How to avoid escalating conflicts in a negotiation?

n the business world, negotiation is a constant. Therefore, it is easy to recognise the advantages of creating a collaborative atmosphere that favours value creation while negotiating. However, negotiation processes characterised by high tension and confrontation are still recurrent. And it is in the course of these same processes that we find angry, frustrated and offended negotiators, egos are challenged and objectivity disappears. This combination thus results in incalculable losses for the parties involved.

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The story of a conflictive negotiation between a Retailer and a Supplier

Retailer and Supplier fight for shelf space

By way of illustration, consider the following negotiation between a Supplier and a Retailer that took place a few years ago. The process began when the Supplier asked the Retailer to guarantee shelf space for all its new products and to accept its entire range unchallenged. However, this request was unacceptable to the Retailer, as it restricted its ability to adjust the portfolio according to consumer preferences, which indicated an increase in demand for private label. As space is limited and several producers were asking for exactly the same, it would be impossible to satisfy this particular supplier's request. Moreover, it would also be unfair to make an exception and discriminate against other important producers.

Faced with this situation, the parties took extreme positions. The Supplier argued that, thanks to its market margin and the strength of its brands, any new product would be a success. In response, the Retailer recalled their long-term relationship and the fantastic results that were only possible with mutual cooperation!

Retailer and Supplier fight becomes about prices

Faced with the Retailer's refusal, the Supplier decided to move on to another issue: the retailer should accept a price increase of at least 2.5% to adjust for inflation. As the other retailers had already accepted this increase, this one should be no exception. Defying expectations, the Retailer refused the proposal, arguing that in the context of their declining purchasing power, it would be unrealistic to raise prices.

Retailer and Supplier enter a spiral of retaliation

By now, the Supplier's representatives were quite upset, as they found this latest refusal unacceptable. As one of the largest FMCG companies in the world, with almost 8% growth in that market in the previous year, they should be treated with respect! Irritated by the Retailer's lack of flexibility, the Supplier decided not to offer discounts on their products. In retaliation, the Retailer has withdrawn 70 products from this supplier.

This was followed by a threat by the Supplier to raise the price of all products by 30% if the Retailer did not reconsider its position. The Retailer responded by discontinuing 300 of the Supplier's products.

The conflict continued to escalate: the Supplier launched a major advertising campaign claiming that its products were available elsewhere, in an attempt to divert traffic from the Retailer's shops to the competition. And the Retailer responded by launching a campaign promoting other brands, in particular its own brand. As a result of this negative conflict spiral, both parties lost immensely, in a situation where conflict escalation was extreme.

The moral of the story

Strange as it may seem, even experienced negotiators are often frustrated by problematic relationships and situations of deadlock and value destruction. Therefore, understanding the circumstances that hinder negotiation processes is of utmost importance in conflict management.

In reality, negative spirals of conflict can result from psychological factors that lead parties to persist with a plan of action that diverges from what rationally would make sense. In these cases, the inability to accept defeat can lead to a battle of 'wills' and, as a result, a lose-lose situation for both sides.

Conflict escalation can also start with mistakes in the structure of the negotiation and the management of the process. Negotiations are often structured around a single topic, "the problem" that affects both parties, and which in this example was shelf space. When negotiation takes place around a single topic, the negotiation is purely distributive: one party wins at the expense of the other. This bargaining logic contributes to a higher level of tension, sometimes even confrontation, in the negotiation.

In contrast, negotiations that involve more than one topic have an integrative dimension, as parties identify opportunities to generate joint value. As the agenda grows, it is possible to identify non-controversial issues where the preferences of both parties point in the same direction. Moreover, as parties value controversial issues differently, it is possible to identify profitable trade-offs : a party may give up something it values less, in exchange for something more valuable to itself. In this sense, identifying win-win situations contributes to creating a constructive and collaborative negotiation environment.

When parties are too focused on solving a single issue, they lack the ability to put things in perspective and identify other issues that could significantly alter the course of the negotiation. And even when other variables are introduced into the negotiation, such as price in the example above, the different issues are discussed in isolation and the approach to the negotiation is issue by issue rather than combined.

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Tips to avoid escalating conflicts

1. improve communication.

Difficult negotiation processes often arise because executives and decision-makers underestimate the importance of building constructive relationships. Many negotiators still believe that the best way to achieve their goals is to exert maximum pressure, insist on their position, use aggressive and disrespectful language, and mislead the other side. They seem to ignore that a negotiator's level of satisfaction is determined not only by the end result, but also by the negotiation process. Therefore:

- Use soft and appropriate language;

- Be courteous;

- Show appreciation for the other;

- Listen actively;

- Acknowledge the other person's point of view;

- Do everything to avoid misunderstandings.

2. Don't put your credibility at risk.

When credibility is lost, trust disappears and working constructively to identify opportunities to create value for both parties becomes virtually impossible. A relationship based on trust, respect and mutual understanding results in easier and more effective negotiations. To that end:

- Do not make commitments you are not able to honour;

- Don't get caught in a lie;

- Don't open the negotiation with an outrageous offer;

- Do not withdraw an offer without having a strong reason to do so.

3. Take a deep breath and remember this advice when the tension starts to build!

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This publication was inspired by the article "Escalation of Conflict in Negotiations" by Professor Luís Almeida Costa.