Gandalf & Prospero's Imaginary Dialogue: The Dance Of Risk And Reward

Through their conversation, they unravel the complexities of corporate deals, the role of mediation, and the delicate balance required to foster collaboration. Join them on this imaginative journey as they explore how trust and communication can transform even the most challenging negotiations into opportunities for success.

A Dialogue between Gandalf and Prospero:

Scene:Gandalf strolls into a bustling coffee shop, the aroma of freshly brewed espresso filling the air. Spotting Prospero at a corner table, he approaches with a warm smile.…

Gandalf: Good morning, Prospero!  What news?

Prospero: Yes, I do have something which I think you will find interesting.  A corporate lawyer friend of mine recently closed a significant deal.

Of course, he was tired, as the signing had been at 3 am, but the usual jubilation at completing a big deal had been tempered with a sense of doubt…

Gandalf: I think I may have an idea about this – it has often troubled me when I hear about deals that don’t feel as good as they should.

Prospero: Yes, you are in the right area, for my friend’s comment about the deal was, “Well, that’s a Court case waiting to happen!”, whilst describing how the obligatory champagne had failed to work its magic.  He explained that the negotiation had been unusually difficult, and that despite his best efforts to work cooperatively with his opposite number, there had been an atmosphere of hostility, point-scoring and hardball position-taking emanating from both the principals!  And this deal was all about a merger between two strong businesses, with the aim, on the surface, of bringing greater strength and security to those very same principals.

Gandalf: Do you think this was about lack of trust?

Prospero: I am certain that this lay behind the difficulties, the sense of anti-climax.  We shall have to see whether this leads to my friend obtaining yet more work when they come to blows!  I should, however, take some comfort from his success in negotiating very sensible and robust dispute resolution clauses.

Gandalf: This story reminds me of a very interesting project I worked on a year or two ago.  

In this case, two multinational corporations were looking to renew a cooperation agreement for the provision of services by one to the other.  The agreement had run for almost three years and was about to expire.  Both parties were aware of the commercial common sense in continuing their arrangement: it was obvious that they were better off together than apart, and there were many opportunities for tangible profit.  The annual consideration was in the hundreds of millions. 

Prospero: This, I suppose, is where your question about trust arises?  Perhaps this is a situation in which, despite the obvious benefits, the parties were having difficulty balancing risk and reward.  Perhaps they each separately felt that their own intentions were good and collegiate:  but each suspected the other of hidden agendas, of intentions to change behaviour the minute the commercial deal was signed?

Gandalf: Indeed so.  I was asked, as a friend of a senior member of each board, to see what I could do to diffuse the atmosphere of hostility and apprehension which surrounded the negotiations.  The first step was to meet separately with the chief negotiator for each side.  I soon realised that there was a great deal of personal rivalry between the two.  Each seemed more focused on scoring points and to taking these as trophies to their respective boards and colleagues.

Prospero: So perhaps – let me guess – the first thing to consider, having met with these two and established rapport, was to build a list of relevant personnel?  A deal of this size must surely have required input from various departments in each corporation, each with competing interests.  So, to get them to talk constructively, it would be necessary to have senior decision-makers, chief commercial negotiators, technical and accounting people, and legal advisers, both in-house and external.  How on earth to manage all that?

Gandalf: To agree to sit down together with a third party – in this case me – was a huge symbolic step in overcoming an endless series of bickering emails and hostile meetings, based around the conflict between “we hate you” and “we need you”.  I believe this sort of work, which has always been my strength, is now called “mediation”.  In this case, there must have been 20 people around the table.  The presence of the very senior people neutralised the positional behaviour of the chief negotiators and I was able to chair a relatively civilised meeting,  However, it did emerge that each side had been harbouring complaints about the other’s alleged non-compliance over the preceding three years, and it seemed that there was a real risk of litigation in any event even if the hoped for renewal did not take place.

Prospero: So, the temperature was raised, the stakes were raised, but at least the landscape of the problem was being viewed on the same terms at the same time by all the relevant people.  Better than lengthy correspondence with long gaps between each letter, I suspect.

Gandalf: Entirely so.  Sometimes things have to get worse before they get better.  People need to look at the abyss together. At least in this case, they could share a common purpose by doing so.  Setting to work, I recommended a smaller meeting of 3 on each side to set an agenda, followed by a small off-stage meeting between the two senior board members, who had never met before.

