RESEARCH GLOBALLY DISTRIBUTED BY THE PAPERSTORE 1-800-90-WRITE Negotiating a Settlement Research Compiled for The Paper Store, Enterprises

s Inc. by Terri Smith, United Kingdom, December 2004. For More Information on How To Use This Report Correctly, Please Visit www.paperwriters.com/aftersale.html The way in which an agreement is made will help to determine the final outcome of any disagreement. A careful and planned approach to the negotiation process may give one party an advantage over another. In the case supplied by the student the two parties are a local major employer; Twin Lakes Mining Company, and the local council; Tamarack Town Council. There is a history of co-operation and a desire to reach and agreement which reduces the potential levels of hostility. The situation is also aided by the existence of a high trust relationship which means there are unlikely to be fears of either party reneging on any agreement reached. In this case we are advising Twin Lakes Mining Company in their negotiations with Tamarack Town Council and need to consider their position. We know that Twin Lakes Mining Company have an advantage; they are the major employer in the area, this gives them a high level of bargaining power. However, they are also in a position where they need to undertake clean up work from the pollution that they have caused and do not have all the funds they need to undertake that clean up.

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RESEARCH GLOBALLY DISTRIBUTED BY THE PAPERSTORE 1-800-90-WRITE The company need the council to make an offer to pay a higher percent of the clean up operation than is being offered at the current time. A broad approach is being taken; Twin Lakes Mining Company is looking to gain concession in a number of related areas including land taxes, help with the clean up costs and help in road maintenance needed for their operations. In order to benefit from the maximum advantage there are several factors which need to be considered by the company. The negotiating position will always be one of asymmetric information on both sides, even where there is trust and past co-operation. Neither party will have full knowledge of the others position and this can be used to the advantage of the relevant part. This can be used in conjunction with the ability to look ahead and foresee possible outcomes of different strategies. This means that the steps undertaken in the negotiating process should be based on logic rather than emotion; although in the right circumstances the manipulation of emotions can be very effective, however this practice can be ethically questionable (Camp, 2004). The first stage of the process for Twin Lakes Mining Company should be an examination of the situation and a recognition of the weaknesses can enhance or hinder the way in which the negotiations take place (Pouliot, 1999). This recognition of potential weaknesses will empower Twin Lakes

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RESEARCH GLOBALLY DISTRIBUTED BY THE PAPERSTORE 1-800-90-WRITE Mining Company will and mean that the 'opposition' will less likely catch out the firm with any aspect of the deal where they do not have a response and alternative approach to propose, either in tactics or strategy (Pouliot, 1999). We can see by looking at the council there are several weaknesses to the company. A major weakness for the council is the way in which they are reliant on the company for 60% of the jobs of the local workforce. The reason for the negotiation itself may be a weakness on the part of the company; there is the need for financial help and it is apparent that the company needs this help in order to continue with the current operations and projects. However, in the case it is also clear that the need to reduce and clean up the pollution is important to both sides of the negotiation. It may also be to the advantage of the Twin Lakes Mining Company that the council do not know exactly what they want and what they can and cannot fund; flexibility in terms of the concessions that will help them. Therefore, we know that both parties have similar goals and as such a clear common interest is easy to establish. This will enable the negotiation to take place building on shared values and the existing relationship, which is shown to be the most effective way forward in any negotiation (Ghitelman, 1998).

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RESEARCH GLOBALLY DISTRIBUTED BY THE PAPERSTORE 1-800-90-WRITE The second stage must be the determination of the bottom line; the least that will be accepted to allow the deal to go ahead (Pouliot, 1999). This is the very minimum which Twin Lakes Mining Company will hope to achieve, however, they will try for more if they can. The bottom line is a contribution level that they can accept is $4 million, or 50% of the interest payable on the bonds. The company may agree to spend $800,000 and contribute $80,000 to annual maintenance costs. However, the company will seek to keep this at a lower level. There is also the need to reduce the level of rates paid on the land owned by the company, this needs to be reduced to $200,000; a 50% reduction. In knowing what the bottom line is the way in which the negotiations are handled are simpler and easier as well as simplifying the decision making process which becomes more straight forward. If the bottom line were not decided until the negotiations were underway there a distinct disadvantage would exist as it is unlikely the other side would have been equally indecisive, they are likely to know what they want; the game will become more one-sided. The negotiation of the bottom line should also include the need for the negotiator; this has to be an individual that is trusted by both parties.

