Negotiating for Impact
Author: Lars Teodor Wolk | Contact: teodor@wolk.cc, LinkedIn | Published on: 07.11.2023
Key Messages
- About 42% of the value in a business agreement is left on the table due to negotiators failing to communicate and bargain effectively. Translating this into impact, the untapped potential is huge. By learning to effectively negotiate for impact, change-makers and impact practitioners can create much more value for the society and environment.
- Impact negotiation differs from other types of negotiations (i.e. commercial negotiations), by the degree of explicitness and attention that is given to the impact at play and the increased uncertainty and stakeholder complexity that comes with it.
- Impact Negotiators often find themselves in a weaker leverage and bargaining position and get contested and reshaped in their most fundamental purpose and business model by other actors during engagements. They usually have great visions to transform society, but often face difficulties and uncertainties on how to turn these visions into practical implementations effectively.
- Good preparation and exploration on stakeholder interests, subject-related knowledge and best alternatives for a negotiated agreement (BATNA) is at the absolute core of any successful negotiation — even more so in the field of impact.
- Impact negotiators should focus on emotional dynamics that can create more awareness towards hindering emotions and understand how psychological states in ourselves and in others can strongly affect capabilities to negotiate well and make good decisions. By improving our capabilities to manage mental hostage states and forming engaged personal relationships through effective bonding and empathy, we can become more persuasive towards other actors and influence the negotiation outcome in favor of good.
A. Introduction
There is no doubt that global challenges we face today and our desire to create a positive impact greatly affect how we negotiate. Climate change, military conflicts, resource depletion and pandemics have pushed negotiators to move beyond sole self-interest and become more considerate towards the greater society and environment. Who we engage with, what we focus on and what we try to achieve at the table is changing and surprisingly little attention is given to these dynamics in the literature. At the same time there is also little discussion between change-makers and impact practitioners on how we can communicate more effectively and responsibly use negotiation techniques to increase our impact potential.
For impact aspiring negotiators and change-makers it is pivotal to reflect upon this issue and get a better understanding about the mutual relationship between impact and negotiation. As research has shown, about 42% of the value in a business agreement is left on the table due to negotiators failing to communicate and bargain effectively (Jensen & Jensen 2013). Translating this into impact, the untapped potential is huge. By learning to become a better negotiator we can significantly improve the value we generate (ElShenawy 2010; Movius 2008) and unleash more positive impact for the society and environment.
Key to getting a better understanding and unleashing more impact potential lies within impact negotiation. Impact negotiation is not a new negotiation technique. It is a learned art and responsibility to purposefully use negotiation techniques to persuade and influence other stakeholders into jointly working for good impact, empathy and well-being. It differs from other types of negotiations (i.e. commercial negotiations), by the degree of explicitness and attention that is given to the impact at play and the increased uncertainty and stakeholder complexity that comes with it.
More stakeholders from various cultural backgrounds with different interests join the table to discuss how to do good for society. Navigating this situation is challenging and it puts high expectations on the negotiator’s abilities to cope with the emotional dynamics during engagements. By managing mental hostage states (Kohlrieser 2006) well and forming engaged personal relationships through bonding and empathy, we can gain more persuasiveness towards other stakeholders and influence the negotiation outcome.
In the following sections I will discuss the idea of impact negotiation in more depth. We will elaborate on its challenges and also look into negotiation techniques and concepts that are particularly directed towards handling the emotional dynamics in stakeholder engagements.
I have assessed negotiation literature and conducted conversations with five social entrepreneurs to gain both theoretical and real-world insights into the awareness and challenges around impact negotiation. This article is meant to be high-level and concise and thus I will not present detailed information on each of the entrepreneurs I engaged with individually, but only provide important contextual insights in places where necessary.
B. What is Impact Negotiation?
Impact negotiation is not a new negotiation technique. The term intends to bring negotiation and impact closer together and create awareness among leaders and negotiators to consciously negotiate for impact that benefits the greater society and environment. It is a learned art and responsibility to purposefully use negotiation techniques to persuade and influence other stakeholders into jointly working for good impact, empathy and well-being. Impact negotiation is about identifying negotiation outcomes that possess the largest impact potential and finding ways to unleash it. This is inspired by MacAskill (2016) as well as Bazerman (2020) and is closely connected to ideas originating from Effective Altruism. There may be many negotiation outcomes and agreements that lead to a greater societal benefit and create well-being, but some outcomes have a greater impact than others. For an impact negotiator it becomes crucial to identify these opportunities and align people involved along these solutions.
