Sunday, September 11, 2016
I am trying to build a MOOC (an open course on line) that will help anyone engaged in real estate development, or any aspect of city redevelopment, think hard about their social responsibilities. To date, most discussion of social responsibility focuses on what is called Corporate Social Responsibility (CSR). That is, what do corporations need to do to meet their social responsibilities? CSR is basically a form of “corporate self-regulation” or “active compliance” with the “spirit of the law,” “ethical standards” and “national or international norms”. By now, after several decades of discussion (and some serious scholarship), CSR advocates are prepared to make the case that corporate actors will have an easier time attracting the workers they want, enhancing their reputations and differentiating their brand, reducing regulatory scrutiny and improving relationships with their suppliers if they take environmental sustainability seriously, get involved in the communities where they operate (often through charitable giving) and avoid false advertising (and engage is what is known as ethical marketing). So, if corporations do “the right thing,” engage in corporate philanthropy and behave ethically they can count themselves as socially-responsible.
I have a different view. Imagine a large real estate investor who is thinking of building a mega-project outside his own country; say, in a developing country. With the help of local partners, he scouts out a site for a large, gated, mixed-use development that will take a decade or more to complete and cost billions of dollars. If he succeeds, he will make a lot of money. He hire consultants (some local, some from his home country) and prepares a marketing brochure that includes images of the amazing project he has in mind. He initiates preliminary conversations (behind closed doors) with key political figures in the region to win their support. And, based on these conversations, he takes on local equity partners. He is assured by these partners that they will have smooth sailing when it comes to getting the regulatory approvals they need. He begins to make highly visible donations to local business organizations and seeks as much media attention as he can get. In the formal submissions he makes to whatever agency has final review power, he highlights his commitment to “green” building and promises to set aside a share of construction jobs for local workers. Most CSR-types would say that he is acting in a socially-responsible way.
As he begins to market his project, it is clear to everyone (from the images on the giant posters on the site and the materials handed out in the showroom), that the project is aiming at attracting a class of international investors and residents who look nothing like the vast majority of people in the region or in the communities near the site. His media consultants succeed in planting newspaper stories highlighting the tax revenues his project will pay to the local and state government. These stories also refer to the substantial grants that the national government has offered the developer and the local community to underwrite the infrastructure required within the gated project. The developer argues that his mega-project will be almost self-sufficient in terms of its energy production, waste disposal, and provision of social services. In the process of filling wetlands and assembling the land for the proposed project, however, environmental interest groups begin to complain that the project will be diverting too much water away from existing settlements. And, they are concerned that the gated community will not be full integrated into (or managed by) the local and metropolitan agencies and service systems that already exist. Some international environmental organizations express worries as well. They are concerned that internationally protected environmental areas will be sacrificed. Some local political groups ask why there has not been a more careful study of the potential environmental and social impacts the proposed project might have. The developer points to (1) the extensive studies he has done that led to the “green” design he is pursuing; (2) the “approvals” he has already gotten from local and state officials; (3) the charitable contributions he has made and will make to local organizations because he intends to be a good neighbor; and (4) his record (in his own country) as someone who takes his corporate social responsibilities seriously. He claims to have met all prevailing regulatory requirements.
It is easy to see why corporate philanthropic contributions do does necessarily equal socially-responsible development. Merely generating some “social good” beyond the interests of the firm is not enough. Reaching informal agreements (or winning political support from a few key officials in the region or the country) is not the same as ensuring that the concerns of local stakeholders (i.e. the people most likely to be adversely affected by a mega-project now and in the future) are met. Obeying the law, to the extent that regulatory requirements are spelled out and enforced, is not enough. Claiming that you “always” take account of your “triple bottom line” (i.e. seeking to have a net neutral environmental impact, a positive social impact and, of course, achieve financial profitability), and that you adhere to ISO 26000 norms (the best practices prescribed by the International Standards Organization) do not guarantee socially-responsible real estate development.
