1.2 What is Negotiation?

So how can we define negotiation? How can we characterize it, recognize it, and know when we should be doing it? The objectives for this segment of the module are, to define and describe negotiation. Differentiate it from selling. I think we all have a sense of what negotiation is. And it is an exchange of offers, a back and forth conversation between two parties and that each have something to offer the other. It can be very self-serving, with both parties solely focused on their own interests. Striving to get the most possible from their counterpart. Negotiation could also be collaborative, a collaborative effort, with both parties working for mutual benefit, or a win-win solution. Win-win is a process of give and take that results in both parties receiving enough of what they wanted to be satisfied. None of these perspectives is wrong, nor are any of them always right. In fact, there’s a wide variety of approaches to the art of negotiation, and the only thing that is universally true about you, negotiation is that no two negotiations are alike. Negotiation is a critical component of doing business today, at every level of an organization, and in every department. Negotiations occur between an organization and its clients. Between an organization and its vendors. Between departments, between managers and team members. Between individuals on a team. Negotiation also occurs outside of the workplace, between parents and their children, between spouses, between friends, and between neighbors. I could go on. But opportunities to negotiate present themselves everyday in all aspects of business and life. Sometimes, though, a negotiation does not occur in a situation in which it could have. This might be because the participants don’t have the skills or because one or both of the participants don’t perceive that a negotiated agreement is an option. Or maybe, one of the parties doesn’t trust or is uncomfortable with their counterpart. There are times when a negotiated agreement or settlement will result in a better outcome for both parties then the first offer or agreement would have provided. So the first question to ask one self is, could the outcome for one or both parties be improved by negotiating the terms? If the answer is yes, and you are reluctant to do to a lack of skills, I hope you’ll reconsider your position after this course. Of course sometimes negotiation isn’t warranted or likely to significantly improve the outcome. In those cases, remember, you don’t have to negotiate everything. It’s important to remember that there are no rules for negotiation, and that your counterpart may have very different goals, values, perspective, and limitations than you do. It’s a bit of a dance, in that, while planning is an important component of the negotiation process, you still cannot always predict what the outcome will be, or what your counterpart will say or do. Quality research and planning will minimize the unknowns, but not eliminate them. Good planning and research will provide you with a toolbox of options and opportunities, when unanticipated responses or offers arise. Negotiation is mostly about building and preserving value for both you, and your organization, or for your counterpart. A good negotiator seeks all aspects of value and strives to maximize them for all parties, and creates an agreement in which such value can be preserved. Negotiation is not a new construct. It has been around since the dawn of man. And research has shown that even capuchin monkeys will negotiate to allocate limited food supplies. I’m sure you know that some cultures are more comfortable with negotiation as it is a more accepted and even expected part of a transaction. I think this is less so in the United States. And we therefore tend to struggle with it a bit. Negotiation has been written about, talked about, and taught in all manner of academic venues. One well-known author and speaker on the topic of negotiation, Gerard Nierenberg, who has been referred to as the father of negotiation by the Wall Street Journal. Says that, whenever people exchange ideas with the intention of changing relationships, whenever they confer for agreement, then they are negotiating. Nierenberg’s statement must further developed by Israel Unterman who said, negotiation is conducted neither to widen nor breach the relationship, but to form a new or different configuration. Negotiation is not selling. This is a frequent point of confusion. Selling is about determining the other person or organizations need and then explaining how you will fulfill that need with your product or service. Highlighting the positives of your product or service, versus an alternative. Selling typically precedes negotiation in that first, the counterpart needs to perceive, acknowledge, and accept that the product or service you have fulfills their need. At this point, the sale could be concluded based on standard terms and pricing. Most likely outlined in a catalog or services contract. Or negotiation might be, at this point, might begin at this point in order to work out the best terms of the transaction. Perhaps regarding delivery time, cost per unit for different quantities, service agreements, duration of the contract. Or a host of other possible terms. Negotiation is not about establishing need and solution fit, but uncovering where potential value lies, and then enhancing the value of an exchange of goods or services