Building Negotiation Skills


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Essential capacity for managerial effectiveness

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Building Negotiation Skills

  2. 2. “Negotiation involves two or more parties with competing or conflicting interests or needs, working towards an agreement on how they will cooperate.” - Tillett Negotiation is a process of finding a point of balance between your objectives and that of the other party.
  3. 3. “Negotiation can be defined as any form of direct or indirect communication whereby parties who have opposing interests discuss the form of any joint action which they might take to manage and ultimately resolve the dispute between them. A negotiator should advance the interests of the party that he or she represents in order to obtain an optimal outcome for that party.” - Scottish Public Services Ombudsman
  4. 4. Characteristics of a Good Negotiator • Assertive • Patient • Open-Minded • Careful Listener • Self-Disciplined • Creative • Flexible • Highly Ethical • Persuasive • Decisive • Confident • Considerate • Prudent • Respect for Others • Ability to Handle Pressure
  5. 5. Factual Negotiator Features • Knows all facts related to the issues • Asks factual questions • Ensures that no fact is left out • Provides information Problem Tendency to leave emotional issues aside while focusing on details and make the other party hostile
  6. 6. Relational Negotiator Features • Establishes relationships with the other party • Builds trust • Is sensitive to the other party’s emotional issues • Perceives the position of the other party Problem Propensity to concentrate on building relationships and lose sight of the reason for negotiation
  7. 7. Intuitive Negotiator Features • Able to proffer unexpected solution • Able to separate key issues from others • Visualizes implications of proposal • Accurately guesses the progress of negotiation • Sees the picture Problem This may be dangerous because of wildness and lack of discipline
  8. 8. Logical Negotiator Features • Sets rules of negotiation • Develops an agenda • Argues logically • Adapts position to meet changing situation Problem Likely to see the process as being more important that content or outcome
  9. 9. The Lead Negotiator This coordinates all the other roles and decides appropriate strategy to apply.
  10. 10. Negotiation Approaches • Competition: In this approach, a party just try to maximize benefits accruable without consideration for the other. This is focused on win/lose. • Collaboration: This approach is based on belief that it’s possible to reach a solution wherein both parties would derive benefit i.e. win/win. • Avoidance: If a party identifies the matter at stake to be of low importance, it may decide to avoid negotiation, thus leading to lose/lose situation. This approach can be adopted to give room for further research or change of strategy. • Accommodation: This involves giving concession to the other party. It may be viewed as Achilles' heel or benevolence. • Compromise: In this case, both parties are expected to sacrifice some elements of their demands, in order to arrive at a middle ground.
  11. 11. Bargaining Styles • Compromisers • Problem Solvers • Accommodators • Competitors • Avoiders
  12. 12. Nemawashi To dig around a root before transplanting it Applied as “groundwork laid inconspicuously in advance.
  13. 13. Naniwabushi Strategy This comprises three parts as follows:  Kikkake: General background of story  Seme: Account of critical events  Urei: Expression of pathos and mourning for what happened
  14. 14. Seven Elements of Negotiation Interests: What do the parties want?  Options: What are likely areas of agreement?  Alternatives: What if we don’t agree?  Legitimacy: How persuasive is each party?  Communication: Are both parties willing to discuss and listen?  Relationship: Are both parties ready to establish operational relationship?  Commitment: What’s the structure of commitment from both parties.