Prospero: Let me try to pull this back to my lawyer friend who had that bittersweet moment with his deal.  I am getting a sense of how that could have been avoided. The distrust arises from the disconnect between people’s actual intentions and their perceived intentions.  We tend to hold others to a high standard and are less demanding of ourselves.  So, each side in the sort of commercial deals we have been talking about can be drawn into thinking it is the one defending itself against an aggressor, which can provoke anger, militating against interest-based solutions and leading to increased distrust and accusations of opportunism.  So perhaps part of what you are addressing is issues of “fairness”, and what is often described as “reactive devaluation” at the other side’s position.  Parties can, of course, fail to do an eminently sensible deal if they do not think it’s fair. 

There is an assumption in a competitive business environment that the other person is intent on pulling the wool over the other’s eyes, when that may not be the case, or very much less the case than is thought.  So, the job of the mediator is to enable people to communicate effectively about their respective risks and rewards and have every opportunity to build the trust that their business experience has so often found lacking, while casting aside their preconceptions.  Then, if having been through that process, the parties can’t do the deal, then it seems clear that they should not do so, and the decision has been taken in an informed and reasoned way, every side having put in the work to understand the balance of the risk and reward of proceeding.  Tell me more about what happened next?

Gandalf: Yes, and here let us pause to note again that what is being developed here is a new agreement.  It is distinct from the usual sense in which we think of mediation in a commercial environment as being inextricably linked to Court proceedings or the threat of them.  As the day progressed, I felt I was able to level out the complex hierarchies at work.  I think I was able to achieve this by showing the same face to all concerned and by arranging conversations between people with similar disciplines without the presence of the commercial and personal strategic dimensions, which had hitherto acted as blocks to communication.  At the end of that day, all assembled, and a working agenda was set. Teams or individuals were tasked with producing specific information, forecasts, and analyses to address the concerns and suspicions of each.  We adjourned, and I summarised the action points and timetable for the future in deliberately moderate language.  I was pleased to note that a reasonable proportion of the negativity which I had identified in my early meetings had been neutralised.

Prospero: It does seem to me, hearing this, that my lawyer friend and his opposite number could have had a much less fraught negotiation with the assistance of somebody with no axe to grind.  I suppose they could be forgiven for not having considered this; it is really unusual, even now, for a third party to be hired in such circumstances.  The reasons are understandable – until, of course, the benefits can be demonstrated!  These are likely to be ignorance of the availability of such a process, a misplaced concern about extra cost (think what they are already charging their clients!), and a sense that if they can’t negotiate the deal themselves, then no one can.  A little humility might help, perhaps …

Gandalf: Yes, I was surprised to find how easily all the lawyers accepted the process once it had been designed with them.  I felt some of the weight falling off their shoulders as they found an open acknowledgement of shared purpose, were able to show appreciation for the work done by their opposite numbers, identified the sense of security that a defined role brings in a complex negotiation, find their status acknowledged as expert in their particular area and were able to share discussion on technical subject matter. They were even willing to express feelings of anxiety about the future to the mediator, thus freeing up space for positive and creative possibilities.  

To cut a long story short, over the next few months, everyone met on a total of six occasions before a lengthy, detailed agreement was signed.  I can’t say there will be no problems in the future, but I think the odds against were considerably improved!  This was achieved through the processes I have described above: coaching each side privately on the next round of presenting information to the other, chairing roundtable meetings, providing detailed written summaries, and being available by telephone.  It was only very occasionally necessary to do the sort of “shuttle” service which regrettably often forms the basis of commercial mediation. 

Prospero: And I suppose that having established trust, you were able to be quite searching and challenging in the round table discussions without either losing neutrality or allowing the party challenged to lose face.  Over-insistence on absolute neutrality can sometimes be deadening to a dynamic which is beginning to lift off and get somewhere.  And I guess you could be directive in momentum?

Gandalf: Yes, and in addition, I think there was less chance of parties taking advantage of each other in the post-transactional phase, once resources have been committed, and where the stakes are therefore higher.

Prospero: We must now consider how we can spread the word on improving the quality of life for our commercial and corporate lawyer friends!