or ideas. It is about defining a solution and all of its parameters as they relate to each party. Selling a negotiation cannot occur concurrently. In fact, the selling must conclude before the negotiation begins. When selling restarts after the negotiation has ended, it’s generally a sign of weakness on the part of the negotiator who has reverting to as, reverted to a stance of selling. So when is negotiation appropriate? In what situations do we benefit from negotiating an agreement? An experienced effective negotiator might argue that anything can be negotiated. While that may be true for the most part, the question becomes, is it worth it? Just how much time and effort are you willing to put in for the anticipated return? In many day to day exchanges, interactions, and agreements, the time required to negotiate a better outcome might be worth more to you than the value of the improved outcome. In that case, save your energy, and take the deal as it is first presented. For example, trying to negotiate ten cents less per pound for apples at the market, just might not be worth your time and effort. Agreements which should be negotiated include important decisions that have a noticeable financial impact upon a business or a family. Such as the purchase of a home, a car, a large piece of equipment, or supply of a critical component in your manufacturing process. Another type of agreement that might be improved by negotiation is an agreement or solution which need to be developed and refined. Some negotiations must include multiple variables, and therefore negotiation is indicated to find the right parameters for each of the variables. Agreements such as facilities management contracts or software upgrade services might fit into this description. In a business situation, the decision to negotiate might relate to a minimum dollar or expense limitation imposed by either your organization or your counterpart’s organization. In a personal situation, the decision to negotiate might relate to the number of recent or ongoing negotiations. In other words, choose your battles wisely. To summarize, a successful negotiation can be described as a mutually beneficial agreement reached through a collaborative effort to maximize and potentially enhance the benefits to both parties. There are a variety of approaches to negotiation and styles of negotiators. The decision to negotiate is situation dependent and best chosen when the likely outcome or agreement is likely to be better than the outcome without a negotiation. There should be enough of an anticipated improvement to justify the time and effort necessary to employ the negotiation process. And finally, negotiations should always follow the sales process and not be attempted concurrently. If you go to your local bookstore or peruse the choices on any online bookstore, you will find many books on the topic of negotiation. And each espouses a slightly different approach. Many of them go into great detail about specific tactics, how to use them, and how to respond to them. In this lecture, I will review, in general, three perspectives on negotiation from a variety of authors. The objectives for this lesson are to describe the basic tenets of a four-option style of negotiating. To describe the basic tenets of a circumstance-dependent or situational style of negotiating. And to describe the basic tenets of a principled style of negotiating. Several of these are referenced in the resources section for this course. Some of them focus on specific tactics that negotiators often use and how to respond to them, while others are more philosophical in their approach. I found at the majority of these offers espouse one of the three approaches or some variation of it, which I will describe in this segment. The first is a model describing four choices, written about mostly by Peter Stark and Jane Flaherty, and some others. The second is what I refer to as, circumstance-dependent model, written about Steve Gates and some others. And the third is the principal negotiation model, written about by Roger Ury, Roger Fisher and William Ury. Each of these has its own merits, and you may find that one resonates with you more than the others, because of the work you do or the type of negotiations you find yourself in. Recognize that none of them are entirely wrong or entirely right. Each, each has its own merits. I will say that for the types of more complex negotiations that are likely to cause someone to seek out information about negotiation. Principled negotiation is often an effective approach, as it can include, it can include some of the best components of the other two models. I will first talk about the perspective on negotiation, which most of us know and that, that of the four choices model. Peter Stark and Jane Flaherty have written about this approach to negotiation extensively and a collection of books and articles. I’ll call this classic negotiation or the four neg, choices model. In this negotiation model, the negotiators are working to achieve one of four possible outcomes. Win-win, win-lose, lose-lose or no outcome. Win-win typically the goal of a negotiation in this model means both parties get a large enough portion of what they wanted to be satisfied and everyone leaves the negotiation feeling that they got their fair share of the bargain. The win-win approach in this model typically involves both parties giving up a little of what they had hoped to