Lawrence Susskind is Ford Professor of Urban and Environmental Planning at the Massachusetts Institute of Technology and president of the Consensus Building Institute in Cambridge, Massachusetts. He is author of Dealing With an Angry Public (Free Press, 1996).

Paul Levy is Executive Dean of Harvard Medical School.

Jennifer Thomas-Larmer is with the Consensus Building Institute.

Part 1

The Mutual Gains Approach

The mutual gains approach to negotiating environmental agreements is described in detail in this part. We begin by looking at the philosophy behind the approach and talk about what regulators, regulatees, and the community at large can learn from its concepts. We then compare traditional negotiation strategies and techniques with the mutual gains approach. We explain the concept of BATNA—"best alternative to a negotiated agreement"—and describe the strategic power of this concept in our negotiation framework. We then present and discuss the essential stages of the mutual gains approach: preparation, value creation, value distribution, and follow through. We place a heavy emphasis on the creation and maintenance of relationships throughout these stages. Finally, we discuss the applications of these concepts to common permitting and other regulatory situations. The part includes adaptations of the overheads we use in our workshop, accompanied by detailed annotations.

Philosophy of the Approach

Regulators and regulatees often have a high degree of skepticism concerning the efficacy of negotiation in the highly structured and legalistic environmental arena. Regulated companies often assume that regulators have little or no discretion when it comes to permitting, compliance, and enforcement. They fear that attempts to engage in negotiation will be perceived by regulators as attempts to "get around the rules" and will therefore backfire by generating even more stringent enforcement activities. Likewise, regulators are often convinced that they, in fact, have little discretion in their permitting and enforcement activities and that attempts to negotiate agreements will serve mainly to weaken environmental laws and regulations.

Our philosophy is that well-structured and thoughtful negotiations can result in gains for both regulators and regulatees, and for the community at large (see Figure 1.1). For the regulator, an effective agreement can produce voluntary compliance that goes beyond minimum standards required or mandated by law. For the regulated company, an effective agreement can offer flexibility in when and how requirements must be met and the opportunity to explain, face to face, the financial and commercial constraints on the regulated industry. For the community at large, agreements can result in better environmental performance and stronger commercial enterprises, yielding numerous benefits to the community.

The Essential Ingredient

The exercise of agency discretion is the key to negotiating optimal agreements (see Figure 1.2). We know that such discretion exists in most regulatory settings. Indeed, state legislators and Congress typically anticipate that enforcement agencies will interpret the law based on technological advances, precedent, financial factors, willingness of companies to cooperate, and a variety of other factors. It is not possible to write an environmental or public health law that can precisely fit the circumstances surrounding each factory, mill, or other production facility. Legislators intend for agencies to use their best judgment to reach the broadly stated goals set forth in a given statute. Courts, too, will generally defer to the expertise of an administrative agency in interpreting the law and carrying out its provisions.

Notwithstanding these facts, regulatory agency officials often feel obliged to assert that they have little flexibility, because they fear that flexibility will lead to being "used" by industries or will prompt complaints from advocacy groups and the press that a company is being given preferential treatment. We believe strongly, however, that regulatory discretion is a tool that can be used to produce results that are better for society. We would not expect a regulator to do less than carry out the law, as he or she understands that law. Likewise, however, we would not expect a regulator to forsake a chance to produce a more beneficial result than that anticipated in the law. We believe that negotiation is a means to accomplishing the latter end.

Regulatees must understand that flexibility also means a lack of uniformity. When a regulator and regulatee enter into negotiations, the chosen solution to a permitting or compliance problem might be different from that required of others in the industry. It is this variability that enables an environmental agreement to be tailored to the particular economic and financial concerns of a given regulatee.

The community, also, must accept that negotiations will likely produce different results in similar cases. The community has a right to expect that the deals and deal mak-ing that lead to such disparate results will be transparent and open to public review. Environmental regulation, after all, is a process carried out for the public good, and the public officials associated with that process must remain accountable to the body politic.

The Goal for Regulatees

Regulatees should learn how to initiate and carry out a process of negotiation that does not in any way threaten the integrity of the regulatory process or individual regulators (see Figure 1.3). Indeed, the establishment of a respectful and trusting relationship is essential to reaching environmental agreements. The mutual gains approach is based on understanding the interests of the other parties. In this approach, both the substance and the process of the negotiations are critical. Action taken by both parties "away from the table" before face-to-face negotiations occur are important, too, in that they help provide people with a better sense of the context and substance of the other party's interests.