You could imagine how a massive real estate project could displace long-time poor residents of an area, claim a disproportionate share of scarce natural resources, radically alter culturally significant patterns of everyday life and leave a number of groups worse off, even as the developer demonstrates that his project will have a positive impact, he will behave ethically, and he will make philanthropic contributions to the area. The balancing of competing stakeholder interests, now and over time, is the issue. Values and conflicting interests need to be reconciled in a transparent way, and not all can be easily factored into a comprehensive benefit-cost analysis. The problem for all the parties is how to meet their conflicting interests in an effective and efficient fashion. I don’t think we can rely on standard government agency reviews to achieve such balance.
Well then, how can such balance be achieved?
My new MOOC (Environmental and Social Impact Assessment: The Keys to Socially-Responsible Real Estate Development) -- that will be offered in 2017 by the Sam Tak Lee Laboratory for Real Estate Entrepreneurship at MIT -- will teach how these conflicting interests can be balanced. My focus is on the process of social and environmental impact assessment. This is the only way to guarantee the direct engagement of all relevant stakeholders; and, the ONLY way to ensure socially-responsible real estate development on a case-by-case basis. The good intentions of the developer are not enough. The physical design of the project is not in-and-of-itself a measure of socially-responsible real estate development. It is only by engaging representatives of ad hoc stakeholder groups, with the assistance of a professional (neutral) facilitator, in a joint problem-solving process, that socially-responsible real estate development can be achieved. The problem-solving I am talking about needs to focus on how the developer, in conjunction with local stakeholders, regulators, independent technical advisors, and non-governmental advocacy groups can ensure that conflicting interests are resolved fairly, in ways that take account of the culture and values of the existing community. The tools for doing this are well developed: environmental impact assessment (EIA), social impact assessment (SIA), and collaborative adaptive management (CAM). I also argue that these tools must be used effectively regardless of the extent to which they are legally mandated. My measure of whether socially-responsible real estate development has been achieved is the extent to which realistic steps have been taken to meet the conflicting interests of the relevant stakeholders, taking account of technically sophisticated forecasts and assessments produced by analysts working for all the stakeholders.
In the MOOC I review exactly what ought to be involved at each step in such a collaborative review process. And, I think I can make this case (although slightly differently) in countries that have less of a democratic tradition of public engagement. I review and illustrate the practical aspects of getting this work done in a reasonable amount of time at the lowest possible cost. And, I emphasize the important role that only a neutral facilitator can play once a large number of stakeholders agree to come together in managing face-to-face problem-solving. Of course, the interactions I am describing do not substitute for or pre-empt government decision-making. They precede it.
In my next blog post, I will review in more detail the ways in which EIA, SIA and CAM have been used (and abused) over the past several decades in the United States, Europe and elsewhere. In this first post, my goal was to reframe the definition of social-responsibility – moving away from the focus on corporate philanthropy. I want to make the case that creating “shared value” from the standpoint of the developer is an inappropriate way to define social responsibility. Most of all, I want to challenge the assumption that traditional entrepreneurial models (i.e. doing well by doing good) can achieve socially-responsible real estate development anywhere in the world. More is required, particularly a commitment to the right kind of direct stakeholder engagement.
Sunday, June 12, 2016
I taught an online negotiation course for the first time this spring. MIT’s Professional Education Program and its Office of Digital Learning (ODL) invited me to design and teach a course for professionals around the world willing to pay approximately $500 to participate in a six week course for about 3 – 5 hours a week. I chose to focus on Entrepreneurial Negotiation and gave the course an added twist by adding to the title “The MIT Way” (reflecting the MIT motto of “mens et manus” or mind and hand, or knowledge and practice”). Over the past few years, ODL has attracted tens of thousands of online learners, so it sounded like an exciting opportunity.
