a startup and its team. Drawing on a decade of research, Wasserman reveals the common pitfalls that founders face and how to avoid them. He looks at things such as whether it is a good idea to co-found with friends or relatives, how and when to split the equity within the founding team, and how to recognize when a successful founder-CEO should exit or be fired. Wasserman highlights the founder’s need to continuously balance controlling the startup and attracting the best resources to grow it, and demonstrates why sometimes the easy short-term choice may turn to be the most perilous in the long term.

The knowledge we gain from Wassermann, based on his popular Harvard Business School course of the same name, is based on the inside stories of many founders, and on quantitative survey data from thousands of founders and companies. While his course was geared towards educating aspiring entrepreneurs about what may lie on the road ahead, it is useful for current founders as a tool for self-reflection and for anyone dealing with a high-growth company. When approaching a negotiation with a high-potential company, one should map out the company’s relationship network and could use Wasserman’s book examples and data to explore the various interests of the individuals.

It is only through the uncovering and addressing of all the relevant interests, the full exploration of subjective metrics, the brainstorming of options and the risk and opportunities analysis of the alternatives, that truly successful negotiations can occur that will lead to long lasting successful agreements.

 

Samuel (Mooly) Dinnar a senior negotiation trainer and mediator with Meedance in Boston. His specialties are in strategy, negotiations, high-growth management and dispute resolution, with over twenty years of experience as an executive, venture capitalist and board member. He can be reached at sdinnar@meedance.com

 

Books Mentioned:

Getting to Yes: Negotiating Agreements Without Giving In

The Founder’s Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup


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Art as a Leadership Tool To Facilitate Consensus
How Using Art and Group Dynamics Opens Our Brain
By Samuel Dinnar – Boston.
Their task was significant. How do they chart out the School’s vision for the next 15 years and change their governance structure to enable it? There had some opposing views between the two groups: the teachers and faculty on one side, and the board of trustees on the other. Various clear positions were articulated in prior meetings with not much progress. This task was especially daunting since one of this community’s stated values is to try and reach all significant decisions by consensus.

Fortunately, everyone was interested in being heard and in contributing to the future of the institution that they loved so much. Also, it was possible to get everyone to commit to a half-day “retreat” at the school on a Saturday.

 

The day started by “breaking bread” together over bagels and coffee, followed by going around the circle with warm-up introductions and then singing in a round together as a way of opening up. After an hour of discussion, setting the background and ground rules, everyone was off in mixed groups of four to start our brainstorming segment: “Paint a picture that represents the school”.

 

There they were in the big room, in foursomes. Among them were,:

–      Two high powered attorneys

–      A CEO of a life-sciences Company

–      A financial Services Vice President

–      An Engineering Executive

–      A software Developer

–      A publishing manager

–      A public advocacy expert

–      A high tech entrepreneur, and a venture investor

As well as, among others:

–      Several nursery and kindergarten teachers

–      A couple of language teachers

–      An administration manager

–      Music and Art teachers

–      A building facilities person

–      Several class teachers, and subject teacher specialists

 

With crayons, markers or paintbrushes at hand, it first it felt awkward for some. But then the power of using art as a connecting fabric worked its magic. Some people started throwing out ideas to their group. Two groups talked about the school as a tree, another group contemplated it as a solar system, one group as a musical orchestra, two groups imagined the community as an agricultural field and one was heard having great laughs around the representation of the school as a cow including hoofs, a bell, a calf, milk, and also manure.

The result was amazing. When everyone reconvened, they all reviewed with great openness and warmth the “artistic” results of the various groups together. Afterwards, the group was guided by the facilitator to go over the list of items and ideas that came out during the “art review” and transition to a relaxed open-minded brainstorming discussion about the various options for the school governance structure. As the day wrapped up they were once again a group of individuals, with various individual ideas and a lot of peer respect. Everyone was heard, and everyone contributed to the brainstorming of options. Some new friendships were forged and some existing relationships strengthened.

