A Lesson in How NOT to Negotiate-The “Fiscal Cliff” and Washington

Yes, we are all (most of us) freaked out by what is happening in Washington. We can all improve our negotiating abilities by watching Washington bumble their way toward the fiscal cliff.

I have taught negotiation for years, including to individuals and corporate leaders, at several businesses, and to members of business SWOT (Strengths, Weaknesses, Opportunities, and Threats) teams. I have worked with groups at an impasse that appeared worse than what is happening in Washington. Many ended up with agreements that got more than either side originally wanted. That's not only possible, it is commonplace, provided people avoid four pitfalls.

Pitfall #1: Confuse a negotiation with a debate. In a negotiation, your goal is a settlement that is the best possible for all concerned. The research is overwhelming that if you take care of the other side's interests, in addition to your own, you will get a better deal, and better future deals, than if you just try to beat your opponent. People often ask me to “play out” a great negotiation. When I do, people ask: When do we get to the good parts? Good negotiations make awful television. No "gotchas," no moments of outrage and no sound bite. What you see is a bunch of people having a cordial and constructive working session around a table.

In debates, the goal is to score points with an audience. You don't really care what the other side thinks or feels. In fact, the more wounded they appear, the better for you (as long as you don't push it too far and make your audience think you are a bully). When people who should be negotiating debate instead, they do lots of press conferences and speak in sound bites, often with laughter in the background.

In the case of the "fiscal cliff" talks, each side complains about the other, releases word that people laughed out loud when seeing what the other side offered, and makes its opponent seem crazy and irresponsible. Debates make great television.

If this were a debate, the Democrats would be winning, according to most recent polls -- most Americans would blame the Republicans if the country drives off the cliff. But since it's a negotiation instead, we're all losing. This approach appears to force the Republicans to give up one of their key points, which takes us to the second pitfall.

Pitfall #2: Go into a negotiation with a few elements you must have, or there's no point in even sitting down. Some of the best negotiators I have ever met work in law enforcement, usually as part of SWAT (Special Weapons And Tactics) teams or teams of behavioral scientists supporting SWAT members. Do people really ask for helicopters and safe passage to Mexico, like in the movies? Last time I asked that question, over lunch with a friend who is a police officer, they burst out laughing. "Not really," was their answer.

"But what would you do if someone asked?" "Get through it," they said, and referred to a technique called "click down". You ask why the helicopter is important. The likely answer would be: "to get away, idiot!" Humor me. "How do you see getting away playing out?" "I want to be treated with respect," might be the answer, and an ideal response to that is, "you have our respect, or else we wouldn't be talking." The person is then likely to talk much more reasonably about what happens next. Why? It is because it was never about the helicopter. It was about respect. When they were shown it, the need for the unrealistic demand went away.

Part of the problem here is that many Republicans signed Grover Norquist's "no new taxes" pledge. I wrote a year ago that revoking that agreement was necessary to deal with our financial situation, and should be done with honor.

To be clear, the fact that people signed this pledge is fine -- it's in line with a political and economic philosophy many of us (myself included) agree with. It is a problem because it prevents responding to unforeseen crises. There was a time when many Democrats would have signed a pledge to not enter wars. That also would have been reasonable, given a philosophy many of us (myself included) agree with. And if the world changed, as it has many times in the last 100 years, the pledge would need to be revoked to deal with Pearl Harbor, the rise of the Nazis or if Syria uses chemical weapons on its own people.

With that agreement in place, the next pitfall is almost inevitable.

Pitfall #3: Confuse positions with core values. I encourage leaders to never bend on their core values, but to make sure it is their values they are honoring, not their gut feeling that their adversaries are idiots. In this case, Democrats talk as if compromise is a core value (it is not), and Republicans talk as if not raising taxes is a core value (it also is not). The way to get past this confusion is for one side to ask why their position (what they say they want) is so important to them. Democrats would respond that compromise is important to get an agreement. Why is getting an agreement important? Because it's our responsibility to get one, they might say. And why is responsibility important? It just is, when a value circles back on itself, we're talking about a core value. And what about the need to increase taxes on people over a certain income level? The core value is fairness.

On the Republican side, why is no new taxes important? Because many conservatives believe that taxes slow growth and discourage investments by small businesses. Why is growth so important? Because people want to grow their businesses, and we all want to grow the economy, but will not if government gets in the way, their thinking goes. And why is keeping government out of the way important? It is because it's about liberty. And why is that important? Because it is -- so it's a core value.

Jonathan Haidt mapped liberal and conservative values in his "Moral Foundations Theory." Liberals (and many Democrats) value care and fairness. Conservatives (and many Republicans) tend to value a broader cluster of issues, including fairness, liberty and authority.

Imagine what would happen if both sides agreed to build a solution to the fiscal cliff based on the core values of growth, liberty, responsibility and fairness. There would be tradeoffs, but that's a much easier process than to sit people down who abhor each other and lock the door until they get an agreement. They might eat each other first.

