Negotiation Skills For Project Managers


Published on

Published in: Business, Education

Negotiation Skills For Project Managers

  1. 1. "In the name of Allah The All Merciful The most Merciful " Useful Science for the Sake of God Course: Negotiation Skills for Project Managers ‫مهارات التفاوض لمديري المشاريع‬ Instructor: Dr. Attia Hussien Gomaa Industrial Engineering Consultant Engineering Service - American University In Cairo Email: – Tel: 0122738497 Who Should Attend: Managers, engineers, and other practitioners concerned with planning and control in government, industrial and services sectors. Objectives: • To provide the participants with the nature and objectives of negotiation process in engineering fields. • To train the participants on negotiation planning and negotiation tactics. • To enhance the participants experience by discussing some real negotiation problems and how to deal with them. Course Outline: 1. Negotiation overview 2 2. Negotiation management 21 3. Negotiation for selling & buying 39 4. Negotiation for salary 49 5. Conflict management 64 6. Negotiation for project managers 70 7. Negotiation case studies for project managers 104 1 Negotiation Skills for Project Managers
  2. 2. Chapter 1: Negotiation Overview What is the Negotiation? Negotiation is interaction between two or more parties to achieve certain goals or targets, & to overcome certain constrains or problems Negotiation (1) (3) (5) (7) Targets Interaction Conference Agreement (2) (4) (6) Constraints Communication Conviction "In business, you don't get what you deserve, you get what you can negotiate", Chester Karrass "Never cut what you can untie", Joseph Joubert 2 Negotiation Skills for Project Managers
  3. 3. Negotiation:  Interaction between two or more parties & Each party having certain goals to be achieved  To confer with another or others in order to come to terms or reach an agreement  Negotiation is the process of achieving goals through an agreement.  Negotiating is the art of reaching an agreement by resolving differences through creativity  The process by which at least two people seek to make something happen. To be successful, both sides must agree with the resolution. This is just the beginning, however. Both sides must cooperate in the implementation of the contract they have accepted  The definition of negotiation as it relates to employment is: a series of communications (either oral or writing) that reach a satisfying conclusion for all concerned parties, most often between the new employee and the hiring organization.  Process of give-and-take exchange among persons aimed at resolving problems or conflicts  Chester L. Karrass: ‘In business, you don't get what you deserve, you get what you negotiate’.  Joseph Joubert: ‘Never cut what you can untie’. 3 Negotiation Skills for Project Managers
  4. 4.  Robert Estabrook: ‘He who has learned to disagree without being disagreeable has discovered the most valuable secret of a diplomat’.  “Everyone has just his [or her] own negotiating style, and the worst thing you can do is to adopt a negotiating technique that does not feel comfortable [because] credibility, based on an evident sincerity, is the most important single asset of a good negotiator.” James C. Freund, Anatomy of A Merger(١٩٧٥) PRINCIPLES OF NEGOTIATION: • The greatest failure in negotiation is failing to negotiate. • The most important person to know in a negotiation is yourself. • Everyone has power in a negotiation. • Single-issue bargaining leaves both parties unsatisfied. • Urgency drives decisions. • Agreement is the end; trading off is the means. • Even in a collaborative environment, best results are obtained by keeping the other party on a "need to know" basis. • The value of something is always in the eye of the beholder. 4 Negotiation Skills for Project Managers
  5. 5. • Success in negotiation is directly related to the amount and kind of preparation preceding the negotiation. • The ability to walk away or select another alternative to a negotiated agreement puts a negotiator in a very strong position. • Even when two sides are far apart on major issues, there are always things they can agree upon. • Meaningful negotiation involves conflicts. The person who has a strong need to be liked, or who tends to avoid conflict, is likely to be at a disadvantage. A Simple Example: • Two agents: A and B • Agent B wants to buy a bicycle from agent A • Start: agent A 150 agent B 50 • What next: agent A ? What is the basis for your next step? • Previous bid of yourself and the other agent (e.g., monotonic concession protocol) • How bad is it to raise your bid? (e.g., how much can you afford) • How bad is it when the transaction does not succeed? (e.g., are there alternatives) • Do you have information about a normal price? (e.g., estimation of the value on the free market) • How reasonable are you willing to be with respect to the other agent? (e.g., is it a friend of yours) 5 Negotiation Skills for Project Managers
  6. 6. Strategies for Negotiation: The Flinch - Draw back at initial propoal The Deadline - Produce results The Nibble - Small “something extra” that is sought The Concession - Valuable to other, little or no value to you THE OLD BOOK ON NEGOTIATION: • “Win -Win” Negotiations: The Good Ones • “Win-Lose” Negotiations: The Bad Ones • “Lose-Lose” Negotiations: The Tragedies THE NEW BOOK ON NEGOTIATION: • Everyone negotiates for one and only one reason: to achieve their goals. • No one ever does anything that is against their interests (at least as they perceive those interests). 6 Negotiation Skills for Project Managers
  7. 7. ?How Team work: Individuals Team Lose / Lose (1) (2) Individuals Targets (3) (4) Team Approach Planning (5) Win / Win (6) Target plan Agreement "In business, you don't get what you deserve.... you get what you negotiate"; Chester Karrass Dr. Attia H. Gomaa: 0122738497 7 Negotiation Skills for Project Managers
  8. 8. NEEDS & WANTS: The wants often distort the Emotion negotiation process, creating a Illogical desire for something that is not Powerful critical to the task. Wants are WANTS Responsive frequently an emotional response Costly and are therefore often beyond Negotiable reason. Alpha Point Logical NEEDS Needs are those things that are seen as Important critical to the task or outcome. They Non-negotiable represent a basic or foundational Critical view, the absence of which would severely restrict the purpose. . Who Negotiates? Everyone!  Children when they ‘beg’ for something: sweets or late to bed  Friend, Wife, etc.  Owner, Contractor, etc. • Negotiating is a basic, generic human activity - a process that is often used in: • Labor-management relations • Business deals like mergers and sales • International affairs • Everyday activities • Negotiation is not a process that everyone does, almost daily 8 Negotiation Skills for Project Managers
  9. 9. What is the Aim of Negotiation?  To arrive at a win-win situation  Both parties must leave the table feeling satisfied with results  Conflict model not helpful in insurance circumstances although may be applicable to third party (TP) claims  Power an issue in TP claims NEGOTIATION CRITERIA: • Issue must be negotiable • Negotiators must be interested in both giving and taking • Parties must trust each other and the negotiation process When parties disagree they either:  Accept the status quo  More powerful side can try to impose solution  Negotiate 9 Negotiation Skills for Project Managers
  10. 10. Negotiating Orientation (structures): The structure of the negotiation itself plays an important part in determining how two negotiating parties should interact.  Win / Win Orientation  collaborative approach  assumes that solutions can be reached to satisfy all parties  look beyond means and focus on end ٥ Steps to Win-Win Negotiating  identify needs of both parties  brainstorm list of possible solutions  evaluate alternative solutions  implement solution(s)  follow up  Win / Lose: Bargaining Orientation  used by competitive communicators  victory by one party matched by loss of other  requires much information gathering  negotiations are begun by taking positions  Lose / Lose Orientation  if one party believes that a negotiating partner is blocking them, seek revenge  generally occurs when partners ignore other’s needs  Compromise Orientation (lose/lose):  usually done when resources are limited or scarce  both parties lose some of what they want 10 Negotiation Skills for Project Managers
  11. 11. Negotiating Styles:  Quick  Deliberate  Middle is compromise Quick Style:  Negotiate in a hurry  Use when you won’t negotiate with these people again  Get the best deal without regard to the other side’s “win” Deliberate Style:  Use when long term relationship likely  Involves cooperation and relationship building to reach agreement  Needs much prep, hard work  May move in fits and starts Outcomes:  Realistic  Both sides satisfied, win/win situation  Usually results from deliberate style  Acceptable  Likely to result from quick style  Something is better than nothing  Always ask for a better deal  Worst  When you’re too stubborn to be flexible  Usually from quick style  Predetermine the outcomes before you start negotiations, you have a better chance of getting a better result  “Think carefully, think creatively, and think ahead” 11 Negotiation Skills for Project Managers
