The Art of Negotiation

Negotiation:

Negotiation is the process when two or more than two parties comes to terms with each other while engaging in any sort of exchange of goods and services and attempts to agree upon the exchange rate of  the transaction. Negotiations are more often termed as bargains by many people.( Business Essentials Harvard, 2003).

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Negotiation can smooth relations. It can save you time, money, aggravation and ‘face’ …

Or gain you a positive advantage but there is a catch .Negotiation is a complex process. It involves learning some skills and some practice Negotiation takes place when two people (or more), with differing views, come together to attempt to reach agreement on some issue. This may be a one-off event or part on an ongoing relationship. It is a form of communication  known as persuasive communication.. Negotiation is about getting the best possible deal; that is, getting what you want in the best possible way

Negotiations occur for one of two reasons:

  1. 1. To create something new that neither party could do on his or her own
  2. 2. to resolve a problem or a dispute between the parties

Difference between “Bargaining” & “Negotiation”

In Bargaining there is a Win-Lose Situation Whereas in Negotiation there is a WIN – WIN Situation.

            As the prologue or the fore cause of negotiation is conflict or disagreement so before moving on to the in-depth discussion on the Art of Negotiation its very important to understand the importance of conflict and its essence in the negotiations and the dealings .Having a clear understanding of conflict itself may enable us to better deal with the negotiation requirements and procedures .( Business Essentials Harvard, 2003).

Conflict

 “Sharp disagreement or opposition, as of interests, ideas, etc.”Conflict can occur when the two parties are working towards the same goal and generally want the same outcome, or when both parties want a very different settlement.

  • Intrapersonal Conflict
  • Interpersonal Conflict
  • Intragroup Conflict
  • Intergroup Conflict
  • Intrapersonal Conflict

At this level, conflict occurs within an individual. Example. We are angry at our boss, but we are afraid to express that anger because the boss might fire us.

  • Interpersonal Conflict

A second level of conflict is between individual people. Example. Conflict that occurs between bosses and subordinates

  • Intragroup Conflict

A third major level of conflict is within a small group Example Among teams, committee members and within families etc

  • Intergroup Conflict

The final level of conflict is intergorup. Example. between unions and management, etc

Functions & Dysfunctions of Conflict

The notion has two aspects; first, that conflict is an indication that something is wrong or that a problem  needs to be fixed and, second, that conflict creates largely destructive consequences

  • Competitive processes
  • Misperception and bias
  • Emotionality
  • Decreased communication.( Business Essentials Harvard, 2003).
  • Framing, Strategizing & Planning for Negotiations

Effective planning and strategizing are the most critical precursors of achieving Negotiation objectives .With effective planning and target setting, most negotiators can achieve their objectives, without them, results occur more by chance than by negotiator effort.( Lewicki, 2006).

Framing (the process of defining what’s important)

There are various approaches to framing and anyone of them can be adopted to achieve negotiations which are

Frames as cognitive heuristics

A frame is a mechanism through which a both individual thinks about the risk associate with a problem and employs certain simple decision rules

Frames as categories of experience

The second view of frame is frames are shaped by the experiences that a negotiator has had – previous negotiations

Frames as process of issue development(Robbins ,2004)

In describing the process by parties with different views about an issue arrive at a joint agreement (win-win) ( Lewicki, 2006).

Goals and Strategy setting

The second major step in developing and executing a negotiation strategy is to determine one’s goals .Negotiators must anticipate what they want to achieve in a negotiation and must prepare for these events in advance both Tangible goals & Intangible goals. A negotiator’s goal will have a major effect on his or her choice of a negotiation strategy. Effective goals must be concrete or specific, and preferably measurable to communicate what we want, to understand what he / she want and to understand whether any particular outcome satisfies our goals. A strong interest in achieving only substantive outcomes – getting this deal, winning this

negotiation, with little or no regard for the effect on the relationship or on subsequent exchanges with the other party – tend to support a competitive (Distributive) strategy. A strong interest in achieving only the relationship outcomes – building, preserving, or enhancing a good relationship with other party – suggests an accommodation strategy. If both substance and relationship are important, the negotiator should pursue a collaborative (integrative) strategy. If achieving neither substantive outcomes nor an enhanced relationship is important, the party might be best served by avoiding negotiation. .( Business Essentials Harvard, 2003).

