The owner and contractor were at an impasse. Unsuccessful in their efforts to negotiate a settlement of a contentious lawsuit, each party was hunkered down, firmly entrenched, and aggressively defending their unyielding positions. The response to each offer and counteroffer was a resounding “NO!” How did they get to this point and, more importantly, did they get past “no”?
The contractor had just delivered $100,000 of specially-fabricated equipment for installation in the owner’s manufacturing plant, which was being renovated to continue producing an old and existing product line. The contractor had another $50,000 of equipment in production. The owner was a long-time customer and had been purchasing the specially-fabricated equipment from the contractor for many years. Without any advance warning or explanation, the owner decided to mothball the plant and canceled its order for the specially-fabricated equipment. The owner refused to pay for any of the equipment, and litigation followed.
“Mothball the plant? Why wasn’t I given advance notice? You gave me no warning that this was coming. All of this mess could have been avoided,” complained the contractor. “What am I going to do with all of this special equipment? If I can’t install it in your plant, it is useless to me. Heck, it will cost me another $7,000 just to dispose of it. I’m not going to eat the loss. I insist on being paid my entire contract balance and every penny of overhead and profit, plus the disposal costs. I’m not budging!”
“Read our contract,” the owner replied. I had a right to terminate our agreement. I couldn’t give you any advance notice because of security concerns at the plant. I needed to shut down the plant and lay off all of the workers in one day or risk retaliation from some rogue employees. I’m sorry, but that’s the way it is. An unexpected change in technology has made products from this plant obsolete, and the new products are now being manufactured in China by our biggest competitor. We are abandoning the old product line, so we can’t afford to keep this plant open. We need to focus our efforts on other product lines at our other plants. I’m not paying a penny for equipment we don’t need and can’t use,” declared the owner.
Recognizing that the parties were unalterably committed to unacceptable positions, the owner’s lawyer asked, “Is there another company in the U.S. that could use the specially-fabricated equipment?”
The contractor responded, “I have no idea. All I know is that I don’t have any use for this stuff and there’s no other market for it. I’ll have to scrap all of it.”
“Well, there is one other industry that uses this stuff that I know of,” the owner replied. “I have some industry contacts whom I can call,” the owner added.
The owner’s lawyer then asked the contractor, “What if we could find a buyer for the equipment that you have delivered as well as the equipment that is currently in production and also help you connect with a new market for your specially-fabricated equipment? Perhaps that would lead to additional sales for your business. If the owner can find a buyer for all of the equipment at a price close to your cost, and introduce you to his industry contacts, would you be willing to give a little on your claim for profit and overhead?”
The owner’s lawyer confronted the inflexibility of the parties and came up with a “face-saving” means by which both of the parties were willing to modify their obstinate positions. By emphasizing the areas of common interest and refocusing their efforts on problem solving, the owner and contractor were able to formulate an alternative solution to the problem that ultimately proved to be mutually beneficial. A buyer was found. The dispute was settled. The litigation ended. New business relationships were forged.
Twenty-five hundred years ago, Sun Tzu, an ancient Chinese military general, strategist and philosopher, is said to have penned The Art of War. It remains a masterpiece of military strategy. Modern day mediators and negotiators have borrowed some of Tzu’s military strategies and used the strategies for managing conflicts and resolving disputes. Sun Tzu counseled military leaders to build a “golden bridge” for an opponent to retreat across. Without an escape route to retreat, your opponent will engage in battle and fight like a caged and cornered tiger. You can avoid battling the tiger and even win the war if you give your opponent a graceful, face-saving way out. Face-saving is an important part of the negotiation process and is vital to building a golden bridge. Building a golden bridge requires that you involve your opponent in the solution and that you work to satisfy your opponent’s unmet needs. A golden bridge makes it easy for your opponent to say yes.
In the example above, both the owner and contractor were able to advance across a golden bridge toward a positive solution. The owner’s lawyer extended an olive branch, built a golden bridge, and laid the groundwork for a graceful retreat and ultimate resolution of a contentious dispute. The contractor saw his retreat over the golden bridge as a victory.
This article was originally published in Construction Connection Newsletter.