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RESEARCH GLOBALLY DISTRIBUTED BY THE PAPERSTORE 1-800-90-WRITE In planning for the negotiation there is also the third stage, this is to learn as much about the other company (or party) as possible. The negotiator here has a distinct advantage if they come from one particular side as this will give them a greater level of information regarding that party. If the negotiator is know to both sides and may be seen as a friend to both sides, which it is quiet possible in a town of this size where there is such a close tie between the parties, this may be more acceptable to both parties. However, this does have dangers. The information at this stage may not be difficult for Twin Lakes Mining Company to obtain. There is the past relationship to build on; using knowledge of the intentions and attitudes of the council in the past as well as council culture and philosophy will give insight and knowledge that can be useful (Pouliot, 1999). The forth stage of negotiation and preparation should be to establish a relationship before the negotiations take place (Lax and Sebenius, 2004). This emphasises the advantage of the company's existing relationship with the council. Negotiations may be more successful when the parties are known on a more personal level. Experienced negotiator Paul Fox, president of Fox Performance Training, a firm in Ellington, Conn. says;

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RESEARCH GLOBALLY DISTRIBUTED BY THE PAPERSTORE 1-800-90-WRITE "Tell the other party you'd like to have a pre-meeting so you can get acquainted. Let them know you realize this is an important negotiation for both of you and you believe both can benefit by getting a sense of how each other operates.Explain that you want to help them achieve their goal as much as you want to achieve your own." (quoted in Pouliot, 1999). Paul Fox also notes that this is the stage of negotiation most people will miss out as it is not seen as immediately productive; yet a small amount of time an effort invested here can be very beneficial when it comes to the negotiating table (quoted in Pouliot, 1999). This is also a stage that the company may want to miss out seeing as they already have a positive relationship with the council, but a pre meeting may be very beneficial. The student should notice that when using a case study it can always be useful to compare to other similar examples and the thoughts of experienced manager who have undergone the process in reality. In this Paul Fox can be seen as an expert with relevant experience, which can be seen as being as useful as theories especially when the evidence is corroborative so supports the theories that are being utilized. The fifth stage is to create the agenda and then try to stick to it. This way the negotiations do not go off track and

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RESEARCH GLOBALLY DISTRIBUTED BY THE PAPERSTORE 1-800-90-WRITE sight of the goals and targets are not lost. This will prevent issues not directly related from becoming involved and will ensure that the order is also logical. This agenda can be planned before the negotiations begin and serve as the agenda during the actual talks (Pouliot, 1999). The agenda can be distributed among the parties negotiating and if the subject does go off track attention can be drawn to it so that the negotiations continue as they should. It is at this time the negotiations can start in earnest. There does need to be some flexibility in these; if adhered to too rigidly the other party may behave defensively is they feel that they are backed into a corner (Pouliot, 1999). The agenda for this case will need to have the items such as the cost of pollution control, the cost of clean up, the rates and road maintenance etc., all as separate issues. The sixth step should be remembered at this stage, and although there has been contact to break the ice the negotiations should not themselves become personal talks (Pouliot, 1999). A problem with negotiation is that it can become personal; if this occurs the emotions can become high and it becomes a matter or wining and loosing rather than negotiating a settlement. If one party refuses to enter this conflicting style of talking the other may be pulled out of it. The basis of this can be seen in communication models; if a parent/child attitude