The Planning Process for Negotiation

Defining issues

An analysis of the conflict situation of our own experience in similar situation

Research conducted to gather information with experts,

 Example: buying a house > price, date of sale, date of occupancy

Assembling Issues and Defining the Bargaining Mix
The next step in planning is to assemble all the issues that have been defined into a comprehensive list.

The combination of lists from each side in the negotiation determines the bargaining mix.

Introducing a long list of issues into a negotiation makes Success more, rather than less. Determine which issues are most important and which are less .

Determine which issues are connected or separate.( Lewicki, 2006).

Defining Your Interests

Defining interest is more important to integrative negotiation

Than to distributive bargaining Substantive, Process based, Relationship based, intangibles

Consulting with Others

Experienced negotiators know that one negotiator alone cannot determine the issue on an agenda When a negotiator is bargaining on behalf of others (accompany, union, department, family etc) must consult with them so their concerns and priorities are included in the mix

Many professional negotiators often exchange the list of issues in advance. They want first to agree on what issues will be discussed before actually engaging the substance of those sues (to avoid surprises)

Knowing your Limits

What happens if the other party in a negotiation refuses to accept some proposed items for agenda?

Negotiator should reassess these issues and decide how important they are. Can they be dropped? Can they be taken up later?

Setting Targets

Specific Target Point (at which we realistically expect to achieve a settlement)

Resistance Point (the least acceptable settlement point)

Alternative (the point where we may have an alternative settlement with another negotiator)

Asking Price (the best deal we can possibly hope to achieve)
Developing Supporting Arguments
What facts support my point of view

Whom may I consult to help me clarify the facts

Have these issues been negotiated before by others? Can I consult those negotiators

What is other party’s point of view(Lewicki,Barry& Saunder, 2006).

Analyzing the Other Party

The other party’s current resources, interest and needs (you can do this by putting yourself in his / her shoes, by conducting a preliminary discussion)

The other party’s objective (many people assume that the other party has same interest and targets as their own)

The Other Party’s Reputation and Style

How the other party’s have negotiated with you / others in the past

The Other Party’s Alternative

Alternative offers the negotiator a viable option for agreement if the current negotiation does not produce results (if other party has a strong and viable alternative, he/she will be more confident in negotiation)

The Other Party’s Authority

When negotiator represents others, their power to make agreement may be limited (may create frustration)

The Other Party’s Strategy & Tactics

It is unlikely that the other party will reveal his or her strategy outright; you can gather the information as the negotiation unfolds (Lewicki,Barry& Saunder, 2006).

The Dual Concerns Model

The model tends to explain the various situations in which the parties may behave and  may act while negotiating the various conditions are as follows:

( Shell,2006).

Contending
Focus more on own outcomes and show little concern for whether other party obtains his or her desired outcomes

Yielding
(Also called accommodating or obliging) is the strategy in the upper left-hand corner. Show little interest or concern in whether they attain their own outcomes, but they are quite interested in whether the other party attains his or her outcomes

Inaction
Inaction is also called accommodating or obliging where the party is not concerned about whether they achieve their desired outcomes neither they are concerned about whether the other party achieve their desired outcomes(Lewicki,Barry& Saunder, 2006).

Problem Solving
(Also called collaboration or integrating) is the strategy show high concern for attaining their own outcomes and high concern for whether the other party attains his or her outcomes

Compromising
It is an approach where one tries to pursue one’s own goals as well as tries to make an effort for the other parties to achieve their goals.

The Role of Alternatives to a Negotiation Agreement

In addition to opening bids, target points and resistance points, a fourth factor may enter the negotiations: an alternative outcome that can be obtained by completing a different deal with a different party. In some negotiations, the parties have only two fundamental choices; to reach a deal with the other party or not to settle at all(Lewicki,Barry& Saunder, 2006).