  15. 15. Functions of Nonverbal Communication  Accent: Punctuating or drawing attention to a verbal message  Complement: Expressions/gestures that support but could not replace verbal message  Contradict: Expressions or gestures that convey meaning opposite to that of verbal message  Regulate: Expressions or gestures that control the pace or flow of communication  Repeat: A gesture or expression that can be used alone to send the same meaning as verbal message  Substitute: A nonverbal cue that replaces verbal message
  16. 16. Examples of Nonverbal Cues  Accent: Touching someone’s shoulder in empathy  Compliment: Smiling in approval or frowning with disdain  Contradict: Reading paper while saying “I am listening”  Regulate: Looking confused by too much information  Repeat: A stern look or pointing along with a verbal command  Substitute: Nods and shakes of the head
  17. 17. Types of Nonverbal Cues 1. Facial expression 2. Eye behaviour 3. Posture 4. Gesture 5. Proxemics 6. Touch 7. Personal appearance 8. Vocal features of speech
  18. 18. Real Nonverbal Cues  Facial Expression: Happiness, sadness, surprise, fear, anger and disgust  Eye Behaviour-Functions: Regulatory, monitoring, cognitive and expressive  Posture: Indicative of attention, involvement, relative status and rapport  Gestures: Speech related and independent  Proxemics: Use space  Touch: ‘of self’ indicates emotion, and ‘of others’ indicates relationship  Personal Experience: Indicators of personality, values and lifestyle  Vocal Features of Speech: Tone, stress, accent, loudness and rate of speech
  19. 19. Common Signs of Deception During Negotiation i. New body movements ii. Touching of self/fidgeting iii. Hesitation iv. Blinking, eye shifting and dilation of pupils v. Lack of spontaneity vi. Speech errors vii. High vocal pitch viii. Negativity
  20. 20. Negotiation Process • Prepare objectives and strategy • Discuss and exchange information • Propose solution • Bargain and review areas of concession • Conclude and draft agreement
  21. 21. Types of Power Positional Power Information Power Control of Reward Coercive Power Access to and Control of Agenda
  22. 22. Using Power in Negotiation  Be able to manipulate meaning and symbols  Maintain a measure of flexibility  Use personal power through confidence  Be able to manipulate rewards  Develop networks and alliances  Know the area in which you intend to negotiate
  23. 23. “Leverage is having something that the other guy wants. Or better, need. Or best of all, simply cannot do without” - Donald Trump
  24. 24. Three Positions for Decision Analysis • Ideal Position • Realistic Position • Fallback Position
  25. 25. BATNA The Best Alternative to a Negotiated Agreement (BATNA) provides more leverage for favourable positioning. Identify BATNA through critical thinking, creative thinking and strategic thinking.
  26. 26. Approaches to Sales Negotiation Transactional Approach: One party demands value and the other gives it up in a particular transaction. Transformational Approach: Application of wide-ranging problem-solving techniques to surmount hitches in customer relationship, thus transforming vendor relationship to business partnership.
  27. 27. Sales Negotiation Process - Elijah Ezendu, Negotiation
  28. 28. Identifying Buying Signal i. Assumptive ownership ii. Issuing instruction for delivery iii. Concentrated attention to buying details iv. Disappointment at lead time for possession v. Looking intently at the product vi. Asking questions about usage of product
  29. 29. Action during Sales Negotiation  Be prepared for tactical response in form of flinch or silence  Use open-ended questions  Mention benefits the prospect would derive from product/service  Don’t be hasty to fill pauses during sudden silence.  Listen  Be ready to change value proposition to confirm price concession  Identify tracks towards agreement  Conclude agreements from time to time  Paraphrase client’s statements and demonstrate commitment
  30. 30. Action After Sales Negotiation Do the following, if agreement is accomplished 1. State agreement verbally and in draft 2. Reinforce purchase decision of prospect/customer and express thankfulness. Do the following, if no agreement is reached 1. Show appreciation to prospect/customer 2. Encourage the prospect/customer to try you next time.
  31. 31. English Auction Dutch Auction First-Price Sealed-Bid Auction Vickery Sealed-Bid Auction Auction
  32. 32. Auction • English Auction: In this case, the Auctioneer declares reserve price and bidding would progress with increasing price. The last (highest bidder) wins and pays the highest valuation. • Dutch Auction: This is characterized by a reducing bid price from a high opening bid announced by the Auctioneer. The first demand to match the descending bid price wins. • First-Price Sealed-Bid Auction: Herein, the bids would be sealed and submitted during the bidding period; and at the resolution phase, the bids would be opened and the winner announced as the highest bidder. • Vickery Sealed-Bid Auction: In this type of auction, the highest bidder wins at the second highest bidder’s price.
