Strategies of Negotiations

Abstract

Since early childhood we have learned to negotiate although we probably didn’t really realize it. While the tactics we used when we were young were more on an emotional basis we still knew what we wanted and how to get it. We continue to negotiate throughout our daily lives. Negotiation takes proper planning in order for it to be successful. Negotiations often fail for numerous reasons however mainly because we either fail to plan or fail to listen. Therefore it only makes sense that successful negotiations are often driven by the planning and listening. Negotiations are affected by the way individuals communicate, their influencing styles and the way they prepare. While most negotiators go into a negotiation looking for a win-win agreement there are times when companies choose to use hardball tactics no matter what cost. It’s important to identify these tactics and know how you will deal with them when confronted.

Negotiations

In our daily life we negotiate whether it’s debating what time your child needs to get up for school, with your boss over a project or what to have for dinner. How we handle each one of those negotiations varies based on who we’re negotiating with. At home we usually don’t go through the steps of planning for the negotiation as we must at work. Not because we shouldn’t but because of the type of negotiating we’re doing. In this paper we’ll discuss what negotiation is. Then we’ll discuss how to prepare for negotiations by gathering as much information as possible. Even when you prepare there are reasons negotiations fail and those will be addressed along with how they succeed. We’ll also discuss things that affect negotiations like communication, influencing styles and preparation. Finally we’ll discuss how not every negotiator goes to the table looking for a win-win bargain.

Negotiation is a process when two or more parties who have their own objectives, goal or viewpoint seek to find a common ground and reach an agreement to resolve a matter of common concern or resolve a disagreement. Although individuals may not always realize it negotiations take place several times throughout the day in our every day lives. Anyone who needs to persuade another is the negotiator. From a very young age we have learned to negotiate in order to get our way. Most parties choose to negotiate because they feel they can get a better deal versus settling for what the other has/wants to give. Companies are no different. Companies want the most “bang for their buck” so to speak. Many companies are better at negotiating than others. That may be due to the individuals they have negotiating on their behalf or it may be because of what they’re negotiating for. Since companies don’t divulge their specific strategies, tactics and techniques they use in negotiations one must have a plan. This plan must be created outside the negotiation room. According to the Essentials in Negotiations, “Effective strategy and planning are the most critical precursors for achieving negotiation objectives. (Lewicki, Barry, Saunders. 2007. P. 85)

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Many times parties go into a negotiation unprepared and end up making concessions that compromising diminishes the profitability of the agreement. “Research shows that you can achieve the best negotiation outcomes by spending 5x longer preparing for a negotiation than you will actually spend in a negotiation.” (Schroth. 2009) An important part of planning is having a clear and concise proposal before entering into the negotiation. There are many areas you need to consider a few of them are knowing your objectives and the other sides’ objectives, determining what concessions you can make, how will you achieve your objectives, what will influence the result of the negotiation.

It is frequently stated that information is power. Therefore it’s important to have certain information during a negotiation. You need to know what information you know that the other side does too, what information you know that the other party doesn’t have, what information do you have and does the other party have to have prior to negotiating with each other. This is very important when you negotiate with parties who focus on price. There’s other information that is important for instance what’s important to the individual you’re negotiating with, why do they need to close the deal, how is business for the company during negotiations and how critical is it that they do business with you. The planning phase of negotiation entails all parties finding out as much information as possible prior to discussing any particular deal or alternatives. For example, if you knew that your company was the only one that could meet the requirements, it’s possible that you could negotiate a more favorable price. If you knew that the other party recently increased their production capability, you might be able to negotiate more favorable terms in return for promising to purchase a definite quantity over a specific time period. By taking the time during the planning stage and listing what information you know and what you’ll need to know, you will have a better opportunity to negotiate well on your company’s behalf.

During the bargaining process it is unlikely for the parties to reach an immediate agreement since they usually don’t have the same objectives. Usually, agreements must be made where each party must give and receive concessions and it is this is where the payoff of the end result will be determined. When getting ready for negotiations, it’s recommended you create a reasonable assessment of your perception of the end result. Decide what limitations you have based on your power in the negotiation then figure out what you are ready and capable of conceding to so that you reach an agreement that is , which pleases all involved.

