Negotiating a Good Outcome
Successful negotiation is the process by which two or more parties arrive at a mutual agreement, by means of discussion and bargaining, within an agreed time scale.
Negotiation is a constant factor in business life and life in general for that matter. While most business people will not be involved in negotiating the sale or purchase of an entire company or of multi-million-dollar contracts, many will be involved in negotiating a new lease on a building, employee salaries and raises, the division of resources among departments in a tight budget year, or, even less happily, the resolution of a lawsuit. At the very least, most people at some point will need to negotiate their own salaries.
Because negotiation is such a common problem-solving process, it is in everyone’s interest to become familiar with negotiating dynamics and skills.
Key Point – To succeed in a negotiation, both parties must want to reach an agreement.
If you discover early on that the other party is reluctant, or worse, not interested, then it would be much wiser to abandon the negotiation.
The Elements of a Negotiation
Given the ubiquitous nature of negotiations, it is important to understand how best to approach them. Three of the most important facets of a negotiation are preparation, the opening gambit, and the ability to walk away. This article addresses the importance of making the opening gambit a product of rational consideration, not a default reaction.
When asked, “Who should make the first offer/demand?” most people respond, “The other guy.” When asked, “Why?” the response usually is, “That’s the way it’s always done.” This can be a serious mistake and can deny a negotiator a crucial tool — the effective opening offer/demand.
Conditions For Negotiation
A variety of conditions can affect the success or failure of negotiations. The following conditions make success in negotiations more likely.
Identifiable parties who are willing to participate. The people or groups who have a stake in the outcome must be identifiable and willing to sit down at the bargaining table if productive negotiations are to occur. If a critical party is either absent or is not willing to commit to good faith bargaining, the potential for agreement will decline.
Interdependence. For productive negotiations to occur, the participants must be dependent upon each other to have their needs met or interests satisfied. The participants need either each other’s assistance or restraint from negative action for their interests to be satisfied. If one party can get his/her needs met without the cooperation of the other, there will be little impetus to negotiate.
Readiness to negotiate. People must be ready to negotiate for dialogue to begin. When participants are not psychologically prepared to talk with the other parties, when adequate information is not available, or when a negotiation strategy has not been prepared, people may be reluctant to begin the process.
Means of influence or leverage. For people to reach an agreement over issues about which they disagree, they must have some means to influence the attitudes and/or behaviour of other negotiators. Often influence is seen as the power to threaten or inflict pain or undesirable costs, but this is only one way to encourage another to change. Asking thought-provoking questions, providing needed information, seeking the advice of experts, appealing to influential associates of a party, exercising legitimate authority or providing rewards are all means of exerting influence in negotiations.
Agreement on some issues and interests. People must be able to agree upon some common issues and interests for progress to be made in negotiations. Generally, participants will have some issues and interests in common and others that are of concern to only one party. The number and importance of the common issues and interests influence whether negotiations occur and whether they terminate in agreement. Parties must have enough issues and interests in common to commit themselves to a joint decision-making process.
Will to settle. For negotiations to succeed, participants have to want to settle. If continuing a conflict is more important than settlement, then negotiations are doomed to failure. Often parties want to keep conflicts going to preserve a relationship (a negative one may be better than no relationship at all), to mobilize public opinion or support in their favour, or because the conflict relationship gives meaning to their life. These factors promote continued division and work against settlement. The negative consequences of not settling must be more significant and greater than those of settling for an agreement to be reached.
Unpredictability of outcome. People negotiate because they need something from another person. They also negotiate because the outcome of not negotiating is unpredictable. For example: If, by going to court, a person has a 50/50 chance of winning, s/he may decide to negotiate rather than take the risk of losing as a result of a judicial decision. Negotiation is more predictable than court because if negotiation is successful, the party will at least win something. Chances for a decisive and one-sided victory need to be unpredictable for parties to enter into negotiations.
A sense of urgency and deadline. Negotiations generally occur when there is pressure or it is urgent to reach a decision. Urgency may be imposed by either external or internal time constraints or by potential negative or positive consequences to a negotiation outcome. External constraints include: court dates, imminent executive or administrative decisions, or predictable changes in the environment. Internal constraints may be artificial deadlines selected by a negotiator to enhance the motivation of another to settle. For negotiations to be successful, the participants must jointly feel a sense of urgency and be aware that they are vulnerable to adverse action or loss of benefits if a timely decision is not reached. If procrastination is advantageous to one side, negotiations are less likely to occur, and, if they do, there is less impetus to settle.