Pitfall #4: Thinking (and saying) that this negotiation has to be hard.  My years of negotiation consulting, teaching and study have taught me one thing: If you follow a simple process, negotiations can move so quickly that the progress is stunning. President Barack Obama has said an agreement could be done in a week. If the people came together and clicked down on the other sides' positions (what they say they want) and then formed a settlement based on a small set of core values, here's what would likely happen: formation of a plan that would target national policy on the goal of creating a thriving economy, that is as fair to everyone as we can get, because we have the responsibility to give our children something better than we have.

This process could be done in half a day. I have seen it happen in some of the hardest situations in the world in under an hour, when people finally decided to stop debating and start negotiating.

We are facing a national crisis that none of us have chosen. As others and I wrote as the housing crash laid waste to the economy, a crisis is a terrible thing to waste. By "crisis," I mean a situation of uncertainty. We need uncertainty, because without it we would just get more of the same partisan divide, people telling the media (and us) that they could get this done if only the other side was more accommodating and responsible. So the crisis is here. 

We can use this latest crisis to create tribes of leaders -- not just politicians -- in Washington if we demand that they avoid these four pitfalls. Really, this is not that hard.

I would love to hear from you!  What is your take on all of this?

Lessons in Selling

Before I was a business counselor, before I was a senior executive and after I was an engineer, guess what I did for a living? Nope, I've never been a stand-up comedian (Why, got a venue you need filled?) Actually, I was a salesman. No, not the used car kind, I sold high-tech stuff like energy management systems and environmental lighting.

I'm not exaggerating when I say it was one of the best jobs I've ever had. Lots of perks, plenty of freedom, good relationships and the pay was pretty good, too. Why did I stop doing it? Well, I'm not sure I ever really did. I just incorporated those skills into my climb up the corporate ladder.

That's probably the best selling point for getting into sales. Whether you aim to be a top executive, an entrepreneur or just about anything, selling is a critical skill set. It will teach you how to pitch, negotiate and collaborate. You'll learn how to sell your projects, your ideas and yourself. And you'll learn the basics of business and finance.

Learning how to sell won't just improve your career. It will make it easier for you to do all sorts of things you have to do in life, like buying and selling, getting help from customer service people, dealing with insurance companies, negotiating with your spouse and kids, and most importantly, personal finance.

Getting into sales was definitely right up there in the top five decisions I've ever made in my life. That's why I think that every manager, executive and entrepreneur should carry a bag once in his career. Here are five lessons that everyone should learn from sales.

Shut up and listen. Nothing you've read or learned is nearly as important as what the person across from you is about to say -- if you just shut up and listen. Besides, when you speak first, you're giving away information and potentially committing yourself to a position. Always listen, learn and then speak.

Problems create opportunities. The most important opportunities to make a difference are always when things go wrong. How you respond in times of crisis, when somebody -- a customer -- needs you, is a window into your true capability. And that spells opportunity if you rise to the occasion and deliver results.

Business is all about relationships. These days it's popular to demonize corporations. That's ridiculous. People run all companies, and business is all about relationships between them. Organizations and teams are groups of people that interact and operate to accomplish shared goals. There's no such thing as a self-sustaining business.

Your customer always does come first. Customers aren't always on the end of a business transaction. You have way more customers than you think. Call it business karma, but whatever you have going on, whatever you expect to accomplish on any given day, when someone, anyone comes to you with a problem, that's a customer. Help her first.

Understand the decision maker's motives. Whether you're trying to sell a product, promote an idea or accomplish pretty much anything in the business world, there will always be a decision maker. Once you identify him, understand what motivates him, what's in it for him. That's the key to getting anything done.

One more thing; the toughest thing about selling is that everything happens in real time. The beautiful thing about that is you learn under fire, and that naturally accelerates the learning process. There truly is no better way to learn how business really works.

Nothing happens without a sale: Employment relies on sales; Finance relies on sales; Commerce relies on sales; Engineering relies on sales; every product without regard to shape, form, and function required someone dealing in the art of the sale.  Look around your surroundings, everything around your internal and external sight of vision was sold by a salesperson.  How important is the salesperson?  I would say critical to our everyday life!

The “Fiscal Cliff”-How will it affect you?

The “Fiscal Cliff”-How will it affect you?

The Facts:

As the end of 2012 approaches, business owners, investors, and the public at large will increasingly discuss the possibilities for the coming “fiscal cliff,” a combination of tax increases and spending cuts that will be automatically triggered at year-end unless Congress decides to act. Should our nation’s leaders decide not to act on these matters before the end of the year, here are some of the potential consequences the citizens of the U.S. may face:

1. Ending of the Bush Tax Cuts: In general, this will result in increased tax rates for most. The current tax structure of 10%/15%/25%/28%/33%/35% will change to 15%/28%/31%/36%/39.6% in 2013.

