Professional Documents
Culture Documents
Negotiation is a part of normal everyday life. Still, many people feel that they are not
experienced negotiators. Perhaps they do not realize that there are many types of contracts to
be negotiated. Not all are complex written agreements. Most contracts are oral agreements
which may or may not involve the exchange of monetary consideration.
Without realizing it, you have probably been involved in a variety of contract
negotiations every day of your life. In fact, we constantly bargain with other people to fulfill
both our monetary and non-monetary needs.
At work, we are involved in continuing negotiations with our superiors, subordinates,
and coworkers concerning a variety of personal and professional issues. They may be
as minor as deciding who will make the next pot of coffee or as major as the rating on
your annual performance evaluation.
At home, you are probably involved in continuing negotiations with your family over
a wide variety of issues. They may be as minor as the time for dinner or as major as
where you will live. A child crying for a favourite toy can be a formidable negotiator.
You have likely been involved in numerous negotiations that will have a long-term
affect on the course of your life, including: the terms of your current employment; an
automobile purchase contract or lease agreement; or your home mortgage or apartment
rental agreement.
In fact, you must negotiate for most things you want in life. You can only avoid
negotiation if you have no desire for anything held or controlled by someone else. Regardless
of your profession, skill as a negotiator is essential to your success.
Negotiation is a process of communication by which two parties, each with its own
viewpoint and objectives, attempt to reach a mutually satisfactory result on a matter of
common concern.
In negotiation, a mutually satisfactory result is vital, because even though the parties
may have opposing interests they also are dependent on each other. Labor and management,
for example, need each other to produce products efficiently and effectively. Likewise, buyers
and sellers need each other to transact business. Both sides must be willing to live with the
result. Negotiation is not one party dictating or imposing terms on another. When that
happens, the outcome will rarely produce mutual satisfaction. The result can only be mutually
satisfactory if both differences and common interests are considered.
To obtain agreement, you must generally sacrifice something in order to get something
in return. In other words, you must give to get. But as long as the anticipated benefit is greater
than your sacrifice, a negotiated agreement is beneficial. The limit is reached when one party
believes that concessions would be more costly than the benefits of agreement.
While negotiation is often a process of mutual sacrifice, it should also be a process of
finding ways whereby both parties will have their interests optimized under the
circumstances. Negotiations should not just be aimed at how to split the pie. Instead they
should be aimed at finding optimal solutions - ways to make the pie larger for all concerned.
For example, both parties benefit when negotiators find that a change in buyer requirements
will enable the seller to deliver a higher-quality standard product instead of a specially built
1
product. The seller realizes lower risks or perhaps more profit from the sale of a standard
product. The buyer pays a lower price for a product that meets the buyer's real needs.
2
o Who display a tendency for arguing will increase the conflict and make a
satisfactory outcome all the more difficult to attain.
Project honesty. Good negotiators are honest and they make others believe that they
are honest. Securing trust is vital to securing a mutually satisfactory outcome.
Concessions are difficult to obtain when other do not trust you.
Foster team cooperation. All members of the negotiation team may not agree on
every issue. Disagreements must be resolved in a manner that fosters team cooperation
and the appearance of team unity during contract negotiations.
Apply good business judgment. Good negotiators are able to evaluate every change
in a negotiating position based on its overall effect on attaining a mutually satisfactory
result.
In general, there are three possible outcomes to every negotiation. These outcomes are
known as "win/win," "win/lose," and "lose/lose." Any negotiation can conceivably result in
any of these outcomes, but different negotiation styles can make one or the another more
likely.
Win/Win Outcomes
A win/win outcome occurs when both sides achieve long-term satisfaction with
negotiation results. Negotiations emphasize developing a mutually beneficial agreement. For
example, awarding a contract at a fair and reasonable price is in the best interest of both the
seller and buyer.
Commercial businesses are emphasizing win/win negotiations because of the
increasing importance of long-term business relationships. Each side has a vested interest in
mutual long-term satisfaction. Any short-term advantage achieved by wringing out every last
concession is usually not as important a long-lasting business relationship.
Win/Lose Outcomes.
