The Consultantthe Negotiation Process                          Students Beatriz Peste Santana                             ...
“Let us never negotiate out of fear. But let us never fear to negotiate.”                                                 ...
IndexIntroduction                                                        41 – Preparation ……………………………..…………………………………….    ...
IntroductionOne major part of a successful business is negotiation. As such, the art of negotiating is anessential skill o...
The Consultant is a non-real case that was created by Michael Wheeler at Harvard Law School.Despite being a fictional stor...
(United Arab Emirates) says that “a negotiation is complex set up of many stages and they areall important. Nevertheless I...
Table 3 – RPS Riverton Public Schools SWOT Analysis                                        Helpful                        ...
1.6 - Steps of                                                      Problem                    Needorganizational buyingpr...
Both Smith and Brown must remember that “Negotiation is the art of letting them have your     3way”. Even if this deal doe...
4.1 - Best Possible Agreement vs Minimum Possible AgreementFor every objective established, Riverton Public Schools and No...
c) Win-Win model      Table 8 –Distributive and Integrative               This approach done y by Fischer and Ury         ...
5- COMPLETIONAccording to the PROACT process, now is time to complete the negotiations. Furthermore, the3 C Framework says...
ConclusionWhether its with an employer, family member or business associate, we all negotiate for thingseach day, like hig...
Bibliography                                          BOOKS    FISCHER, Roger, URY, William, and PATTON, Bruce, Getting t...
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The Consultant

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In this paper, based on a negotiation scenario, The Consultant case, we will show how to position ourselves during the several stages of a negotiation process. It intends to be a contextualized guide on the negotiators roles and behaviors leveraging their objectives on a path to establish a common goal. So, we will exemplify it combining some scenes from the film Pretty Woman in order to show the best practices in the negotiation process. In the same way, we decided to ask professional negotiators to understand which are major items they give more importance in their international deals.

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The Consultant

  1. 1. The Consultantthe Negotiation Process Students Beatriz Peste Santana Nuno Ferreira Ricardo Marques Professor Pascal Brassier Course Negotiation Skills Master in International Management Year 2012/2013
  2. 2. “Let us never negotiate out of fear. But let us never fear to negotiate.” John F. Kennedy 2
  3. 3. IndexIntroduction 41 – Preparation ……………………………..……………………………………. 5 1.1 – Background checking 5 1.2 – Systematic preparation 5 1.3 – The negotiators profile 6 1.4 – SWOT Analysis 6 7 1.5 – The Quintilien’s Hexameter 1.6 – Steps of organizational buying process 8 1.7 – Preparing possible outcomes 82 – Relationship 83 – Opening 94 – Arguments 9 4.1 – Best Possible Agreement vs Minimum Possible Agreement 10 4.2 – Wrap Up: defining the Zone of Possible Agreement 10 4.2.1 – Win-Win Approach applied to The Consultant case 115 – Completion 126 – Transaction 127 – Serve 12Conclusion 13Bibliography 14 3
  4. 4. IntroductionOne major part of a successful business is negotiation. As such, the art of negotiating is anessential skill of the modern business pro. But negotiating isn’t always so easy, as it is generallya trait that has to be developed rather than an inherited trait.Negotiation is a method by which people settle differences. It is a process by which compromiseor agreement is reached while avoiding argument. In any disagreement, individualsunderstandably aim to achieve the best possible outcome for their position (or perhaps anorganization they represent). However, the principles of fairness, seeking mutual benefit andmaintaining a relationship are the keys to a successful outcome.Specific forms of negotiation are used in many situations: international affairs, the legal system,government, industrial disputes or domestic relationships as examples. However, generalnegotiation skills can be learned and applied in a wide range of activities. Negotiation skills canbe of great benefit in resolving any differences that arise between you and others.Negotiation is a tool. Just a hammer is useful for driving nails but not for driving golf balls,negotiation is useful for resolving some but not all disputes. It is useless if parties have nothingin common to motivate settling their differences. It is unlikely to settle differences in belief, asthe history of theological disputes testifies. It is even less likely to change Man´s natures,however much idealists see negotiation as a panacea for conflict.In this paper, based on a negotiation scenario, The Consultant case, we will show how toposition ourselves during the several stages of a negotiation process. It intends to be acontextualized guide on the negotiators roles and behaviors leveraging their objectives on apath to establish a common goal. So, we will exemplify it combining some scenes from the filmPretty Woman in order to show the best practices in the negotiation process. In the same way,we decided to ask professional negotiators to understand which are major items they give moreimportance in their international deals. 4
