One of the most critical aspects for any negotiation is planning, which is a subject worthy of its own blog post. Part of the planning process includes assessing power and leverage of the parties who will participate in the negotiation. Power and leverage are not synonymous but are often articulated interchangeably. Who has more power in the negotiation? Who has leverage? How can that leverage be influenced?

Well, what’s the difference?

Power is the strength, ability or resources to do something or act in a particular way (subtext – a way that can also control other people or outcomes).

Leverage is having something that someone else wants or needs, and thus the ability to influence power (subtext – to impact other people or outcomes).

Consider the massive real estate developer who has successfully purchased all but one tiny home in the area designated for a client’s new medical research campus. That home is owned by a 80-year old woman (in good health, so she’s presumably not going anywhere) whose grandfather built the house, was raised there, and raised her own family there. She has communicated to the developer that there is no price they can put on that house. It’s simply not for sale. She’s just a “little old lady” and they are the big powerful developer. But she’s got the leverage.

Many of us are parents. As between us and our 3-year old child (which was many years ago now for me), we are the more powerful party. We are bigger, stronger, have a more developed brain, more experience, and better command of our fine and gross motor skills to accomplish tasks. But if you want your child to eat their peas, the child has the leverage. Sure, you can use threats and bribes which could impact future opportunities for your child (no dessert unless you eat the peas; no movie after dinner; no playdate the next day with their friend). Carrots and sticks are important tools in the parental toolbox, and can be very effective when used, particularly in combination with one another. But ultimately you cannot force the child to eat the peas. Only they can do so. They’ve got you in the cross-hairs and it’s really a test of your own temperament, behavior, and strategy as a parent how you respond. Not only might your ego be on the line (“I can’t let them win this one. I need to maintain who’s in charge”), but shaping future behaviors is also a factor to consider (“If I surrender on the peas, what am I signaling? It means I lose credibility and they will learn that they don’t have to listen to me in the future.”) Leverage is nuanced and can be a real thorn in the side of the more “powerful” party at the negotiating table when they don’t have it.

Now for the punchline: leverage can shift. Perhaps there’s a way for the real estate developer to affect conditions to change the situation (e.g. start the demolition on the properties surrounding our “little old lady,” creating conditions so intolerable that she finally caves). Perhaps you can use a third party as an influencer: that favorite uncle who your child constantly imitates happens to be visiting that evening for dinner and delightfully devours their peas, exclaiming how good and healthy and strong peas make them feel . . . causing your child to gladly eat their peas so they can be just like Uncle Mark. Another extremely important aspect of negotiation, after the planning is complete, and you are in the thick of it, is remaining agile. Often new information is presented to you through the course of the negotiation. Pay attention.  Assimilating (after validating it) that new information and assessing how it impacts your options (and possibly shifts leverage) is absolutely critical. You may need to adjust your expectations or your bottom line accordingly. You may need to take a break to develop additional options or conduct more research. The point is, leverage is a key player in a negotiation – and a dynamic one.

And for an entertaining depiction of shifting leverage, watch Pirates of the Caribbean: Curse of the Black Pearl.

Lucia Kanter St. Amour, Pactum Factum Principal