  33. 33. Negotiation Tactics & Ploys 1  Brooklyn Optician: This is a type of add-on ploy in which a service/product would be ‘completely knocked down’ into components, and a prospective buyer ensnared unto a haggle circuit from one component to another. For example, “The palmtop is 180,000 Naira; if you want the ear piece, that’s 9,000 Naira; if you want the satellite control system, that’s just 15,000 Naira; there’s even a special bag, and if you want it, that’s only 5,000 Naira.”  Fait Accompli: It’s a ploy used for shifting power to the doer and raise the stakes, if counter sanctions are applied. For example, Military officers seize a town, then offer to negotiate.  Escalator Schedule: This is a formula for increasing an agreed share or salary in uncertain future income stream, if performance reaches a particular level. For example, an employer who agrees to escalate a worker’s entitlement from a 100,000 Naira to 150,000 Naira, if his performance level increases to 40 closed deals per month.  Padding: It’s a negotiating margin set by sellers, wherefore the padded price gives them room to tackle the bargaining instinct of a prospect/customer.
  34. 34. Negotiation Tactics & Ploys 2  Noah’s Ark: It’s a buyer’s pressure ploy used for moving a seller to reduce the price of a particular product. For example, “You should sell at a lower price, others have offered better than that”.  Call Girl: This involves demanding for up-front payment. For example, “I must be fully paid before I come to site”.  Bad Publicity: Lure someone to think that if he obtains his goal and some people find out, he would be widely scorned or condemned. For example, “if your Boss finds out that you refused to endorse it, you would lose credibility and your career may run amuck.”  Quivering Quill: Pause exactly at the time of endorsing a deal, and demand for extra concession. For example, “Oh! If you include the laptop bag in the deal, I would just endorse the cheque.”  Faking: Deceive the other party to believe you are who you aren't. For example, “When I was in Cape town, I led a group of professionals to the mining office and convinced the Chief Executive to implement a change that increased the firm’s productivity.”
  35. 35. Negotiation Tactics & Ploys 3  Nibbling: Demanding for little things one after the other so much that a lot would be collected. For example, “Bring a pen…..and a piece of paper……oh! Just come with cold water.”  Red Herring: Set-up a false trail to mislead the other party and keep him away from what you intend to hide. For example, “the seller of a second-hand car tells a prospect to inspect its interior, emphasizing it’s the only part that require refurbishing. Meanwhile, the engine had developed a fault which would become noticeable to a layman only after the vehicle must have been driven for some months.”  Trial Balloon: This involves putting forward a suggestion as ultimate solution, and see if the other party would accept it. For example, “Let’s install this particular software in your firm, I think it would improve your performance.”  Russian Front: On deciding what to offer to the other party, present it as a second option after telling them about the first option which would be described to evoke repulsion. For example, “ The AG9T is a big engine that demands crane to move it and its cost of usage is very high; the AB4X is computerized, finer, portable and its life cycle cost is very low.”
  36. 36. Price Negotiation Price negotiation is a zero-sum game - the game theory jargon signifying that what one party gains the other loses. The most profitable strategies in price negotiation are as follows: 1) Form one-person-queue 2) Buyers should test quantity discounts, while sellers evaluate total revenue 3) Focus on cooperative relationship 4) Deploy blue ocean strategy 5) Use add-on ploys 6) Test sensitivity of the other party 7) Focus on win-win 8) Test interest of the other party
  37. 37. Impasse In negotiation, if what a party offers is less than the least which the other party will accept, then impasse may arise, unless there’s change in the standpoint of one or both.
  38. 38. How to Break Impasse 1. Change the subject. 2. Brainstorm together. 3. Throw some wild and crazy idea on the table. 4. Change the form of the payment. 5. Handle the emotional subject of money as quickly as possible. 6. Change the members of the negotiating team. Adapted from Michael Lee & Sensei Tabuchi, Black Belt Negotiating
  39. 39. Deadlock This occurs when concessionary impasse strains the enabling interface between the parties and mutual interests wane.
  40. 40. Handling Price Deadlock  Pay a fraction in cash, the rest in kind  Pay more now, then less next month  Pay in another way  Pay in U.S Dollars or Euro  Pay a quarter now, then the rest next month  Split the invoice across various budgets
  41. 41. Handling Deadlock Across the Issues i. Amend the specification ii. Alter the time structure of events by using Salami. iii. Change the responsibilities iv. Change the nature of the business
  42. 42. Deadlock Ploys They are used for inducing fear of deadlock in another party. Examples are as stated below.  Introduction of phoney deadlines.  Exhibit false temper.  Become unavailable.  Emphasize the dilemma of reaching an agreement.  Accuse the other party of not being interested in agreement  State final offer  Express great pessimism  Act as if you intend to go off in a huff.