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RESEARCH GLOBALLY DISTRIBUTED BY THE PAPERSTORE 1-800-90-WRITE is taken and a fight refused the party adopting the child attitude is likely to align themselves with the adult approach and adopt the adult attitude. If this takes place the negotiations will come back into line without the emotions running high causing conflict, increasing the chances of satisfactory outcome to the talks (Pouliot, 1999). Often it is also worth noting that when emotions run high the actual underlying cause of conflict may not be the issue in the table, it might not that which is being voiced but another underlying concern, such as fear or hidden concerns (Rao, et al, 1998). A good tactic to increase the awareness of this is to increase the amount of variables that are being negotiated (Pouliot, 1999). The last stage of a negotiation is seen where there is a stalemate; if there is a stalemate to move forward the cause of that stalemate must be found and resolved, the above tactics can help. If we apply these principles to the case we can see the

way in which the negotiations appear to have been conducted. If we apply this there may need to be the use of some bluffs, but based on trust, such as the exaggeration of the final impact that a lack of help result in for Twin Lakes Mining Company and the potential cost of job loses and the level to which the company are prepared to go to reach that agreement.

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RESEARCH GLOBALLY DISTRIBUTED BY THE PAPERSTORE 1-800-90-WRITE Both parties start further away and move towards an agreement point. As the talks take place there is increasing commitment emphasised. To gain the commitment from the council the company may want to give an indication of a potential concession and then back track. It is a classic sales tactic; give something to someone, and then put an obstacle in the way at the last minute in order for them to want the deal more and fight to get it. The obstacle trick has been used in negotiations of all sorts from the sale of double glazing to the negotiations of multi million dollar acquisitions and mergers (Agency Sales Magazine, 1999). The idea of a solution being found between the parties is also aided psychologically by the round table. The case study may be best conducted at a round table to avoid a situation which could be seen has conflicting where parties may feel that they are on opposing sides. The use of the round table there is more of a team work idea; where there is the attempt to give the impression both parties are on the same team. This can be seen to work, even if it is really the company that is in control, it is not an intimidating control and it is not dominant. The psychological impact of believing to be close to a deal and then appearing to loose it may help push the council further towards a deal that is favourable to Twin Lakes Mining Company

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RESEARCH GLOBALLY DISTRIBUTED BY THE PAPERSTORE 1-800-90-WRITE in an attempt to find a solution; it is usually the salesman who will present it, ether directly or indirectly (Yama, 2004). The negotiator on behalf of the company tells the council what he proposes as a deal, and why it is so good for all the parties concerned. This will not be the bottom line position and there will be a focus on the mutual benefit and the way the benefits can be seen to outweigh the costs. We can see negotiation involves many stages in addition to the sitting round a table and talking. The student should be aware of the many tools that can be used and the roles they play, such as the withholding of information and revealing of other information as well as the way in which to gain information and then the appropriate uses for that data. The roles of asymmetry of information and the use of limited authority, growing commitment, bluffs and other useful ploys such as attitude and even the arrangement of the physical surrounding such as tables and chairs in addition to the importance of the preparation are all important areas of influence and should all be considered when any negotiations are undertaken and Twin Lakes Mining Company is a case which shows how the firm can benefit from this carefully managed approach.

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References Agency Sales Magazine (no author cited), (1999, Nov),Tips and tactics. (useful suggestions from manufacturers' agents to their colleagues), Agency Sales Magazine, v29 i11 p40(2) Camp Jim, (2004, May), How to land the best deal: these negotiation tactics will help sort out the best possible advantage, Incentive, v178 i5 p59(2) Fisher R., Ury W. B Patton. (1991) Getting to Yes: Negotiating Agreement without Giving In New York, Penguin Ghitelman David, (1997, Sept), Getting your way, Conventions, v32 n10 p78(6) Meetings &

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RESEARCH GLOBALLY DISTRIBUTED BY THE PAPERSTORE 1-800-90-WRITE Silverstein Elliot. (1996, March), The art of tough negotiating: thrust and parry, Training & Development, v50 n3 p42(7) Supplier Selection & Management Report, (No author cited), (2003, March), Supplier negotiation tactics: what they don't teach in school. Supplier Selection & Management Report, p1 Yama Elliott, (2004, Sept-Oct), Purchasing hardball, playing price. Business Horizons, v47 i5 p62(5) Yanow Morton, (1992, Spring), Mutual agreement: tactics for negotiating. Whole Earth Review, n74 p30(3)

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