  5. 5. The Consultant is a non-real case that was created by Michael Wheeler at Harvard Law School.Despite being a fictional story, we decided to follow the PROACT framework in order to reach asolution for it. The PROACT process is a standardized schematic guideline of a negotiationprocess. It gathers seven crucial steps that both parts should cover in order to succeed:Preparation, Relationship, Opening, Arguments, Completion and Transaction.1 – PREPARATIONGenerally agreed as the most important phase of the negotiation process, the first PROACTstep, preparation, is highly important because it will set the success or failure of both parts. TheRiverton Public Schools and the Northeast Computer Services may prepare their positions anddefine what they hope to achieve with the negotiation. Clinical and objective analyses are vitalwhen they are preparing to negotiate, and they must gather as much information as they can.The negotiators should learn about the other side and their strengths and weaknesses. So, themore they know beforehand, the better prepared they will be when the negotiations start. Tokeep always the information updated can be a key factor for their success, as shown in thepreparation of Eduard Lewis team to the acquisition of Morse Industries, a shipbuilder companyowned by James Morse, in the Pretty Woman film.1.1 – Background checkingThe Consultant case presents us a typical negotiation process. So, it is important to set abackground checking in order to collect the necessary information about both parts (table 1). Table 1 – Background checking Riverton Public Schools Northeast Computer Services- Based in Riverton, Wyoming, it belongs to - Based in Hebron, Connecticut, Northeastthe Department of Public Works, which Computer Services can help the businessesgathers the police, the library and the other increase productivity providing new desktops,schools. Each department is responsible for laptops or upgrade existing systems toreprogramming its own system and training its improve performance and efficiency. Whenpersonnel. considering a centralized file server for your business, Business servers offer many- This is the second attempt to solve the benefits over simple networking.computerizing existing problem between thepublic works department. The first one failed - Recognized as the best player in theirdue to bugs in software, so they decided to market, this company is mainly used to dealdevelop specific software for each corporate clients and doesn’t have any kind ofdepartment. public sector customer.- The budget is up to $50.000. - Price range from $85.000 up.- Negotiator: Antoine Smith. - Negotiator: William J. Brown.1.2- Systematic preparationBefore every negotiation situation, the players should always do a systematic basic preparation.This means not only do their homework but also their partner’s homework. This includesknowing each others’ markets, needs, limitations and procedures. This helps determining theother part’s profile and anticipate several scenarios and situations. Further on we will explorethis, when analyzing both Antoine Smith’s, Riverton Public School negotiator, and William J.Brown, Northeast Computer Services negotiator.We gathered the opinion of long established professionals of various sectors regardingnegotiation skills, asking which their favorite sources of information and documentation arewhen they are preparing a negotiation. For instance, Makram Salloum – Sales Director in CNS 5
  6. 6. (United Arab Emirates) says that “a negotiation is complex set up of many stages and they areall important. Nevertheless I would highlight the importance of the preparation in terms of 1actually knowing all you can know about the other party before the engagement.”Dario Félix Rodrigues, former Communication Manager of Schering AG pharmaceuticalcompany and nowadays researcher and invited Professor at Instituto Superior Politécnicobelieve that “the power of choice is obviously the web, whether to get information about outside 2interests, whether for information about our own alternatives (BATNA or MAAN)” .1.3 – The negotiators profileTo establish an analysis to whom are we negotiating with is useful to the find out how thenegotiation can succeed (table 2). To read their Curriculum, please see the Attachment 1 and 2. Table 2 – The negotiators profile Antoine Smith William J. BrownAdministrative employee, Antoine Smith’s Accountable for functions including web siteresponsibilities include hiring, training and design, user experience, taxonomy and on-directing individuals who are performing entry site search; web content publishing, whichlevel, public work positions. has produced and maintains over 1 million product SKU across 9 separate web sitesThis is a management position, with hands-on servicing B2C & B2B customers; webresponsibility and accountability. Maintaining analytics; 4 transactional mobile sites; emailsafety in the school is also a key marketing, which deploys over 1 billionresponsibility. permission marketing & transactional messages annually; profile segmentation & targeting. One