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standards, such as the rate of in”ation or the terms of settlement in other districts. A classic example of fair procedure !nds two sisters deadlocked over how to divide the last wedge of pie between them. They agree that one will cut the pie into two pieces and the other will choose the piece that she wants.

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Fisher and Ury devote most of their attention to creating value—!nding better solutions for both parties. They downplay the question of claiming value. Yet there are many examples in which shrewd value claimers have come out ahead. In 1980, Bill Gates offered to license an operating system to IBM about 48 hours before he had one to sell. Then he neglected to mention to Tim Paterson of Seattle Computer that Microsoft was buying his operating system to resell it to IBM. Gates gave IBM a great price: only $30,000 more than the $50,000 he’d paid for it. But he retained the rights to license it to anyone else. At the time, Microsoft was a “ea atop IBM’s elephant. Almost no one except Gates saw the possibility that consumers would want an IBM computer made by anyone but IBM. IBM negotiators might well have thought they were stealing candy from babies in buying DOS royalty-free for a measly $80,000. Meanwhile, Gates was already dreaming about millions of computers running his code. As it turned out, the new PC was an instant hit, and IBM couldn’t make enough of them. Within a year, Microsoft had licensed MS-DOS to 50 companies, and the number kept growing (Mendelson and Korin, n.d.). Twenty years later, onlookers who wondered why Microsoft was so aggressive and unyielding in battling government antitrust suits might not have known that Gates had long been a dogged value claimer.

A classic treatment of value claiming is Schelling’s 1960 essay The Strategy of Con!ict, which focuses on how to make credible threats. Suppose, for example, that I want to buy your house and am willing to pay $250,000. How can I convince you that I’m willing to pay only $200,000? Contrary to a common assumption, I’m not always better off if I’m stronger and have more resources. If you believe that I’m very wealthy, you might take my threat less seriously than you would if I can get you to believe that $200,000 is the highest I can go. Common sense also suggests that I should be better off if I have considerable freedom of action. Yet I may get a better price if I can convince you my hands are tied. Perhaps I’m representing a very stubborn buyer who won’t go above $200,000, even if the house is worth more. Such examples suggest that the ideal situation for a bargainer is to have substantial resources and freedom while convincing the other side of the opposite. Value claiming provides its own slant on the bargaining process:

• Bargaining is a mixed-motive game. Both parties want an agreement but have differing interests and preferences, so that what seems valuable to one may be negligible to the other.

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• Bargaining is a process of interdependent decisions. What each party does affects the other. Each player wants to be able to predict what the other will do while limiting the other’s ability to reciprocate.

• The more player A can control player B’s level of uncertainty, the more powerful A is. The more A can keep private—as Bill Gates did with Seattle Computer and IBM—the better.

• Bargaining involves judicious use of threats rather than sanctions. Players may threaten to use force, go on strike, or break off negotiations. In most cases, they prefer not to bear the costs of carrying out the threat.

• Making a threat credible is crucial. A threat works only if your opponent believes it. Noncredible threats weaken your bargaining position and confuse the process.

• Calculation of the appropriate level of threat is also critical. If I underthreaten, you may think I’mweak. If I overthreaten, youmay not believe me, may break off the negotiations, or may escalate your own threats.

Creating value and claiming value are both intrinsic to the bargaining process. How do you decide how to balance the two? At least two questions are important: How much opportunity is there for a win-win solution? And will you have to work with these people again? If an agreement can make everyone better off, it makes sense to emphasize creating value. If you expect to work with the same people in the future, it is risky to use scorched- earth tactics that leave anger and mistrust in their wake. Managers who get a reputation for being manipulative, self-interested, or untrustworthy have a hard time building the net- works and coalitions they need for long-term success.

Axelrod (1980) found that a strategy of conditional openness works best when negotiators need to work together over time. This strategy starts with open and collaborative behavior and maintains the approach if the other responds in kind. If the other party becomes adversarial, however, the negotiator responds accordingly and remains adversarial until the opponent makes a collaborative move. It is, in effect, a friendly and forgiving version of tit for tat: do unto others as they do unto you. Axelrod’s research found that this conditional openness approach worked better than even the most !endishly diabolical adversarial strategy.

A !nal consideration in balancing collaborative and adversarial tactics is ethics. Bargainers often misrepresent their positions—even though society almost universally condemns lying as unethical (Bok, 1978). This leads to a tricky question for the manager as politician: What actions are ethical and just?

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MORALITY AND POLITICS Burns (1978), Lax and Sebenius (1986), Messick and Ohme (1998), and Svara (2007) explore ethical issues in bargaining and organizational politics. Burns’s conception of positive politics (1978) draws on examples as diverse and complex as Franklin Roosevelt and Adolf Hitler, Gandhi and Mao, WoodrowWilson and Joan of Arc. He sees con”ict and power as central to leadership. Searching for !rm moral footing in a world of cultural and ethical diversity, Burns turned to Maslow’s (1954) theory of motivation and Kohlberg’s (1973) treatment of ethics.