Some of you have heard about MOOCs (Massive Open Online Courses). MIT participated jointly with Harvard and other top-tier universities -- through an entity called Edx -- to offer free online access to regular college courses. These consisted of videos of college lectures supplemented by power points. Students took machine graded multiple choice exams at the end of each module, and received a certificate of completion if they made it all the way through a class. Production and dissemination were paid for by foundation grants or donated by universities hoping to sell accompanying books or other teaching materials. Edx has run through many millions of dollars. Only a tiny fraction of the global participants who signed up for most MOOCs (many of them high school students) actually completed the courses and mastered the material. So, MIT has decided to look for a more financially sustainable and effective way of sharing the knowledge developed on campus with a wider international audience.
The MIT professional staff I worked with are practitioners of a new approach to online learning called User Experience Design (UX or UXD or UED). I like the Wikipedia description of UX: it is the process of enhancing user satisfaction by improving the usability, accessibility, and pleasure provided in the interaction between the user and the product. It is revolutionizing all kinds of design efforts, including the way companies market products and organizations interact digitally with their clients. The MIT Professional Education staff, with its UX orientation, made me rethink every aspect of my approach to teaching negotiation. I will share a few of things I learned.
First, online learners prefer to watch videos rather than read text. When I say videos, I don’t mean videotaped versions of the 50 minute lectures I would usually give in a regular class or training program. They want short, animated or otherwise highly produced segments that get to the point and entertain (infotainment). The MIT team informed me that my usual negotiation lecture introducing key negotiation concepts would need to be reduced to a six minute animated short. It took some doing (and a lot of help from several skilled graphic artists, especially one in the Czech Republic I never talked to directly) to present almost two dozen concepts in a six minute cartoon strip based on two key characters – Novi (a female, African-American inventor) and Vic (a male, Caucasian venture capitalist) who were about to negotiate the possibility of some kind of joint venture keyed to a new device Novi had created. If you start, as UX does, from the standpoint of the learner rather than the instructor, everything you say and the way you say it, changes.
MIT has developed a platform that allows hundreds (actually thousands) of course participants to interact face-to-face simultaneously via the web (not skype). So, each week, more than two hundred participants negotiated with randomly assigned partners from elsewhere in the world. Each negotiation was scheduled for 60 – 90 minutes. When the scheduled time for negotiations was over, students could watch a taped version of my MIT graduate students doing the same negotiation (from start to finish) that they had been assigned. Viewing my same negotiations that the online participants had just completed was optional, but almost all of the online students chose to view the tapes. Then, they watched me (on tape) interacting with two sets of my students who had completed the negotiation assigned to the online class that week. My online video debriefing of each week’s negotiation assignment involved me going through the full tape of my two graduate student pairs of negotiators and selecting video highlights focusing on the key learning points I wanted to raise. When I met with the four students (in a studio setting) to debrief, I had two giant screens on the wall that I controlled from a laptop in front of me. I pre-selected highlights (almost like a sports broadcaster reviewing all the games on a particular day) so I could question my students, pressing them to explain why they did what they did, what they might have done differently and what they learned. The tapes of these studio interactions initially ran for several hours. But, with the help of my editing team, we were able to post-produce three or four eight minute segments keyed to the theme of the week. The online participants were also asked to complete short assigned readings each week from the electronic version of my recent book). My assumption was that watching me debrief my students would resonate with the experience the online learners had just had. From the polling we did, that turned out to be true. It was as if I was debriefing the online learners.
When I first saw the tapes of my students completing the negotiations that the online class was assigned, I didn’t want to leave anything out. Every second seemed valuable. After multiple tries, however, I was able to isolate 8 – 10 minutes of highlights (especially pair handling the same moments in the negotiation differently). I pre-load these for the studio debriefing with my students. When I reviewed the several hours of video of the debriefings that followed (all unscripted), I didn’t see how I would be able to cut these down to three or four segments of seven to eight minutes. I had to put myself into the learner’s position. What did they most want to know? And, why? Each finsished video segment was “tested” multiple times by people like those we thought would sign up for the course. While you need skilled editors to smooth out the video and audio, and to add titles and music, those of us who have only taught from our own perspective can eventually, on our own, identify with the needs of the learners.
