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The Art of Balancing Fear and Trust in Dealmaking

As a corporate lawyer, I spend a large part of my time writing and reviewing contracts and advising clients on opportunities, risks and on their legal rights, responsibilities, and obligations related to their business dealings. However, what I often find most fascinating are the emotions that impact business deals and the resulting group dynamics that often go unnoticed by the participants. While most participants consciously focus on price, timing, problems and other terms, their actions and decisions are often driven by emotion — fear, anger, expectation, hope, disappointment, and so on.

Two emotions that commonly impact business deals are fear and trust. Frankly, I don’t know which is scarier, because either emotion can make people act irrationally.

Acting out of fear, a participant is likely to overreact to a perceived threat in the negotiation or overanalyze an agreement to the point of losing out on a potentially good deal. On the other hand, participants who are overly trusting may enter into an agreement without carefully thinking it through and later regret their decision.

A healthy balance of fear and trust leads to better outcomes.

The 4 Steps to Diagnosing Fear in Business

I often write about fear dynamicsthe behavior and communication patterns that emerge during interpersonal interactions involving fear or anxiety that any or all involved parties are feeling. For example, I was working with a client who repeatedly took hard line stances on negotiation points as his initial opening position. However, when there was silence in the negotiation or it appeared the other party might walk, then my client would cave and give in to the demand. I had observed this type of negotiating tactic before (as I am sure many have), but the consistency of this behavior and almost complete capitulation on virtually every issue was unusual.

As I engaged with my client, I stated that the dynamic he was creating was making each negotiation point more and more difficult because he was teaching the other side that he would give in whenever there was a pause or a fear that the deal might die. My client was self-aware enough to understand this and, to his credit, he admitted to engaging in this behavior. He also stated very clearly that he did not want to lose the deal regardless of the terms. This insight was very helpful to me in understanding the situation; knowing that my client and I understood each other alleviated my anxiety. It allowed me to be more aggressive in stopping my client from speaking and in avoiding breaks and other moments of silence that would eat away at my client.

Ultimately, we worked through the deal and were able to close the transaction. I believe that my client got a better deal after he and I were able to understand the tension between the two of us, and I was then able to act to mitigate my client’s fear response.

Fear dynamics play a role in what is often referred to as

Finding Business Solutions in the Humanities

At most colleges and universities in the U.S., the schools of humanities and business traditionally have not crossed paths. While you might find business majors in humanities classes, mostly because they are required to take a certain number of electives, it is the rare humanities major who will enroll in a business course. The reason could have more to do with culture than interests. Business seems to draw people with a more fiscally conservative mindset, whereas the humanities tend to draw more liberal minded students. The BA’s and MA’s do not often mingle with the MBA’s.

However, the line dividing business and humanities is blurring. More and more businesses are looking to the humanities for employees or new perspectives on solutions, not only “hard skills,” such as marketing, communications, and graphic arts. Companies are increasingly seeking expertise in the social sciences — anthropology, sociology, and psychology. In 2011, at the iPad 2 launch, Steve Jobs said,

Fight, Flight, or Freeze: Are Those the Only Options?

For our own protection, we are hardwired to fight, flee, or freeze when we perceive danger. The brain’s amygdala triggers a release of stress hormones, including adrenaline and cortisol.

Your heart rate jumps, breathing becomes shallow and rapid to take in more oxygen, your throat tightens, your face gets flush, your palms get sweaty. While the fear response has been very helpful historically and in the physical world, it is a useful indicator in our personal or business relationships, our careers, our finances, or even our freedom. The fear response serves as an early warning of potential threats and let us know when “something just doesn’t feel right.” However, it can seriously interfere with our engagement with the world if it disengages rational thought processes. In the midst of a fear response, complex decision-making and memory are inhibited. You lose the ability to view a situation from multiple perspectives, so you tend to see complex issues in black and white.

When I am in a heated moment of a transaction or negotiation I find that I need to actively slow myself down and “take a beat” in order to engage thoughtfully and rationally. Early in my career it seemed as though I would take the emotional bait of fear and anxiety in a situation and find myself being reactive to challenges or emergencies in a transaction. Through experience and self-introspection, I have found that if these impulses can be moderated, better decisions and advice are more likely to occur.

As you might expect, the fear response can lead to conflict and prevent people from making well-informed, rational decisions. It can cause people to act out of

Fear Dynamics 101: Part 4, Reaping the Benefits of a Fear Audit

Welcome to the final part of my four-part series: Fear Dynamics 101. In Part One, “Defining Fear Dynamics,” I introduced the concept. In Part Two, “Recognizing the Warning Signs,” I illustrated several common symptoms of fear that arise in group settings, so you know what to look for. In Part Three, “Counting the Costs of Fear Dynamics,” I discussed the potential consequences of failing to address the fear factor in business. In this part, I encourage you to take the first step toward identifying and addressing fear in your organization and business deals — by conducting a fear audit.

