Business Essays - Negotiating Parties Solution

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Negotiating Parties Solution

Negotiating is the process by which two or more parties with different needs and goals work to find a mutually acceptable solution to an issue. Because negotiating is an inter-personal process, each negotiating situation is different, and influenced by each party's skills, attitudes and style.

We often look at negotiating as unpleasant, because it implies conflict, but negotiating need not be characterized by bad feelings, or angry behavior. Understanding more about the negotiation process allows us to manage our negotiations with confidence increasing the chance that the outcomes will be positive for both parties.

The negotiation itself is a careful exploration of your position and the other person’s position, with the goal of finding a mutually acceptable compromise that gives you both as much of what you want as possible. People's positions are rarely as fundamentally opposed as they may initially appear - the other person may have very different goals from the ones you expect! In an ideal situation, you will find that the other person wants what you are prepared to trade, and that you are prepared to give what the other person wants.

If this is not the case and one person must give way, then it is fair for this person to try to negotiate some form of compensation for doing so. Ultimately, both sides should feel comfortable with the final solution if the agreement is to be considered win-win. If you "win" there must be a loser, and that can create more difficulty down the road. The best perspective in negotiation is to try to find a solution where both parties "win".

Only consider win-lose negotiation if you don't need to have an ongoing relationship with the other party as, having lost, they are unlikely to want to work with you again. Equally, you should expect that if they need to fulfill some part of a deal in which you have "won," they may be uncooperative and legalistic about the way they do this.

We all negotiate in our personal and professional lives. We negotiate when we go to a garage sale, or when we want to do something different at work, or when we are dealing with members of the public. Sometimes its easy to negotiate, but other times, when we have a great deal at stake or we are upset, the task can be intimidating or difficult.

Since we are trying to find a solution acceptable to both parties, we need to understand the other person's needs, and wants with respect to the issue. If we don't know what the person needs or wants, we will be unable to negotiate properly. Often, when we take the time to find out about the other person, we discover that there is no significant disagreement.

Negotiating is about finding solutions...Arguing is about trying to prove the other person wrong. We know that when negotiating turns into each party trying to prove the other one wrong, no progress gets made.Negotiation need not be confrontational.The attitude that you take in negotiation (hostile, cooperative) will set the tone for the interaction. If you are confrontational, you will have a fight on your hands.

Americans say that the most important factor in considering a job opportunity is salary. 89% of the respondents in a Job Satisfaction Survey conducted by SurveySite for rated salary as being as most important when deciding whether to accept a job offer. In addition, more than 50% of the survey respondents believe they are underpaid.

Negotiating your salary is a two-way process where you and your prospective employer are each trying to get something you need. In a negotiation, you're both designing the terms of a transaction so that each of you will receive the maximum benefit from the final agreement.

It's all negotiable. Every new job - every performance review, in fact - is an opportunity to negotiate base salary, various kinds of bonuses, benefits, stock options, and other incentives that add to job satisfaction and provide financial security. The negotiation process is an opportunity to define, communicate, and achieve what you want out of your job offer. But to get offered the right job that pays what you deserve, you'll need to do your homework. The first step in the negotiation game is to understand the negotiation basics.

Negotiation requires gathering information, planning your approach, considering different alternatives and viewpoints, communicating clearly and specifically, and making decisions to reach your goal. Each party in a negotiation can fulfill specific needs and wants of the other party, a concept called "relative power." Understanding your strengths and resources; being able to respond to the needs of the other party; and knowing your competition enable you to assess your bargaining position more accurately.

For the first time, employees have access to the equivalent of a Kelley Blue Book for jobs. The availability of online compensation information has leveled the playing field between employer and employee when it comes to negotiation and job offers. Employers who are confident in their pay practices should welcome these new data sources, as they provide external validation that their compensation is competitive with the market.

Better access to data improves the quality of salary negotiations by making it possible to start on common ground. The new salary negotiation is starting to look more like this.

1. Agree on a benchmark job.

2. Agree on your proficiency and performance level.

3. Agree on the market value of the job.

4. Agree on where your salary should fall.

5. Agree on what performance is necessary for future salary increases.

Step 1. Agree on a benchmark job

You and your employer compare your job description to that of a benchmark job. Your responsibilities should be at least a 70 percent match to those of the benchmark position. Chances are, your employer has already done this. You have to make sure you know what job the company has compared yours to, and understand any discrepancies between their idea of your level and your own. For example, they might think you are at the middle level of a job (e.g., a Level II) while you think you're at a senior level (e.g., a Level III). If so, work with your boss to understand each other's reasoning and resolve the differences.

If you really are working at a higher level, you may be able to negotiate for a promotion. Or you may have advanced as far as you can in your position. If there is no path for you with the company, you may have to choose between doing the same job for a long time and moving to another company. On the other hand, if you have shown that you can handle additional responsibility and the company has room for growth, this may be your time to move up.

Step 2. Agree on your proficiency and performance level

Whether you are receiving a job offer from a company or going through your performance review, you and your employer should agree on where your performance fits in relation to the benchmark job description. If you are new to the position, for example, chances are that you already have some of the required skills but are developing others. In the new salary negotiation, your level of proficiency and performance will determine how close to the median you'll be paid.

Proficiency and performance are related, but not the same. You become proficient in a job as you acquire the relevant skills. Your level of performance is how well you do that job. Proficiency is only one component of your work that should be measured in your performance review - attitude, punctuality, teamwork, and other general skills are also taken into consideration.

If you are very good at the technical requirements of your job, but have not developed solid soft skills, your performance review is likely to reflect these deficiencies. Conversely, if you have a winning attitude and are a solid team player but aren't yet good at the specific skills required for the job, your lack of proficiency could hold you back.