It is important to note that any type of negotiation can create impact and must not apparently fall into the category of “impact negotiation”. A negotiated agreement on a factory set-up that was purely calculated on a commercial basis (e.g. by profit, costs, efficiency) will create impact on societal and environmental well-being and health. Or a sole profit oriented sales deal that allows the distribution of a new product can impact consumption patterns of people and thereby change their livelihoods. The difference between such “ordinary” types of negotiations and impact negotiation lies in the degree of explicitness and attention that is given to the impact at play. In a pure commercial setting, for example, we set our focus on the commercial outcome and by that become more detached from the societal and environmental impact that our decisions make. Numbers on profit, costs and effectiveness are playing the dominant role in evaluation and stakeholder alignment. In impact negotiation, however, making impact on society and environment is the primary cause of why stakeholders come together and negotiate. Issues about life, health, happiness and well-being are brought to the table in the form of spoken words and documents. Societal and environmental consequences of decisions and outcomes become much more apparent, making us also more emotionally engaged with the matter.
C. Challenges to Impact Negotiation
Perhaps the most unique challenge impact negotiators face — may it for example be a social business, a charity owner or a non-for-profit leader — is their weaker leverage and bargaining position in engagements with other stakeholders. As pointed out by Newth (2016) and Interviewee 3, impact negotiators very often get contested and reshaped in their most fundamental purpose and business model by other actors during engagements. It is difficult to make a general statement on to which extent being contested and reshaped is beneficial or harmful for the negotiation outcome and the impact that is at stake. But compared to negotiations in other settings, this is a very unique feature that appears especially often when people work for impact.
When reflecting upon why this is the case, we can of course recognize that there are many particular challenges that impact negotiators face: large financial resource constraints and reliance on funding from governments and investors (Interviewee 4), fierce market competition, reputational pressure from society and politics (Interviewee 2, Interviewee 3) as well as uncertainties and ambiguities in how to design and implement a business model that maximizes impact (Interviewee 3). But many of these constraints are common to those faced by start-ups and entrepreneurs (compare with Dinnar & Susskind 2019) and do not exhibit any characteristics that are specific to the impact field.
Instead, as I believe it, the cause for the difficult leverage and bargaining position of many impact negotiators is tied to shifts that happen on the high-level when we decide to explicitly negotiate for impact. Looking closely into impact negotiation, we can recognize two major shifts that occur when making impact creation our main aim — shifts in the matter of what we negotiate (1) as well as shifts in stakeholder-arrangements during negotiations (2).
These shifts increase the degree of uncertainty and ambiguity in our engagements as well as the complexity to align with other stakeholders during engagements. Below, we will assess this in more detail:
1. Shifts in the matter of what we negotiate
When negotiating for impact we focus on achieving positive impact that benefits the greater society and environment. What we negotiate — funding from investors, a sales deal, support from government, collaboration terms with NGOs etc. — remains the same as in any other negotiation. But we make doing good an explicit goal of our engagement and by that enlarge the scope and matter on what we negotiate from sole self-interest towards being considerate to the greater picture. This is a challenging re-orientation process for many stakeholders involved, in which we practice to be more empathetic and thoughtful towards others and the effects that our actions have on the greater society.
Changes in the matter of negotiation brings in new perspectives into our way of negotiating with other actors, but it also increases the uncertainty and ambiguity in what we try to achieve and how we can get there. As pointed out by interviewee 3 and Heinecke, Kloibhofer & Krzeminska (2014), impact negotiators usually have great visions to transform society, but often face difficulties and uncertainties on how to turn these visions into practical implementations effectively. Difficulties to accurately define and (quantitatively) measure impact — may it for example be improving well-being, happiness or health — are further complicating the task (Nguyen, Szkudlarek & Seymour 2015).
When working for big-scale deployment of emission lowering technology, interviewee 3 engages with many social entrepreneurs that have good intentions, ideas and innovations, but simply do not know how to capitalize on them effectively to maximize impact. Through lack of knowledge they end up in a weaker position during negotiations and engage with an “improper” set of stakeholders, that does not enable them to fully unleash impact. Many entrepreneurs want to create impact every day, instead of planning for the long run, investing time and resources in high quality advisory from world-class professionals, networking and business set-up and then make impact on a larger scale at a later stage. Great ideas and innovations stay costly, limited in reach and scale and unable to break free from (philanthropic) funding.