  12. 12. Principles:  There are no rules  Establish an agenda  Everything is negotiable  Ask for a better deal  Be creative  Learn to say “NO” yourself A Good Negotiator Is..  Creative  Versatile  Motivated  Has the ability to walk away Are you a Motivated Negotiator?  Enthusiasm  Confidence  Engaged  Recognition  Accomplishment  Pat on the back  Integrity  No trickery  Trustworthiness  Social Skills  Enjoy people  Interest in others  Teamwork  Better as a team  Self-control  Creativity  Always looking for ways to complete the deal 12 Negotiation Skills for Project Managers
  13. 13. The Art of Negotiation: o Identify your power o Decide what you are willing to concede o What are the consequences of disagreement o What can you offer to allay the other party’s fear? o Is the issue tied to others that you can make offers based on? o Can you bring others in on the negotiation? o Think about tone and body language – remain courteous! Do Your Homework:  Know what you want  Know the negotiator  What’s the negotiator’s model?  What does the negotiator want? Double Think:  What do you want? (think)  What does the negotiator want? (double think)  What does the negotiator think you want? (triple think)  Where’s the middle ground? 13 Negotiation Skills for Project Managers
  14. 14. Build Trust:  Tell the truth  Respect confidences  Honor your commitments  Be clear  Be open  Be firm External Listening:  Body language – yours and theirs  Non verbal messages:  Facial expressions  Voice inflections  Eye movement Move Beyond Positions:  Ask questions that probe specific needs / interests  Create a supportive climate  Find mutual ground 14 Negotiation Skills for Project Managers
  15. 15. LEAVE SOMETHING ON THE TABLE: Peace treaties are made between enemies, not friends: It usually takes a war to get them to the bargaining table. Deals are made between parties who seek mutual advantage, not unilateral victory. Both sides have to win something, or you don't have a deal, you have a homicide. One way or another, your counterpart will see to it that crime doesn't pay. FIRST NOT FINAL: Don't create a situation in which your opponent can't justify his value to his principal by accepting your offer. Give the person on the other side of the table a chance to knock you down a little. Remember the previous point: He or she needs to win something, too. DON’T NEGOTIATE WITH YOURSELF: Once you've made an offer, if the other party doesn't accept it, don't make another offer. Wait for a counteroffer. Don't lower your own demands without getting them to lower theirs TAKE A RISK: Sometimes it's risky not to take a risk. The trial lawyer who says he or she never lost a case settles too easily. Don't let yourself be bluffed by artificial deadlines or "final offers." And don't run bluffs, either. If you are called and you don't follow through, your credibility is shot. 15 Negotiation Skills for Project Managers
  16. 16. USE EXPERTS: You don't know everything. Trying to pretend to your opponent, your client or yourself that you are knowledgeable in some area or have some vital information when you don't harms your position. It makes you appear weak and foolish. ACCURATELY ASSESS OTHER SIDES STRENGTH: Remember, in any negotiation, both sides are under pressure to perform. They have bosses, deadlines, pressures, fears and objectives, the same as you do. TAKE YOUR TIME: Don't let the other side force a deal. The more time you give yourself, the more information you can gather about their true needs. REVIEW AND LEARN: Look back on the negotiation that you have conducted and identify what worked and what did not. Learn from the experience. Know Your BATNA:  BATNA – Best Alternative To A Negotiated Agreement  Can you afford to walk away? 16 Negotiation Skills for Project Managers
  17. 17. BATNA: Realistic alternatives instead of strict limits. This method consists of three steps in order to overcome unrealistic and un-flexible limits:  Step (1): List everything you could do in case you do not come to an agreement  Step (2): Explore your best options and try to improve them  Step (3): Choose the best option. Calculate the value of each concession. Before making the concessions, ask yourself:  What is the value of such concession to the other party?  What will it cost me?  What do I need in return? Concessions:  Leave room for negotiation  Make the other party struggle for a concession on your part  Do not make too many concessions, too fast if possible, make the first most significant concession come from the other party. 17 Negotiation Skills for Project Managers
  18. 18. Impasses:  Pause  Honorable withdrawal  Change of place, person or proposal  Mediator  Respond to aggressions with facts  Avoid personality conflicts  Emphasize previous points of agreement  Move on to non conflicting issues Negotiating a Raise or Promotion:  What have you done for them lately?  How often can you ask for a raise or promotion?  How much should you ask for?  How do you ask?  What if the answer is no? Setting It Up:  Agree on a benchmark job  Agree on proficiency / performance level  Job value  Salary range  Necessary performance 18 Negotiation Skills for Project Managers
  19. 19. What is a Win?  Settlement range  What’s your bottom line? Enjoy Yourself:  Negotiation is an art  Logical steps set the parameters  The art is in the deal  Have fun! The Buyer’s Role in Negotiation:  Acting Alone:  Recurring purchases of standard, low price items  Meets in office with supplier reps.  Buyer as Team Leader:  Expensive, technically advanced items, or complex contracts  Setting up long term relationships  Negotiating details and specs not included in the RFP 19 Negotiation Skills for Project Managers
  20. 20. Personality Types: 1- 2- 3- 4- 5- 6- 20 Negotiation Skills for Project Managers
  21. 21. Chapter 2: Negotiation Management Negotiation Management is a powerful systematic methodology to achieve certain targets between two or more parties. Through: (1) Define the scope of work (2) Define the targets, bottom lines, and constraints. (3) Information collection, estimation & analysis. (4) Brainstorming, planning and target plan. (5) Consequence estimation and risk analysis. (6) Face to face discussion (7) Motivation and direction (8) Implementation (9) Control & corrective Actions (10) Learned lessons (11) Close out report 21 Negotiation Skills for Project Managers
  22. 22. The Negotiation Process: Preparation -1 Establishing -2 Objectives Control & -5 Assessment FACE-TO-FACE Face-to-Face -3 Discussion DISCUSSIONS Final -4 Action 22 Negotiation Skills for Project Managers
  23. 23. Negotiation Process: Preparation  What do you want?  What does the other side need?  Decide on style  What are the consequences of each choice. Know the item or service:  What is being purchased?  Who is it for?  How will it be used?  Are there any substitutes?  What is the procurement history of this item?  What is its future with this company?  Is there any trade lingo to be familiar with? The Sellers Bargaining Strength  Seller’s Desperation  Certainty of getting contract  Time to reach agreement The Buyers Bargaining Strength  Extent of competition  Adequacy of cost/price analysis  Knowledge of the Seller  Thoroughness of preparation Note: ٩٩ % or more of the time involved in a successful negotiation is invested in preparation for the actual face-to-face discussion 23 Negotiation Skills for Project Managers
  24. 24. Negotiation Process: Establishing Objectives  Objectives must be specific!!  General objectives are inadequate and too vague to foster good negotiation.  Planning sheet  Issues involved  Realistic, possible, worst Examples:  “Lower than previous price”  “Good on-time delivery performance”  “Satisfactory technical assistance” The buyer should develop three specific positions for each term and condition being negotiated:  An Objective (target) Position  A Minimum Position  A Maximum Position The buyer should also develop estimates of the sellers positions Potential Negotiation Issues Objectives should be developed for all of the following issues:  Costs and prices  Delivery schedules  Quality levels  All technical aspects of the purchase  Types of materials and substitutes  Buyer-furnished material and equipment  Mode of transportation  Warranty terms and conditions  Payment terms  Discount provisions  Liability for claims and damage  F.O.B. point 24 Negotiation Skills for Project Managers