of the most successful affiliate marketing programs on the Web, supported by a multiple recipient of Affiliate Marketer of the Year.Smith’s profile as a negotiator: rational, calm, Brown’s profile as a negotiator: flexible, smartable to handle local school issues. Knows his and experienced. Has vast experience in thestaff and school reality. Aims at solving his private sector but interested in expanding andproblem and getting recognized by it. therefore looking good in the company – he wants to win the client. Source: Linkedin1.4 - SWOT AnalysisSimilarly, we can proceed to a SWOT analysis based on the information given on both parts.Let’s have a look at their strengths, weaknesses, opportunities and threats at table 3 and 4.1 th SALLOUM, Makram, interview, 20 October 20122 st RODRIGUES, Dário Félix, interview, 1 November 2012 6
  7. 7. Table 3 – RPS Riverton Public Schools SWOT Analysis Helpful Harmful to achieving the objective to achieving the objective STRENGHTS WEAKNESSES Internal Factors Market Know - How trough shopping around Low budget Inexperienced negotiator RPS Gain reputation in the Public Sector Time constraints within control Repeat past mistakes OPPORTUNITIES THREATS External Factors Opportunity to become a case study for other Not solving the current problem Government institutions Keep spending public money on a solution Environment To have the best solution in the market To invest on a worst but cheaper solution outside control To have the deployment services of the best that will eventually affect the school company in the market performance Table 4 – NCS Northeast Computer Services SWOT Analysis Helpful Harmful to achieving the objective to achieving the objective STRENGHTS WEAKNESSES Internal Factors Reputation Expensive price for the solution Market leader NCS High know-how on their solutions Inexperienced dealing in the public sector within control OPPORTUNITIES THREATS External Factors Diversifying the go to market approach by The possibility of not winning the deal may starting a public sector vertical inside the be a setback on entering the public sector Environment company outside control Low price competition Increase of market reputation1.5 - Quintilien’s Hexameter Another framework we can establish in the preparation phase of The Consultant case is the Quintilien Hexameter. This is regarded as an information-gathering process. It consists on a formula for getting the complete background on the negotiation process. To be considered complete, it must answer a checklist of six questions, each of which comprises an interrogative word: Who, What, When, Why, How, and Where. Figure 1 – The Quintilien’s Hexameter approach to The Consultant case 7
  8. 8. 1.6 - Steps of Problem Needorganizational buyingprocessThese steps can be Performance Potencialapplied on both situations, evaluation suppliersand not only on Smith’sperspective as the client.Both perspectives can be Order Proposalsorganized through these routinesimple stages of Evaluationorganizing buying/hiringprocess. Figure 2 – The main steps of organizational buying process1.7 - Preparing possible outcomes:Finally, in order to finish the preparation process, it’s required to define goals, limits andalternatives on both sides, as well as organize and anticipate the alternative approaches fromthe other part.Considering a negotiation scenario, there are many items to be discussed and it is essential tocreate a set of acceptable alternative situations for both parts. We may analyze negotiablepoints and arrange a lot of different perspectives. Doing this, you are trying to understand andanticipate the others’ objectives, interests and needs, as well as alternatives, reputation,negotiating style and authority degree to set the deal (table 5). Table 5 –Possible Outcomes Riverton Public Schools Northeast Computer Services To assure the problem is solved and the To get their first client in the public Goal software is correctly installed sector $50.000 $85.000 Limit Pay more, but demand other services Lower the selling price, but demand Alternatives such as maintenance, training and exclusivity. hardware in the deal. Lower the selling price, offering no Pay $50.000 and allow NCS to use the complementary services (maintenance, school’s premises for corporate events. training and hardware). Breakdown the services, i.e., have less Lower the selling price and decrease employees involved, increase the the warrantee time. expected time for complete the task. Lower the selling price and increase Pay the same but allow longer deadline for the delivery deadline. the task delivery. Accept progressive payment but Pay progressively through time. keeping the selling price.2 – RELATIONSHIPIn every negotiation process, there are three key steps which no one can avoid. First of all, is toconsult (figure 3). Nowadays we come from transactional to a relational work. Consequently,create relationship has the purpose of engaging people with much synergy. This secondPROACT step implies the first interactions between Mr. Smith and Mr. Brown, the mutualdiscovery of needs and some socialization. Probably they want to establish a long-lasting andauthentic partnership, so they may be kind. For instance, we selected a scene from the PrettyWoman film to show how the negotiation process can start.