There are lots of other innovative instructional elements in the course. We interviewed Cambridge entrepreneurs – mostly MIT spin-offs – in their offices. I asked them on camera to talk about the most difficult negotiations they have had. These were also reduced to six minute cameos that appear week by week and align with the four teaching themes around which the course is structured – dealing with ego and emotion, coping with uncertainty, managing technical complexity and building trusting relationships. While I got better at preparing five or six minute mini-lectures introducing topics like these, it took the guidance of a skilled video producer to help me transform my usual pedagogical style to a learner-oriented approach to presenting my ideas. By the way, I found it impossible to use a teleprompter to read scripts. It was only through multiple impromptu takes that I found the voice I was looking for.
The MIT teaching platform allows students to share their written work with each other, and give each other grades and feedback (all anonymously). I assigned a short-follow-on scenario each week that picked up where the assigned negotiation exercise left off. They had to write out one page of their best advice to Novi and Vic in each situation. Then, each participant had to offer comments and grades to at least two other people on their written responses. I provided a detailed grading template with an example of how I graded a student’s response to each assignment. This is all accomplished electronically and automatically by the MIT Professional Education platform. But, a problem emerged when a handful of online participants offered nasty comments and unfair grades. I had to add an online ombudsmen (one of my post-docs with a lot of negotiating teaching experience). He was available to re-review comments and grades for anyone who felt they had been treated unfairly. While this only amounted to 1% - 2% of the participants, I was genuinely surprised at how mean the class participants could be to each other. Remember, everyone was paying to participate in the six week course and these were mostly young professionals. These were not your usual internet trolls who write vitriolic comment and leave.
I asked the participants to reflect at the end of each week (in writing, but for themselves) on what they learned and what they were confused about. At the end of each week I entertained questions (on the Open Electronic Forum also supported by the platform). I chose about a dozen (from about 50 – 60) questions to answer in writing each week. It took me about two to three hours to write out my answers each week. It was clear that participants were taking the class very seriously and reflecting carefully on what was happening. I posted by weekly answers for the whole group to see each Monday morning as a new unit began. I could tell from their questions where I had failed to be clear or where the materials I had developed did not go far enough. Answering their questions in real time was important, also, for those who had expected to interact with me personally when they had signed up for the course.
In the last week of the course, I asked them to prepare a composite reflective memo. While we polled the group each week (after every exercise and assignment) to find out the ratings and judgments about each component of the class), their detailed closing evaluations made clear that the idea of a “learning journey” really does make sense. They elaborated on what they took from the course (relative to their individual needs) and gave me a sense of whether I had succeeded. There’s no way a “final exam” makes sense in this context (and I wonder, in retrospect, how much sense it makes in more traditional in-person classes). My focus on their evolving theories of practice and the importance of continuing to learn from your own negotiation experience may be the most important thing I gave them.
Preparing and presenting the online course made me think very hard about how people learn to negotiate, how they acquire and master various micro-skills, how they confront and reformulate their personal theories-of-practice and how they learn from their own ongoing negotiating experiences. As I try to think 10 years ahead, I imagine that my face-to-face negotiation instruction and training sessions will incorporate a lot more prepared video elements (before and after class). I’ve already introduced a new kind of video assignment in my “regular” MIT class – requiring students to videotape (using an ipad) at least three other pairs or groups of students doing assigned negotiations and producing (using imovie) annotated video presentations for the rest of the class. The act of having to edit, add titles and sub-titles, and narrate a three to four minute composite video turns out to be a great way to get students to realize what they are supposed to be learning. Video debriefing allows us to all be looking at the same thing.
The MIT Professional Education team hired someone (an MIT undergraduate, it turns out) to write the detailed code “automating” every moment of the six week on line course. Imagine you had to anticipate every question, every concern and every bit of confusion that online learners might have. Then, you had to write the instructions to those learners (both in terms of how to use on the platform and in terms of queuing up the learning assignments they are required to complete). That’s what it means to incorporate a UX perspective in online negotiation instruction. That’s what I think we should all learn to do.
