08/04/2020
**The Impact of Stress on Negotiations**
Unless you are in solitary confinement, as humans we negotiate many times every day of our lives. Most of these negotiations are small and we don’t even notice we are doing them – like who is doing the grocery shopping or who is mowing the yard – through to the larger negotiations, like a major purchase or to a much larger and challenging negotiation like a commercial dispute. As the impact of the outcome becomes greater and therefore more important to the individual, there are circumstantial factors that are directly correlated to the importance of outcome – the main one is stress. The more important the negotiation, the higher the level of stress will be evident and this will affect the way the individual interacts in the negotiation. Different personality types will handle stress differently – some can adapt and be driven to increased performance under stress whilst others will not like negotiating anything other than the most basic requirements. Everyone is different and that’s ok. But what happens when there are major external stresses, like serious financial stress present? When these external stresses come to play the ability of the person negotiating can be severely affected and behaviours in the negotiation process can become unpredictable and irrational.
Covid 19 is creating a serious amount of stress at the personal level, as well as financial and economic stress for small business and these stresses are clearly impacting on the way people are acting. The ugly impact of stress impacting on behaviour is showing itself in many ways – who would have thought that we would be witnessing physical abuse by everyday people over a relatively basic commodity like toilet rolls?
The fundamentals of negotiation are based in an exchange of information. Depending on personality types and communication preferences, people gather and process information differently. Some people will want information in varying degrees of detail and prefer to make structured logical decisions based on that information and others requiring the same level of detail will place more importance on the humanitarian aspect of the decision. That does not mean that a person cannot make decisions across this entire spectrum, it’s about their preferred way of doing things. There is a lot of really good research and learning available on this topic.
What is clear from the research is that when extreme stress comes into play, people tend to loose the ability to make rational decisions and they gather and process information in a manner that is not necessarily the way they would normally do so. When extreme external pressures come to play, someone who would normally want the big picture information and make a logical decision based thereon will tend to unknowingly revert to wanting absolute detail and start coming to conclusions in what they think are a humanistic manner. But unless they are practiced at exercising decision making in ways they would not normally choose to, then there is a high risk that they will implement the decision making in an irrational and immature way. This has diabolical outcomes in any negotiation situation.
My observations are that this is what is happening in so many situations now due to the unprecedented stress being caused by Covid 19. Take for example Landlord and Tenancy negotiations.
The government recognised that there is currently a major issue with commercial leases due to the impact on small business during Covid 19, and as an interim measure placed a moratorium on lease termination, calling for parties to talk to each other and negotiate a solution that assisted both parties to get through these times so that the national outcome was we have an economy where business has a chance to regain normality reasonably quickly. Some parties, be it Landlord or Tennant, took this advice and embarked on a negotiation process with varying degrees of information gathering from the other party. In a lot of instances this was as simple as a request from the tenant to the landlord for rent relief, in others it was simply a Landlord taking the initiative and contacting the tenant and offering relief. The trouble is the unknown level of stress each of the parties are personally under and the unknown influence this stress this is having on the individual and thus outcomes are ranging from success to rage. The initial advice and direction from the government was great, but the impact of stress on behaviours is so great that the success curve is quite flat! This inability to act rationally calls for adjudication and when the inability is widespread then adjudication is called legislative direction.
Thankfully there is imminent legislative direction by way of state based codes of conduct for Small Business leasing during Covid 19. This code is expected to mandate rent relief for small business tenants and will set the scene for how both Landlords and Tenants are to behave, place a level of direction as to what the outcome of negotiations can and can’t be and provide for formal mediation process where necessary.
My advice for commercial landlords and tenants is that if they have attempted to negotiate a mutually beneficial outcome with the other party and you have not been able to achieve this then don’t make hasty decisions – help is on its way. Do what you need to do in order to put the interaction in a holding pattern in the short term and when clear mandated direction is available, those parties with the inability to make rational, mutually beneficial decisions will be forced to do so.
The fundamentals outlined here apply to all commercial negotiations. If you need some direction or interpretation of rules as they come in, some help in setting a strategy to achieve rational outcomes, or some insights into your own reactions in this stressful period of time we are here to assist.
Stay Safe, Act Humanly and strive to make Rational Decisions!
Frank Cassells