  9. 9. Both Smith and Brown must remember that “Negotiation is the art of letting them have your 3way”. Even if this deal does not go forward, it doesn’t necessarily mean that these two entitiesgrow apart. To maintain a healthy and positive relationship with the negotiation partner willsoften the hard part and may open doors to future partnerships.3 - OPENINGAfter time for normal introductions, courtesies and smalltalk, Mr. Brown and Mr. Smith are opening thenegotiation process. Now, they should begin bydiscussing the agenda for the negotiation and agree onthe main items to be discussed.Opening is the stage of disclosure the information anddiagnose. Brown and Smith expose their limitsstrategically. Figure 3 – The 3 C FrameworkAt this point, the negotiators have already spoken and know each other’s limitations. Yet, theyare willing to meet in person in order to find common ground and build a solution. Thus, they areapproaching the phase of confrontation (figure 3). In the same way, we can watch a new sceneof the opening step between James Morse, his grandson David and Edward Lewis in theirnegotiations.4- ARGUMENTSWhen the time to arguments comes, both parts must develop their Value Message. That is tosay that Smith and Brown should bring something unique to the negotiation in order to convinceeach other. This stage is where the work is in fact developed, minding several points of view,proposals and counter proposals. According to Makram Salloum, Sales Director of CNS inDubai and experienced negotiator in corporate deals “Put a clear focus on what you REALLYwant. Many people enter negotiation only to find they did not have a clear desired outcomedefined in their own mind. Write down your desired outcome as concisely as possible and use 4this outcome as the center point of your preparation” . So, let’s see the initial proposal set forThe Consultant case (table 6). Table 6 –Initial approach Riverton Public Schools Northeast Computer Services Buying/Selling $50.000 $85.000 price The whole amount when the task is 50% up front, 50% when task is Limit finished finished Delivery 6 weeks 6 weeks deadline installing the adapted software for the installing the school needs Services school needsAs we can, there are points where both negotiators agree, but there other ones where theyhaven’t a different perspective.3 VARÈ, Daniele, The Laughing Diplomat, Doran & Doubleday Company, 19383 th SALLOUM, Makram, interview, 20 October 20124 SALLOUM, Makram, idem 9
  10. 10. 4.1 - Best Possible Agreement vs Minimum Possible AgreementFor every objective established, Riverton Public Schools and Northeast Computer Services mayprepare a scale of success. This scale should gather the minimum possible agreementacceptable and the best possible agreement, and everything between. Similarly, maneuverspace is formed in order to create opportunities and exchange concessions. We may remember 4Kissinger’s definition of negotiation: exchanging concessions.As a result, here are the initial proposals for each player and what would the Best Alternative Toa Negotiated Agreement (BATNA) be for each one (table 7). Table 7 –Defining and developing BATNA Riverton Public Schools Northeast Computer Services $50.000 - $70.000 (through progressive $85.000 - $65.000 Buying/Selling payment plan) ($50.000 up front and $35.000 until 3 price years $50.000 up front and the rest until 3 to 5 50% up front, and the rest until 3 Payment years years Delivery 6 weeks, can be extended to 8 6 weeks minimum, 12 weeks deadline maximum Installing the adapted software for the Installing the adapted software plus Services school, including complementary training the school’s personnel and services such as training personnel on three year warrantee the new software, maintenance and warrantee of program functioning during the payment period of time4.2 – Wrap Up: defining the Zone of Possible AgreementNext, we come to a time when a Zone of Possible Agreement (ZOPA) can be settled, based onall alternatives given by both negotiators. Before settling it, there are several scenarios andmodels that could happen. These are known as the win-lose models, and if applied to the case,this is how they could be.In The Consultant Case, the strategy will be settled around buying cheap and selling expensive.That is to say, there are three different ways to reach this goal. The first oneis about what one wins and the other loses. The second happens when the distributivenegotiation leads to a zero sum game between both parts. And the third one involves slightchanges: if both concessions in some particular details, probably they will reach their goals(table 8). a) Win-Lose model Riverton Public School and Northeast Computer Services try to maximize their negotiation outcome. The result will be a zero-sum game: only one part will benefit from the deal, because they consider the other part as a competitor and not a partner. Their interests are opposite. b) Lose – Lose model They don’t reach an agreement at all. Both walk out with nothing because they were not able to establish common ground solution, the ZOPA. Smith did not dare to go over his budget, nor Brown to compromise to a much cheaper sale and look bad to other clients of his firm. 10