  25. 25. Presentation:  Creative title  Reduce to “must know” items  Keywords  Mini-speeches around keywords  Visuals  Don’t give concessions just to keep things going  Make note of concerns and keep going Negotiation Process: Face-to-Face Discussion Fact Narrowing Hard Finding Recess Differences Bargaining Fact Finding:  Initial Meeting  Focus on inconsistencies between supplier’s proposal and buyer’s information  Should gain a better understanding of the supplier’s interests and abilities (strengths & weaknesses)  Focus on interests and information, NOT positions The Recess:  Buyers reassess relative strengths and weaknesses  Review and refine  Organize an agenda  Prioritize issues to be discussed in the order of their probable ease of solution  Goal is to develop a cooperative atmosphere; yet, one that is going to allow you to effectively negotiate 25 Negotiation Skills for Project Managers
  26. 26. Narrowing the Differences:  The “back and forth” process  Define the issue, state the facts, attempt to convince supplier that your position is reasonable  If agreement can’t be reached, move on to next issue  Continue until all things are worked out  If agreement cannot be reached, there are two choices  Adjourning  Hard bargaining Hard Bargaining:  Normally, the last resort  “Take it or leave it”  Doesn’t work well if the approach to purchasing is collaborative  Be careful with bluffing  Unless a one-time purchase is at stake, be careful that the seller doesn’t feel abused or unfair treatment  When in doubt, ask questions!  Open questions  Reflective questions  Tactics 26 Negotiation Skills for Project Managers
  27. 27. Tactics:  Use  Walk out  Don’t use  Emotional outburst  Argue special case  Pretend ignorance  Play for time  Nibble and retreat  “You go first”  Bad environment  Defer to higher authority  Not willing to make any changes  Silence  Good guy/bad buy Negotiation Process: Final Action (Agreement)  Arrangements should be neutral and comfortable  Pay attention to what others say  Screen out all visual distractions  Ask open ended questions  Listen to responses  Proactive vs. reactive behavior  Win-win  Individualistic or integrative - (e.g., individual vs. team vs. group)  Making a deal or creating a relationship  Short-term goals or long-term goals  Creativity - develop different angles (offer recuperator free for ١st year). 27 Negotiation Skills for Project Managers
  28. 28. Principled Negotiation:  Separate the people from the problem  Focus on interests, not positions  Invent options for mutual gain  Insist on using objective criteria Separate People from Problem:  Understand the other side's position  Acknowledge emotions, let steam out  Use active listening Focus on Interests, not Positions:  Position is something decided, interests are cause of decision  Identify underlying interests---some interests will be shared by both sides Invent Options for Mutual Gain:  Brainstorm options  Evaluate alternatives  Reconciling differences: look for items that are of low cost to you and high benefit to them, and vice versa Insist on Using Objective Criteria:  Find objective criteria: both parties should be willing to be bound by standard  Use and acknowledge reason  Do not give in to pressure 28 Negotiation Skills for Project Managers
  29. 29. Dealing with problem:  Avoid a strict mandate  Moderate the demands of your constituency  Keep persons whose expectations are too high outside the negotiation process  Keep results vague or quite complicated so that criticism has little basis  Exaggerate opponent’s concessions ETHICAL:  Productive.  Sets high standards, independent thinking  Develops proposals in common interest  Less productive.  Becomes ‘preachy’. Overly concerned with ideals and common values  Tendencies in conflict.  Sticks to his case because he is ‘right’. Becomes easily disillusioned ANALYTICAL:  Productive.  Careful analysis. Preference for hard facts and figures. Predictable, Holds to goals  Less productive.  Over pre-occupation with details. No ability to improvise. Not sensitive to climate of meeting  Tendencies in a conflict.  Amasses more and more evidence that argument is right. Becomes stubborn FLEXIBLE:  Productive  Wants to get things done. Takes advantage of opportunities. Quick to act. Likes to organise  Less productive.  Bossy. Easily becomes impatient and impulsive  Tendencies in a conflict  Does not concede. Tries to win. Becomes angry 29 Negotiation Skills for Project Managers
  30. 30. JOVIAL:  Productive.  Socially skilled, diplomatic. Tries to influence climate positively. Flexible.  Less productive  Offers little resistance. Reluctant to take a stand, ambivalent  Tendencies in conflict  Over-compromising. Gives in to preserve harmony and good will Other Party Doesn't Play:  Other party is more powerful  Other party won't use principled negotiation  Other party uses dirty tricks Other Party Is More Powerful:  Don't focus on a "bottom line"  Know your Best Alternative To a Negotiated Agreement (BATNA)  Know your opponent's BATNA  Don't agree to anything less than your BATNA Won't Use Principled Negotiation:  Continue to use principled negotiation  Use "Negotiation Jujitsu": deflect attacks onto problem  Assertion of position --> ask for reasons  Attack your ideas --> ask for advice  Personal attacks --> recast as attacks on problem Other Party Uses Dirty Tricks:  Deception: seek verification for claims  Personal attacks: recognize them Refusal to negotiate: ask why 30 Negotiation Skills for Project Managers
  31. 31. Cartoon of the Day: 31 Negotiation Skills for Project Managers
  32. 32. Customer-Oriented Development: § It is important to develop good relationships with customers (I.e. clients) -- WHY?  System development is a partnership effort (it is a ‘two-way street’)  It is difficult (if not impossible) to achieve high quality partnership without good IT-business relationships  High quality IS-client relationships reduce chances of IS implementation failures. How?  High quality IS-client relationships reduce chances of IS implementation failures. How? • management of client’s expectations as to project scope, deliverables, development speed, etc. • improvement in mutual understanding as to quality and satisfaction • building systems clients actually use • improving efficiency of interrelated tasks  High-quality relationships also • enhance professional IS credibility • improve quality of work life for ISPs and clients Poor IS-business relationships  contribute to IS project failures  detract from IS credibility  hinder success of subsequent organizational change projects  plant the seed for the decision to eventually outsource IS services to a third party contractor 32 Negotiation Skills for Project Managers
  33. 33. Reasons for poor relationships: o Lack of collaboration among key stakeholders o “culture gap” between technical specialists and their business- focused clients o behaviors of IS specialists during projects: • failure to understand client’s needs and incentives • overemphasis on technical issues at the expense of social issues • overall, a lack of client-oriented behaviors and service culture High quality IT-business relationships: § Will discuss conditions under which good relationships evolve at the end of this presentation Customer-Oriented Practices: § Planning: • Select appropriate lifecycle model that gives customers progress visibility, such as? • Identify real customer (the boss?) • Create a Win-Win project (Theory-W project management) • Mitigate the risks § Requirements Analysis: • Gather the real requirements (essential) with customer-oriented requirements practices • Clients are more satisfied if they participate in requirements specifications. Why? • Use methods such as JAD § Design: • Let customers change their minds occasionally 33 Negotiation Skills for Project Managers
  34. 34. Construction: • Use readable, modifiable coding practices so you can change the software • Use project-monitoring (mini-milestones) so customer knows you are accomplishing tasks • Lifecycle model that shows progress Managing Customer Expectations: • Prevent customer-determined schedule before requirements & resources are known • Manage the size & complexity of features • Emphasize that the prototype isn’t the product • Don’t create unrealistic expectations about schedule, functionality, etc. Use Project Recovery When... • Don’t know when project will finish • Laden with defects • Developers working burnout hours, low morale • Nobody can control the schedule • Customer doesn’t believe project will be done • The team is defensive, relations are strained… • Project is about to be canceled Approaches to Recovery: • Cut project size to fit time & effort planned • Increase process productivity by focusing on short-term improvements • Slip schedule & proceed w/damage control • Combination of all 3: Drop features, increase productivity & slip schedule • Get project under control & FINISH it! o Problem NOT catching up BUT finishing project 34 Negotiation Skills for Project Managers