Concessions contain two parts; cost and value. Although the words can be used interchangeably they do not mean the same thing. There are times when something is of low cost but great value and vice versa. Therefore it’s important to know when going into negotiations what is of cost and what is of value to you and your company. During negotiations it’s possible to concede issues that have minimal dollar cost to you because they may be of great value to the other party. These are the types of concessions you want to proceed with. However, you want to avoid conceding to issues that are of great cost to you regardless of what their value is to the other parties. When planning for negotiations you need to ensure you know what could you reasonably achieve, what is the probable outcome, what is your authority is, what concessions can you concede to and what is their value to both sides. Once that is completed you can then work on planning your strategy.

Another part in the planning process is creating a strategy. You’ve already established what your objectives are and now you need a plan on how to attain them. During the strategy planning you need to ensure you look at the negotiation from both sides. You can’t go into a negotiation with blinders on only looking at it from your viewpoint. If so, you will most likely fail. You need to look forward and think about the other parties’ strategy.

While planning you must be cognizant of the different negotiation tactics and figure out which ones you are comfortable using and realize which ones are being utilized by the other party. We learn to negotiate at a young age in order to get what we want. The tactics used for children are emotional outbursts, stomping our feet, or drawing attention to ourselves in public in order to manipulate our parents. It’s amazing that at such a young age we know what we want and what to do in order to obtain it. This approach is considered the positional negotiation and is one-sided. This type of negotiation is holding a strong position and not wanting to know what the basic needs are of the other party therefore we are determined to get the work the best deal at any expense. However, the emotional outburst approach needs to be left to the children and those characters on television. You can not have a relationship and a win-win situation with that approach therefore your negotiation has failed.

Negotiations fail for many reasons. Depending on what is being negotiated, who is doing the negotiation and what is at stake. One of the main reasons negotiations fail is due to lack of planning. There is a saying “failing to plan is planning to fail”. That is exceptionally true when it comes to negotiations. Planning will ensure you’re conscious of your objectives and requirements. Although you will need to be a quick thinker and be flexible, in case the other party makes a decision you didn’t plan on, you can’t just be spontaneous. You have to realize that both parties are interested in mutual problem solving. Remember that you’re entering into a relationship therefore you need to be aware of the long-term implications of any decision you make.

Negotiations also fail because one person does all the talking and they fail to listen. It’s best to listen first and then speak after hearing what others have to say. In John Maxwell’s book, The 21 Irrefutable Laws of Leadership, he discusses how positional leaders speak first and need the influence of the real leaders to get things done. The real leaders speak later and influence the entire audience. (Maxwell, 2007) This is very important during negotiations if you want to influence the other party.

It’s important to clarify the agenda prior to solving serious problems. You want to ensure everyone is on the same page and there is no confusion. You do not want to catch the other party off guard and bring up issues they’re not ready to deal with. This will put them on the defense as if you’re trying to trick them. You also must elucidate your authority. If you don’t have the authority to make certain decisions the other party needs to know that upfront. You will be wasting everyone’s time if you have to get back with them after conferring with someone who does have the authority. During negotiations it’s important not to put down others and use threats that can’t be carried out. This again will cause the other party to be defensive and create an unfriendly atmosphere. Deliberations will be limited and you’re less likely to get what you want.

One example of this as stated by Osama El-kadi is when the owner of Harrods, Mr. Al-Fayed, wanted the price to be reduced for Estee Lauder merchandise carried in his store. Mr Al-Fayed that demanded the Chief Executive Officer of Estee Lauder lower the price or he threatened that he would no longer carry the products in his stores. The CEO called his bluff by stating he would have all the goods picked up the following Monday from all his stores. Mr Al-Fayed realized that he made a common negotiator blunder and asked for forgiveness. He also apologetically asked that the CEO not pick up all the goods. Due to the amount of business that Estee Lauder did in Mr Al-Fayed’s stores they had the advantage when they went into the negotiation. Mr Al-Fayed used a threat he wasn’t ready to carry out and it would have been detrimental to his business and Estee Lauder’s CEO knew this therefore he called the bluff. That is why you must be willing to go through with a threat if you make it. That is where analyzing your position and planning comes into play.