  11. 11. c) Win-Win model Table 8 –Distributive and Integrative This approach done y by Fischer and Ury 5 Negotiation stats that demands and concessions are made equally on behalf of both parts. Smith Brown and Brown want to reach an agreement. They must be flexible and open to suggestions, Lose Win alternatives and concessions. Both must be on board with this standard and able to search Smith loses Brown wins for mutual interest points. For instance, Brown Brown loses Smith loses is searching for enter in the public sector and Lose Smith wants to a reputable partner. It is a = = great opportunity to fix a new strategic alliance No deal Brown sets the with added values from both parts. Smith conditions However, as Dário Félix Rodrigues Smith wins Smith wins remembers, no matter how model is being Brown loses Brown wins followed "«Negotiation Jujitsu» can be very useful in front of a bargainer that mainly Win = = asserts positions or attacks your ideas. Then Smith Both establish the key will be to look behind position to determines the pleasant terms in conditions the deal identify interests and invite criticism and 6 advice”. The Negotiation Jujitsu is not properly a model but, in fact, a useful style ofnegotiating.4.2.1 – Win-Win Approach applied to The Consultant caseWe believe these two parties managed to find a ZOPA and finished off with a win-win situation.They managed to reach developed cooperation, despite differences and constraints. Thismeans that interests, rather than positions, were considered, and multiple options with mutualbenefits were set, with objective criteria. Table 8 –Zone Of Possible Agreement for The Consultant Case5 FISCHER, Roger, URY, William, and PATTON, Bruce, Getting to YES: Negotiating Agreement WithoutGiving In. New York: Viking/Penguin, 19796 st RODRIGUES, Dário Félix, interview, 1 November 2012 11
  12. 12. 5- COMPLETIONAccording to the PROACT process, now is time to complete the negotiations. Furthermore, the3 C Framework says that after the confrontation comes the conclusion. In the same way we canwatch a final scene taken from the Pretty Woman film, which shows how the Arguments &Complete resulted in a deal between Lewis and Morse. As shown in the movie, this stage iswhere all the details are settled and the practical aspect is put in motion. Once the generalagreement is done, similarly Smith and Brown may use handle brakes to define and donecessary adjustments to the deal. Normally, at this stage, this is the time to include thespecialist.5.1 – Price SurgeryOne of the techniques used to settle the necessary adjustments to the final budget is PriceSurgery. It consists on adjusting the complementary services included in The Consultant deal,such as training personnel on the new software, maintenance and warrantee of programfunctioning during the payment period of time. The Price Surgery doesn’t have anything to dowith discounts. This must be seen as the last instrument to close the deal.After concluding these details, Mr. Smith and Mr. Brown have the possibility to say theyconcluded the negotiations (Table 9). Table 9 – Final agreement $70.000 (through progressive payment plan) Buying/Selling price $50.000 up front and the rest until 3 years Payment Delivery 6 weeks deadline Installing the adapted software plus training the school’s personnel and three year Services warrantee. Similarly, the NCS can use the RPS to their public events.6 – TRANSACTIONThe commitment itself, between Riverton Public Services and Northeast Computer Services. Atthis point, the deal is broken down into items, which are listed and made official, throughdocumentation. It is about legal procedures and assigning responsibilities on both parts. BothSmith and Brown should inform their companies of the settlement and enter this new inputofficially, bearing in mind all bureaucracy needed.7– SERVEThe operational follow up happens after the deal materializes. This implies the elaborationof an action plan, not only for the 6 weeks settled as the job deadline, but also for trainingand warrantee. Through this time frame, key dates can be settled by both parts to evaluatethe job progression: this way determining if it should go forward, needs adj ustments or inthe worst case scenario, i.e., needs to be aborted. Also, it is important to schedule trainingevents for the school’s personnel, once the software is set and in full operational status. Alldetails must live up to the agreement, in order to best fulfill each part’s expectations andensure positive cooperation. 12