When a negotiation results in a win/lose outcome, one side is perceived as having
done significantly better at the expense of the other. This type of negotiation tends to be
highly competitive, with a large degree of mistrust on both sides.
In commercial business, win/lose outcomes often occur when the negotiators do not
anticipate additional business beyond the initial transaction. There is no motivation to ensure
long-term satisfaction for the other side. Examples of win/lose outcomes abound in everyday
life, such as private home and auto sales where the negotiators generally do not anticipate
additional negotiations with the other party.
Both sides often feel that they are the losers in a win/lose negotiation because of the
competitiveness and mistrust that characterized the negotiation.
The losing side might feel good at the conclusion of the win/lose negotiation because
of their immediate perception that they obtained the best deal possible under the
circumstances.
In the long run, the losing party often regrets the agreement after discovering that the
deal was not a good one after all.
The losing party becomes even more mistrustful of the other party and reluctant to
continue any sort of business relationship.
3
Lose/Lose Outcomes.
When there is a deadlock, the negotiating outcome is known as a lose/lose outcome. A
deadlock occurs when final agreement cannot be obtained. Since both parties had a stake in a
successful outcome of the negotiation (or they would not have been negotiating in the first
place), both sides lose when negotiations stalemate and deadlock occurs.
Sometimes, avoiding a deadlock is very difficult when the other party is unfair or
uncompromising. The negotiator must decide on the better alternative: deadlocking or being
on the losing end of a win/lose outcome. Considerable effort should be made to avoid a
deadlock because the negotiator may suffer a loss whenever one occurs.
1. Preparation: In which the negotiators identify the issues and range of objectives
for each issue.
2. Developing a strategy: In which each party decides what strategy and style to
adopt.
3. Getting started: In which each side presents their initial demand or case.
4. Building understanding: In which the negotiators justify their position and try to
weigh up the other's position.
5. Bargaining: In which each party tries to get concessions.
6. Closing: In which final agreement is reached or the negotiations are terminated
short of an agreement.
Some of these stages are more relevant to formal negotiations between teams
or organizations than to informal discussions between individuals. However, even in
a more informal situation, the six steps provide a simple and practical framework for
managing your negotiations, and identify the skills and strategies involved in this
process. We recommend you use this six-step approach in all your negotiations, as,
whilst it is not guarantee for success, it will help you to assess the situation accurately,
select the best means of persuasion and implement your strategy effectively. It will also
protect you from making some of the most common and costly mistakes, and help you set
objectives and time limits that work for, not against, you.
4
The following sections deal in some detail with the skills, and activities associated
with each stage of this approach (such as assessing relative strengths and weaknesses,
setting the agenda, and getting and making concessions) and provide hints for improving
your performance as a negotiator in each stage.
In negotiating like many other activities, it is vital to understand that 'if you don't
know where you are going, you are liable to end up some place else'. What you need to
do, therefore, is to think carefully and prior to the actual negotiation about what you are
trying to achieve.
5
agreement (commonly referred to by its acronym BATNA) and it will help you define and
decide on your target objective in a realistic way. It also determines your degree of
generosity and the level of your 'walk-away' position. If you have little to lose, your
downside risk is small. You can afford to be generous. On the other hand, if you stand to
lose a great deal, you must choose and use your objectives with great care.
In defining your BATNA, ask yourself:
How far can I go? When should I stop negotiating?
What will happen if I stop negotiating?
Do I need the other party for implementing my solution?
Do they need me?
Normally, the better your BATNA, the stronger your bargaining position, and the
more demanding you can afford to be. However, to assess bargaining power, you also
need to consider the other party's best alternative to non-agreement.
If possible, one of your bargaining objectives should be to help the other party to
feel satisfied with the outcome.
Finally, in negotiation, firmness and clarity are a strength. Therefore, as a rule,
your BATNA and bargaining objectives should not be altered unless the underlying
assumptions change.
To plan your negotiation, you may have to make assumptions about the other
side's likely reactions to your demands. Assumptions are best guesses, and must be
tested. If you act without testing your assumptions you may inadvertently spend a lot of
energy in resisting something the other party is not demanding or demanding
something the other is not resisting.
