Negotiation Skill

MBA - MANAGERIAL COMMUNICATION (MC)

NEGOTIATION SKILLS

INTRODUCTION

The dictionary meaning of the word negotiate is to confer with another person in order to arrive at some agreement on an issue important to both parties. Salaries are often negotiated. So are service conditions. Sales representatives and buyers negotiate prices and contracts. So negotiation is an interaction between two parties on an issue 

• which is important to both the parties,

• which could involve conflict between the two parties (the candidate demanding a high salary but the employer keen to keep it as low as possible), and 

• which makes both the parties strive to arrive at a mutually acceptable agreement. 

Non-negotiable Issues

It should be remembered that certain issues are non-negotiable and no compromise or flexibility is permissible as far as they are concerned.

1. No negotiations are possible on issues that violate legislative orders, or which involve racist, religious, sexist or any other kind of discrimination.

2. If strict trading terms have already been laid down by an organisation and no compromises are allowed, these terms cannot be negotiated for one customer. That would bring a bad name to the organisation besides playing havoc with its marketing strategies.

3. If negotiated agreements violate the core ethical values of an organisation, negotiations cannot be entertained.

4. If disciplinary action has been initiated against some employees, it should be non-negotiable.

 Approaches to Negotiations

1. Win-lose

This approach is based on the assumption that in a negotiation process, the gain accrued to one party has necessarily to be matched by an equivalent loss to the other. The assumption is not always tenable. It is true that in one-time transactions, not likely to be repeated in future, like the sale or purchase of a house or a vehicle if the seller is pushed into selling at a lower-than-desired price, the seller's loss is matched by the buyer's gain. But such transactions do not fall under regular organisational transactions. It is sad to observe that the win-lose approach, though not very sound, is the one most often employed during negotiations.

2. Lose-lose

In this approach, both the parties feel that if the negotiated agreement were to be accepted in its proposed form, they would both end up as losers. Obviously, this is not the initial feeling with which negotiations begin. But somewhere down the line, one party gets the feeling that the other is being unreasonable and blocking the negotiation process. This perception makes him assume a rigid posture. If this kind of impasse occurs and neither side is willing to show any flexibility, the negotiation process will soon collapse, leaving both sides with a bitter taste in the mouth.

3. Compromise

In a bid to avert a lose-lose situation, sometimes, the negotiating parties arrive at a compromise in which neither party emerges the clear winner but they do not end up feeling frustrated either. Both of them gain a little, lose a little. They wind up the negotiations with the feeling that in the given situation, the final outcome was the best they could have achieved.

4. Win-win

This approach is based on the assumption that it is always possible to find alternatives that could satisfy the needs of both parties. Suppose, a retailer presses for a higher discount rate. The wholesaler agrees on the condition that a minimum sales level (higher than what was earlier stipulated) would be assured. The retailer gets cheaper goods; the wholesaler's turn-over is enlarged. So his overall profits do not show any dip. A win-win approach is one that all negotiations should be founded on. In their book, The Essence of Effective Communication, Ludlow and Panton uses a beautiful analogy to explain the four approaches:

Two parties are negotiating for a cake. 

Win-lose Give the cake to one party or cut it unevenly. 

Lose-lose Take the cake away so that neither party gets it. 

Draw Cut the cake down in the middle. (Compromise) 

Win-win Make two cakes or a much larger one.

 ----Negotiation is an interaction between two parties to arrive at an agreement on a debatable issue important to both of them.

 ----Matters involving law, any kind of discrimination, organisational policies or values, and disciplinary matters are not negotiable.

 ----There can be four approaches to negotiations: 

1. Win-lose one party wins, the other loses - should be avoided

2. Lose-lose both parties lose - should never be accepted

3. Compromise both gains a little, lose a little - minimum acceptable 

4. Win-win both emerge as winners - should be the aim of all negotiations

  

How to Make Negotiations Successful

The well-being of every individual associated with an organisation is inextricably linked with its general prosperity, and successful negotiations at different levels hold the key to this prosperity level. The guidelines given below will help to facilitate the negotiation process.

1. Provide for a congenial ambience where negotiations are to be held. Such simple variants as the location of the meeting, the seating arrangement, the degree of informality also influence the final outcome.

2. Be prepared to listen and understand. How can you assess your opponent's stand if you do not listen? Rest assured that if you actively listen to your opponents and are sensitive to the non-verbal clues being offered by them, you will be able to get more concessions for yourself. Listening will also help you to judge what is negotiable and what is not. Persistently arguing over non-negotiable issues creates avoidable friction and spoils the atmosphere.

3. Never lose sight of the opponent's psychological and emotional needs. If the negotiation process hurts your opponent's ego or if it gives him the feeling that you are indulging in arm-twisting or bullying, that you have an unreasonable advantage over your opponent, which you are exploiting, it will lead to resentment, antagonism and hardening of stance. Whether an agreement is signed or not, negotiations can never be regarded as satisfactory.

4. In the early stages of negotiations, try to create a climate that is cordial, collaborative and conducive to interaction. Positive gestures like a warm handshake, friendly eye contact, etc., motivate people to cooperate.

5. Begin your negotiations by reaching a minimum agreement even if it is not related to your basic objectives. It will strike a promising note for what is to follow. Then build bit by bit on what has initially been agreed upon.

6. In case of an impasse, try to judge whether it is the material or the emotional aspect that has created a stumbling block. If it is emotional, rephrase your proposal to suit your opponent's psychology. If it is material, see what concessions you can allow or what alternatives you can offer to take the negotiations forward.

7. Show genuine respect for your opponent's cultural background. Racial, linguistic and cultural barriers are very hard to overcome, but the most smarting hurts originate there. Ensure that you do not hurt your opponent's sentiments either verbally or through any of the signals you might have sent inadvertently.

