2.3 Value, Fairness, and Successful Outcomes

In this module, I will discuss value, fairness, and successful outcomes. Our objectives for this lecture, are to understand the meaning and significance of value to both you and your counterpart. Define fairness, and recognize its role in a negotiation. Evaluate and characterize our definition of success in terms of a negotiation. I have referred to value a few times in this course. Well what exactly do I mean by value? Value isn’t just final price. Value might be price, but there are many other aspects to value, such as delivery terms, delivery time, packaging, turn around time, volume limits, payment terms, renewal options, staffing considerations. The list is very, very long. You will find that most negotiations center around a specific issue, such as cost per unit in a supply agreement or overtime policy in a union negotiation. As a negotiator, your job is to identify opportunities to add value to the central issue through exploration of related options. Every central issue has multiple related issues or options. Options related to cost per unit might be units per package, or type of packaging, or variations in the unit itself. Variables related to long term contracts include components of the suite of services, the timing of delivery, the option of dedicated staff, the training of the staff, the length of the agreement. Returning to the issue of price, while it must be addressed and early on is best. Strive to keep it from being the primary issue of the negotiation. Continually seek to focus on total value with price being a component. The goal is to create an agreement in which both parties have maximized the value of the central issue as well as the related variables. To do this you need to determine what aspects of a potential agreement have the greatest value to your counterpart. You may find that what has great value to your counterpart or the other organization is of much less value to you. This would uncover what could be a very attractive opportunity for you. Therefore, gathering as much information about the organization and the person with whom you are negotiating is critical. In the early stages of your agreement, when you’re gathering information, seek information about every option related to the central issue. Every option you can identify. Learn how each of these options influences your counterpart’s business, and how changing one or a few of them might add value for your counterpart. Knowing such information helps you to build trust, and enhance the value of the agreement to your counterpart. In working to increase total value, rank price to one or more other options and seek to add value in areas that are of greater significance to your counterpart than to you. That way, you increase the value to your counterpart without losing that same amount of value on your side of the agreement. For example, if you find that your counterpart has been frustrated by delivery issues of similar items, and your organization has a particular strength in logistics, an attractive delivery offer may have much greater value to the counterpart than cost to you. Linking options to cost has another advantage. When price pressure surfaces in the negotiation, it is clear and expected, that if one option, such as cost changes, there will be an offset in one of the other options. Therefore, it is in your best interest to link the options and keep everything conditional. The important thing to keep in mind is that there is much more to value than price per unit. And that what has value to you may not be as valuable to your counterpart, and vice versa. Many of us hold the value of fairness. And we choose to operate with a fair outcome being the goal. Concern over what is fair is the down fall of many negotiators though. This is not to say that fairness is irrelevant or that fairness is in the eye of the beholder. Your idea of fair is likely to be different from that of your counterpart. Your judgement of fairness to the other organization is based on much less information than your counterpart’s. As a result, you are not in a position to judge what is fair for both sides, only for yours. It is up to your counterpart to judge what is fair for his or her organization and communicate it to you. The same goes for you. But the use of the fair in negotiations tends to drive the conversation in the direction of values. I recommend focusing on interests instead. Each party is responsible for doing what is in the best interest of his or her organization. One other consideration that will help you decide which options are most important to you is the speed, quality, price conundrum. There are over arching priorities which will help you to make these decisions. No doubt you have seen this before. Briefly stated, you can’t have all three. You have to give up quality if you want a low price and fast delivery. If you want high quality you’re probably going to have to pay more or wait a bit longer. The three interdependent perimeter conundrum also applies in other areas of business. In the contract negotiation sector, these three variables might be timing, cost, and gratification. In the services sector, these three elements might be timing, cost, and services. The relevance to you is, how do these three parameters rank in terms of importance for you? If you know that, you’ll have an easier time understanding which variables mean the most to you. When it is all said and done, how will you know if you negotiated well? You may not ever, because the other party may never tell you what might have been. But how can you define success? By success, I don’t mean simply winning, or getting the price you wanted. I’m referring here to a more complete evaluation of the outcome of the negotiation. Success should not only be measured by the monetary value of a win, infact, there are various ways of evaluating the outcome of a negotiated agreement. Did you achieve a better deal than before? Improve the deal over the original offer? Overcome a deadlock? Move the other party significantly? Agree to terms that saved your organization significantly on shipping, delivery, or production costs? The definition of success truly depends on the negotiation itself as the criteria for defining success will vary with each negotiated opportunity. Success must be evaluated on the degree to which you have maximized the total value or opportunity for all parties. As part of any negotiation debrief, we must question whether or not we created the most value for both parties, considering all possible parameters. Also, when evaluating the outcome of a negotiated agreement, we must take out the component of self justification, and focus on the what, and the why. In other words, what are the details of the agreement and why are they beneficial or detrimental to each party. And not why did I offer or not offer certain options or did I go a good job of presenting. In this lecture I discussed value and the importance of seeking additional points of value to the central issue. Particularly value points that are of greater significance to your counterpart than to your own organization. I also discussed our sense of fairness and its role in a negotiation. Finally, I talked about how we define and evaluate success following a negotiation. What about emotion? Should we allow our emotions to be evident to our counterpart? Should we exhibit only positive emotions? Control of emotion can be difficult for some negotiators, and therefore a real challenge to maintaining their power. When your counterpart shows strong emotion when meeting you, you can learn much about what is of greatest interest or greatest value to him or her. What the nonnegotiables are and maybe even where his or her weak points are. The same goes for any displays of emotion from you, in terms of what your counterpart can learn. At the same time though, a control display of motion can be a conversation back from a tangential one. It can clarify your position to your counterpart and stop your counterpart from being unreasonable. So, what is the bottom line on emotion? The bottom line is that your emotional responses need to be controlled and intentional. Strong emotional expressions can signal an absence of self control, a lack of openness, and lack of trust or trust worthiness, frustration, or feelings of weakness. Your counterpart is likely to view it as weakness in some form. And therefore, you lose some power. That said, emotion can be used to beneficial effect if it is used in a planned, intentional manner. Thinking about your counterpart’s emotional expression, pay attention to any differential you observe between what is being said, and how the person is behaving. Also, take note of sudden changes in behavior, the loss of eye contact by your counterpart. It’s not so much any particular behavior, but sudden changes or words that are incongruous with body language. These are the signs to watch for. When body language doesn’t match the words, you’re seeing an internal conflict, and most likely hearing an untruth or a misrepresentation. Recognize that anger on the part of the counterpart may be directed at you, but not really about you or the conversation. You counterpart maybe frustrated by his or her limitations or expectations of the higher authority. Try to take your own emotional response out of your interpretation of what you are seeing. And try to understand the true cause of the emotional display. Strong emotion can be used intentionally with good results, but it’s risky. I would consider intentional use of strong emotion, as a higher order negotiation skill, and don’t recommend it for developing negotiators. Generally speaking, it’s best to maintain a professional and personable demeanor throughout the negotiation. If your goal is a principle negation, and your goal is to achieve an agreement with maximum value developed for all parties. In this module, we address factors that influence the progression and the outcome of a negotiation. We talked about power, trust, authority, location and timing and how they influence each negotiator’s perceptions of the situation, the counterpart and their own role and level of influence. I also discussed, what is meant by value in the sense of identifying other potential components of an agreement that would enhance its value to both you and your counterpart. I talked about fairness and the importance of recognizing that each participant must define fairness on his or her own terms. Finally, I talked about emotions and how they can effect the progression and outcome of a negotiation. Please review the text and video resources I have provided, and check your understanding by completing a quiz.