As early as possible in your preparation and negotiation, you need to carry out
the following activities:
1. Try to establish what the other party's claims are and what they are seeking to
achieve.
2. Probe whether specific problems or concerns lie behind their questions or claims.
3. Exchange factual data in advance of negotiations.
4. Consider what facts and arguments the other party is likely to use in support of
their claim.
5. Consider the possible existence of a hidden agenda. Look for underlying issues
which may influence the conduct and outcome of the negotiations or cause delay
and confusion during negotiation.
Strength is the power or influence you can exercise over the actions of the other
party.
Power and influence may take many forms, for example:
Decision-making authority (you're the boss).
Superior knowledge of the issues in dispute.
Superior financial resources.
More time to settle the case.
6
The moral strength of the actual case.
The determination or persistence of the negotiator.
Better preparation.
More experience in negotiating.
When assessing your strengths and weaknesses, you should bear in mind that
power in negotiation has some characteristics:
Power is of no use unless both parties know about it and have a similar view of its
extent. If you are stronger than the others but they do not know, then you have no
effective power. If you are weak and they do not know, you are stronger than you
think you are.
If you are stronger and both parties know it, then your basic use of this advantage in
the negotiation will be to remind them of the consequences of not conceding to your
suggestions. The skilled negotiator uses or threatens to use his/her power to
influence and persuade the other party rather than to defeat them.
You may be the weaker of the two parties but you are never totally powerless. When
your case is really hopeless, plan to minimize your losses rather than to defend the
case.
Experienced negotiators will think very carefully before they take full advantage of the
other side's weaknesses. Recognizing the need to `live together`, however uncomfortably,
gives each side some negotiating strength.
Negotiating skill is no substitute for lack of negotiating strength. Skill can only offer
short-lived advantages.
Your own negotiation position can sometimes be strengthened by identifying and
tactfully reminding the other party of sanctions which are available if negotiations fail. These
sanctions may be financial, legal or emotional, or may relate to the effect of a particular
outcome on an organization's or on an individual's reputation, image or self-esteem. Displays
of emotion may occasionally be beneficial provided that they are sincere and used
consciously. However, try to avoid emotional outbursts.
7
When you are negotiating as a team, also consider the following questions:
Who will lead the discussion?
Who will check understanding (verify facts)?
Who will ask what questions?
Who answers the other side's questions?
Who will work to reduce tension and show concern for people?
In addition to determining your strategy, there are two questions to be answered before
entering the negotiation:
What style will I adopt? Although you may not often think of it this way, everyone has his
or her own characteristic approach, or style, when it comes to managing conflict. For
example, a particular person may be characterized as being more (or less) aggressive,
dominating, inflexible, dishonest, constructive, compliant, co-operative, competitive
and so on. Let us remember the different styles of conflict management, namely the five
styles discussed in Part 4 - forcing, avoiding, accommodating, compromising, and
collaborating. There is no one best conflict style in all situations: the best style depends
upon the situation.
What tactics will I use? There are a number of additional aspects of the negotiation
which need to be considered and require decisions to be made during the
preparation. These include:
Where to negotiate? Most negotiators feel more confident on home ground,
but for major, formal negotiations, the use of a neutral location may be
desirable.
When to negotiate? Timing is a crucial factor in negotiation. Ensure sufficient
time is allocated to allow adequate preparation and negotiation. In particular,
avoid starting negotiations on the spur of the moment.
How to start the first meeting? Careful attention to how the first meeting is
conducted is an important preparatory tactic. Consider the goals and
objectives of the first meeting seriously, because they have the ability to
shape the climate and outcome of the negotiation process.
8
Consider available alternatives. Your solution may not be the only right solution to a
particular point in the negotiation. The same may be true of the other side's position.
Attempt to identify other solutions for consideration. The final solution may not be
any better than the original solution offered by one side or the other. However, it is
perceived as better, because it was reached through mutual cooperation.
Base results on objective standards whenever possible. Negotiators are more likely
to be satisfied with a particular result, when it is based on an objective standard. Do
not refuse to compromise simply because "that's the auditor's recommendation." What
was the standard used by the auditor in developing that recommendation? There may
be many standards to consider including: historical experience, industry practice, or
projections developed using quantitative analysis.