The mutual gains approach is both a strategy and a set of tactics. As a strategy, it provides a broad framework within which an environmental negotiation can take place. But it also provides the context for tactical steps that all parties might seek to employ. The approach is tied to specific behaviors exhibited and choices made before, during, and after face-to-face sessions. How can regulatees do a better job of finding out what regulators really need to know to do their job effectively? We explore ways they can improve communications with the many levels of agency personnel. We offer advice on how they can get interpretations of regulations before making major financial commitments. Finally, we provide insights into how regulatees can get readings from the agency about their "bottom line"—what they really would be willing to live with.

The Goal for Regulators

Likewise, regulators need help understanding the interests and problems of regulated companies (see Figure 1.4). After all, regulators' goal should not be to achieve minimal compliance. Their goal should be to achieve results that are better than the minimum required by the law. Regulators need to understand how to improve communications with all levels of corporate personnel. We provide regulators with advice on how and when to offer interpretations of regulations before regulatees have made major financial commitments that might not satisfy the environmental objectives of the jurisdictions involved. We also offer our thoughts on how and when regulators should let regulatees know what the agency is really willing to accept in a given situation.

The Conventional Wisdom

We do not have to look far to see examples of the conventional wisdom regarding negotiation. Frequent travelers have likely read about the conventional approach in advertisements in airline magazines. Parents all too frequently find examples in their relationships with their teenage children—either as practiced by the teenagers, the parents, or both. Unfortunately, we also often see it employed in the context of environmental negotiations.

The traditional approach typically goes something like this (see Figure 1.5): First, come to the table with a clear set of demands, and make sure those demands are inflated beyond even your expectations. You know you are going to have to give up something, so start high. Only back off from your initial demands if concessions are made by the other side, and then do it grudgingly. When your opponents offer data and arguments, do your best to discredit those data and arguments and undermine their use in the discussion.

Do not forget to wear a mask. Never let your underlying feelings, concerns, or interests be seen by your adversary. Any indications of openness are a clear sign of weakness. Likewise, never show empathy for the other side, lest you give them leverage against you.

Finally, use pressure tactics to show that you are powerful. For example, intimidate people by raising your voice and banging your fist on the table periodically. Use outside pressure also. Threaten to get your opponent fired, perhaps. However you do it, be sure to engage in the kind of psychological warfare that breaks down your opponent's willpower so that you can win. After you win, gloat about it with your colleagues.

Does this sound familiar? We know it does, and we trust it makes you vaguely uncomfortable, whether you work for the government, a private firm, or a nonprofit organization. It probably makes you uncomfortable because, to do it, you know you will have to act—to pretend to be someone you are not. You may even have to lie. After all, if you start out by saying "We absolutely cannot pay any fine above $20,000," and then, after hearing some valid arguments from the other side, you concede, "OK, we could go to $25,000," you have instantly revealed yourself as a liar. From that point on, the other negotiators will not trust anything you say; your power and influence have been greatly diminished, and both your short- and long-term relationships with the other parties have been damaged. The following illustrations will show how you can steer clear of these problems—and come up with better outcomes for all parties—using the mutual gains approach.

Challenging the Conventional Wisdom

Figure 1.6 outlines the major steps involved in the mutual gains approach to negotiation, which is markedly different than the conventional approach.

BATNA—A Key Concept

The mutual gains approach is founded on a key concept—the BATNA. BATNA is defined as the "best alternative to a negotiated agreement." It is each party's best estimate of what he or she will do if no agreement is reached. Think strategically for a moment. If you view negotiation as a means to an end, rather than an end in itself, you must consider other means to that same end, including other approaches that do not rely on negotiation. Only by considering the alternatives to negotiation can you assess the value of a potential negotiated settlement. Simply put, if, through negotiation, you cannot do as well for yourself as your BATNA, you should walk away from the negotiation and live with your BATNA.