From Maslow, he borrowed the hierarchy of motives (see Chapter 6). Moral leaders, he argued, appeal to higher-order human needs. Kohlberg supplied the idea of stages of moral reasoning. At the lowest, “preconventional” level, moral judgment rests primarily on perceived consequences: An action is right if you are rewarded and wrong if you are punished. In the intermediate or “conventional” level, the emphasis is on conforming to authority and following the rules. At the highest, “postconventional” level, ethical judgment rests on general principles: the greatest good for the greatest number, or universal moral principles.

Maslow and Kohlberg, intertwined, gave Burns a foundation for constructing a positive view of politics: “If leaders are to be effective in helping to mobilize and elevate their constituencies, leaders must be whole persons, persons with full functioning capacities for thinking and feeling. The problem for them as educators, as leaders, is not to promote narrow, egocentric self-actualization, but to extend awareness of human needs and the means of gratifying them, to improve the larger social situation for which educators or leaders have responsibility and over which they have power” (1978, pp. 448–449).

Burns’s view provides two expansive criteria: Does your leadership rest on general moral principles? And does it appeal to the “better angels” in your constituents’ psyches? Lax and Sebenius (1986) see ethical issues as inescapable quandaries but provide a concrete set of questions for assessing leaders’ actions:

• Are you following rules that are mutually understood and accepted? In poker, for example, players understand that bluf!ng is part of the game but pulling cards from your sleeve is not.

• Are you comfortable discussing and defending your choices? Would you want your colleagues and friends to know what you’re doing? Your spouse, children, or parents? Would you be comfortable if your deeds appeared on the Web or in your local newspaper?

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• Would you want to be on the receiving end of your own actions? Would you want this done to a member of your family?

• Would the world be better or worse if everyone acted as you did? If you were designing an organization, would you want people to follow your example? Would you teach your children the ethics you have embraced?

• Are there alternatives you could consider that rest on “rmer ethical ground?Could you test your strategy with a trusted advisor and ask about other possibilities?

These questions embody four principles of moral judgment:

Mutuality.Are all parties to a relationship operating under the same understanding about the rules of the game? Enron’s Ken Lay was talking up the company’s stock to analysts and employees even as he and others were selling their shares. In the period when WorldCom improved its pro!ts by cooking the books, it made its competitors look bad. Top executives at competing !rms such as AT&T and Sprint felt the heat from analysts and shareholders and wondered, “Why can’t we get the results they’re getting?”Only later did they learn the answer: “They’re cheating, and we’re not.”

Generality. Does a speci!c action follow a principle of moral conduct applicable to comparable situations? When Enron and WorldCom violated accounting principles to in”ate their results, they were secretly breaking the rules, not adhering to a broadly applicable rule of conduct.

Openness.Are we willing to make our thinking and decisions public and confrontable? As Justice Oliver Wendell Holmes observed many years ago, “Sunlight is the best disinfec- tant.” That was why Aruna Roy was so passionate about making government more transparent. Keeping others in the dark has been a consistent theme in corporate ethics scandals. Enron’s books were almost impenetrable, and the company attacked analysts who questioned the numbers.

Caring.Does this action show concern for the legitimate interests and concerns of others? Enron’s effort to protect its share price by locking in employees so they couldn’t sell the stock in their retirement accounts, even as the value of the shares plunged, put the interests of senior executives ahead of everyone else’s.

Business scandals come in waves; they are a predictable feature of the trough following every business boom. After the market boom of the Roaring Twenties and the crash that began the Great Depression, the president of the New York Stock Exchange went to jail in

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his three-piece suit (Labaton, 2002). There was another wave of corporate scandals in the 1970s. The 1980s gave us Ivan Boesky and the savings and loan crisis. And in the early years of the twenty-!rst century, we have seen scandals at Enron, Siemens, Volkswagen, Wells Fargo Bank, and WorldCom, among many others. There will always be temptation whenever big egos and large sums of money are at stake. Too many managers rarely think or talk about themoral dimension of management and leadership. Porter notes the dearth of such conversation:

In a seminar with seventeen executives from nine corporations, we learned how the privatization of moral discourse in our society has created a deep sense of moral loneliness and moral illiteracy; how the absence of a common language prevents people from talking about and reading the moral issues they face. We learned how the isolation of individuals—the taboo against talking about spiritual matters in the public sphere—robs people of courage, of the strength of heart to do what deep down they believe to be right (1989, p. 2).

If we banish moral discourse and leave managers to face ethical issues alone, we invite dreary and brutish political dynamics. An organization can and should take a moral stance. It can make its values clear, hold employees accountable, and validate the need for dialogue about ethical choices. Positive politics without an ethical framework and moral dialogue is as unlikely as bountiful harvests without sunlight or water.

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