Focus on positive tactics to resolve differences. Do not rely on deceptive behavior or
bargaining ploys. Tricking another negotiator may win an apparently favorable result,
but the results during contract performance or in the next negotiation may be
devastating.
Emphasize the importance of a win/win result. Remain positive during and after the
negotiation. Never gloat about winning the negotiation, even as a joke.
o The perception of the result by each side determines whether an outcome is
win/win or win/lose. In other words, the same contractual result could be
viewed as being either win/win or win/lose depending on the eyes of the
beholder. For example, a $700,000 contract price could be considered a
win/win or win/lose outcome depending on how the seller views that price.
o The negotiator's behavior during and after negotiation is often the primary
influence on the other side's perception.
o Regardless of the negotiation result, the seller is more likely to perceive a
win/win outcome when the buyer negotiator exhibits win/win behavior.
o The seller is more likely to perceive a win/lose result when the buyer side
appears to have a win/lose attitude.
o You should exhibit a win/win attitude before, during, and after negotiation.
9
Spectrum of Negotiation Styles.
Negotiation styles are rarely pure win/win or win/lose. Instead, they cover a wide
spectrum between the two extremes. You should strive for a pure win/win style, but many
negotiators exhibit a combination of win/win and win/lose traits during the course of a
negotiation.
For example, mildly deceptive behavior is sometimes exhibited by even the best
win/win negotiators. The use of some win/lose traits may even be justified, particularly when
dealing with a win/lose negotiator. Similarly, win/lose negotiators often exhibit some win/win
traits even though this behavior may only be intermittent or a ploy to deceive the other
negotiator.
No negotiation style or combination of styles assures a win/win outcome. In fact,
following a particular style does not even guarantee that others will perceive that you are
following that style. Behavior that is 60 percent win/win and 40 percent win/lose may be
perceived as win/lose by the opponent and may even result in deadlock. Likewise, there is
always a possibility that a negotiating style that is 30 percent win/win and 70 percent win/lose
may be perceived as win/win by the opponent.
While the proportion of win/win behavior needed to produce a win/win outcome
varies by negotiation and is never certain, the probability of a win/win outcome typically
increases in proportion to the win/win behavior exhibited by the negotiators. Conversely, the
probability of either a win/lose or lose/lose outcome increases in proportion to the win/lose
behavior exhibited by the negotiators.
The very beginning is probably the most important part of any negotiation,
because it will set the tone for all that follows.
There are two key elements for getting started:
1. Opening the negotiation.
2. Setting the agenda.
10
Who should speak first?
For the reasons noted above, it may be to your advantage to get the other party to
make their opening statement first. This will avoid a serious miscalculation as their
style may be significantly more co-operative or competitive than you expected. One
way of securing this opening position is to volunteer a brief rehearsal of the
background before full negotiations begin. Then ask them to give an idea of their
current position.
In most negotiations, the first position of either side has more effect on the final
outcome than any of the later moves. The skill comes in setting yours at the right level
and responding to theirs in the right way.
In negotiation, information is power. The more information you call get from the
11
other side the better.
It seems obvious that to gain information, you should ask questions. However, in
real negotiations it is remarkably easy to get so wrapped up in presenting your own
case that you forget to ask questions at all.
The quality of the information provided by the other party depends largely on the
type of questions asked. To maximize the amount of information provided by the other
person, you should ask the following types of questions: open, probing, closed, or
hypothetical questions.
In addition to asking questions, there are a number of other techniques which
can be useful for getting the other side to tell you more about their case, such as:
lubricators (such as 'Yes', 'Go on', 'mm', and 'Ah-ha' indicating to the other
party that you are listening and want them to continue),
comparisons (e.g. `What are the relative merits of this proposal?`)
silences,
bridges (e.g. `I think that is all we need to say on that topic, now let`s turn to…
`)
repeating or paraphrasing (e.g. `What you seem to be telling me is that…`),
summaries (e.g. `What we seem to have discussed and decided so far is…`).
Having obtained more information from the other party, their case should be
tested. In particular, when testing the other side`s case, you should look for the
following flaws or distortions in the arguments of the other negotiator:
Factual errors or omissions.