No major psychological barriers to settlement. Strong expressed or unexpressed feelings about another party can sharply affect a person’s psychological readiness to bargain. Psychological barriers to settlement must be lowered if successful negotiations are to occur.
Issues must be negotiable. For successful negotiation to occur, negotiators must believe that there are acceptable settlement options that are possible as a result of participation in the process. If it appears that negotiations will have only win/lose settlement possibilities and that a party’s needs will not be met as a result of participation, parties will be reluctant to enter into dialogue.
The people must have the authority to decide. For a successful outcome, participants must have the authority to make a decision. If they do not have a legitimate and recognised right to decide, or if a clear ratification process has not been established, negotiations will be limited to an information exchange between the parties. A willingness to compromise. Not all negotiations require compromise. On occasion, an agreement can be reached which meets all the participants’ needs and does not require a sacrifice on any party’s part. However, in other disputes, compromise–willingness to have less than 100 percent of needs or interests satisfied–may be necessary for the parties to reach a satisfactory conclusion. Where the physical division of assets, strong values or principles preclude compromise, negotiations are not possible.
The agreement must be reasonable and implementable. Some settlements may be substantively acceptable but may be impossible to implement. Participants in negotiations must be able to establish a realistic and workable plan to carry out their agreement if the final settlement is to be acceptable and hold over time.
External factors favourable to settlement. Often factors external to negotiations inhibit or encourage settlement. Views of associates or friends, the political climate of public opinion or economic conditions may foster agreement or continued turmoil. Some external conditions can be managed by negotiators while others cannot. Favourable external conditions for settlement should be developed whenever possible.
Resources to negotiate. Participants in negotiations must have the interpersonal skills necessary for bargaining and, where appropriate, the money and time to engage fully in dialogue procedures. Inadequate or unequal resources may block the initiation of negotiations or hinder settlement.
Why Parties Choose To Negotiate
The list of reasons for choosing to negotiate is long. Some of the most common reasons are to:
• Gain recognition of either issues or parties;
• Test the strength of other parties;
• Obtain information about issues, interests and positions of other parties;
• Educate all sides about a particular view of an issue or concern;
• Ventilate emotions about issues or people;
• Change perceptions;
• Mobilise public support;
• Buy time;
• Bring about a desired change in a relationship;
• Develop new procedures for handling problems;
• Make substantive gains;
• Solve a problem.
Why Parties Refuse To Negotiate
Even when many of the preconditions for negotiation are present, parties often choose not to negotiate. Their reasons may include:
• Negotiating confers sense and legitimacy to an adversary, their goals and needs;
• Parties are fearful of being perceived as weak by a constituency, by their adversary or by the public;
• Discussions are premature. There may be other alternatives available–informal communications, small private meetings, policy revision, decree, elections;
• Meeting could provide false hope to an adversary or to one’s own constituency;
• Meeting could increase the visibility of the dispute;
• Negotiating could intensify the dispute;
• Parties lack confidence in the process;
• There is a lack of jurisdictional authority;
• Authoritative powers are unavailable or reluctant to meet;
• Meeting is too time-consuming;
• Parties need additional time to prepare;
• Parties want to avoid locking themselves into a position; there is still time to escalate demands and to intensify conflict to their advantage.
Dynamics of Negotiation
Examining the approaches to negotiation only gives us a static view of what is normally a dynamic process of change. Let us now look at the stages of negotiation most bargaining sessions follow.
Negotiators have developed many schemes to describe the sequential development of negotiations. Some of them are descriptive–detailing the progress made in each stage–while others are prescriptive–suggesting what a negotiator should do. We prefer a twelve-stage process that combines the two approaches.
Stages Of Negotiation
The formal, age-old process of negotiation continues to pass through well established phases that are widely accepted. There is no shortcut to a successful negotiation. However, after the period of preparation, the negotiation phases often pass so quickly that you hardly notice them.
The following points summarise the stages you will have to go through in a negotiation. We describe these in more detail in the sections which follow.
1. Make a specific and detailed analysis of your aims, objectives and concessions you can and cannot make, and the limit to which you can go. List your questions.
Stage 1: Evaluate and Select a Strategy to Guide Problem Solving
• Assess various approaches or procedures–negotiation, facilitation, mediation, arbitration, court, etc.–available for problem solving.
• Select an approach.
Stage 2: Make Contact with Other Party or Parties
• Make initial contact(s) in person, by telephone, or by mail.