2. Shifts in stakeholder arrangements and increased complexity
Focusing on unleashing the greatest impact possible, changes the scope of stakeholders with whom we care to negotiate — both institutionally and geographically.
On an institutional level, this means that the range of different types of actors in a negotiation process is expanding. Making impact creation an inherent business goal drives negotiators to include more non-profit driven actors in their engagements. Beyond working with investors and other (sub-)contractors, more importance is given to (local) governments, NGOs and beneficiaries themselves. They are the main target group or act as “gatekeepers” and need to be engaged with in order to be granted access in the first place.
On a geographical level, the shift is reflected in new regional arrangements of stakeholders that are participating. Wanting to create a large impact, drives negotiators to focus on geographical areas that exhibit the most impact potential. Usually these are situated in developing countries, as one can technically bring much more change for the amount of resources invested (MacAskill 2016).
Increasing the amount of stakeholders involved also increases the complexity to find a good negotiation outcome. Stakeholders with very diverging mindsets, rationales and values sit at the table and engage about conflicting interests. Investors value good returns, while governments want to push for their political agenda and NGOs and beneficiaries are concerned about the impact that can be achieved on the local ground. For impact negotiators it can be difficult to navigate through these seemingly “conflicting” interests and find a common point of orientation onto which stakeholders can align to.
The issue of diverging mindsets and conflicting interests is not only a challenge during official negotiation, but can extend far outside the actual engagement itself and influence who we look for and choose to engage with. As pointed out by Heinecke Kloibhofer & Krzeminska (2014), social entrepreneurship exhibits a certain set of culture, attracting people that are led by a greater social purpose and vision. They have a strong intrinsic drive and passion for the challenge they want to address, but can often be reluctant towards cooperating with stakeholders that do not share the same values and visions (Interviewee 5). The result is avoiding engagements and conflicts by being indifferent, stop engaging with each other or working oppositely to what was agreed on, although an effective engagement may contain great potentials for impact making.
The business of Interviewee 1 is in this case a good example. Being a social entrepreneur in the food & beverage industry, collaborating with large retailers offers an extremely lucrative opportunity for market penetration and scalability of his products. However, differences in mindset and approach of doing business, keeps Interviewee 1 from negotiating with these stakeholders. He stated that he declined any engagement with a few particular retailers as they would be too profit driven. They may offer large potential for scalability and market exposure, but for him, the differences are too large and the common ground too thin to make it work.
D. Techniques for Impact Negotiation
Having elaborated on the meaning of impact negotiation as well as some of the key challenges to negotiating for impact, we now turn to concepts and techniques from the literature and assess how these can be applied in our use case.
Before digging into any specific concepts and techniques I would like to highlight that good preparation is at the absolute core of any successful negotiation. This includes heavy research and knowledge acquisition practices to gain state-of-the-art market insights, fully understanding your and other stakeholders interests, comprehending the negotiation procedure, developing the best alternative to a negotiated agreement [BATNA] and so on (Fisher & Ury 2011, Interviewee 3). In this article, I take these good preparation practices for granted and all the concepts and techniques I raise hereafter are those that go beyond this.
There exists a wide range of concepts and techniques that are highlighting different angles and aspects of negotiation and which are proposed by well-known authors such as Fisher & Ury (2011), Voss & Raz (2016), Kohlrieser (2006), Dinnar & Susskind (2018) and Bazermann (2020). But given the limited scope of this article, I will limit my discussion on the emotional dynamics of negotiations and only assess a few useful concepts and techniques mainly proposed by Kohlrieser (2006).
Emotions form the basis of all our engagements, relationships and decisions (Voss & Raz 2016; Kohlrieser 2006) and working with those therefore constitutes the first and most fundamental part for an effective engagement. This is especially true when working for impact, where we engage with a wide range of different stakeholders with different cultural backgrounds and negotiate on sensitive and emotion-filled topics that concerns health, happiness and well-being of the society and environment.
During negotiations, we encounter difficult trade-offs and seemingly “unsolvable” situations in which we face dilemmas of what we should do. But it is often not the situation per-se that poses the real challenge. Instead it is usually the underlying emotions that causes the real problem and hinders us to think creatively and engage effectively with others. By focusing on emotional dynamics we can create more awareness towards these issues and understand how psychological states in ourselves and in others can strongly affect capabilities to negotiate well and make good decisions. By learning to manage our own emotional state and at the same time utilize techniques that help us influence others’ emotional states, we can take the lead in critical situations and acquire great influence on the negotiation outcome.
