2.1 Factors That Influence How a Negotiation Proceeds

In this module, we will be looking at a variety of factors that might have an impact on how your negotiation proceeds. I will talk about balance of power, trust and authority. I will also address the issues of value and fairness as well as what each might mean to the progression and the outcome of the negotiation. The final segment of this module addresses how emotions play a role in a negotiation. The objectives for this module, are to clarify the factors that might influence a negotiation, and how to prepare for and use them to our advantage. To understand the meaning of value and options in a negotiation. To understand the role of fairness and from whose perspective to evaluate it and how to define success in a negotiation. The first important factor to consider when planning a negotiation is power. In this lecture I will talk about what power is, the types and rules of it. As well as the factors and circumstances which influence it. We will also talk about the role that level of authority plays in a negotiation, along with trust and empowerment. Consider for a moment what comes to mind when you think about the word power. Do you think of strength, influence, authority, or dominance? Certainly the word can be used in various contexts to mean all of those things. And the term power often has negative connotations. The term power with respect to negotiations should have neither a negative nor a positive connotation. Power refers to the ability to influence a negotiation or the people involved in that negotiation. The more power you have, the more influence you have on the timing, the scope, and the style of negotiation that takes place. Power is easily misinterpreted and often underutilized in negotiations. Be aware of and encouraged by the fact that there is often more power on your side than you see on the surface. And that you can take steps to increase your power, and reduce or minimize your counterpart’s power. Even if the balance of power at the outset appears to be in your counterpart’s favor, you can change this balance of power. To favor your organization by being proactive and taking control. An important piece of being proactive about power is being knowledgeable about your counterparts’ position in terms of their current situation. Their market conditions. Competitors vying for the same contract. And their BATNA. You need to know not just about the company and organization but also about the person with whom you are going to be negotiating. Information increases power. For example, if you know you’re major competitor has recently raised their prices or suffered a loss of a manufacturing facility. Or you know your counterparts organization is about to launch a major product in a new market in 30 days. Then you have information that can be used to your advantage. And engineering a high value agreement. That’s power. Another critical piece of knowledge which relates to power is your counterparts accountability structure. Most everyone whose negotiating, is accountable to someone else higher up in the organization. That organization has most likely provided the negotiator with some guidelines. Some bottom lines and some timelines. The more information you can gain about these guidelines, the more power you have. The good news is that in reality you probably have more power than you think. It has a lot to do with self confidence which is enhanced through effective preparation. In order to prepare be sure you do your research before the first conversation. Use planned, targeted questions to gain potentially useful information. And consider where you stand with respect to the power balance. Stark and Flaherty describe ten types of power. Position, knowledge, character, rewards, punishment, gender, powerlessness, charisma, lack of interest, and craziness. These are all sources of power. They all have potential weak points or characteristics that could be used to shift the balance of power in your favor. This is where information and preparation come in. If you have information about a real or perceived power held by your counterpart, you can much more effectively overturn it. Know also that perceived power is just as effective as real power, if well implemented. If your counterpart believes that you hold a certain power, it doesn’t matter if you really do or do not. It’s quite real to your counterpart, unless you tell him or her otherwise. Your counterpart may well be trying to project more power than he truly holds. But if you see the use of a power which you know from your research and questioning that your counterpart does not have, you will not succumb to a bad option in the agreement. This brings us to the rules of power. There truly aren’t any real rules to the negotiation. But there are some of what I’ll call truths regarding power. I’ve spoken already about the fact that you probably have more power than you think. You will perceive and your reasearch will tell you about the power held by your counterpart. It is very easy, however, to overlook your own sources of power, so be sure to consider both. The reality is that in most negotiations the power is close to evenly distributed when you consider all of the sources of power from both sides. This is important in that the more balanced the sources of power, the more likely it is that you can operate your negotiations with a principled or a win,win style. When the balance of power is close to being even, you are both more likely to be searching for additional point of value to add to the agreement. When the balance of power favors one counterpart more then the other, there’s a tendency to work on simply distributing the existing power and acknowledging that and acknowledge value with one partner exerting his or her power over the other partner to gain as much of this value as possible. Gauge refers to this as value distribution. Another truth which I’ve mentioned before is that power can be real or perceived, and that perceived power can be just as affective as real if the counter part believes in it. Related to this is the fact that power must be tested to truly evaluate just how much of it you have. I’ve stated before that power must be used to be useful, but it is also true that power only exists where it is acknowledged and accepted by the other party. In other words, if the other party does not recognize that you hold that power, it doesn’t really exist for the purposes of the negotiation. Conversely, if you don’t have a certain power, but your counterpart perceives that you do, then you are able to use it. A truth which is both good and bad news to negotiators is that power relationships can change in a negotiation and can do so quite rapidly. This often occurs, when new information, new points of value, new participants, new conditions or limitations, become a part of the negotiation. The level of trust between negotiators, is an important factor, in the approach to, and progression of, a negotiation. So why is trust necessary in negotiation? Many of us have interacted with individuals who operate in a cycle of mistrust, viewing most counterparts as adversaries, and worthy of suspicion. Certainly this is one stance that can be taken in the negotiation, but it is not likely to lead to the most productive agreements in the long run. Generally, a negotiation between parties who do not trust each other takes the path of a win,lose approach with no new value or options added to the conversations. A better strategy is to take the time in the beginning stages of the negotiation to take steps to build trust with your counterpart. This is because a trusting relationship allows for a meaningful and robust exploration of options that will benefit both parties. You as a negotiator will need to assess the level of trust between you and your counter part. And proceed accordingly. Take care not to place too much trust in an untrustworthy individual as a result of your desire to develop a better relationship. On the surface being empowered with the authority to make offers and decisions on a wide range of variables and price points might seem to be a great benefit to your side of the negotiation. Certainly such empowerment allows the negotiator a wide range of options during the negotiations. But such empowerment also means greater exposure and risk. Be sure at the outset to determine what level of authority and empowerment your counterpart has been given. You want to find out what constraints he or she is working under. And how they compare to yours. It may seem that a higher level person with greater authority to approve price or component changes would be in a better position to negotiate. But this generally is not the case. This is because the person with the greater scope to negotiate also carries a greater risk. A high level of empowerment can lead to quick and less well considered agreement, in which the full range variables is not evaluated. This is where limits provided by those in authority over you can be in your favor as a negotiator. As you are much less likely to fall victim to unfavorable offers by the counterpart, or settle too quickly or easily. Similarly, if you have a high level of authority and are empowered to make decisions regarding concessions or price changes, it might be in your best interest to allow an individual with less authority but armed with a set of guidelines to negotiate for you. Quite often, higher level individuals give in or walk away more quickly in order to complete the process. A lower level individual with a set of limits and expectations might be in a better position to explore a wide variety of options for the agreement. If your counterpart holds considerably more authority than you do, he or she may not be willing to discuss points of value with someone at your level of authority. And choose to either dominate the conversation or demand an individual with a higher level of authority with whom to negotiate. Negotiating between teams of individuals from each organization is another approach to managing this authority issue. When different members of a negotiating team are empowered with different components of the agreement and each member focuses on his or her area, of the empowerment. The opportunity to take advantage of a single individual or agree to conditions or value points too quickly is eliminated. Team negotiations tend to provide greater protection. For the organization and enables the development of some high value agreements by utilizing the expertise and constraints within the team to greatest advantage.