Step 3. Agree on the market value of the job

You've researched the numbers, and so has your employer. Online compensation data is a good starting point for the conversation about what your job should pay.

If you have agreed on a benchmark job in Step 1, it should be relatively easy to agree on the market value for that job. Your employer is likely to have access to additional sources of data that provide a better level of detail than what is available to you. The data your company has is generally very specific to the company's compensation philosophy.

Your employer's data might show what your company and a dozen or so direct competitors are paying for the job. Depending on the industry and the region in which you work, this number could be higher or lower than your number.

If you get to the point in a salary negotiation where you and your employer are discussing the applicability of various data sources to your situation, you're doing great.

Step 4. Agree on where your salary should fall

After you and your employer have agreed what job you're doing, how well you're doing it, and what the market pays for that job, you're ready to discuss what you're worth to the company.

Let's assume for a moment that your performance is at exactly the midpoint of what is expected for someone in your job. You have shown your employer an average proficiency and average performance. You should expect to earn the approximate median for the job.

The company's pay philosophy and pay structure come into play here. Depending on the importance of your job to the company, your employer might actually pay you more than the median as part of a pay philosophy geared toward retaining people in your position.

For example, a law firm might pay its administrative assistants above the market rate, because they are critical to organizing the firm's work and maintaining relationships with clients. Or, a software company might pay its programmers above market because their skills are so scarce.

A company might pay you less than the median in base salary as part of an overall total compensation program that could be at or above market. In other words, some companies provide higher or lower pay levels to balance with their bonus plans, stock options, benefits and even intangible rewards. Still other companies might pay people in your position less than the median because your job is not as critical to the company's success as some other jobs.

The company might agree that you're worth a certain amount, but be unable to pay it. If raises really are 4 percent across the board, you have to make the case why you have earned a bigger increase. From the manager's perspective, a larger raise for you often means a smaller one for someone else. But if you agree on what you should be paid, you can start to create a path for how your employer is going to bring you there - maybe not during this review period, but over time.

After you've discussed where you should fall in the context of the company's pay philosophy and structure, you're ready to agree on a number and and start earning your new salary.

Step 5. Agree on what performance is necessary for future salary increases

Performance reviews and salary negotiations are continual processes. The last step of one salary negotiation should be the first step of the next. With this in mind, talk about your future - the next three to six months.

Now is a perfect time to set the groundwork for what specific performance objectives you need to achieve to get a larger raise or promotion in the near future. One of the major reasons people are dissatisfied with their salary increases is that the raise is less than expected and the boss doesn't have room to increase it. Setting the expectations early doesn't guarantee anything, but it does cause your boss at least mentally to "reserve" that money for you from the next raise pool.

By talking about future performance and expectations, you are jointly committing to a positive working relationship going forward. This helps end your negotiation on a positive note for both sides.

Negotiate for a win-win The data itself is neutral, but subject to a great deal of interpretation. It is a set of facts, but it is not law. You should negotiate in relation to it - and so should your employer. Demands and ultimatums based on any published data without open discussion are likely to leave everyone dissatisfied. A good negotiation is a discussion in which each party understands and respects the other's position and it ends when all parties feel their positions have been heard and their needs have been optimized within the other party's limitations.

For a negotiation to be 'win-win', both parties should feel positive about the negotiation once it's over. This helps people keep good working relationships afterwards. Displays of emotion are clearly inappropriate because they undermine the rational basis of the negotiation and because they bring a manipulative aspect to them. Despite this, emotion can be an important subject of discussion because people's emotional needs must fairly be met. If emotion is not discussed where it needs to be, then the agreement reached can be unsatisfactory and temporary.

Negotiating is a complex process but one worth mastering. Failure to consider all important aspects brings undue aggravation and frustration. My personal experience illustrates just this situation. Originally from Romania, I came to this country as part of an internship program. I ended up working for one of the best country clubs in Naples, FL. My plan was to improve my communication skills, gain as much experience as possible by working in different departments, save some money and finally get my MBA.

When one of the assistant managers left for a better opportunity, the general manager offered me the job and the possibility of being permanently employed by the club. He promised me he would sponsor my H1B visa and that was very important to me so I took the opportunity and went ahead and negotiated the salary and the benefits. We covered a lot of different aspects like regular benefits, further education, evaluations and so forth. We estimated the expenses related to my sponsorship at around $5000 so I accepted a salary that was more or less the normal pay for my position minus the $5000, which seemed fair at that time. We never signed a written contract since it was not customarily for the club to do so.

A couple of months after, the general manager himself went for a better opportunity and he wrote me a letter as proof of our verbal agreement. The gentleman that replaced him continued to offer me the support I needed with my sponsorship and I finally got my employment visa.

Everything went fine and dandy so the next year I was evaluated and offered a raise. This was the tricky part. Instead of getting a lump sum to absorb the loss in salary from the previous year, I received a percentage increase, which, applied to my base salary, barely raised my pay to the original value. Now that was frustrating… I went to my general manager and explained to him the situation, but he believed I was trying to twist his arm, so I didn’t insist at that time.

The following months I had all these mixed emotions, from feeling unappreciated to feeling like I was being used ( since my visa only allowed me to work for the club, nobody was concerned about me leaving).

I finally set an appointment with my boss and my proposal was to start a new salary negotiation from the idea of me being a new employee. I followed the 5 steps presented before and a managed to increase my base salary and have the possibility of a new raise with the new evaluations.

They say that if you accept a job that pays you $5000 less than you deserve, when you are in your twenties, you will end up losing half a million throughout your career. I am happy to have all that extra money to spend…


Robert Bacal

Johanna Schlegel

Prof. Sungu Amargan Organizational Behavior (course)