achieve, but not so much that they feel that they’ve lost. Concessions or compromise is common, but each negotiator feels that he or she achieved enough of what was wanted to be satisfied. Not every negotiator enters a negotiation with a win-win solution as a goal though. In a negotiation that assumes there is a single item or single set of items that are the subject of the negotiation. Some negotiators have a singular goal of gaining a greater share of the item or items being negotiated. This is what is happening in a win-lose negotiation. In a win-lose scenario, one negotiator gains more and the other loses some of what they hoped to gain. Or they walk away from the negotiation with less than their counterpart. This is the type of negotiation in which the agreement is perceived as a pie to be divided. A negotiator who chooses this approach simply wants a greater slice of the pie than his or her counterpart. Generally speaking, win-lose scenarios are generally short lived as they typically turn to lose-lose scenarios longer term. I say this because long-term, the loser in this scenario is very unlikely to do business with that counterpart again. Or to recommend him or her. The losing party may even go so far as to do damage to the winner through negative posts on social media or complaints to business organizations. In a lose-lose scenario, neither party is satisfied with the outcome because neither party walks away with the satisfac, with satisfaction. This is typically the result of one of the negotiators being a hard bargainer with a goal of win-lose outcome, and successfully bullying the counterpart into agreement. Into an agreement that favors the winner and damages or causes a loss to the loser. If both parties decide to end the negotiation without an agreement, we refer to it as a no outcome negotiation. In this case, both parties walk away unresolved, and either do not pursue an agreement at all. Or seek an alternative supplier. The reigning assumption in all of these outcomes is that there is a finite amount of value being negotiated and that the components of that value are shared equally or unequally. The negotiation typically comes down to how to share the pie. Which way to cut it so that each participant feels they got the half they wanted. I referred to the second type of negotiation as circumstance-dependent. In circumstance-dependent or situational negotiating, the counterparts choose their approach based on what is being negotiated, where they are in the negotiation, and with whom they’re negotiating. In this approach, a negotiator might chose a positional approach such as bargaining, haggling, bartering or trading. Positional negotiations assume that the amount of value to be distributed is fixed and that each negotiator takes a position regarding how much of the value, and in what form he or she will claim his or her share. There is generally no collaboration or development of additional options. The circumstances, however, might suggest a more collaborative approach in which the negotiators might seek compromise, might seek win-win, or even a mutually beneficial outcome with value added to the agreement for both sides. For any of these collaborative approaches to be effective, there must be a positive relationship in place. For this reason, approaches that seek positive outcomes for both parties, by both parties, requires some relationship and trust building to occur in advance. Something to keep in mind about situational or circumstance-depended negoti circumstance-dependent negotiator is that he or she might change strategies as the negotiation progresses. Sometimes this will take the form of specific tactic, tactics that could be categorized as hard bargaining or bartering. It’s wise not to assume that because the negotiator takes a particular stance at the outset that he or she will continue with that stance throughout the negotiation. As I mentioned earlier, my focus in this course is on principled negotiation with a goal of maximizing the value of the agreement for both parties. Opponents of principled negotiation believe that while every negotiation is different, the basic components and strategy are consistent across all types of negotiation and all types of negotiators. Principled negotiation is discussed at length in a best-selling book entitled Getting to Yes by Roger Fisher and William Ury. Fisher and Ury tell us not to bargain over positions but to focus on the interests of each party, and to separate the people from the problem. Principled negotiation involves working with a counterpart to identify multiple possible solutions to the issue at hand. And to remain focused on that issue, and not the positions that any particular person has taken. This may sound very similar to a win-win style, or a collaborative style, and there are certainly similarities. The main difference lies in the intent. In the Fisher and Ury model, they focus on development of solutions that address the issue without regard to the position of the counterpart. The other models consider the counterpart’s position, or what they say they want to achieve, rather than identify a problem to solve, or an issue to address and seek solutions to it. Our approach to negotiation throughout this course is one of seeking to develop multiple possible solutions, increase the total value of the agreement for both parties, and to work in partnership with the counterpart to achieve mutual gain and benefit.