  35. 35. Recovery Plan: First Steps • Assess situation: how firm is deadline? • Apply Theory-W analysis -- make winners out of everyone or quit • Mentally prepare yourself to fix the project • Ask team what needs to be done • Be realistic about what you can expect o Don’t promise unrealistic new delivery dates THEORY- W --?? ** WHAT IS IT AND HOW DOES IT WORK? ** WHAT ARE THE BENEFITS? Theory W-Stakeholder Conflicting Goals: • Customers want quick schedule, low budget, lots of features, user- friendly, robust software • Bosses want no overruns, no surprises, successful project • Developers want interesting work, challenge, no grunt work, home life • Maintainers want no defects, documentation, modifiability Theory-W Benefits: • Project objectives are clearer from beginning because each stakeholder’s “win” conditions are identified up front. • Better communication with customers • Better requirements reduce rework • Goal-setting produces better schedule expectations • Minimizes feature creep 35 Negotiation Skills for Project Managers
  36. 36. Theory-W: Everybody a Winner • Separate people from the problem • Focus on interests rather than positions • Invent options for mutual gain • Insist on objective criteria • Set project up so everyone can win - if you cannot set it up, then don’t do the project Win-Win Steps: 1- Establish Win-Win Preconditions: o Identify & include all the stakeholders o Establish reasonable expectations o Assign tasks so people can achieve their own win conditions o Provide environment that supports project goals, e.g., training, appropriate lifecycle model 2- Structure Win-Win Software Process: o Establish a realistic plan (see Step 1) o Use the plan to control the project (follow it!) o Identify & manage win-lose & lose-lose risks  For each win condition, identify & monitor risks o Keep people involved 3- Structure Win-Win Product: o Internal parts that developers & maintainers see  Documentation  Modifiability o External parts that customers/users see  Easy to learn and to use  Robust 36 Negotiation Skills for Project Managers
  37. 37. When is Win-Win Appropriate? o Project recovery or from beginning (best) o When there is a champion (upper-level support) to bring in all stakeholders o Small or large projects o Downside? -- Manager’s role more demanding: • Has to manage stakeholder relationships • Negotiate with stakeholders • Set & monitor goals Leverage the People: • Restore team morale o Improve working conditions • Clean up major personnel problems • Replace problem leadership, o Give managers assistance o Change manager’s supervisor • Add people carefully, if at all • Instead focus existing team members’ time on project • Allow team members to respond differently: o Some work harder o Some work slowly but surely • See that developers pace themselves 37 Negotiation Skills for Project Managers
  38. 38. Leverage the Process: • Find & fix the classic mistakes o Are you still changing the project definition? o What about the design adequacy? o Too few management controls to track status? o Shortchanged quality to meet the deadline? o Are people getting burned out? • Find & fix the classic mistakes o Is the deadline realistic? o Are people working too hard & quitting? o Is new technology a problem? o Problem developers? Low morale? Accountability? • Fix broken development processes o Usually software development fundamentals, e.g., version control, defect tracking • Use miniature milestones o Schedule realistically with miniature milestones o Track scheduling progress carefully o Record reasons for missed milestones o Recalibrate schedules from what you learn after 2-3 weeks have passed o Don’t commit to schedule until you have one you can believe • Manage risks carefully Leverage the Product: • Stabilize the requirements o First determine WHAT the requirements are • Trim the feature set - prioritize what’s left • Assess your political position? • Reduce number of defects & keep them low • Get to a state you can test & keep it working 38 Negotiation Skills for Project Managers
  39. 39. Chapter 3: Negotiation for Selling & Buying Objectives of Negotiations:  To obtain the quality specified  To obtain a fair and reasonable price  To get the supplier to perform the contract on time  To exert some control over manor in which the contract is carried out  To achieve maximum cooperation  To maintain relationships  To create a long-term relationship When to Negotiate?  Sole source situation  Sellers market  Specification not complete  Competitive bidding not appropriate  New products  When Competitive Bidding is Impractical or Inappropriate  When Risks and Costs cannot be accurately predetermined  When the buyer is contracting for a portion of the seller’s production capacity  When tooling and set-up costs represent a large percentage of the supplier’s total costs  When a long period of time is required to produce the item  When products of a specific supplier are desired to the exclusion of others 39 Negotiation Skills for Project Managers
  40. 40. NEGOTIATIONS WITH VENDORS: Can you negotiate? • Yes, negotiation is natural! (Would you be here today if you could not negotiate?) • Negotiation is the means by which we gain what we need or want or desire want or desire when somebody else controls what we need or want or desire. • But there are skills to be learned. • And we should be prepared for negotiation to expose our weaknesses (e.g. losing our temper) as well as our strengths. • And if after learning the skills and getting some experience we do not feel comfortable with negotiation, we should leave it to others to negotiate on our behalf. Why negotiate? • Negotiation is inevitable if librarians wish to provide a good service to their users. • Our political masters will not provide us with resources unless we present a good case : that involves negotiation. • The content our users need mainly comes from commercial providers : they wish to make as high a profit as possible and unless we are willing to pay the highest price we need to negotiate. • Even if we leave the face-to-face negotiation to other people, we need to know enough to assess whether the best deal has been achieved. 40 Negotiation Skills for Project Managers
  41. 41. Before negotiation starts …… • Know what you want. The lowest price? The most content? Added benefits like training? How important is the content to your users? At what point will you walk away from the negotiation? • Know who you will be negotiating with. Is this a new market for the company? Do they have any existing sales they may wish to protect? Is the company looking for good publicity from your purchase? Are the sales staff familiar with your situation? • Choose the venue and the participants carefully. Use the “home advantage” if at all possible. Do not allow a commercial supplier the advantage of being your host. Always have a colleague with you. You decide when to take meal-breaks. When the negotiation starts … • Stay calm and strong! This helps to keep you in control of the negotiation. Ask the vendor to justify their position. • Stay in control of the agenda. Prepare a list of issues to be covered. Use short, simple words and sentences to describe the points of greatest importance to you. Know what you expect to be included as part of the basic price and what you are prepared to consider as “extras”. • Know when to compromise. Compromise is almost inevitable but the art is in knowing what to concede, when and how. Make notes on concessions won and given. • Know when to say “no” and walk away. Librarians have not done this enough because of the need to supply content their users need. Make clear the issues on which negotiations have broken down so that they can be resumed if conditions change. 41 Negotiation Skills for Project Managers
  42. 42. After negotiations end … • Send a letter or e-mail as quickly as possible summarising your understanding of the agreement reached. It keeps you in control of the situation if you are the first to write down what was agreed. Solve any problems of misunderstanding before the lawyers start drawing up a contract. • Sign a legal contract as soon as possible. Do not give the vendor time to back out of any favourable terms you have agreed. (N.B. If the terms are not favourable, you should not be agreeing to them!) Read the contract carefully. Define the issues!  Interests  Success  Performance or function  Details  Terms - conditions  Price  Liabilities  Delivery - dates 42 Negotiation Skills for Project Managers
  43. 43. Negotiation For Selling & Buying: Selling: • Recognise ‘buying roles’ – particularly within organisations / families • Need identifier • Budget holder • Purchaser • Gatekeeper • User Sell benefits: • Aim to ‘solve customer’s problems’ (not sell your product) • Recognise the whole product offering not just the core benefits (packaging; brand; image; colour; distribution) • Recognise importance of relationships and relating to people (one of your skills?) Relationship Marketing: • Use database / IT to personalise communication with customer • Track usage, interest, and complaints • Capture and build upon communication with prospective customer • Tailor offerings to customer profile Buying: • Don’t accept the first offer • Determine a ‘package’ which recosts the product (i.e. support services included) • Know your requirements and what will solve your problem – draw up a specification • Use knowledge of competition’s offering to secure a lower price 43 Negotiation Skills for Project Managers