In other negotiation, however, one or both parties may have the choice of completing an alternative deal

Actual Settlement Point

 The fundamental process of distributive bargaining is to reach a settlement within a positive bargaining range. The objective of both parties is to obtain as much of the bargaining range as possible – that is, to get the settlement as close to the other party’s resistance point as possible Both parties in distributive bargaining know that they might have to settle for less than they would prefer

Bargaining Mix

In almost all negotiations, agreement is necessary on several issues for example: buying a house Each item in the mix has its own starting, target and resistance points. Some items are obvious importance to both parties; others are of importance to only one party.The other’s resistance point will vary inversely with his or her cost of delay or aborting

Example The more a person needs a settlement, the more modes he or she will be in setting a resistance point. Therefore, the more you can do to convince the other party that delay or aborting negotiations will be costly, the more likely he or she will be to establish a modest.

Resistance point

A resistance point will vary directly with the value the other party attaches to that outcome. For example If you can convince the other party that a present negotiating position will not have the desired outcome or that the present position is not as attractive because other positions are even more attractive, then he or she will adjust the resistance point.

The other’s resistance point varies inversely with the perceived value the first party attaches to an outcome for example knowing that a position is important to the other party, you will expect the other to resist giving up on that issue.

Tactical Tasks

  • ·         Assess the other party’s outcome, values and the costs of terminating negotiation
  • ·         To manage the other party’s impression of the negotiator’s outcome values
  • ·         To modify the other party’s perception of his or her own outcome values
  • ·         To manipulate the actual cost of delaying or aborting negotiations
  • ·         Assess Outcome Values and the Cost of Termination
  • ·         Manage the Other Party’s Impressions because each side attempts to get information about the other party through direct and indirect sources, an important tactical task for you as a negotiator may be to prevent the other party from getting accurate information about your position, while simultaneously guiding him or her to form a preferred impression of it.
  • ·         Screening Activities the simplest way to screen a position is to say and do as little as possible. Silence is golden when answering questions; words should be invested in asking questions instead Direct Action or Alter Impressions. Negotiator can take many actions to present facts that will directly enhance their position or at least make it appear stronger to the other party.
  • ·         Modify the Other Party’s Perceptions: A negotiator can alter the other party’s impressions of his or her own objectives by making the outcomes appear less attractive or by making the cost of obtaining them appear higher.
  • ·         Manipulate the Actual Cost of Delay or Termination: Negotiators have deadlines. A contract will expire. Agreement has to breach before a large meetings occurs. Someone has to catch a plane. Extending negotiations beyond a deadline can be costly, particularly to the person who has the deadline, because that person has to either extend the deadline or go home empty-handed. At the same time, research and practical experience suggest that a large majority of agreements in distributive bargaining are reached when the deadline is near(Dawson, 2000).

Positions Taken During Negotiation

  • Effective distributive bargainers need to understand the process of taking a position during bargaining (the opening offer or opening stance) and the role of making concessions during the negotiation process(Dawson, 2000).
  • At the beginning of negotiations, each party takes a position. Typically, one party will then change his or her position in response to information from the other party or in response to the party’s behavior
  • Opening Offer: What should the opening offer be? Will the offer be seen as too low or too high by the other Should the opening offer be somewhat close to the resistance point
  • The fundamental question is whether opening offer should be extreme or modest
  • Studies indicate that negotiators who make extreme openings offer get higher settlements than do those who make low or modest opening offers
  • Opening Stance :Will you be competitive (fighting to get the best on every point)
  • Or moderate (willing to make concessions and compromises)
  • Initial Concessions :An opening offer is usually met with a counteroffer, and these two offers define the initial bargaining range What movement or concessions are to be made
  • You can choose to make none, hold firm, and insist on the original position, or you can make some concessions(Dawson, 2000).