Monday, December 28, 2015
If you can’t negotiate, you can’t be a successful entrepreneur. My new online class at MIT is designed to help both new and experienced entrepreneurs improve their negotiation skills. This includes learning how to handle the four unique features of entrepreneurial negotiation.
Harvard Business School Professor Howard Stevenson had it right when he said that entrepreneurship is “the pursuit of opportunity beyond resources controlled.” That means that no matter what the sector, entrepreneurship requires convincing others—start-up co-founders, angel investors, venture capitalists, employees, and potential business partners —to commit their knowledge, time, reputation, expertise, and money to your idea. You’ve got to convince them it’s in their interest to do what you want, when you want, the way you want. And, you also have to be able to listen and improvise so you can refine, or even overhaul, your ideas in light of others’ needs and contributions.
These are learnable skills. Studies and experience show that people can get better at negotiation, no matter what their underlying style or background. Self-confidence has nothing to do with it, either. Empirically, confidence is a terrible predictor of one’s negotiation ability. So, if you think you can’t negotiate, don’t be discouraged. And if you think you’re a negotiation genius, don’t be so sure.
My new online MIT Professional Education course, Entrepreneurial Negotiation: The MIT Way, is designed to teach dealmaking skills to people working in start-ups or other entrepreneurial settings. It focuses on the unique features of entrepreneurial deal-making: the importance of ego and emotion; technical complexity; uncertainty; and the need to build and maintain relationships. Most simple buy/sell negotiations don’t always these factors; most entrepreneurial endeavors do.
My online negotiation course is like no other. It teaches negotiation through the use of role-play simulations developed by the Program on Negotiation at Harvard Law School (which I co-founded, and where I have taught executives and students for many years). These sims allow participants to practice the skills they’re learning, and discuss what worked and what they could have done differently. The course also includes video of real people negotiating, and shows me giving them coaching advice using video-recorded highlights of their efforts. The course provides opportunities for students to put their learning into action by writing short (two-page) response papers that other students in the class read and grade using an assigned template.
It is not possible to learn negotiation skills without practicing. And, it is best to practice with someone you can talk to afterwards. So, everyone who registers is urged to have a buddy register with them, so that they can complete four face-to-face practice negotiations. For those who can’t co-register with a buddy, we have other ways to help you practice.
The course focuses on the four unique features of entrepreneurial negotiations:
(1) Ego and Emotion
Anyone who invents or creates something tends to become attached to it—maybe even a little protective or defensive about it. After all, they’re proud of what they produced—which they understand better than anyone—and have their own ideas about the best way to proceed. They are likely to get upset if someone else even appears to downplay its value. Entrepreneurial negotiations, therefore, almost always involve some degree of defensiveness on the part of the proposer or creator. On the other side, negotiation counterparts, such an investors, tend to have a healthy skepticism about the claims any inventor is making. After all, a large percentage of all new businesses and new ideas fail. Put these two together, and talks are likely to be delicate, perhaps even escalating into increasingly bold claims and deeper skepticism. Such interactions can lead to bruised egos.
Why does this happen? Psychologist Lee Ross at UCLA has identified an important cognitive bias that applies in these situations—reactive devaluation. It causes all of us to automatically question the legitimacy of anything proposed by a negotiating partner. An inventor is inclined to mistrust the statements made by the other side about his or her invention. While investors or business partners almost always start out skeptical about the claims made by an inventor.
There are a number of strategies and techniques that can be used to counteract important emotional and cognitive dynamics like reactive devaluation. Entrepreneurial Negotiation: The MIT Way gives budding entrepreneurs a chance to learn and practice these deal-saving techniques.