  44. 44. Closure: • Ensure agreement / next meeting is secured • Secure in writing / shake hands if appropriate • Build a relationship for future supply / purchase Spend ١٥ mins..  reducing a price by £٥٠٠, you have effectively earned your business £٢٠٠٠ an hour 1- Preparation: • Know the item or service • Know the seller’s bargaining strength • Know the buyer’s bargaining strength • cost or price analysis • Know the seller 2- Aspects to Negotiate: • Price • Quality • Support • Supply • Transportation • Duration 3- Negotiation:  Negotiation is a back and forth communication designed to reach an agreement.  Soft  Hard  Principled • decide issues on their merits rather than through haggling 4- Criteria:  Produce a wise agreement  Efficient  Don’t damage the relationship 5- Problems with Positions:  Ego 44 Negotiation Skills for Project Managers
  45. 45.  Stalling  Endanger relationship  Hard game always dominates a soft one Three Stages of Negotiation:  Analysis  Planning  Discussion New Focus:  People  Interests  Options  Criteria 1- Focus on People:  Separate the people from the problem  Don’t degenerate into blaming, anger etc.  People problems are:  Perceptions  Emotion  Communication Perception: o Put yourself in their shoes o Don’t blame them for your problem o Face saving Emotion:  People often feel threatened  Allow the other side to let off steam  Don’t react to emotional outbursts 45 Negotiation Skills for Project Managers
  46. 46. Communication:  Negotiators often not talking to each other  Listen actively  Build a working relationship  You are on the same team  face the problem - not the people 2- Focus on Interests:  Not positions  There are usually several ways to satisfy an interest  Behind opposing positions lie shared and compatible interests as well as conflicting ones. Interest Identification:  Ask “why”?  Ask “why not”?  Multiple interests  You must communicate your own interests  Look forward, not back 46 Negotiation Skills for Project Managers
  47. 47. Invent Options for Mutual Gain:  Watch out for:  premature judgement  searching for a single answer  The assumption of a fixed pie  thinking that solving their problem is their problem Prescription:  Brainstorming  Broaden your options  Look for mutual gain  Make their decision easy  Give them an answer, not a problem Objective Criteria:  Horse trading may miss the point entirely  Market value  Precedent  What a court would decide  Reciprocity Review Session:  7:00 Sunday  Room 118  Bring your questions 47 Negotiation Skills for Project Managers
  48. 48. Negotiator Behavior:  Willing to compromise  View issues independently  Explore twice as many options per issue  Make comments about common ground  Make less irritating comments  Give fewer reasons for arguments advanced  Congratulate counterpart on job well done Tactics:  Low Ball  Honesty/Openness  Price Increase  High Ball  Best and Final Offer  Silence  Use of Power 48 Negotiation Skills for Project Managers
  49. 49. Chapter 4: Negotiation for Salary The definition of negotiation as it relates to employment is: a series of communications (either oral or writing) that reach a satisfying conclusion for all concerned parties, most often between the new employee and the hiring organization. It takes the Right Attitude: •Employers don’t give salary increases, employees earn them. •You have no right to an increase, you earn it. •You have the right to a salary adjustment due to inflation or an increase in the cost of living, but you have no right to an increase based on merit. Timing is Everything How much time should pass before you should think about your next salary increase? • When you have been praised for work you have just completed. • When major changes occur in your job responsibilities or tasks. The Art of Negotiation Principles of Negotiation 49 Negotiation Skills for Project Managers
  50. 50. 1. Postpone the negotiation •Bounce back the question to the interviewer. •Stall elegantly. •Use your sense of humor. •Disarm your interviewer 2. Avoid mentioning your last salary Employers use this to: •Gauge where you fit in the salary range; •You may be screened out quickly if the number of candidates is large, as salary is an ideal and obvious way to compare candidates and screen them out. 3. Make them talk first: Wait for the interviewer to expose himself. Effectively postponing the negotiation and making the interviewer talk first has several advantages. Most importantly you: •Get a better offer than you originally planned; •Refrain from “shooting yourself in the foot” by asking for too high of a figure; •Take the necessary time to obtain specific information about the level of the job and its corresponding responsibilities; •Gauge how the interviewer is evaluating you before you have to negotiate with him; •Discover the starting point of the negotiation process. Sometimes the interviewer will try to 50 Negotiation Skills for Project Managers
  51. 51. open negotiation by coming right out and asking how much money you want to make. Example: I: How much do you want to earn? Y: Oh, thank you for raising this issue. Before answering you, I’d like to ask a question. I: Please do. Y: Do you have salary curves or indexes in your organization? I: Yes, of course we do. Y: Could you tell me, then, what sort of salary range you have in mind for this job? This will make things easier and save us time. Stand Your Ground : Agree with Gentle Humor I: You certainly are tough when it comes to negotiating! Y: Why, thank you! Turn Negatives to Positives I: You seem so sure of yourself! It appears that nothing will make you budge. Y: Yes, this is a compliment given to me by many of my past employers. Common Sense I: You appear to be a person who is always watching out for himself. 51 Negotiation Skills for Project Managers
  52. 52. Y: Do you think so? I: Yes, you seem to be very interested in the money aspect of this job. Y: The job to be filled requires excellent negotiation skills. I am demonstrating that I have those skills. Later, when I work for you, I will fight and negotiate just as firmly on your behalf. Continued Principles: •Avoid bluffing. •You will be more efficient if you stick to the truth for several reasons: •The very fact that you use only true information makes you feel more comfortable and secure, which make the interview easier. •Bluffing, lies, or exaggeration can hamper the otherwise good negotiation tactics at your disposal. •When checking is done after the interview, your integrity and good faith are proven and you benefit. Get It In Writing Accepting a firm job offer together with a salary proposal can be done either verbally or in writing. However, a confirmation in writing is a must in the following four cases: •If you have some sort of negative intuition or feeling about your interviewer and have doubts about the value of his word; •If the promises made to you seem too numerous or generous to be given without something more being demanded of you some time down the road; •If the salary formula is complex (due to adjustment, commissions, etc..), or if you think the salary has not been stated clearly or not negotiated thoroughly; 52 Negotiation Skills for Project Managers
  53. 53. •If the risk to you is great. Ex. If you must resign from a present job to take a new job the risk is too large without having a firm written proposal in your hand, signed by the person for whom you will be working for. Money Isn’t Everything •Communicate salaries after the offer has been made. •Analyze other options/ child care, elder care, disability/ life insurance, other perks… •Ensure you like your job. •Don’t accept a job based on salary. •Accept a job that you will enjoy. Negotiation is a Gamble we all Play… Good Luck!!!!!!!! Interdependence: • Both parties need each other. A buyer cannot buy unless someone else sells and vice versa; each is dependent upon the other. • When we are dependent on another, we have to accept and accommodate the demands of another. • Interdependent relationships are characterized by interlocking goals-both parties need each other to accomplish their goals. Standards for Evaluating Relationship Outcomes: 53 Negotiation Skills for Project Managers
  54. 54. • Anticipated Outcome (٠): What we expect to receive from this relationship. • Comparison Level (CL): The standard against which a person evaluates a relationship---what we could receive from other relationships. • Comparison Level for Alternatives (CLalt): The lowest level of outcome that would be accepted from this relationship before changing to another relationship. 54 Negotiation Skills for Project Managers