We have seen that impact negotiators often get contested and reshaped by other stakeholders during negotiations, which is primarily caused by the larger uncertainty and ambiguity in what is negotiated as well as by the increased complexity in multi-stakeholder engagements (Section C). Feeling struggle, becoming less focused and determined in decision-making can be a common reaction to such circumstances. In the negotiation literature we call this as being a mental hostage (Kohlrieser 2006). Being taken mentally hostage describes a self-inflicted state of mind in which we face difficult decisions, conflicts or tensions that make us feel helpless and out of control. We let our emotions go-free, lose our ability to carefully listen to other parties and tend to make bad choices.
Not the actual conflict, but rather the struggling emotional state behind it becomes the real problem in such situations and keeps stakeholders from outstanding results. Though this is a topic for another article focused on personal development, I would still like to briefly mention how important it is to learn to manage our own mental hostage states and also be able to resist being affected by mental states of others. This includes learning to be more (self-)aware, controlled and sensitive towards how we cope with our own emotions in difficult situations and being able to keep our mind’s eye — what we choose to focus on during negotiations — focused on constructive problem solving (Kohlrieser 2006).
What perhaps is more stimulating, is to think about how we can learn to see mental hostage states as opportunities that we can use in order to gain more influence on the outcome of a negotiation. When we enter a hostage stage and lose our sense of orientation, we have a strong desire to find something or someone that can provide us with safety. In Kohlrieser’s (2006) terms we are looking for a secure base that offers guidance and comfort in times of uncertainty and discomfort. A secure base can be anything that we are positively attached to and that stimulates a sense of security, calmness and peace of mind. Secure bases we develop over time can be very different among people and can be anything ranging from persons (e.g. parents or friends), objects (e.g. a car, motorcycle) to even peaceful memories of past experiences.
The power a secure base has over people is immense. Ideas, suggestions and recommendations that originate from an individual that is a secure base are more influential than those coming from people who are not. They have the power to convince people, change their minds and make them reflect on things as we regard them as a safe source. As an impact negotiator it therefore becomes crucial to understand these dynamics and learn to use this as an opportunity to acquire more goodwill leadership, influence and persuasiveness towards others.
Key to becoming a secure base is the formation of personal and sincere attachments and bonds with other stakeholders. It is through our sincere commitment and constant engagement in a personal relationship with others, in which we create the space for people to get emotionally attached and open up for wholehearted communication, negotiation and intrinsic driven change (Kohlrieser 2006). The focus here really lies on the word personal. All our relationships — whether it is in personal life or in business — are personal in some way or the other and are always based on emotions. Even if we would try, we can never completely detach our feelings from a relationship, regardless of the setting (Voss & Raz 2016).
Gaining trust and building personal and effective relationships is not easy and it is important to recognize that, if we want to proactively build relationships with others, it has to happen on the terms of the other person. To open up, share feelings or do a favor for others is a personal choice and act that is completely owned by the person in charge. The will to conduct this act comes solely from the belief and conviction that resides inside this person. We can therefore in many instances not force a relationship with others that is built on our terms, if we want them to act or choose in a particular way that benefits our desired negotiation outcome. Instead we need to get a good sense of the way of communication and personality of the individual we are engaging with and adjust our communication accordingly to match their frequencies. This will enhance their abilities to open up and bond with us.
There are two pivotal factors that come into play when building a personal relationship with others that can lead to change — feeling heard and understood (1) and receiving information that kicks off an internal realization process that leads to change in behavior (2). In simplified terms, the way these factors come into play can almost be procedural. We need first to let our counterpart feel heard and understood, before we can bring in our own ideas and information that make them change their minds.
A good way to go about this is by starting with building empathy through careful and active listening practices. By actively listening to what the other has to say and signaling that we empathize and understand their message, we can unleash a feeling of gratitude and appreciation in our counterpart, which in turn leads to more positive associations attached to our relationship. A good practice we can use, is for instance to summarize ideas and views shared by our counterpart in our own words after we have heard them out. We can also label core essences of messages to make them more explicit in our engagement and create a sense of common agreement and understanding between each other (Voss & Raz 2016). Further we can intensify the dynamics through asking particular questions about their feelings and thoughts on particular issues and by that engaging their brain in a reflection process that brings our conversation and relationship onto a deeper personal level. By also carefully sharing our feelings and thoughts towards the same subjects, without making any accusations or judgments, we can enhance mutuality in the relationship. This is an act of giving, which triggers deep emotions of appreciation.