(2) Technical Complexity
Many start-ups are built around a technical insight or design. These may involve innovative hardware or software, or a complicated new application of old tools to solve a tricky problem, or capture an untapped market segment. Despite plenty of exceptions, potential investors or business partners rarely have the same specialized expertise as the inventors with whom they are negotiating. That’s why investors often rely on experts of their own to test and vet whatever is being proposed. Asymmetries in technical understanding and the involvement of skeptical experts working for the other side can create difficulties.
For example, experts selected by an investor or potential business partner may represent a particular school of thought on a technical matter that causes them to be skeptical of what is being proposed. When this happens, the inventor has to work especially hard to win over the other side’s expert. Moreover, even in the face of a great idea, an investor’s technical expert might remain skeptical, just to prove his or her worth, reflecting more of a bias than an objective evaluation of whatever is being proposed. In such situations, the entrepreneur will end up negotiating not only with the investor but also, indirectly, with what we call the investor’s or partner’s “back table.”
To negotiate with a back table (even indirectly), entrepreneurs have to find a way to make sure claims about their product or service, based on technical or scientific tests they have done themselves, are convincing. They know the strengths and weaknesses of the tests inside and out. Unfortunately, given typical negotiation dynamics, their results may fail to persuade a back table for the reasons mentioned above. Entrepreneurial Negotiation: The MIT Way teaches “joint fact-finding” – a technique for overcoming this problem.
Entrepreneurship turns on innovation, and innovation is ripe with uncertainty. The usual argument in favor of something innovative is that no one has ever tried it before. The argument against it is also that no one has ever tried it before. All this uncertainty creates both risk and opportunity. Both are magnified by technical complexity in fast-changing markets and shifting business environments.
Especially at a start-up, reasonable minds can disagree about how to manage uncertainty. Experimentation and creativity help, of course. But in negotiations, investors and entrepreneurs sometimes turn to another tool to resolve their different estimates of what is likely to happen. Instead of trying to negotiate agreements based on whose forecast is more likely to be correct—e.g., how fast the user base will grow, how soon the company will become profitable, when the next round of funding might arrive, how fast the company can scale up its presence or production—the parties can use “contingent agreements.” These bridge competing forecasts by spelling out what both sides agree should happen regardless of which scenario is correct. In Entrepreneurial Negotiation: The MIT Way, I examine the best ways of using contingent agreements as a hedge against uncertainty.
At the conclusion of many buy-sell negotiations, the parties are glad they never have to see each other again. Entrepreneurial negotiations, on the other hand, often require ongoing relationships. Managers need to keep talking to their board of directors; founders need to talk to venture capitalists more than just once. Once they have worked together for a while, they may part company; until then, though, they are best off behaving as if they will have to continue to work together.
There are several ways negotiators should and should not behave when they anticipate the possibility of long-term interactions with their negotiating partners. First, long-term working relationships hinge on trust, and trust depends on truthfulness. My course explores the differences between the kind of bluffing that’s seen as appropriate in many negotiating contexts, and the kind of deceit that sours relationships. Second, when relationships matter, negotiators should avoid win-lose deals that eventually leave one side realizing they didn’t get a fair shake. The alternative is a win-win outcome that benefits everyone, at least one that leaves all parties better off than they would be with any other available deal. This is more if both sides commit to creating enough value to go around. Entrepreneurial Negotiation: The MIT Way explains how to create value through win-win trades that build trust and sustain relationships.
The MIT Way
To be a good negotiator, you need more than mere tactics and technique. You need a theory, one that explains why you should do some things and not others. MIT’s motto (“Mens et manus”) is Latin for mind and hand—theory and practice, why and how. Any good entrepreneurial negotiator must know what to do and how to do it. Without adequate theory, you won’t know how to improvise or apply what you know in new situations. Without adequate technique, you won’t be able to pull it off. The MIT way is to learn the theory of negotiation (that has developed in academic and business settings over the past several decades) try it out, and then formulate a personal approach to entrepreneurial negotiation that integrates both the why and the how.
The text for the MIT course is Good For You, Great for Me: Finding the Trading Zone and Winning at Win-Win Negotiation. Those who enroll get a free electronic copy.