  55. 55. Standards for Evaluating Relationship Outcomes (SERO): • The Thibaut and Kelly mode of analysis permits us to draw a distinction between attractiveness and satisfaction on one hand and dependency on the other. • A person can dislike a relationship and stay, or like a relationship and leave. • In negotiation, the other party may dislike dealing with us, but since we have "the best deal in town;' he or she will continue to negotiate with us. • Alternately, the other party may like us, but nonetheless break off negotiations because of more attractive possibilities elsewhere. • Whether you should or should not agree on something in a negotiation depends entirely upon the attractiveness to you of the best available alternatives • This concept is called BATNA (an acronym for Best Alternative To a Negotiated Agreement) and suggest that negotiators need to understand both parties' BATNAs when they negotiate. 55 Negotiation Skills for Project Managers
  56. 56. Example : SERO • Gomaa has been employed by an organization for six months and is making $٣١,٠٠٠ per year. • The average salary of Gomaa's college classmates who were accepting new jobs was $٣٠,٠٠٠. • Recently, the organization where Gomaa works was downsized and Gomaa's job was eliminated. • His boss offered him another job in the organization at $٢٨ ,٠٠٠. • Gomaa realizes that most other companies are not currently hiring because it is not the end of the school year, and he believes that it would be difficult to find a new job for more than $٢٥,٠٠٠. • Anticipated Outcome: The salary for the new job in the organization is $٢٨,٠٠٠. • Comparison Level (CL): The average starting salary of Gomaa's classmates is $٣٠,٠٠٠. • Comparison Level for Alternatives (CLalt): The perceived salary of a readily available alternative job is $٢٥,٠٠٠. Principles of Negotiation? 56 Negotiation Skills for Project Managers
  57. 57. • The greater the distance between ٠ and CL, the greater the attractiveness or unattractiveness of the relationship. • When a relationship is unattractive, we may think of leaving, but whether we do depends upon our options. • We may not like our current job, but if we are relatively unskilled, we may find it difficult to get another job. • If we have many skills, however, we may know of several jobs to which we can easily move. • People leave relationships when outcomes fall below this CLalt. • It is assumed that the more a person's actual outcome exceeds the CLalt, the more dependent upon the relationship he is. 57 Negotiation Skills for Project Managers
  58. 58. The Dilemma of Honest: • Concerns how much of the truth to tell the other party • Telling the other party everything about your situation may give that person the opportunity to take advantage of you. • However, not telling the other person anything about your needs, wants, and desires may lead to a stalemate. • Just how much of the truth should you tell the other Example: The Dilemma of Honest • If X told Y that he would work for as little as $٣٥,٠٠٠ but would like to start at $٤٠,٠٠٠, • It is quite possible that Y would hire him for $٣٥,٠٠٠ and allocate the extra money, that he might have paid to him elsewhere in the budget. • If Y does this, he might hurt their long term relationship. • Y should insure that both parties’ needs are met. • If X does not tell Y any information about his salary aspirations, then Y would have a difficult time knowing how to satisfying those needs. 58 Negotiation Skills for Project Managers
  59. 59. The Dilemma of Trust: • Concerns how much to believe what the other party tells you. • If you believe everything the other party says, then he or she could take advantage of you. • If you believe nothing the other party says, then you will have a great deal of difficulty in reaching an agreement. • Exactly how much to believe of what the other party tells you depends on many factors: • The reputation of the other party • How he treated you in the past • The present circumstances, and so on. Example: The Dilemma of Trust If Y told X that $٣٨,٠٠٠ was the maximum has was allowed to pay him for the job, without seeking approval “from above”, should X believe him or not? 59 Negotiation Skills for Project Managers
  60. 60. Search For An Optimal Solution: • The search for an optimal solution through the processes of giving information and making concessions is greatly aided by trust and a belief that you're being treated honestly and fairly. • Two efforts in negotiation help to create this trust and belief: • Perceptions of outcomes • Perceptions of the process • The former attempts to change a party's estimation of the perceived importance or value of something Perceptions Of Outcomes: • Attempts to change a party's estimation of the perceived importance or value of something • If Y convinces X that a lower salary for the job is relatively unimportant given the high promotion potential associated with the new job, the X can feel more comfortable making a concession on this point. Perceptions Of The Process: • Efforts based on the negotiating process help convey images of equity, fairness, and reciprocity in proposals and concessions • Satisfaction with a negotiation is as much determined by the process through which an agreement is reached as with the actual outcome obtained 60 Negotiation Skills for Project Managers
  61. 61. Understand the Nature of the Interdependence: • Understanding the nature of the interdependence between parties in a negotiation is a critical negotiation skill. • Unfortunately, negotiation situations do not present themselves with neat labels, typically, describing the nature of the interdependence between parties. • Negotiators make judgments about the nature of the interdependence in their negotiation situations, and negotiator perceptions about interdependence become as important as the actual structure of the interdependence Understanding History: • The point here is that people bring much baggage with them to a negotiation, including: • Past history • Personality characteristics • Moods • Habits • Beliefs about how to negotiate • These factors will influence how people perceive an interdependent situation, and this perception will in turn have a strong effect on the subsequent negotiation. 61 Negotiation Skills for Project Managers
  62. 62. Cooperators and Competitors: • There are two general types of negotiators: • Cooperators • Competitors • Competitors enter negotiations expecting the other party to compete, and to compete with everyone. • Cooperators will cooperate with other cooperators and compete with competitors Competitors: • Competitors believe that all negotiations are competitive and that the world contains only competitors because all the people they negotiate with compete (either they were natural competitiors, or they were cooperators who have adapted and compete rather than being taken advantage of). Cooperators: • Cooperators understand that negotiations may be cooperative or competitive and recognize that there are both cooperators and competitors in the world. 62 Negotiation Skills for Project Managers
  63. 63. Mythical Fixed Pie: • Most negotiators in a situation containing both cooperative and competitive elements (mixed-motive) will assume that there is a fixed pie – the more I get the less you have • ٦٨% of negotiators assume that negotiations will be win- lose and only ٣٢% assume a win-win situation • Those negotiators that adjust to a situation quickly generally achieve better results 63 Negotiation Skills for Project Managers
  64. 64. Chapter 5: Conflict Management  The objective is not to eliminate conflict but to learn how to manage it so the destructive elements are controlled while the more productive aspects are enjoyed.  Negotiation is a strategy for productively managing conflict. Conflict more generally  When a person or group frustrates the goal attainment of another.  Types of conflict  Relationship  Task  Process Levels of Conflict: • Intrapersonal or Intrapsychic – conflict occurs within the individual. Souces of conflict can include ideas, thoughts, emotions, values, predispositions, or drives that are in conflict with each other. • Interpersonal – conflict between individual people • Intragroup – conflict within a small group – among team members, committee members, familes, etc… • Intergroup – conflict between groups, unions and management, warring nations, feuding families, etc… 64 Negotiation Skills for Project Managers