  13. 13. ConclusionWhether its with an employer, family member or business associate, we all negotiate for thingseach day, like higher salary, better service, or the resolution of a dispute. Although most peoplewould probably define good negotiators as people who get the best deal for their side, the wordnegotiate actually means to discuss with the goal of finding terms of agreement. That isbecause a deal that is to the advantage of one party and the detriment of the other sows seedsof disagreement, resentment and retaliation, which can backfire on the negotiator.This case study shows that common needs can be satisfied and we should try to leverage apossible mutual understanding. This means a clear focus on maintaining the relationship, notallowing the disagreement to damage the interpersonal relationship, not blaming the others forthe problem and aiming to confront the problem, not the people. This can involve activelysupporting the other individuals while confronting the problem. Remember: separate the peoplefrom the problem.Negotiation is about finding an agreeable solution to a problem, not an excuse to undermineothers, therefore, to avoid negotiation breaking down into argument; it is helpful to consciouslyseparate the issues under dispute from the people involved. One valuable approach is tocontinue to express positive regard for an individual, even when disagreeing with what he/she issaying.This case also shows us to focus on interests, not positions, rather than focusing on the otherside’s stated position, consider the underlying interests they might have. What are their needs,desires and fears? These might not always be obvious from what they say. When negotiating,individuals often appear to be holding on to one or two points from which they will notmove. Understanding the emotional needs of others is an essential part of understanding theiroverall perspective and underlying interests. In addition to understanding others’ emotionalneeds, understanding of your own emotional needs are equally important. It can be helpful todiscuss how everyone involved feels during negotiation.Another key point is that decisions should not be forced upon others. This is a negotiation. BothSmith and Brown will feel much more committed to a decision if they feel it is something theyhave helped to create and that their ideas and suggestions have been taken into account. It iscrucial to generate to offer a variety of options that offer gains to both sides before makingdecisions. Rather than looking for one single way to resolve differences, it is worthwhileconsidering a number of options that could provide a resolution and then to work together todecide which is most suitable for both sides. Techniques such as brainstorming could be usedto generate different potential solutions. Good negotiators will spend time finding a number ofways of meeting the interests of both sides rather than meeting self-interest alone and thendiscussing the possible solutions.To sum up, negotiations are not like sports. In sports, both sides want the same thing - to win -so there is always a winner and a loser. The goal of negotiating is to see both sides win - thateveryone gets some of the things they want, but not necessarily everything. By identifyingwhats important to both sides, you can usually get the things you most want, and concede tothe other side their top priorities. A good negotiation can turn a hostile, destructive environmentinto one of cooperation. That, in turn, improves the productivity of an organization, and thelikelihood of its long-term financial health.Negotiation is a process, not an event. Mastering all the steps in the process, allied with a goodcommon sense, will certainly help us to succeed in very business and almost in every aspect oflife itself. With all of this in mind, it´s our job to keep improving our negotiation skills. In the endit´s all about people and relationships and how we can have the capability to manage them in asuccessful way. 13
  14. 14. Bibliography BOOKS  FISCHER, Roger, URY, William, and PATTON, Bruce, Getting to YES: Negotiating Agreement Without Giving In. New York: Viking/Penguin, 1979  VARÈ, Daniele, The Laughing Diplomat, Doran & Doubleday Company, 1938 FILMS  PRETTY WOMAN, directed by Garry Marshall, United States of America, 1990 INTERVIEWS  th SALLOUM, Makram, interview, 20 October 2012  st RODRIGUES, Dário Félix, interview, 1 November 2012 WEBSITES  th Linkedin, http://www.linkedin.com, consulted at 24 October 2012  th Negotiation, http://www.negotiation.com, consulted at 20 October 2012  Program On Negotiation, Harvard Business School, http://www.pon.org, consulted at th 28 October 2012  th nd Vimeo, http://www.vimeo.com, consulted everyday from 15 October to 2 November 2012 14

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