how good are your negotiation skills? - amnt
TRANSCRIPT
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© Sacker & Partners LLP 2016
How good are your negotiation skills? 23 February 2016
How good are your negotiation skills? AMNT Members’ Meeting
Ian Pittaway 23 February 2016
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Preparation Engagement Dealing with deadlock
Areas to be covered
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Funding Transactions Third
Parties
Investment managers
Negotiation for Trustees
TPAs
The Pensions Regulator
Reconstructions
Takeovers / Bids
Self- sufficiency
Technical Provisions Contingent
Assets Recovery
Plan
Buy-in
Litigation
Benefit changes / closure
The arena
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Characteristics of the
negotiation
Reasoned
Power Play
Mutual gain
No walkaway Key difference to conventional negotiation
“Instead of attacking each other you jointly attack the problem.” Getting Past No : Negotiating your way from confrontation to co-operation
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Step 1 : Preparation
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Preparation is key!
Establishing the negotiating arena
“Trustees should be well prepared and be willing to work with the employer to reach a common agreement”
TPR’s Code of Practice 03, Funding defined benefits
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Map out the negotiating arena What do they
want to achieve?
What information do we need
e.g. covenant info?
What information
are we prepared to share?
What do we want to achieve?
What is our target?
Are there common interests? Can we both get a
better deal?
What is our walkaway position?
Some key first principles
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You Diamond geezer
Example – Buying a car
0 2,000 4,000 5,000 6,000 8,000 10,000
You want to pay
But will drop to
He wants
But can go to
Zone of negotiation
The negotiating arena
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Existing recovery period acts as natural starting point
How does it work in a pensions context?
0 5 7 10 15
You want
(target)
But company will go to
But will accept (limit)
Zone of negotiation
The company
wants
RECOVERY PLAN
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“Prepare by knowing your walk away [conditions] and by building the number of variables you can work with during the negotiation …. you need to have a walk away …. a combination of price, terms and deliverables that represents the least you will accept. Without one, you have no negotiating road map”
Keiser
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Key Variables in the negotiation
Technical Provisions Your Target
Your Limit
The Company’s Target
The Company’s Limit • Discount rate
• pre-retirement • post-retirement
• Mortality • base table • improvements
• Inflation • rate • caps • CPI / RPI gap
• Commutation • allow for?
• Recovery Plan • length • Asset outperformance
• Contingent Assets • yes / no. Type
1.75% 1.25% 1.00% 1.5%
7 13 15 10
0.5% 1.0% 1.0% 0.75%
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FULL TRUSTEE DEBATE
Facilitated / Structured
Arrive at negotiating mandate
Report backs? / Authority to
agree
But understanding of employers
An important role for the scheme’s advisers
Targets / Limits / Concessions
Manage conflicts
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Preparing more than just boundaries
Who speaks / What do they say?
Who is our negotiating team?
Training?
Roles?
Putting together a package
What is the role of the scheme actuary?
Who listens?
“Soft issues”
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Objective voice of reason
Technical Support
As a blocker?
As a player?
Bilateral negotiation with
counterpart
Role of the actuary
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Who are you? Types of negotiators
“TOUGHIE” “WARM”
“NUMBERS WOMAN”
“DEALER”
And what are your opposite numbers? Think about their characteristics.
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• Negotiation is a continuing process • Goodwill / effective communication is key
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Step 2: Engagement
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Engagement tips
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Step 2: Engagement
Preparing for engagement
Who goes first?
Language is key Concessions
Watch out!
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Pleasant surprise?
Let them show their
hand
Will anchor closer to
your target
“If you haven’t prepared an opening offer, you shouldn’t be at the bargaining table. Remember, your opening offer is a behavioural manifestation of your
aspiration point. So it’s imperative to prepare your opening offer.” Thompson L (2008) The Truth About Negotiations
Let’s get going
Key question who goes first?
You let them go first? You go first
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Opening offer needs to be
Otherwise lose credibility
Don’t be salami sliced. Conditionality key
Realistic
But aspirational
Package
Nothing is agreed until everything is agreed
Remember the anchor. Give room for manoeuvre
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LANGUAGE CRITICAL
Firm and precise Not loose and flabby
“Our opening offer is …”
“We’re looking for …”
“Our actuary says will need between £100m and £125m …”
“We would probably settle for …”
“I know that sounds high, but I’m not sure the trustees will accept lower …”
“We were rather hoping for a charge, but if that is difficult, we’d accept a guarantee …”
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LANGUAGE CRITICAL in how you respond to counter-offers
“That longevity assumption doesn’t work for us because …”
“The collateralisation package you’ve just described is unacceptable …”
“You’re going to have to improve on that …”
But avoid rude - “that’s ridiculous”
sarcastic - “you’ve got to be joking”
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SILENCE IS GOLDEN
Active listening not only allows us to assess the other side’s position, but also enhances our own position
through the power of silence.
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Concessions Plenty of
time-outs. Don’t be rushed
Essential part of negotiation
Link it to package
Ask – and ask for something back
– “if / then”
Good to plan out “concession
giving”. Team need to know plan
They give ≠ you give
Withdrawn demand = concession
Concessions
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Concession planning VALUABLE / CHEAP
US THEM
Concessions we will give Concessions we expect to get
Asked to give outside our limit Surprise!
TIME OUT
What is valuable to them but cheap for us?
US THEM
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Text What is your leverage in a major corporate event?
W.H. Smith trustees
Wind-up? Unilateral power to change investment
strategy
Call an actuarial valuation Press /
members
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Brilliant funding / security package
Contested take-over
Select Committee
Court proceedings
Pension scheme pivotal
Boots
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KODAK
Agreed to purchase two businesses for
£210m
Pension Scheme biggest
worldwide creditor - $1.8bn
Chapter II Bankruptcy
Pension scheme now running two global businesses
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Watch out!
THE MONKEY
THE SETTING
“JUST ONE MORE THING”
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Concessions Reporting back.
Prioritise
Usually follows deadlock
What is your mandate?
What is objective of the exercise?
Unrealistic expectations
Confidentiality – what can you
reveal?
A chat with the other actuary!
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Step 3 : Dealing with deadlock • Getting past the impasse
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Dealing with
deadlocks
Put point aside. Return to it
Restate issue. Do not fill gap
Vary package. Remember conditionality
Adjournment
Strip out the emotion. Issues not people
Or walk away. Don’t be pressured by deadline
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KEY DO’S AND DON’T’S
Ask questions
Don’t Do
Talk too much Summarise
Listen
Build on common ground
Emphasise agreement
Build on their ideas
Describe your feelings
Be concise
Use clear, simple language
Be firm
Dilute arguments
Interrupt or fill gaps
Point score
Emphasise disagreement
Make numerous counter-proposals
Use irritating or provocative language
Use long words / jargon
Be long-winded
Be aggressive
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TWO KEY TIPS
Strip out the emotion
Silence is golden