This is just common sense, but many people enter negotiations without a clear understanding of their BATNA. Let's take a simple example. Say a firm's executives have received a notice of permit violation from the state Department of Environmental Protection (DEP). The executives' BATNA is to fight this notice through the administrative procedures established by the state agency, and then, if they lose, to appeal to the state court system. How do they value that BATNA? Their lawyers may tell them that they have a strong and convincing case if they ever get to court. But before taking this path, the executives need to consider its costs and benefits. If they pursue this option, they will incur direct costs relating to the salaries and fees of their staff, consultants, and attorneys. They will also incur indirect costs. The staff that is involved in fighting the legal battle will not be available to do their regular jobs—to improve the productivity and efficiency of their manufacturing processes. There is the potential for ongoing, unfavorable media attention while the case is proceeding. If the case goes to court, it will probably be at least three years (from now) before a decision is reached, during which time the company and the products it produces will be branded with the "corporate polluter" label, potentially hurting their market share, profitability, and the cost of capital in financial markets. Finally, the legal process may do serious damage to the firm's relationship with the DEP enforcement staff, who monitor this and every other permit every day of the year for the rest of this company's life.

On the regulator's side, too, a BATNA analysis might offer strategic direction. Officials at the DEP have issued a notice of permit violation. Instead of reaching a negotiated resolution with the firm, they can proceed with the administrative and judicial review process, using staff time and other resources that might be applied to more significant violations. What if, at the end of that process, the agency's decision is overturned by the state court? That would set a terrible precedent and would seriously diminish the deterrent effect that the agency had hoped to accomplish through this enforcement action.

If you are involved in a situation like this and think you might want to pursue negotiations, you must recognize that the first stage of any negotiation occurs "away from the table." Analyze your BATNA. That is, conduct a systematic and thoughtful assessment. Consider ways in which your BATNA might be improved. In the example above, if you are the firm in question, prepare an accurate and thorough summary of your exemplary compliance record over the previous 10 years, a document you can present to an administrative law judge or trial court judge should litigation become necessary. If you are the DEP, prepare a detailed summary of the warnings you have given to the firm before the notice of violation was issued, a summary of the technical-assistance documents you offered the firm to help it deal with the problems it faces, and scientific studies proving the detrimental human health effects of this kind of violation.

Before entering the negotiation room, you also need to analyze the other party's BATNA. At what point will the other side be likely to walk away? Once the negotiation begins, you should raise doubts about the other side's BATNA. Perhaps the firm has not reviewed the record of litigation for this category of permits, and perhaps it does not know that, say, 3 percent of all cases are successfully appealed through the courts. Perhaps the DEP staff person is not aware of a recent case, identical to yours, in which the courts established a precedent that supports your actions. These kinds of discussions should not be put in the form of threats. Ideas and concepts should be presented as facts that can have an influence on the other party's calculation of its BATNA.

Clarifying Interests

The conventional wisdom relies on asserting "positions"—stated demands. The mutual gains approach relies on clarifying "interests"—underlying needs and concerns. Clarifying interests means explicitly discussing them. Traditional negotiators might view this as handing over valuable information. We view it as providing information essential to reaching an agreement. As long as you know your BATNA, you have not weakened your negotiating power by telling the other sides your interests. You have made it possible for them to help you meet your interests. If the other sides cannot or will not respond, your BATNA tells you when it is time to walk away.

In discussing negotiations, professor Roger Fisher of Harvard Law School often gives the example of two sisters cooking together, working on two separate recipes, each of which calls for an orange. There is, however, only one orange left in the house. Each sister states her position: "I need that orange." After further discussion, they learn of their underlying interests. One sister needs the juice of the orange for her recipe. The other needs the peel. A successful conclusion results because they have gone beyond their stated positions and have tried to understand each other's interests. If these archetypal siblings can do it, so can you!

Inventing Options

Our goal is to use people's natural problem-solving instincts to help them satisfy their interests. We want to create an environment in which parties feel free to invent creative solutions to their problems. This can be done through brainstorming, a process of discussion designed to defer criticism and to hold each person harmless for any suggestions he or she might make. During brainstorming, ownership of an idea should be separated from the idea itself—that is, ideas should be depersonalized by transferring them to flip charts without attribution. The brainstorming process should not involve any commitment beyond the commitment to be creative. No party should be obligated to endorse any idea that has been put up on the board, even its own!