 

Today, it is several years after that day. The school community members benefit greatly from the successful implementation of the new governance structure that resulted from the series of meetings. The school community has continued to grow and improve in its communications and decision-making processes, and the memory of that one powerful day will forever stay an incredibly strong in my mind. Art and social dynamics do open our brain and heart to effective brainstorming. They can and should be used appropriately as leadership and influence tools.

Samuel (Mooly) Dinnar a senior negotiation trainer and mediator with Meedance in Boston. His specialties are in strategy, negotiations, high-growth management and dispute resolution, with over twenty years of experience as an executive, venture capitalist and board member. He can be reached at sdinnar@meedance.com


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Negotiating CEO Succession At A High Growth Company
Israeli Founder Changes World, then ousted as CEO?
By Samuel Dinnar - Oct 2012 – Boston.
News is out today that Shai Agassi, one of the global icons for world-changing entrepreneurs with a “do good” agenda, was ousted by the board and will be replaced as CEO. Aggasi, a serial entrepreneur (TopTier that was sold for $400 million to SAP in 2001, and several others) later joined his acquiring company became a senior SAP executive. As such, he was considered one of the most influential executives in the world, and was next in line to become SAP CEO in 2007, but decided to leave and pursue a global formidable challenge: to develop a model and infrastructure for employing electric cars as an alternative to fossil fuel technology.

Agassi, an Israeli born entrepreneur who lived much of his business life in the US, founded his company “Better Place” to pursue his vision. He spoke in Boston in 2008, and captivated the local audience at the Museum Of Science with his pitch. That year, Aggasi was named one of Time magazine’s “Heroes of the Environment,” and he explained how Better Place’s revolutionary model for scalable, electrified personal transportation will liberate cars from oil, reduce carbon emissions, and facilitate an era of sustainable mobility. Since then, through partnerships with government leaders, auto manufacturers, energy companies, and other key parties, Better Place successfully raised over $800 million to build the world’s first all-electric transportation infrastructure. Israel, Denmark, and Australia were the first countries to embrace the Better Place model, and Better place put forth a strong global team of players in various countires. In fact, Agassi will be replaced as CEO by one of them, Evan Thornley, the current CEO of Better Place Australia.

The vision of not so long ago is now becoming a reality. Aggasi is quoted as saying “Five years ago I pursued a vision of weaning the world off oil and its dependency on it, and last month I drove across the state of Israel in an electric car. Very few people get to transform such a complex vision into reality in five years”. Yet in what is seen as a surprise move, this global and Israeli icon has now been fired from his CEO position. Why?

Why is it that founders are replaced as CEOs of “their own” startups? What happens to the startup after the founder is replaced with a professional CEO? Prof. Noam Wasserman of the Harvard Business School has been teaching and studying these kind of questions for over a decade, and he details these “Founder Dilemmas” in his new book by the same title. Prof. Wasserman shows us that founders’ most common motivations are building wealth, and controlling the growth of startups. Naturally, they also want their “baby” to succeed, and so how succession in managed is also of great interest to them. Prof Wasserman has conducted surveys of over 10,000 founders, reflecting more than 4,000 high-potential startups, from the two central industries of technology and life sciences. Together, these industries dominate every measure of young startup employment and funding (around half of the IPO’s in 2000-2009, and three-quarters of Angel and VC money invested in this decade). Technology and Life Sciences are also two areas where making the world a better place is at times a strong motivation for the founders and the investors, as well as two industries that have a strong presence here in the Boston area, as well as countries such as Israel. There are many lessons learned about founders and high-growth companies from Professor Wasserman’s research and they are grouped into Pre-founding career dilemmas; Founding Team Dilemmas – including Solo-versus-team, relationships, roles and rewards; Beyond the founding team – including hiring, investor and CEO-succession,

As Prof. Wasserman explains, the fonder-CEO succession event is likely to be traumatic, but as a process it has the opportunity to be productive and rewarding as well. In Agassi’s case, the Chairman of the Board is quoted as saying “It is almost five years to the day since Shai launched Better Place and a natural point in the company’s evolution to realign for its second chapter and for the challenges and opportunities ahead”. For the sake of the world’s environment and future green technology founders, we are all hoping that the company can successfully navigate these challenges and help the world capitalize on the opportunities.