  65. 65. Elements That Contribute to Conflict’s Destructive Image: 1. Competitive Processes – parties compete against each other because they think their goals are in competition and that the two of them cannot both achieve their objectives. 2. Misperception and Bias – as conflict intensifies, perceptions become distorted. People tend to view things consistently with their own perspective on the conflict. Thinking tends to become stereotypical and biased 3. Emotionality – conflcits tend to become emotionally charged as the parties become anxious, irratated, annoyed, angry, or frustrated. Emotions tend to dominate thinking and the parties may become more emotional and irrational as the conflict escalates. 4. Decreased Communication – Communications declines. Parties stop communicating with those who disagree with them and communicate more with those that agree. 5. Blurred Issues – Central issues in the dispute become blurred and less defined. New, unrelated issues are drawn in as the conflict becomes a vortex that attracts both related and innocent bystanders. 6. Rigid Commitments – parties become locked into positions. As they are challenged by the other side, parties become more committed to their points of view and less willing to back down from them for fear of losing face and looking foolish. Thinking processes become rigid, and the parties tend to see issues as very simple and either or rather than as complex. 65 Negotiation Skills for Project Managers
  66. 66. 7. Magnified Differences; Minimized Similarities 8. Escalation of the Conflict Functions and Benefits of Conflict: • Discussing conflict makes organizational members more aware and able to cope with problems. Knowing that others are frustrated and want change creates incentives to try to solve the underlying problem. • Conflict promises organizational change and adaptation. Procedures, assignments, budget allocations, and other organizational practices are challenged. Conflict draws attention to those issues that may interfere with and frustrate employees. • Conflict strengthens relationships and heightens morale. Employees realize that their relationships are strong enough to withstand the test of conflict; they need not avoid frustrations and problems. They can release their tensions through discussion and problem solving. • Conflict promotes awareness of self and others. Through conflict, people learn what makes them angry, frustrated, and frightened and also what is important to them. Knowing what we are willing to fight for tells us a lot about ourselves. Knowing what makes our colleagues unhappy helps us to understand them. • Conflict enhances personal development. Managers find out how their style affects their subordinates through conflict. Workers learn what technical and interpersonal skills they need to upgrade themselves. 66 Negotiation Skills for Project Managers
  67. 67. • Conflict encourages psychological development. Persons become more accurate and realistic in their self-appraisals. Through conflict, persons take others' perspectives and become less egocentric. Conflict helps persons to believe that they are powerful and capable of controlling their own lives. They do not simply need to endure hostility and frustration but can act to improve their lives. • Conflict can be stimulating and fun. Persons feel aroused, involved, and alive in conflict, and it can be a welcome break from an easygoing pace. It invites employees to take another look and to appreciate the intricacies of their relationships. 67 Negotiation Skills for Project Managers
  68. 68. Conflict Management: C o n c e r n A b o u t O t h e r ’ s O Yielding Problem Solving Compromising Inaction Contending Concern About Own Outcomes • Contending (competing or dominating) – Parties who employ this strategy maintain their own aspirations and try to persuade the other party to yield • Yielding (accommodating or obliging) – Show little or no concern in whether they attain their own outcomes, but are quite interested in the other party attains their outcome • Inaction (avoiding) – show little interest or concern in whether they attain their own outcomes, nor do they show 68 Negotiation Skills for Project Managers
  69. 69. much concern about whether the other party obtains his outcomes. Inaction is often synonymous with withdrawal or passivity, the party prefers to retreat, be silent, or do nothing • Problem Solving (Collaborating and integrating) – actors pursue a problem solving strategy showing high concern for attaining their own outcomes and high concern for whether the other party attains their outcome. Both parties pursue approaches to maximize their own joint outcome so both sides win. Managing conflict: Assertiveness vs. Cooperation  Avoidance (low, low)  Accommodation (low, high)  Competing (high, low)  Compromise (med, med)  Collaboration (high, high) 69 Negotiation Skills for Project Managers
  70. 70. Chapter 6: Negotiation Skills for Project Engineers Golden Rules for project engineers: • In business, you don't get what you deserve, you get what you negotiate. • If you fail to plan, then you plan to fail. • Negotiation is an art and The art is in the deal • When you see a problem, you say welcome • In practice, there is no optimal solution. • The best solution must be customizing according to the working conditions. • There is always room for negotiation. • Ensure that the negotiation team members have a consistent message, roles, and approach for the negotiation. • Determine your “drop dead” conditions and fallback positions before beginning the negotiation. • Negotiate to a complete contract, taking into consideration potential changes to your organization and to the vendor’s. • Hope for the best and plan for the worst. 70 Negotiation Skills for Project Managers
  71. 71. Timeline for Project Engineer Negotiation: What are the bases of negotiation in the following? Timeline Owner Contractor 1. Initial Contact 2. Initial Interview 3. Tender /Offer Interview 4. Follow-up Interview 5. Offer detailed negotiation 6. Contract review negotiation 7. Progress negotiation 8. Closed-out negotiation Contract negotiation: The contract negotiation process should be a period to clarify and resolve issues identified during each phase of the selection process. 1. Define requirements 71 Negotiation Skills for Project Managers
  72. 72. 2. Evaluate responses 3. Evaluate product demonstration 4. Site visit 5. Contract and cost analysis 6. Contract negotiation 7. Agreement • In summary, we often need to balance the desire for technical excellence and cost • It can be a point where management and engineering collide. 72 Negotiation Skills for Project Managers
  73. 73. Evaluating and resolving conflicting objectives: 1. Technical Proposal – if OK then move onto 2. Budget (or Financial) Technical Proposal: – knowledge and experience in relevant fields – 50% – Managerial and financial capabilities – 20% – General capabilities – 30% Knowledge and Experience in Relevant fields: • The design document should detail how the proposed design will meet the design requirements • The document should detail a timeline as to how the project will be executed Managerial and Financial Capabilities: • Does the tenderer have appropriate personnel (CV)? • Is the tenderer able to substitute a similarly qualified person should the primary person become unavailable? • Is the tenderer able to complete the work within the budget allocated? 73 Negotiation Skills for Project Managers
  74. 74. General Capabilities: • Is the tenderer or good reputation? • Does the tenderer have a good understanding of your business and the environment in which it works? • Does the tenderer have good contacts within the industry? Lastly,… • Once the tenders have satisfactorily satisfied the technical requirements then tenders should be compared on the basis of cost Four foci of evaluation (Cotterall and Hughes1995) 1. Strategic Assessment 2. Technical Assessment 3. Cost-benefit assessment 4. Risk Analysis • Where do each of these forms of evaluation relate to when considering the Tender? 74 Negotiation Skills for Project Managers
  75. 75. Contract evaluation matrix Technical Proposal Level Budget K M G Strategic x Assessment Technical x Assessment Cost-benefit x assessment Risk Analysis x K - knowledge and experience in relevant fields – 50% M - Managerial and financial capabilities – 20% G - General capabilities – 30% 1- Strategic Assessment • Objectives: support for corporate vision • Information System (IS) Plan: legacy systems • Organisation Structure: enhance of destroy? • Management Information System (MIS) • Personnel: manning levels and skill base • Corporate Image: will it affect customer perceptions 75 Negotiation Skills for Project Managers
  76. 76. 2- Technical Assessment • Functionality: will the end product work? Applications Security Metrics –design requirements • Scalability: is the network able to grow without major problems • Adaptability: will the project be able to incorporate new technologies in the future? • Manageability: can we monitor network operations and make necessary changes easily? 3- Cost-benefit Analysis: • Costs – Development cost – Setup cost – Operational costs • Benefits – Direct benefits (reduction in salary bills) – Indirect benefits (increased accuracy, increased timeliness, more user friendly) – Intangible benefits (Better customer and supplier relationships, better information flows/problem solving) 76 Negotiation Skills for Project Managers
