Threats in a negotiation: impasse or call to action?
Today I’m sharing some tactics and strategies you can use when you find yourself on the receiving end of threats in a negotiation.
Resorting to threats in a negotiation is one tactic among many in a toolkit full of aggressive options. In its most basic form, a threat communicates the costs of noncompliance if and when specific issues or demands fail to be adopted. Threats tend to lurk in the background of most negotiations, even if never wagered by the parties.
None of us like to be on the receiving end of a threat, much less feel pressured to respond or act in a specific way. Nevertheless, when deployed at an appropriate time under certain circumstances, there is a way to issue threats intelligently and effectively with benefit to all parties involved.
A well-played threat is not designed to punish the other side; it serves to protect your interests in the face of very challenging circumstances.
I recently had the privilege of working with a start-up company that has designed a proprietary algorithmic trading system using artificial intelligence to trade the equities markets. With the assistance of a hedge fund, the start-up has been able to prove the strength of its unique approach and system. The hedge fund is eager for diversification, and the start-up is keen to prove-out its’ technology.
During a six month period, the start-up demonstrated promising returns; so the hedge fund requested increased capacity. At the same time, the start-up is at a stage where it requires investment capital to scale the system for commercial use. The hedge fund has expressed reluctance. In response, the start-up explained that if no investment were forthcoming, it would no longer be able to trade the hedge fund’s capital because it would not have funds to cover operating expenses or increase capacity.
The start-up had no choice but to threaten to abandon the hedge fund, resulting in a forfeiture of all progress that had been made. It was able to do this successfully because the start-up had nothing to lose by walking away and pursuing other alternatives to achieve its growth strategy. As a result, the hedge fund agreed to fund operating expenses for the foreseeable future with a view to raising the investment capital necessary within a few months.
When leveraged successfully, threats in a negotiation can motivate the other side to take action without being punitive in nature.Leaving aside the all-or-nothing component to a threat, the key is to frame it in a way that highlights the other side’s interests by illustrating how noncompliance will thwart the desired outcome.
If you find yourself on the receiving end of threats in a negotiation, consider the context in which it was issued and try to determine the motivations behind it. I can think of three personality types that regularly engage in issuing threats as part of an integrated tactic in negotiation:
This personality has a need to be heard and acknowledged and will issue threats in negotiation when feeling frustrated or offended.
The Straight Shooter:
This personality is no-nonsense and usually likes to get straight to the point. Threats are issued due to real constraints being faced and/or existing alternatives to achieve the outcome being sought.
The Poker Player:
This personality is driven by having the upper hand and exerting power. Whether from a place of insecurity or a desire to dominate, threats in a negotiation are wielded without much thought to consequences or regard for relationships and may be more of a bluff than reality.
Before you start issuing counter-threats that will likely only escalate tensions, and as you set out to achieve your goals within a negotiation, consider whether releasing a threat will genuinely help you make your outcome. In certain situations, issuing a threat might provide gratification, but you want to avoid locking yourself into a course of action that could be costly.
Moreover, if you find yourself confronted with a particularly aggressive threat, consider a display of strength either by reframing the demand or ignoring it altogether by expressing your preference for negotiating at the level of all parties’ interests.
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