A fear audit provides an objective analysis of interactions within an organization, between among parties involved in a business deal, or between an organization and its clients or vendors in order to identify and correct fear-driven behaviors and communications that often undermine business deals and that hinder performance and productivity. A fear audit is a four-step process, preferably conducted by an objective, third-party observer with expertise in fear dynamics:

Fear Dynamics 101 — Part Three: Counting the Costs of Fear Dynamics

Welcome to Part Three of my four-part series: Fear Dynamics 101. In Part One, “Defining Fear Dynamics,” I introduced the concept. In Part Two, “Recognizing the Warning Signs,” I illustrated several common symptoms of fear that arise in group settings, so you know what to look for. In this part, I discuss the consequences of allowing fear to govern business behaviors, relationships, and interactions.

I would not be discussing the problems associated with fear dynamics (the behavior and communication patterns that emerge during interpersonal interactions involving fear) if there were no costs that people and organizations suffer. Unfortunately, the potential costs of fear dynamics are quite substantial.

When fear operates unchecked or acknowledged, people often respond in the following ways:

Fear Dynamics 101 – Part Two: Recognizing the Warning Signs of Fear Dynamics

Welcome to Part Two of my four-part series: Fear Dynamics 101. In Part One, “Defining Fear Dynamics,” I introduced the concept and presented an example to illustrate how fear dynamics threatened to derail an acquisition I was working on for a client with the help of an accounting group. In this part, I describe common fear dynamics warning signs, so you know what to look for.

(Photo by Fineas Anton on Unsplash)

Perhaps what is most sinister about fear dynamics (the behavior and communication patterns that emerge during interpersonal interactions involving fear) is that they arise from causes unseen. Like a tsunami that swells from shifting land masses miles below sea level, fear dynamics wash over everyone involved, often without them ever sensing the cause.

Note: Although I recommend ultimately working toward eliminating fear dynamics through proactive processes, learning how to mitigate or manage existing fear dynamics can be equally beneficial and is often a necessary first step — a step that requires the ability to recognize when a fear dynamic is at work.

One of the first steps in managing fear dynamics is to learn to “smell fear” when it is influencing the behavior of one or more parties in a group. (The “group” may be an internal group, a client service group of several companies, or a group working on a transaction in an adversarial setting.) Here are a few of the most common warning signs that fear is influencing a person’s behavior or a group dynamic:

Fear Dynamics 101 – Part One: Defining ‘Fear Dynamics’

Fear is an unpleasant feeling that tells us when someone or something is potentially dangerous — that it threatens our being or well-being or is likely to cause pain of some sort. It serves the useful purpose of keeping us out of trouble; it can motivate us to take much-needed action — fight, flight, or freeze. And it is useful in various aspects of our lives, warning us of threats not only in the physical world, but also in our personal or business relationships, our careers, our finances, or even our freedom.

However, if it is unwarranted or excessive, fear can warp perception, stifle innovation, erode confidence, undermine trust, and trigger conflict. Left unchecked or misunderstood, it can paralyze an individual or an entire organization and lead people to make poor decisions with potentially catastrophic consequences. Yet, fear in the business environment is rarely addressed in any formal way. In fact, most do not even recognize the warning signs. As a result, many suffer the consequences —

Cheers to the Agents of Change

Small or massive, change is as draining as it is invigorating. I have been reflecting on this dichotomy recently as I navigated the change in where I “hang my shingle,” as they say in the legal world. The transition has subjected me to alternating waves of great hope and mind-numbing laboriousness, often in rapid succession.

During this life-changing event, I tried to take a step back and reflect on what change must be like for my clients and connections. I spend my days facilitating change in companies and for individuals. Whether it is the hiring or firing of an employee or the purchase or sale of a ten-store dealership group, the constant is change. I often am involved in significant change with my clients where the future goals are large or the failure risk is high. These sorts of situations consume energy at high levels for all the players involved. I had understood this at one level before I made my change, but have come to a new appreciation of what is really involved in these situations.

I have also come to realize that the type of energy in change situations is different than that needed to maintain a routine or pattern. This makes intuitive sense, as the energy needed to evaluate new and changing facts and circumstances differs from that needed to

The Downside of Negativity Bias and Other Patterns

My 14-year-old son has started to use the phrase, “triggered” while we are watching a program on television. He is referring to an irrational response a character has due to a past event. Or sometimes, quite often actually, he directs this expression directly at me, his father, when I respond in a way he finds irrational.

This made me think about how past encounters with clients and other participants in a transaction or project may affect our current perceptions and behavior. When you stop to think about this statement, it may not be an “A-ha” moment, but one that definitely feels familiar. I raise this issue because, while it may be obvious, we find ourselves being blindsided by this phenomenon at times and it’s easy to see how it can play out with other relationships in business settings.

One of the clearest examples of a trigger that I can recall involves an intermediary who was providing information for several different transactions. The information for one of the transactions was