Faulty logic.
Selective use of statistics.
Hidden agenda.
Misinterpretation of priorities.
In this phase of the negotiation it is extremely important that you allow the other side
to make their case fully before you reply. This means that you:
Do not interrupt the other party's responses to your questions.
End each statement with a direct question.
Say only what is necessary. Remember that professional negotiators spend a lot more
time listening than talking.
Summarize regularly what has been said. Be careful to use your own words rather than
mimicking or parroting what has been said by the other party.
Avoid being side-tracked. New issues may be introduced into the negotiation as a
diversion, or to provide opportunities for trade-offs between parts of a bargaining
package.
Above all, never give information unless you get something useful in return.
12
Longer discussions often lend to boredom, loss of attention, fatigue and/or unproductive
exchanges related to a 'random walk' syndrome.
13
try to move as little as possible.
Any concession presents you with three problems:
1. Should I make it now?
2. How much ground should I give?
3. What am I going to get in return?
There are a number of approaches you can use to deal with these problems. One
approach is to make conditional offers. By attaching conditions to your concessions, you
get something for something rather than something for nothing. So whenever possible
look for something in return for every move you think of making. When making
conditional offers, introduce the condition first and do not give details of the
concessions until the other party shows some willingness to negotiate on the condition.
In addition, when considering concessions, keep in mind that:
A good concession usually is a small one. Major shifts make it difficult for the
negotiator to maintain a credible position and will almost certainly encourage further
pressure from the other party to move even more.
You may sometimes be in a position where you have little or no room to manoeuvre;
but generally, it is a disaster to go into any negotiation with no concession in mind or
possible.
You should always try to promote in the other party a willingness to make
concessions. You can do this by:
- Convincing them that they cannot hold to their present position.
- Showing them how they can move without loss of face.
- Indicating that you too will move at some time.
14
Mediation is a more direct form of help. Here both parties agree to consider (but
are bound to accept) a solution suggested by the outsider.
Arbitration is the most powerful and risky form of third-party intervention. This
is where both parties bind themselves in advance to accept the third-party's solution.
15
5.2.6 Step 6: Closing
To get an agreement, the other party needs to be convinced that she/he cannot push
you any further. She/he may believe this if:
Your final offer is tabled with conviction.
Your final offer is not seen as yet another in a chain of final offers.
The nature of your concessions has become minimal and they won with increasing
difficulty.
Your previous willingness to move is no longer apparent despite pressure being
applied.
You suggest that the other party refers your 'final offer' to his/her members for
consideration.
How do you make final offers?
Your final offer and agreement needs to be timed to with a period of constructive
discussion – not during a combative phase.
It is important to achieve credibility for any statement about an offer being final – the
tone and style of such statement may be as important as its substance.
How to formulate an agreement?
Before formulating an agreement, check that all aspects have been agreed, particularly
dates for implementation, reviewing or completion, and definitions of terms. Ensure full
understanding of what has been agreed by final summaries and by producing written
confirmation. Some record of the outcome of negotiations, however informal, is desirable.
Unresolved issues should not be 'fudged' by producing vague or ambiguous forms of words in
order to achieve apparent agreement.
How can you identify a `good deal`?
Regardless of what is agreed, both parties will always express their satisfaction with
the final deal. You should expect the other party to 'broadcast' their satisfaction with the deal
to which she/he has agreed (as you no doubt will yourself!) to show to those she/he
represents that a good job has been done on their behalf. She/he is judged and rewarded by
them on what is 'delivered'.
While both parties may win, it is rarely a 50/50 split finish. The better share goes
either to the party which has the power, and knows how to use it, or the party which plans
and conducts its negotiation better, when power is equal.
16
negotiated agreement. Such a programme will define what has to be done, when and by
whom.
For some agreements, implementation may be best effected by a joint team. Those
affected by, or required to apply, an agreement need information and explanation, even
though they are not involved in the actual negotiation. This communication should be based
on defining who needs to know what, how and by whom this information should be given and
by what methods and what time-scales.
After closing the negotiation, you should review your experience. Ask yourself
the following questions:
17