  43. 43. Reason Versus Influence Where a party resolutely refuse to understand or admit reason, then influence would be an alternative façade for progress. Had your organization or department faced such situation? How was it handled?
  44. 44. An Influencing Agenda For Potential Allies Identify Potential Ally Analyse Potential Ally’s Interests Assess Your Resources Relevant to Potential Ally Diagnose Your Relationship with Potential Ally Select Influencing Approach Execute and Monitor Your Approach - Gavin Kennedy, Influencing For Results
  45. 45. Goals of Lease Negotiation • Gain reduction in rent, repairs, permission or allowances. • Sustaining congenial relationship with the lessor
  46. 46. Strategies for Lease Negotiation 1. Emphasize existence of competition. 2. Using applicable information. 3. Enhancing collaboration by focusing on mutual benefits. 4. Take advantage of defects and demand for reduction . 5. Paint a picture of insufficient fund. 6. State whatever input you may need to bring into the equipment or house, using that as a ploy for reduction. 7. Establish lines of agreement systematically. 8. Identify areas you would readily concede and areas of no-concession. Then use areas of concession to gain areas of no-concession.
  47. 47. Basic Rules in Collective Bargaining Negotiations • Seek common grounds • Use listening ability for indicating intention to understand the other party. • Build your case in a logical sequence, gaining agreement at each stage. • Use counter proposals when necessary for realigning position. • Invite the other party to look at the problem from the opposite perspective. • Avoid declaring that an area is non-negotiable. • Use analytical questioning technique to shift the other party.
  48. 48. Pre-Negotiation Preparation in Collective Bargaining  Identify objectives in terms of keeping wage increases below level of productivity increases and within inflation rate.  Organize a Negotiation Team and clarify the roles of each member.  Conduct extensive research concerning economic impact of demands, comparative occurrence in the industry, and identify demands which are important to the other party as well as your core demands.  Initial response should be in writing  A wide-range of alternatives should be invented  A negotiation strategy should be adopted.
  49. 49. Dr Elijah Ezendu is Award-Winning Business Expert & Certified Management Consultant with expertise in Interim Management, Strategy, Competitive Intelligence, Transformation, Restructuring, Turnaround Management, Business Development, Marketing, Project & Cost Management, Leadership, HR, CSR, e- Business & Software Architecture. He had functioned as Founder, Initiative for Sustainable Business Equity; Chairman of Board, Charisma Broadcast Film Academy; Group Chief Operating Officer, Idova Group; CEO, Rubiini (UAE); Special Advisor, RTEAN; Director, MMNA Investments; Chair, Int’l Board of GCC Business Council (UAE); Senior Partner, Shevach Consulting; Chairman (Certification & Training), Coordinator (Board of Fellows), Lead Assessor & Governing Council Member, Institute of Management Consultants, Nigeria; Lead Resource, Centre for Competitive Intelligence Development; Lead Consultant/ Partner, JK Michaels; Turnaround Project Director, Consolidated Business Holdings Limited; Technical Director, Gestalt; Chief Operating Officer, Rohan Group; Executive Director (Various Roles), Fortuna, Gambia & Malta; Chief Advisor/ Partner, D & E; Vice Chairman of Board, Refined Shipping; Director of Programmes & Governing Council Member, Institute of Business Development, Nigeria; Member of TDD Committee, International Association of Software Architects, USA; Member of Strategic Planning and Implementation Committee, Chartered Institute of Personnel Management of Nigeria; Country Manager (Nigeria) & Adjunct Faculty (MBA Programme), Regent Business School, South Africa; Adjunct Faculty (MBA Programme), Ladoke Akintola University of Technology; Editor-in-Chief, Cost Management Journal; Council Member, Institute of Internal Auditors of Nigeria; Member, Board of Directors (Several Organizations). He holds Doctoral Degree in Management, Master of Business Administration and Fellow of Professional Institutes in North America, UK & Nigeria. He is Innovator of Corporate Investment Structure Based on Financials and Intangibles, for valuation highlighting intangible contributions of host communities and ecological environment: A model celebrated globally as remedy for unmitigated depreciation of ecological capital and developmental deprivation of host communities. He had served as Examiner to Professional Institutes and Universities. He had been a member of Guild of Soundtrack Producers of Nigeria. He's an author and extensively featured speaker.
  50. 50. Thank You