 

Samuel (Mooly) Dinnar a senior negotiation trainer and mediator with Meedance in Boston. His specialties are in strategy, negotiations, high-growth management and dispute resolution, with over twenty years of experience as an executive, venture capitalist and board member. This blog was posted in relationship with Dinnar’s work as a member of the NEIBC Life Sciences Summit 2012 Organizing Committee, and the successful conference where Dinnar introduced Professor Noam Wasserman as a speaker. He can be reached at sdinnar@meedance.com


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Giving Thanks and Mutual Gains
The Joy of Reciprocal Learning
By Samuel Dinnar - Boston.
On this time of Thanksgiving, I want to give special thanks to all my international students and colleagues, from which I continue to learn. This past year I trained many international participants both as part of Harvard Negotiation Institute at Harvard Law School and through Meedance, MWI, CMIIG and other various organizations. I was once again reminded how learning is truly a mutual-gains activity. Through this wonderful interaction with the diverse and impressive collection of lawyers, judges, business people, community leaders and activists, I was reminded how fortunate we are to live in this world and be able to make a difference. It also was a sober reminder to put in perspective some of the challenges of our own everyday life.

Last year, Hurricane Sandy was nature’s reminder that all plans are subject to unexpected changes. It also brought the practical question in late October of whether some of the international participants would make it to Cambridge to attend the Mediating Disputes workshop where I was teaching (along with three wonderful faculty experts, from which I also learned so much). Eventually all participants arrived, despite some enduring incredible rerouting, and overcoming loss of luggage. From our safe indoor training sessions, our hearts went out to the victims of this natural storm here on the east coast of the USA. This year, with no natural disaster interfering, we unfortunately witnessed a few last minute cancellations of government employees who were forced to stay home due to the government shutdown.

 

The students from Haiti, inspired me with their ever-present jovial mood. Haiti being one of the poorest and least developed countries in the world, in recent years has been struggling with problems ranging from near-constant political upheaval, health crises, an annual barrage of hurricanes and the worst earthquake in the region in centuries hitting it in 2010. With around a quarter of a million deaths and over a half a million still living in displaced camps, Haiti’s social structures are still being rebuilt. As a dynamic group, we explored dealing with negotiation questions such as how to ensure that an agreement was executable despite the environment of risks and uncertainties.

 

I was fascinated by the will power of a group of business leaders and political activists from Mongolia. This country that has been rarely heard of in recent decades, is now a major player with double-digit economic growth, which is among the highest in the world. It is estimated that the country has as much as $1 trillion worth of untapped precious metals and minerals. Wedged between Russia and China, the challenge facing the nation is to ensure that its mineral wealth benefits the whole nation rather than just certain sectors of society, as has been the case in some other resource-rich countries, and how to keep democracy initiatives moving forward. These strong individuals who emphasized their heritage, including Genghis Khan, and were very interested in specific techniques for ensuring the creation of more value before fighting over the distribution of value.

 

From my Nigerian friends, I have learned about how Nigeria grew from three states at independence to thirty-six today, with hundreds of Local Government Areas! This dynamic and diverse population is challenged with negotiations at the various levels of government in a way that allows the whole country to benefit from foreign national extraction of natural resources, and yet overcomes the culture of prebendalism – the sense of entitlement that many people feel they have to the revenues of the Nigerian state. We talked about the parties that are not represented “at the negotiation table” and how elected officials, government workers, and members of the ethnic and religious groups to which they belong feel they have a right to a share of government revenues, and any agreement has to consider those external stakeholders.

 

Every training opportunity creates moments like these to learn form, and this past year, while training negotiations and mediating disputes, was definitely rich and special with such opportunities. I hope that sharing these moments helps us all think of this world as one global diverse village, and of how improved negotiation skills as a way of making the world a better place.