Negotiations must be written down. That way both parties know what they’re agreeing to and neither party can argue that something wasn’t part of the deal. This also avoids any confusion or misconstruction. Don’t hold back information. That doesn’t mean talk too much and give up everything however you must let them know what is on your mind. Sharing information helps to create a relationship between both parties. Don’t compromise too quickly. Although you want to make a deal you don’t want to be to hasty. Now that we discussed why negotiations fail we’ll discuss how they succeed.

Negotiations succeed because of proper planning. By spelling out your objectives, requests and what you’ll settle for you’ll be more prepared when going into a negotiation. Don’t forget to know the same for the other party. Negotiations aren’t short term. You must be prepared to gain ones trust and create a long term relationship. If you wouldn’t want to be treated specific ways make sure you’re not behaving in that manner. You need to be, share information and concerns as well as listening to the other parties. Clarify any issues or questions you may have. By knowing the agenda you can prepare prior to the negotiation. Successful negotiations are made by understanding the other party. Look at the other parties’ viewpoint and you will be able to come up with a solution that is acceptable to all. As stated earlier listening to what the other party is saying so you can understand where they’re coming from. It is natural for one to want to talk but during negotiations it’s best to listen to the other party.

In today’s society we come across people with many different backgrounds. As much as we’d like to think that everyone is the same we’re not. You need to be aware of the diversity that is encountered whether it is culture or language. People from different societies may have a different perspective and belief on how a negotiation should go. In some cultures it’s important to gain a relationship and not discuss the negotiation right away. In America we’re quick to get right down to business and forget the getting to know one another piece. By knowing the culture and or language you can have a successful negotiation by breaking the barrier and preventing any misinterpretation of what is said.

Although the negotiation isn’t a legal document make sure you write it down. Be brief, and concise about what was agreed upon. This will ensure you remember what the agreement was between the parties. In order for the negotiation to be a success you need to know what the what the position is of the other party and why they have that position. This will allow you to for create a win-win solution for all involved.

Osama El-kadi states that “Successful negotiation is all about shaping the game before hand. This is what differentiates the men from the boys when it comes to major negotiation. This approach is called tactical-positioning leading to winning (El-kadi.).” Mr El-kadi explains this with an example of how to create a winning position prior to the negotiation. He gives a story of Mr Al-Fayed and his decision to purchase Harrods. Mr Al-Fayed didn’t decide one day to walk in and purchase Harrods. He had designed a plan which took three years before he moved on it. He worked for someone on the board. He befriended board members, created credentials, gained trust, and when the time was right he advanced on his plan. By this time he was friends with the deputy chairman of the House of Fraser Group. He went to him one day and asked how much the company was worth. When the deputy stated they had an offer Mr Al-Fayed made a counter offer for almost twice the original offer. By Mr Al-Fayed was fully prepared by establishing a winning position prior to the negotiation. There are many things that affect negotiations.

Negotiations are affected by the differences in people or the difference portrayed by people. First is communication. Communication is

“Any act by which one person gives to or receives from another person information about that person’s needs, desires, perceptions, knowledge, or affective states. Communication may be intentional or unintentional, may involve conventional or unconventional signals, may take linguistic or nonlinguistic forms, and may occur through spoken or other modes.” (National Joint, 1992, p. 2)

During negotiations the most visible and sometimes the most important type of communication is the non-verbal communication.

Non-verbal communications are those visual signals which include facial expressions, body language or even the intonation of your voice. In the Essentials of Negotiation book it discusses three important non-verbal behaviors. They include making eye contact, body posture and encouraging. Eye contact can say a lot about someone. Many times people who are shy or dishonest do not look people straight in the eye when they speak. They look up, down or around so people can’t see in to them. Looking someone in the eye is important so they know you are listening to them. However, you need to know the party you are negotiating with because “in some cultures such as the Japanese, prolonged eye contact is considered rude and is generally avoided (Payne, para. 2).” Body posture is another way to let people know you’re paying attention. If you’re slouched in the chair and look lackadaisical business negotiations aren’t going to go well because it will appear to the other party as you don’t care. Lastly encouraging is non-verbal communication used by nodding your head or moving you hand to let the other party know you hear what they’re saying. Although you may not verbally be saying anything during the negotiation your body is saying a lot. Those non-verbal communications could make or break your negotiation.

