In this article from the Harvard Law School Program on Negotiation the authors offer insight on “Managing Your Counterparts Satisfaction”. This is a key concept to have both parties feel as if the negotiation was truly a win-win for both parties. The authors caution against:
“escalate expectations by making a steep concession that could lead the other side to expect another.
agree to your counterpart’s demands too quickly.”
The authors suggest “a better win-win strategy may be to delay agreement and even ask for additional concessions, because you may be able to make your counterpart more satisfied with a deal.”
The authors also point out the need for each side to make comparisons “between their outcome and their counterpart’s outcome.”
Finally, they comment that for a win-win negotiation, both sides have to view the final outcome as fair. To do this the authors suggest to “be sure to acknowledge your counterpart’s perspective and invite him to express his views, to suggest alternatives, and to react to initial proposals.” By acknowledging his perspective and explaining your rationale, both sides will have communicated effectively and have a better understanding of the reasons behind the negotiated agreement.
I would like to offer some insights on this article focusing on interests and fairness based on one of my own experiences.
Assisting a client that had an issue with the IRS I was brought in as a “Disclosure Witness” to assist my client and the IRS to reach an agreement on a valuation issue on examination. Revenue Procedure 68-29 and Internal Revenue Manual126.96.36.199.4.2.1 (04-20-2010) describes the process. In short I am brought into the discussion because I have “knowledge of facts pertinent to the matter involving the issues in the examination … of a “return (that) is currently under examination by (the IRS) and I “will participate in the following matters until the conclusion of the examination, and through and including the Appeals process, if (necessary)”.
The case is far more complex and involved experts on both sides, but for simplification purposes I will not go into details with the experts, but instead focus on the client and the IRS examination team.
It is important to understand up front that the examination function can resolve the issue based on the facts, and that Appeals can settle the issue based on the hazards of litigation. My client cannot simply offer a percentage deal to the examination team as he could if the case were in Appeals. Rather my client has to present a factually based alternative to the examination team. Given my background, I was oriented at making sure my client understood this and how to implement this with the IRS examination team and to ensure that my client was treated fairly.
The IRS agent had not been following proper procedures and was at times bullying to my client. Given this situation there was a certain amount of animosity between my client and the IRS agent before I was brought into this case. As a former IRS manager with over 25 years of managerial experience, I knew that the agent had not always followed proper procedures nor met professional standards. My book, How to Work with the IRS, Second Edition, was updated and enhanced with three chapters including how IRS employees are evaluated. Elements from this book were used to document inappropriate behavior that could potentially be shared with the IRS agent’s manager. This can become key if the IRS agent is not acting appropriately. However, it was in everyone’s best interest to focus on the issues and to work to resolve the issues between the parties. If necessary this information could have been brought to the attention of the manager.
Focusing on the issues, a process of de-escalation was needed first. I suggested a meeting between my client and the IRS agent and her manager. During that discussion I explained my role to the IRS agent and her manager. The manager was very receptive to my intervention on this case. The manager was able to control the IRS agent from acting improperly and the meeting was both cordial and professional. We worked on developing a good relationship, listening to the agent’s perspective and then educating the IRS agent and her manager on both why the client had approached the issue the way he had and addressing areas of concern by the approach taken by the IRS agent. Working with her manager, my client was able to propose a way to resolve the case in a manner that considered the interests of the IRS agent and my client’s expectations. My client did offer a specific number, but not an approach to the issue.
The client was oriented towards a dollar amount of tax settlement during the discussion. The exam team does not have the ability to simply accept a percentage or dollar amount settlement. I counseled the client and the IRS that I would work with my client to develop a factual methodology to make a specific offer factually to the IRS. The IRS appreciated that I was able to work with my client to provide a factually determined offer to the IRS.
Both sides agreed that given the time spent on this audit both in terms of calendar time and staff days, that this offer would be a bottom line offer. If there was no agreement then the case would be unagreed and go to Appeals. My client came in with his “bottom line” number which addressed the two major interests raised by the IRS agent, allowing the IRS agent to “save face” and yet have a bottom line number that met my client’s interests as well.
In the end the proposal recommended by my client was accepted by the IRS. The client believes the result is a reasonable resolution. The IRS found the result to be acceptable. The client, the IRS agent and his manager all are able to leave the audit on professional terms and the case is closed.
Reviewing the commentary as summarized from the article above:
Both parties had been pushing back and forth on proposals that were unacceptable to each.
Neither was truly listening to each other.
There was no danger of agreeing to the counterpart’s proposal to early given the long history, but now that the case was near the end, a bottom line number that was “reasonable” needed to be determined factually.
By listening effectively an offer was made that allowed the IRS team to save face on two of the IRS team’s key interests.
In the end part of the rationale was to make sure that my client was treated fairly consistent with the IRS mission statement – “Provide America's taxpayers top quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all.” He was by the end. This was the comparison to other taxpayers that may have similar facts. Until the manager was involved this had not been a consideration.
To reach a conclusion my client was able to acknowledging the IRS team’s perspective and explain his rationale. Both sides communicated effectively and fully understand the reasons behind the negotiated agreement. Bringing in the manager in this instance and addressing fairness were keys to issue resolution in this instance.
Michael Gregory, ASA, CVA, MBA is an expert in conflict resolution and enhancing effectiveness who is dedicated to making individuals, organizations, thought-leading entrepreneurs and executives more successful. Michael’s books, including How to Work with the IRS, Second Edition and his NEWEST BOOK, now also available as an eBook, Peaceful Resolutions are available at this link. On point resources are available online at www.mikegreg.com and check out the blog. Contact Mike directly at firstname.lastname@example.org or call (651) 633-5311.
About the author
Mike Gregory is a professional speaker, an author, and a mediator. You may contact Mike directly at email@example.com and at (651) 633-5311. Mike has written 12 books (and co-authored two others) including his latest book, The Collaboration Effect: Overcoming Your Conflicts, and The Servant Manager, Business Valuations and the IRS, and Peaceful Resolutions that you may find helpful. [Michael Gregory, ASA, CVA, NSA, MBA, Qualified Mediator with the Minnesota Supreme Court]