 

Allow me to close with a quote from a participant’s email a couple of weeks after the training, following his experience as a neutral in a west African country with a history of violence and poor governance, and after helping the local political parties overcome their disputes and negotiate an agreement on reforms that were long overdue: “I appreciate the course even more, now that I have put the skills and approaches to use. This experience has built my confidence”.

 

Happy Thanksgiving.

Samuel (Mooly) Dinnar a senior negotiation trainer and mediator with Meedance in Boston. His specialties are in strategy, negotiations, high-growth management and dispute resolution, with over twenty years of experience as an executive, venture capitalist and board member. He can be reached at sdinnar@meedance.com


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Leadership, Influence and Negotiation for The New Year
By Samuel Dinnar – Jan 2013 – Boston.
My friend was frustrated as we walked the woods on this cold but sunny December day, with no leaves on the trees and no snow on the ground. Just like the snow was late to arrive this year, so was my friends’ 2013 budget. Despite the fact that his CEO had kicked off the 2013 budgeting process in October, things were still not finalized. Internal wrangling combined with external uncertainties and conflicting pressures have caused a procrastinated process that was leaving them with no approved plan going into the holidays.

There are so many things each of us wants to do in the next year. The last weeks of the year are the perfect time to take stock and set the plans in order to achieve consensus and alignment. The art of leadership calls for knowing how to orchestrate your decision making process, and knowing how to say “no” to some of the initiatives. Knowing what not to do is sometimes more valuable than knowing what needs to be done. Along with the decision to say no to something, comes the art of how to say no to some people while still maintaining the relationship and their loyalty.

The same principles hold true for my friend’s business, as well as for most others. In every organization that is preparing for the New Year, multiple negotiations are ongoing simultaneously:

–       What new initiatives do we launch?

–       Which programs do we keep, cancel or modify?

–       How do we respond to market challenges and stakeholder requests?

–       What are the correct project priorities and appropriate resource allocation?

–       Should we invest in long-term infrastructure/development initiatives or do we need to focus on the short-term success metrics?

–       How do we allocate the finite budget between the different groups, without suggesting a zero-sum or scarcity mentality?

My friend understands this. He has seen from the inside how multi-national companies run the budget process for over a decade. He also knows how it is done at the non-profits he has served on. He understands that all sides of the decision-making relationship are challenged with how to influence others to adopt their proposed idea, as well as with how to influence teams to do what it takes to get plans approved in situations where authority cannot be used to mandate contribution or compliance. So what is different this year?

My friend’s frustration was with the fact that this year appeared to have too many moving parts. Key people felt that they were not part of the decision making process, and time and time again it was not clear what the picture was, or where in the process the organization was. Uncertainty is bad for business. So is lack for process transparency. After a short silence, we somehow shifted to discussing the bad example that Washington is setting these days. With the Fiscal Cliff Crisis, the national economy is also going into the holidays without a clear 2013 plan and budget. The partisan negotiations (or lack thereof) on the Hill set a bad example, rich with the posturing of hard positions and brinkmanship, treating the issue as a zero-sum game rather than a mutual-gains problem solving challenge. This national picture is probably a contributing factor that influences the local level of communities and companies this year – adding both to uncertainty and to the wrong culture. All of this is further propagated by the media.

My role as a friend was not to offer advice, but to be a supportive listener. My friend told me that he has confidence that his CEO will eventually make the right calls, and that the company will end up with a plan that everyone can support. He just wished there were things to be done to make it easier next time. I mentioned that there were, and that negotiation is an organizational capability that when developed correctly helps both the external give-and-take leadership, as well as the internal decision-making process influence. Who knows, maybe next year my friend’s company will be one of our clients? Or maybe next December, we will have snow on the ground before Christmas? And maybe, just maybe, next year we can see congress get together and solve national issues as if they were a joint-problem?

Wishes of a happy and prosperous 2013 New Year, to you, your loved ones, and your organizations.

 

Samuel (Mooly) Dinnar a senior negotiation trainer and mediator with Meedance in Boston. His specialties are in strategy, negotiations, high-growth management and dispute resolution, with over twenty years of experience as an executive, venture capitalist and board member. He can be reached at sdinnar@meedance.com


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