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Anglo Tapes: The Negotiation Lessons

by Tom O'Connor on August 27th, 2013
Leaked Tapes from within Anglo Irish Bank HQ lift lid on negotiation methods

Leaked tapes from within Anglo Irish HQ lift lid on negotiation methods

The Anglo tapes have been a bit of a godsend in an otherwise slow news period.

They also provide an insight (if at times somewhat misguided) into the Anglo playbook of streetwise negotiation ploys: the ultimatum, the low-ball, the sunk cost.

The Ultimatum
The launching pad for their €7B demand from the Central Bank is a clear ultimatum: either they get the money or the financial regulator risks bringing down all the other banks – specifically Bank of Ireland’s capacity to roll-over its €45B worth of bonds coming due within 12 months.

This ultimatum tactic is normally used in negotiation when one party believes that he/she has total power and can insist on his/her proposition.

It is also known as the Russian Front technique – referencing how the WW2 German soldiers would do anything to avoid being assigned to the Russian front.

The choice is between whatever the other party wants you to do and a Russian Front option (which is so undesirable that in reality you have no option).

The Low-Ball
Having suitably concentrated minds with this “give us the money” or “suffer banking Armageddon” option, the Anglo representatives next follow-up with a low-ball estimate of what is really needed.

They ask for €7B, even though in reality, they know that they will need a lot more.

Thus, they explain in the tapes:

“If they (the Central Bank) saw the enormity
up front … they might decide they have a choice …
they might say the cost to the taxpayer is too high …
if it doesn’t appear too big at the outset …
if it looks big, big enough to be important
but not too big that it kind of spoils
everything … it can creep up”

One recognises this type of low-ball technique as a classic ploy from the contracting world – where in anticipation of lucrative changes of scope inevitably happening later, a contractor makes a money-losing bid upfront, just to get the foot in the door.

The Sunk Cost
In tandem with this low-ball tactic, Anglo also unleash a sunk-cost wrinkle for good measure.

They are counting that in time the Central Bank will fall prey to a well known decision-making flaw – where negotiators are slow to cut their losses in a deal, if there is any chance that by committing a little extra, they can delay crystallising a loss.

Again, they explain in the tapes:

“If they (Central Bank) saw the enormity of it
up front, they might decide they have a choice ….
the strategy here is you pull them in, you get them to
write a big cheque and they have to keep,
they have to support their money”.

The Lessons
Valuable and all as these are as very practical insights into the world of negotiation practice, one is equally struck by the bitter irony involved in the whole affair.

How things might have turned out a lot different, if they had only taken the time to display the same level of cunning when it was really needed in the first place:  ie. when they were advancing the many loans, that went so bad with the property bust.

And, in a way, that’s the problem with the negotiation lessons on these tapes: it isn’t so much that they are misguided … as misplaced.

PS. For related Torc training programmes, please click on the following links:
1. Integrative & Distributive Negotiations
2. Behavioural Models of Negotiation
3. Streetwise Tactical Negotiations

PPS. For related negotiation blogs, please click on the following Torc links:
1. Lincoln: Model Negotiator
2. Pride as a negotiating pitfall
3. Cool Hand, Hustle & Sting
4. Women make better negotiators
5. The art of the haggle
6. Negotiating – eyeball to eyeball
7. Humphrey Bogart’s dual duel
8. Negotiating: when the stakes are high
9. Streetwise tactical negotiation
10. Stand-offs … & face savings

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