2. Long-term capital gains tax will rise from 15% to 20% and dividends will likely be taxed as ordinary income.

3. The temporary 2% reduction in employee-paid Social Security tax will expire.


4. The estate tax structure will change significantly, with the exclusion for estate and gift tax to drop from $5.12 million in 2012 to $1 million in 2013. Additionally, the top estate tax rate increases to 55% from 35%.

5. High earners (those single filers earning over $200,000, married filers over $250,000, or individuals married filing jointly over $125,000) will be the most affected. For these taxpayers, certain itemized and dependency deductions will be reduced or removed, and the Medicare tax on these individuals will be raised an additional 0.9%. On unearned income, these individuals will pay an additional 3.8% in Medicare tax.


6. Education, transportation, and energy programs will be the hardest hit by mandatory spending cuts set to take place over the next several years.

While none of these consequences are foregone conclusions at this point, our nation inches closer and closer to the coming “fiscal cliff” as the elections have ended and the new year deadline approaches. Unfortunately, much of the debate for finding resolution on these topics will likely be delayed by an arrogant Congress.

The fiscal cliff is a powerful metaphor. It sounds like an impending disaster, but in reality, we’ll wake up on the morning of Jan. 3 and life will be unchanged. Sure, tax rates will nominally be higher, some tax breaks will have been canceled, and the government will be expected to implement major cuts in military and domestic spending. If that continues for several months, it will have an adverse effect on the economy.

But letting the law take effect will also have some real benefits. For one thing, on the other side of the cliff, we’ll be a big step closer to the kind of fundamental reform of the tax code that both Democrats and Republicans say they want. Two provisions that limit the deductions and personal exemptions the wealthy can take — similar to the cap on deductions proposed by Mitt Romney — will come back into effect. Capital-gains rates will rise from 15% to 20%, and dividends will be taxed at normal rates, reducing the incentives for tricks like the notorious carried-interest loophole. And instead of a tax system that produces less revenue as a percentage of GDP than at any time since 1950, we’ll move toward one that is adequate to the needs of a modern, dynamic economy. The fiscal cliff is, all by itself, a budget deal and a step toward tax reform; A flawed and dangerous one, to be sure, but a far superior starting point for a real budget agreement than the temporary rules of 2012.

Once tax rates and other provisions have returned to their previous levels, as planned, Congress and the White House will have a little time to look at taxes and spending and decide how best to keep the economy moving now and in the future. Is it by cutting taxes for low- and middle-income working families, who were hit hardest by the recession and gained little in the George W. Bush years, when most of the benefits of growth went to the top? Or is it another round of tax cuts for those who have gained the most?

Let’s remember also that the fiscal cliff is not a natural phenomenon; it’s the law. None of the tax cuts that will be changed by it were supposed to be permanent in the first place. Some of the cuts — mostly those from the early Obama years — were to provide economic stimulus during the recession. Those should be revisited every couple of years, and if we think the economy still needs a boost, we should renew them for another year or two. But, the bulk of the tax cuts that expire date from 2001 and ’03. At that time, when our country had budget surpluses, both Democrats and Republicans wanted to cut taxes. But Republicans wanted to cut them by about twice as much and to make much bigger cuts for the wealthy than for the middle class. Rather than compromise with Democrats, Republicans twice employed a special rule, known as reconciliation, to use their narrow congressional majorities to push their version of tax cuts through. Because that special rule can’t be used to make permanent changes that worsen the deficit, they had to put an expiration date on those tax cuts. So the fiscal cliff is a long-overdue chance to revisit choices from the past and better address what we need to do for our future.

In the world on the other side of the fiscal cliff, Democrats and Republicans will have no choice but to work together on tax cuts that will be fairer to the middle class and encourage economic growth. And then, over several years, we have an obligation to look closely at Medicare in particular and figure out how to slow the growth of health care costs in that program. That work can only begin on the other side of the fiscal cliff.

Personal Opinion:

To barge through this political gridlock and get the parties into position for real compromise, I hereby suggest they go over the cliff.

The implications would not be felt for several months, giving time for making amends. Both sides would have "held out to the end," satisfying their most ardent flag-wavers. The threats of tax hikes and spending cuts would be real, putting politicians on the spot without time to dally.

And the challenge would become one of adding benefits and mitigating tax pain, a much easier proposition than reducing benefits and adding pain before the deadline.

Republicans would agree to reinstate tax cuts for everyone except individuals making more than $200,000 a year and families making more than $250,000.

Democrats would agree to more entitlement program reform than they would before the cliff deadline.

Today's admonitions are based on worst-case implications if the tax hikes and spending cuts go fully into permanent effect, which is not in the cards, regardless. Let both sides jump in the soup together by letting the cliff deadline pass. Then we'll see the fur fly, and at the end of a few weeks all hands will wring out the kind of compromise solution they can't reach until dawdling is not an option. The changed political dynamic will bring it on. The fiscal cliff will have done its tactical duty.

So, you Thelma and Louise’s out there; What do you think?