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Good Negotiation Skills Are More Important Than Ever

Good Negotiation Skills Are More Important Than Ever

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  • 1. Good Negotiation Skills are More Important than EverNegotiating is a key personal skill. It is a refined communication process designed to resolveconflict over interests. It ranges from a simple request from a colleague, “Have you got fiveminutes?” to the process by which we acquire a place to live which we will spend the next thirtyyears paying for. It involves governments and major business interests agreeing on acomprehensive new tax for the mining industry and sovereign states agreeing to theestablishment of a new refugee processing centre in East Timor. To understand the importanceof negotiating we need a comprehensive definition. “Negotiating is an interpersonal decision-making process necessary when we cannotachieve our objectives single-handedly.” This definition by Leigh Thompson provides a clueto the pervasive nature of the negotiating process. It encompasses our business life, ourpersonal life and our domestic relationships. It can be simple transactional exchanges to multi-party, multi-jurisdiction, multi-cultural and multi-interest negotiations. We are often involved innegotiation with out even being aware that we are. The simple request for five minutes of ourtime is typical of the micro negotiations that fill our working lives.In many aspects of human endeavour our natural instincts do not serve us well. Our instinctivebehaviour when the rear end of our car goes into a slide is to steer out of the slide, whereas askilled driver will steer into the slide to regain control of the car before steering out. An enginefailure on takeoff will see an inexperienced pilot pull the nose up to gain altitude often stallingthe aircraft. An experienced pilot will put the nose down to gain speed and therefore control.There are similar examples with sailing and towing trailers. So it is with negotiation that ourinstinctive behaviour is often the opposite to correct behaviour. Before we examine thesebehaviours it is important to understand the increased relevance of negotiating to modernorganisational life.While negotiating has always been a key competence it is increasingly important because of thefollowing reasons:Increasing organisational complexity;Greater interdependence of between firms and within firms;More flexible working arrangements and career opportunities;Globalization of trade; andthe availability of information.
  • 2. Let us consider the impact of each of these in turn:Increasing organizational complexityThe very boundaries of organisations are becoming more flexible and fluid in response tocompetition. Old certainties, silos of expertise and fixed boundaries which gave certainty andrigidity have disappeared. The open source movement breaks down traditional models ofownership and cooperation. Work levels and standards are less likely to be mandated andsupervised than negotiated and built on mutual dependence and trust. This modern frameworkof flexibility and engagement is more likely to be negotiated freely by the parties than mandatedby one of them and accepted by the other.Greater interdependence between firmsCompetition has forced a rethinking of traditional relationships. Strategic alliances, partneringand outsourcing of key functions and creation of shared services are all examples of newchallenges for managers. Firms can be both competitors and allies depending on the particularneed required. Businesses can compete fiercely for a major contract and then subcontract amajor part of the business between them when the tender is decided.Many non-core functions are now outsourced to external suppliers while the enterpriseconcentrates on its key competencies. Functions such as information technology, security,logistics and catering are often outsourced. These outsourced functions must be negotiated withindependent organisations seeking to maximize their own returns rather than with colleagueswithin the organisation.More flexible working arrangementsOld power structures were largely based on formal authority, position and seniority. Increasinguse of subcontractors, independent consultants and temporary staff results in less formalrelationships and more consensus styles of management. Diversity among employees isincreasing with the need to manage different value systems within a common mission.Flatter structures and more porous boundaries between organisations provide many moreopportunities to negotiate.Globalisation of tradeThe opportunities and threats implicit in a world where competition and cooperation are globalrequire high levels of integration and coordination between firms to secure the benefits of trade.Managers need to manage the blurred boundaries between their firm and others in the marketplace. The rise of China and India has provided hundreds of millions of additional workersneeding to integrate into the global economy. This collapsing of boundaries between willingsuppliers and buyers provides countless opportunities for negotiation and integration.The availability of information
  • 3. The internet and communication technology have rebalanced the relationship between buyersand sellers in favour of buyers. Consider the market for new and used cars. Competition used tobe local and the sellers were better informed than most buyers. A car salesperson would sellsix cars a month while the average buyer would make a purchase every three years. The buyernow has access to the same market information as the seller through sites like buyer can use the net to seek quotes on vehicles from dealers throughout the country andpossibly even overseas.If negotiation skills are more important than ever why are we so poor at negotiating?Given the critical importance of negotiating skills to management performance it is surprisingthat many are demonstrably poor negotiators. There are a number of reasons for this. Theyinclude the failure to develop their skills; a lack of personal discipline; a win/lose mind set;irrational behaviour under pressure; an inability to distinguish between relationship andcommercial issues; a failure to prepare and use of short- term tactics rather than robuststrategies.Fortunately there has been increasing academic interest in negotiating practice and theory inrecent times and a growing body of accessible work to help the practitioner understand theunderlying theory and improve their personal performance as negotiators.The works of Roger Fisher at Harvard, Gavin Kennedy in Scotland, Leigh Thompson at Northwestern University are examples of this academic research informing best practice.The opportunities and threats implicit in a world where competition and cooperation are globalrequire high levels of integration and coordination between firms to secure the benefits of trade.Managers need to manage the blurred boundaries between their firm and others in the marketplace.What is the new skill set required to prosper in this changed environment?A negotiator needs discipline: The discipline to prepare thoroughly and undertake the required research prior to negotiating. The discipline to develop a robust strategy and stick to this plan. The successful negotiator also requires flexibility around strategy if their initial choice fails to work. The discipline to prepare options and the provide solutions to any conflict.To achieve mutually successful outcomes the negotiator needs confidence. Confidence to understand that information sharing is crucial to any gain sharing in a negotiation. This sharing of information is essential to building trust and a collaborative outcome. It is interesting that research indicates that people who share personal information prior negotiating are less likely to deadlock. We like to know who we are dealing with. So the increased use of social media both provides excellent research
  • 4. material but also a means of establishing a relationship with the counterparty prior to negotiating. Confidence to know that if the negotiation creates value then you have the skills to negotiate a fair share of that value.The skilled negotiator needs creativity. While they need to be strong in asserting their rights and in pursuing their own objectives they need to be creative in trying to achieve the other party’s legitimate objectives. A starting point for the creative process is to put yourself in the other party’s shoes for part of their preparation. This will provide both understanding of and empathy for the other party. They need to be creative in bringing a range of issues to the negotiating table. This is because single issue negotiations inevitably lead to either deadlock or compromise. So rather than negotiate an annual salary increment, open up the negotiation to career issues which include training, opportunity to work in different teams, overseas experience and temporary project assignments. Rather than negotiate the purchase price of an asset, look at its whole economic life which would include maintenance, upgrades, training and replacements.To conclude, we may not need to reconsider the answer of the question from our colleague,“Have you got five minutes?” but in a modern age where there is increasing organisationalcomplexity, greater independence of firms, more flexible working environments, globalisationand the ubiquity of the internet, negotiation skills are more important than ever. To be moresuccessful negotiators we must increase discipline, confidence and creativity.Keith StaceyScotwork 9211 3999