Role of Concession in Negotiations

Concessions are central to negotiation. Without them, in fact, negotiations would not exist if one side is not prepared to make concessions, the other side must capitulate or the negotiations will deadlock .People enter negotiations expecting concessions

 Good negotiators will not begin negotiations with an opening offer too close to their own resistance point, but rather will ensure that there is enough room in the bargaining range to make some concessions and then as to Final Offer in which Eventually a negotiator wants to convey the message that there is no further room for movement – that the present offer is the final one. A good negotiator will say, “This is all I can do” or “This is as far as I can go”. A concession also may be personalized to the other party (“I went to my boss and got a special deal just for you”)

Finding Ways to abandon commitment Position during Negotiations

Frequently negotiators want to get the other party out of committed position. Another’s way to abandon a commitment is to let the matter die silently. After a lapse of time, a negotiator can make a new proposal .One way is to restate the commitment in more general terms. Example. The purchasing agent who demanded a 10% discount may rephrase this statement later to say simply that a significant volume discount is needed

Closing the Deal in Negotiations

 After negotiating for a period of time, learning about the other party’s needs, positions, and perhaps resistance point, the next challenge for a negotiator is to close the Agreement. There is several tactics available to negotiators for closing deal some are as follows:

  • Provide alternatives that are Rather than making a single offer, negotiators can provide two or three alternative packages for the other party that are more or less equivalent in value. People like to have choices
  • Assume the close that is Salespeople use an assuming-the-close technique frequently. After have a general discussion about the needs and positions of the buyer, often the seller will take out a large order form and start to complete it
  • Split the difference The negotiator using this tactic will typically give a brief summary of the negotiation (we have both spent a lot of time, made many concessions etc)
  • Exploding offer: An exploding offer contains an extremely tight deadline in order to pressure the other party to agree quickly. For Example A person who has interviewed for a job may be offered a very attractive salary and benefits package, but also be told that the offer will expire in 24 hours
  • Sweeteners: Another closing tactic is to save a special concession for the close. I will give you X if you agree to the deal

The Art of Negotiations in Organizational & Management Arena:

Negotiations are to be leaned by every manger every employee in the organization failing to do so may end up several problems in the organization and management of the organization. One need to have what is called BATNA ( best alterative to be negotiated agreement ) it’s the need for time . All over the department production & operations, finance& accounting, sales &marketing, R&D, Human Resource and Administration .Hence ,it extremely important for everyone to learn the skills of negotiation to be able to get audible and have true return of one’s efforts. Managers need negotiation skills all across their work be it motivation of employees, implementing new policy, bringing change and upgrade the organizational structures and the setup. To do anything cost effectively which is the major task nowadays again negotiations can play a magical role. Pursuing an individual goal or an organizational one polished negotiation skills may always win the day and the hearts of people

REFRENCES:

  • Business Essentials Harvard(2003).Business Communication (Harvard Business Essentials) . Harvard Business School Press.
  • Business Essentials Harvard(2003).Harvard Business Essentials Guide to Negotiation. Harvard Business School Pres
  • Dawson, R.(2000). Secrets of Power Negotiating. Career Press.
  • Dennis & Rendell(2006). ,Internatioal Human Resource Management .Prentice Hall
  • Lehman, C.M. & DuFrene, D.D.(2007). Business Communication (with Teams handbook) . South-Western College Pub.
  • Lewicki, R., Saunders, D.& Barry, B.(2005).Negotiation. McGraw-Hill/Irwin
  • Lewicki, R.J.(2006). Mastering Business Negotiation : A Working Guide to Making Deals and Resolving Conflict. Jossey-Bass
  • Lewicki, R.J., Barry, B. & Saunder, D. M.(2006). Essentials of Negotiation. McGraw Hill Higher Education.
  • Lewicki, R.J., Barry, B.&  Saunders, D.M.(2006). Negotiation: Readings, Exercises and Cases . McGraw Hill Higher Education.
  • Robbins ,S.P.(2004) Organizational Behavior .Prentice Hall .
  •  Shell, G. R.(2006). Bargaining for Advantage: Negotiation Strategies for Reasonable People. Penguin (Non-Classics)

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