Careful and active listening are powerful concepts, which support us in forming deep and empathetic relationships with our counterparts and making our exchange of information increasingly personal and emotional. When we make the other person feel heard and provide room for any kind of view or opinion, we create space for a more sincere and honest engagement. Information exchange becomes unfiltered and the degree of attention and importance that people devote to our conversation increases. At this point, we start to gain opportunities to gain power and become persuasive. We can lead the conversation to focus on controversial pain points, thus actively digging into emotion-filled and problematic issues that increases the degree of uncertainty and insecurity in our engagement. The increased uncertainty and insecurity among actors allows us to take the emotional lead in the conversation and provide views and thoughts that are much more likely to get considered. Building personal and sincere bonds to other stakeholders is essential for any negotiation and can be key in order to make people change their minds.
E. Concluding Remarks
In this article I have elaborated on impact negotiation, its core challenges as well as some concepts and techniques that can be useful in order to become more persuasive and influential towards others and by that unleash more impact during engagements. I intended to create a connection between the impact field and the negotiation literature and make impact practitioners more aware about negotiation techniques and at the same time stimulate the negotiation literature to reflect upon how working for impact changes the way we negotiate. The article was designed as a high-level and concise introduction into the topic and there are many concepts and ideas that I did not have a chance to elaborate on here. This especially includes more details and nuances to human interactions, an in-depth discussion on the importance of good preparation as well as the particular meaning of culture in geographically ever-increasing complex stakeholder-arrangements. The latter one is particularly important to discuss, as there exists huge geographical misalignment between where capital for impact is located (developed regions) and where the largest impact can be generated (underdeveloped regions). Elaborating on these issues should be subject for future research.
F. References
Bazerman, M. H. (2020). Better, not perfect: a realist’s guide to maximum sustainable goodness.
Dinnar, S., & Susskind, L. (2019). Entrepreneurial negotiation: Understanding and managing the relationships that determine your entrepreneurial success. Cham, Switzerland: Palgrave Macmillan.
ElShenawy, E. (2010). Does negotiation training improve negotiators’ performance?. Journal of European industrial training, 34(3), 192–210.
Fisher, R., Ury, W. L., & Patton, B. (2011). Getting to yes: Negotiating agreement without giving in. Penguin.
Heinecke, A., Kloibhofer, M., & Krzeminska, A. (2014). Leadership in social enterprise: How to manage yourself and the team. World Economic Forum. Access Link: https://www3.weforum.org/docs/WEF_leadership_in_social_enterprise_2014.pdf
Interviewee 1. Personal conversation with social entrepreneur in female finance. Held in June 2023.
Interviewee 2. Personal conversation with social entrepreneur in the food & beverage industry. Held in June 2023.
Interviewee 3. Personal conversation with social entrepreneur in the emission reduction industry. Held in July 2023.
Interviewee 4. Personal conversation with social entrepreneur in inclusive arts. Held in July 2023.
Interviewee 5. Personal conversation with social entrepreneur in youth empowerment in politics. Held in September 2023.
Jensen, K., & Jensen, K. (2013). A New Paradigm for Commercial Relationships. The Trust Factor: Negotiating in SMARTnership, 3–12.
Kohlrieser, G. (2006). Hostage at the table: How leaders can overcome conflict, influence others, and raise performance (Vol. 145). John Wiley & Sons.
MacAskill, W. (2016). Doing good better: How effective altruism can help you help others, do work that matters, and make smarter choices about giving back. Penguin.
Movius, H. (2008). The effectiveness of negotiation training. Negotiation Journal, 24(4), 509–531.
Newth, J. (2016). Social enterprise innovation in context: Stakeholder influence through contestation. Entrepreneurship Research Journal, 6(4), 369–399.
Nguyen, L., Szkudlarek, B., & Seymour, R. G. (2015). Social impact measurement in social enterprises: An interdependence perspective. Canadian Journal of Administrative Sciences/Revue Canadienne des Sciences de l’Administration, 32(4), 224–237.
Voss, C., & Raz, T. (2016). Never split the difference: Negotiating as if your life depended on it. Random House.