• Explain your desire to negotiate and coordinate approaches.
• Build rapport and expand relationship
• Build personal or organization’s credibility.
• Promote commitment to the procedure.
• Educate and obtain input from the parties about the process that is to be used.
Stage 3: Collect and Analyze Background Information
Exchange information with the other party to develop trust and review the objectives of both sides. Weigh up the differences.
• Collect and analyse relevant data about the people, dynamics and substance involved in the problem.
• Verify accuracy of data.
• Minimise the impact of inaccurate or unavailable data.
• Identify all parties’ substantive, procedural and psychological interests.
Stage 4: Design a Detailed Plan for Negotiation
• Identify strategies and tactics that will enable the parties to move toward agreement.
• Identify tactics to respond to situations peculiar to the specific issues to be negotiated.
Stage 5: Build Trust and Cooperation
• Prepare psychologically to participate in negotiations on substantive issues. Develop a strategy to handle strong emotions.
• Check perceptions and minimise effects of stereotypes.
• Build recognition of the legitimacy of the parties and issues.
• Build trust.
• Clarify communications.
Stage 6: Beginning the Negotiation Session
• Introduce all parties.
• Exchange statements which demonstrate willingness to listen, share ideas, show openness to reason and demonstrate desire to bargain in good faith.
• Establish guidelines for behaviour.
• State mutual expectations for the negotiations.
• Describe history of problem and explain why there is a need for change or agreement.
• Identify interests and/or positions.
Stage 7: Define Issues and Set an Agenda
• Together identify broad topic areas of concern to people.
• Identify specific issues to be discussed.
• Frame issues in a non-judgemental neutral manner.
• Obtain an agreement on issues to be discussed.
• Determine the sequence to discuss issues.
• Start with an issue in which there is high investment on the part of all participants, where there is not serious disagreement and where there is a strong likelihood of agreement.
• Take turns describing how you see the situation. Participants should be encouraged to tell their story in enough detail that all people understand the viewpoint presented.
• Use active listening, open-ended questions and focusing questions to gain additional information.
Stage 8: Uncover Hidden Interests
• Probe each issue either one at a time or together to identify interests, needs and concerns of the principal participants in the dispute.
• Define and elaborate interests so that all participants understand the needs of others as well as their own.
Stage 9: Generate Options for Settlement
• Develop an awareness about the need for options from which to select or create the final settlement.
• Review needs of parties which relate to the issue.
• Generate criteria or objective standards that can guide settlement discussions.
• Look for agreements in principle.
• Consider breaking issue into smaller, more manageable issues and generating solutions for sub-issues.
• Generate options either individually or through joint discussions.
• Use one or more of the following procedures:
• Expand the pie so that benefits are increased for all parties.
• Alternate satisfaction so that each party has his/her interests satisfied but at different times.
• Trade items that are valued differently by parties.
• Look for integrative or win/win options.
• Use trial and error generation of multiple solutions.
• Try silent generation in which each individual develops privately a list of options and then presents his/her ideas to other negotiators.
• Use a caucus to develop options.
• Conduct position/counter position option generation.
• Separate generation of possible solutions from evaluation.
Stage 10: Assess Options for Settlement
• Review the interests of the parties.
• Assess how interests can be met by available options.
• Assess the costs and benefits of selecting options.
Stage 11: Final Bargaining
• Final problem solving occurs when:
• One of the alternatives is selected.
• Incremental concessions are made and parties move closer together.
• Alternatives are combined or tailored into a superior solution.
• Package settlements are developed.
• Parties establish a procedural means to reach a substantive agreement.
Stage 12: Achieving Formal Settlement
• Agreement may be a written memorandum of understanding or a legal contract. Detail how settlement is to be implemented–who, what, where, when, how–and write it into the agreement.
• Identify “what ifs” and conduct problem solving to overcome blocks.
• Establish an evaluation and monitoring procedure.
• Formalize the settlement and create enforcement and commitment mechanisms: Legal contract
• Performance bond
• Judicial review
• Administrative/executive approval
Once the agreement has been reached, it is worthless until it has been implemented. You should have defined clearly as part of the negotiation process whose responsibility it is to implement the deal.
Dr. Brian Monger.
Brian Monger is the Executive Director of MAANZ International and a Principal Consultant with The Centre for Market Development. He has extensive international experience in Direct Negotiations, Negotiating and supporting the negotiations of others and in porviding organisational training and mentoring in negotiation.
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