8. There must be congruence between your verbal and non-verbal communications.

9. Don't encroach upon other people's private space. See that you are not causing them any kind of inconvenience. In particular, ensure that they do not experience any discomfiture during the entire negotiation process.

10. Don't try to achieve your personal objectives through any negotiation. It is your commitment and loyalty to your organisation that has to be kept uppermost in your mind.

Negotiating is a critical process of vital importance. Corporate ethics demand that once an agreement has been signed, it should be faithfully adhered to. Violation of agreements is permissible neither legally nor ethically. But negotiations before signing the agreement are perfectly in order. Successful businessmen are very hard negotiators.

Seven-Step Negotiating Process

The negotiating process is comprised of seven steps.

1. Preparation

• The first step is to have clearly defined objectives as well as limits within which negotiations have to be conducted. The limits define both qualitatively and quantitatively the concessions you are empowered to allow and the extent to which you can relax your initial stand.

• Objectives can be primary or secondary. Primary objectives form the purpose of negotiations. There can be no compromise on them. Any effort to subvert them will render the entire negotiation process futile. Secondary objectives lay down additional benefits that you could extract through your negotiation skills. Concessions can obviously be allowed only in the domain of secondary objectives

• The second step is to collect relevant information. The stand that you are going to take during the negotiations might need tangible statistical support, so it is important to get all relevant data ready with you before you take your seat at the negotiation table.

• An important aspect of preparations is to verify whether your assumptions are fairly sound. Make sure that you are not taking certain assumptions as verified facts and building your position on them.

2. Arguing

Negotiations begin with arguing. The two sides try to put across their respective stands as clearly as possible. The basic objective at this stage is-

• to make a clear and forceful statement of one's own 

• to patiently listen to and understand the other person's stand.

Keeping the atmosphere cordial during the arguing stage is very important. Often the initial positions taken by the two negotiating parties are diametrically opposed to each other. Even a little hostility in the atmosphere, a minor unpalatable utterance could vitiate and sabotage the whole process. If we remember that the final outcome is usually far removed from the initial positions and that here the aim is to understand to what extent the differences can be narrowed down, it will help us to remain cool and take the negotiations smoothly forward.

3. Signalling

If arguing suggests irreconcilable stances, negotiations might approach a deadlock. You will have to use all your interpersonal skills to save negotiations from breaking off. You will need to resort to signalling.

The word signal in this context refers to verbal and for non-verbal clues that could open up the possibility of moving ahead. If the other person has sent any such signals, it is important to interpret them correctly and modify your stand. If the other person is unwilling to budge, it is quite likely that his primary objectives are being threatened, or that he does not have sufficient trust in you. In this case, you will have to review your stand, examine all possibilities of modifying it and give meaningful signals of your willingness to accommodate.

4. Proposing

This is a decisive phase. It is here that a verbal statement is made about the proposed agreement. Arguments are not tangible, they cannot be negotiated. It is only a proposition that can be negotiated.

5. Packaging

At this stage, you offer a package for the other person's consideration. The package should take care of all the suggestions put forward by you, or by the other party. The following points should be borne in mind while preparing a package:

• The package must address your own and your opponent's primary objectives. (If a package fails this test, don't waste your breath on offering it.)

• It should be in consonance with the organisation's policies and value system. 

• You should be confident of getting your organisation's full backing on it. 

• You should be clear about further concessions that you would like to get or offer when the package is finally approved.

6. Bargaining

This is the stage to extract or grant concessions. Bargaining can be regarded as satisfactory only if it leads to a win-win situation. For example, if you are raising your discount (a concession being offered), is your opponent willing to assure you a larger sale (a concession extracted)? If you are willing to accept a higher price for a utility product, will your supplier agree to give you a longer warranty or a better after-sales service? While bargaining, it ought to be remembered that any negotiations that lead to a win-lose situation will leave one party feeling cheated or exploited. That is not good bargaining.

7. Closing

This is the final stage. The negotiation process ends with this. If the deadlock could not be broken at the argument stage, the negotiations would probably be called off. But if you have arrived at some satisfactory conclusion, it is time to give it a formal shape. You should first make an oral statement, clearly spelling out all the terms and conditions applicable to the agreement. Once a clear understanding has been arrived at, the agreement should be put in black and white and duly signed by the concerned authorities.

KNOW YOUR BATNA

BATNA, a term coined by Fisher and Urg (Getting to Yes, 1981), means Best Alternative to a Negotiated Agreement.

BATNA gains importance in cases of deadlocks. If it is not possible to take the negotiations forward in spite of a keen desire of both the parties and you do not want the negotiations to break down, you should have your BATNA already worked out and should bring it forward for the other person's consideration.

Your BATNA defines the best alternative that will meet your needs. Look at the best offer that is available. Carefully compare the two. If you think the offer looks promising, begin to negotiate afresh. Keep comparing your BATNA and the available offer continually. This comparison will prevent you from accepting what you should reject and from rejecting what you should accept.

BEHAVIOR IN NEGOTIATION

The behaviour of negotiation parties plays a vital role in creating a favourable climate to hold negotiations. Here are some guidelines for good behaviour: 

1. Remain polite. 

2. Instead of appearing to be unreasonably obstinate, make your opponent see the situation from your perspective. 

3. Let issues be in focus rather than personalities. 

4. Show your enthusiasm for a fair solution. 

5. Periodically keep reviewing the points agreed upon and the outstanding issues. 

6. Do not respond to the following: 

Personal abuse,

Sarcastic comments,

Any attempt to bully you or pressurise you, 

Any new demands that might be distracting, 

The introduction of any fresh person into the negotiation process.