Besides non-verbal communication the language can affect your negotiation. Many people go into negotiations trying to use big words to either impress or possibly confuse the other party. It’s important that everyone in the negotiation can understand what is being said. Trying to sound as if you’re educationally above the other party is going to affect they way they think of you and the outcome of the negotiation. Also with diverse society we have and the number of different cultures it’s important everyone understands what is being conveyed. What you believe you may be saying may mean something totally different to someone of another culture. Even if they can speak English the translation is different.

According to Great Scope Consulting, “studies show that successful influencers use two clusters of language styles during negotiations.” Just like in the supply chain management they are the push and pull style. You have a high push and low pull style if you give new ideas, information or shut the other person out. On the other hand you have a high pull and a low push if you seek information, build on ideas from others and test understanding. The style of influencing used will be dependent on the negotiation and it is important to be able to use either style. The suitability and characteristic of each style varies. The push style is more of a high risk, low commitment and wins-lose situation and is best used for short term negotiations. The pull style is more of a low risk, win-win situation and best utilized for long term. Another area that can affect negotiations is preparation. This has been reiterated a number of times throughout this paper because it is so important. Negotiations begin way before you sit at the table. It is a procedure that develops over time. It isn’t a one time occasion. Gathering information and having adequate time to negotiate. You can’t expect to go into a room and have a final agreement in 30 minutes. Negotiations take time. The whole purpose of a negotiation is to reach a win-win situation. Therefore you need to be aware of the win-lose styles and avoid them. Sometimes companies may not appear to be looking for a win-win situation and will use hardball tactics during their negotiations.

As a negotiator you have to be able to identify the hardball tactics and decide how you want to handle them. An example of a company who often uses hardball tactics is Costco.

Although most of the negotiations with suppliers are kept private lately Costco has been announcing their view on the situation. Recently Costco pulled the Coca-Cola products off the shelf to prove a point. The companies are negotiating over the price customers should pay for the products. “Costco never accepts a price increase from a supplier without examining every alternative possible to hold the line on price. At Costco, nothing is ever marked up 14% above costs. (Sarasohn-Kahn. 2009, para 7) Costco feels that if they can’t give the value their customers deserve than they won’t sell that product. Even though Coca-Cola is a large company and a valued supplier Costco is willing to take the risk and publicly announce the issues it is having at the negotiation table. This is one hardball tactic used. Coca-Cola now has to decide whether to ignore the tactic, continue with discussions or reply with a different hardball tactic. The negotiation between Costco and Coca-Cola hasn’t been finalized so whether this hardball tactic works in this situation has not yet been determined. When playing this way it is important to understand the possible impact if this approach fails. Although negotiations can be successful this way if you really want to be successful during your negotiation process you must find out what the other party wants and figure a way to give it to them while getting what you want too.

From our childhood years we negotiated with our parents to manipulate them into giving us what we wanted. Whether that was candy in a store, letting us stay up late, or buying that toy we really didn’t need. At a young age we didn’t really know what negotiation was all we knew was what we wanted and how to get it. As we figured out what negotiation was it was then that we had to start preparing for it. We couldn’t react on an emotional level and expect to get what we wanted. Even though we should plan for negotiations they sometimes still fail as they did with Mr Al-Fayed who didn’t realize he was weaker during his negation process. In his case he actually failed to plan and know what is position was prior to entering into the negotiation. However if you do the proper preparation you will most likely succeed in your negotiation. Negotiators need to be knowledgeable about what affects negotiations like verbal and non-verbal communication and push/pull influencing styles. It may not always be what you say that determines whether you create a win-win situation. Lastly, we discussed how some companies choose to use hardball tactics regardless of the potential impact therefore you need to be able to identify them and know how to handle them before you go into the negotiation.