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  • Writer's pictureJonathan E. Pearl

Tactics 101: The Negotiation Embrace

Virgil’s famous saying "Timeo Danaos et dona ferentes" roughly translates to: "Beware of Greeks bearing gifts". Virgil was writing about his Greek enemies – and what he said in this context was true. The myth goes that Greeks built a huge wooden horse within which warriors were concealed. The Trojans were persuaded to admit the gifted horse into their city, which was then sacked by the Greek soldiers hidden inside. They also say “there’s no such thing as a free lunch”, which is a short way of saying: to get one thing that we like we usually have to give up another thing that we like. You put these two concepts together and you get: corporate hospitality.

Most people know the difference between bribery and corporate hospitality. A gift is something of value given without the expectation of return; a bribe is exactly the same thing given in the hope of influence or benefit. Not a very helpful definition is it?

Bribery used to be very common in business. As recently as 1997 payments made to ‘grease the wheels’ in foreign transactions were tax-deductible for German companies. Now most large corporates have a strong policy against the giving and receiving of gifts and entertainment. Increasingly you will find that people insist on paying their own way in a restaurant if a supplier is present – this is especially so in the public sector. Other companies have a process whereby gifts are collected centrally and donated to charity – to save the embarrassment that sometimes arises when gifts are rejected. And the U.S. Foreign Corrupt Practices Act has certainly had a massive impact, although interestingly the U.S. as a country is ranked only 18th in Transparency International’s annual corruption index.

Clearly, it is unethical and in some instances illegal to accept gifts or invitations to any event where the intent is to buy favour. But corporate hospitality – formal and informal – continues to be a significant feature in building commercial relationships.

Your negotiation counterpart may 'embrace you' by hosting a lavish dinner, or give you expensive theatre tickets and other goodies. The giving and receiving of gifts in business is common in some Middle Eastern and Asian countries where this is not just culturally acceptable, but expected. By refusing a gift you may cause great offence. Within certain cultures, over many centuries merchants have perfected the art of turning clientele from browsers to buyers by inviting them to drink tea. Seated, the customers sip at leisure, while merchandise is brought before them piece by piece. The merchant thus achieves three goals. His clients have been honoured, immobilised, and placed under an obligation. The result is often an unwanted purchase, and one that is directly linked to the hospitality.

Breaking bread with people is important to forging relationships. If you are sharing food, you can’t be fighting (unless of course you’re at one of our family’s Passover dinners). And there's something to be said for having dinner with your opposing negotiation team to build trust. Having social time together can also be revealing: I once had a dinner with someone on the other side during a negotiation and was surprised to discover that they had a 'drink problem'. This wasn't earth-shattering, and didn't affect how he behaved in work hours and in the room, but it was useful information nonetheless.

I recall a long-running patent licensing negotiation I was involved in where the two parties’ principals would meet two or three times a year to try to progress the deal, each time in a far-flung location. We alternated who would host and each meeting would end with a dinner, which got more and more lavish as the years went on. It was fun to attend these dinners, but I began to suspect that it was not simply a mutual love of food that was in play. In fact, the dinners began to take the form of an ‘apology’ that, once again, the parties had failed to reach a settlement. I am not saying this was in any way improper. On the contrary, the dinners played an important role in maintaining a friendly atmosphere, that could otherwise have turned nasty and litigious.

But watch out: the psychological impulse to reciprocate 'the embrace' is strong. Where there's a negotiation embrace - even if there's no explicit request for some sort of reciprocal gesture - it may be difficult for you to resist returning some kind of favour.

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