  77. 77. • Cost-benefit Analysis – If benefits > cost, that is good – If benefits < cost – that is bad • How do you measure intangible benefits? 4- Risk Analysis • What is the likelihood that an event will result in the project not meeting its objectives? • A cost-benefit style of analysis can also be used to quantify possible losses. “What if” analysis • The difficulty is determining the likelihood of an event occurring or accounting for an unpredictable set of circumstances Typical Risks: • Lack of commitment on pricing. • Implementation services bid are inadequate to accomplish the implementation. • All components (pieces of the system required to make the software work as discussed) are not included in the bill of materials. • Little ability to escalate problems so that they have appropriate attention. • Inability to cleanly exit the contract if the solution does not work appropriately or circumstances change. • Payments do not incentivize the vendor to complete the implementation in a thorough and timely manner. 77 Negotiation Skills for Project Managers
  78. 78. Service level: • Ask the question whether specific technologies are suitable for the kind of service you wish to deliver. • Best effort • Deterministic service • Guaranteed Service Criteria used in your last milestone exercise Milestone Service Best Effort Deterministic Guaranteed Response Time Accuracy Availability Network Utilisation Throughput Efficiency Latency 78 Negotiation Skills for Project Managers
  79. 79. Negotiation Timeline for real project: Activity Dur. Month 1 2 3 Type Week Select Preferred Vendor 4 X Review Contract 1 X Select Negotiation Team Members 1 X Orient Team to Issues 1 X Hold Negotiation Kickoff Meeting 1 X Validate/Negotiate Sizing and Pricing 1 X Draft Milestones 1 X Agree on Acceptance Criteria 1 X Draft and Finalize Work Plan 2 X Complete Terms/Conditions 4 X X Conduct Legal Review 1 X Sign Contract 1 X 79 Negotiation Skills for Project Managers
  80. 80. The Role of Contract Negotiation: • System Planning • System Selection • Implementation • Establish the foundation and structure for a solid working relationship. • Clarify and/or resolve any issues identified during the selection process. • Further understand the vendor’s goals, objectives, priorities, and culture. • Provide detailed understanding regarding the mechanics of the relationship to your executive team and project sponsors. • Assess lingering risk and mitigate with specific strategies. • Enable your organization to take advantage of best-case scenarios. • Protect your organization against potential worst-case scenarios. 80 Negotiation Skills for Project Managers
  81. 81. Developing a Negotiation Strategy: • Identify negotiation team members (3–4). • Determine the timing for inclusion of legal counsel. • Review the contract and develop an issues list. • Determine the priority of issues and areas for leverage. • Develop a party line. • Identify team member roles/responsibilities. Contract Negotiation Strategies: Vendor contracts are, to varying extents, one-sided and in favor of the vendor. The trick to negotiation is to identify the tactics and approaches that are most effective in obtaining concessions. • Hardball Tactic – protracted negotiation typically accomplished via attorneys. • Pushover (non-tactic) – negotiation on price with acceptance of terms and conditions. • Balanced Approach – open discussion of issues and implications on both sides with a desire to develop a workable solution for each party. 81 Negotiation Skills for Project Managers
  82. 82. Contract Negotiation Process: Step Main items 1. Determine Goals/ • Uses. Objectives • Growth. • Timing. 2. Obtain the “Complete” • Bill of materials. Contract From the Vendor • Terms and conditions. • Appendices. 3. Review and Identify Major • Balance of responsibilities. • Inclusion/expansion. Issues • Payment. 4. Identify Negotiation Team • Executive sponsors. • System owner(s). • Legal counsel. 5. Develop Strategy • Goal. • Leverage. • Concessions. • Go/no-go. 6. Negotiate Contract • Location. • Frequency. • Format. 82 Negotiation Skills for Project Managers
  83. 83. Relationship between Owner and Contractor: • It is important to develop a good relationship between Owner and Contractor. • Discuss the major contract terms and conditions that can and should be negotiated. • Identify various strategies and approaches for negotiation. • Provide suggestions to improve leverage. • Provide a framework for contract negotiation. Relationship Status Owner Contractor Good & Long term Win Win Lose Win Bad & Short term Win Lose Lose Lose 83 Negotiation Skills for Project Managers
  84. 84. How to establish Good & Long term Relationship? 1- Information Analysis:  Scope and requirements analysis  Budget and payment analysis  Technical conditions analysis  Time analysis  HSE analysis  Resource analysis  Risk analysis  Others conditions 2- Double / Triple Think:  What do you want? (D)  What does the negotiator want? (T)  What does the negotiator think you want? (T)  Where’s the middle ground? (D)  What’s your bottom line? (T) 3- Build Trust:  Tell the truth  Respect confidences  Honor your commitments  Be clear  Be open  Be firm 84 Negotiation Skills for Project Managers
  85. 85. 4- Move Beyond Positions:  Ask questions that probe specific needs / interests  Create a supportive climate  Find mutual ground 5- External Listening  Body language – yours and theirs  Nonverbal messages o Facial expressions o Voice inflections o Eye movement 6- Know Your BATNA  BATNA – Best Alternative To A Negotiated Agreement  Don't focus on a "bottom line"  Don't agree to anything less than your BATNA  Separate the people from the problem  Focus on interests, not positions  Invent options for mutual gain  Insist on using objective criteria  Can you afford to walk away? 85 Negotiation Skills for Project Managers
  86. 86. 7- Negotiating a Raise or Promotion  What have you done for them lately?  How often can you ask for a raise or promotion?  How much should you ask for?  How do you ask?  What if the answer is no? 8- Setting It Up  Agree on a benchmark job  Agree on proficiency / performance level  Job value  Price / Salary range  Necessary performance 86 Negotiation Skills for Project Managers
  87. 87. Negotiation Issues: Negotiation may be developed for all of the following issues 1- Budget and payment conditions:  Costs and prices  Discount provisions  Payment terms 2- Technical conditions:  All technical aspects  Quality levels 3- Time conditions:  Schedules  Crushing 4- Safety conditions:  HSE levels  Safety tools 5- Resource conditions:  Types of materials  Material levels  Manpower limits and skills  Tools types and level  Equipment types and level  Subcontractors 6- Others conditions:  Mode of transportation  Warranty terms and conditions 87 Negotiation Skills for Project Managers
  88. 88.  Cooperation and relationships Note: ٩٩% or more of the time involved in a successful negotiation is invested in preparation for the actual face-to-face discussion Objectives of Negotiations:  To obtain the quality specified  To obtain a fair and reasonable price  To get the supplier to perform the contract on time  To exert some control over manor in which the contract is carried out  To achieve maximum cooperation  To maintain relationships  To create a long-term relationship 88 Negotiation Skills for Project Managers
  89. 89. PMIS - Negotiation Issues # ID Form/report Responsibility 1 PSR Project scope & requirements Project 2 WBS Work breakdown structure Manager 3 PBP Project base price 4 SEC Standards & Engineering calculations 5 DDS Detailed drawing and specs Design 6 BOQ Bill of quantity Manager 7 WPA Work package activities 8 RAL Resource allocation (Mat., HR, Eq., SubCont.) 9 RPR Resource performance rates 10 BOM Bill of materials and program 11 BOE Bill of equipment and program Resource 12 BOH Bill of human resources and program Manager 13 IER Internal and external resources and program 14 PPR Procurement program reports 15 RCR Resource cost rates 16 TMC Total material cost 17 TEC Total equipment cost 18 TLC Total labor cost 19 TSC Total subcontractor cost Cost 20 TDC Total direct cost Manager 21 TOH Total overhead cost 22 TPC Total project cost 23 NVA Net value added and Margin factor 24 NPR Net profit (or Saving) ±X % 25 MAP Target Master plan for WBS Planning 26 APS Action plans for each WP Manager 27 DPS Detailed plans for each work type 28 WOS Work orders for each crew (weekly or monthly) Site 29 WFU Work order follow-up (weekly or monthly) Manager 30 PER Performance evaluation report All 31 KPI Key performance indicators (for Top mang.) Project 32 RAS Risk ass. Report for critical (for Top mang.) Manager 89 Negotiation Skills for Project Managers
  90. 90. Project Cost Parameters • Total direct cost  Total Materials cost  Total Labor cost  Total Equipment cost  Total Sub-contract • Total indirect cost (overhead)  Project (job or site) overhead (10 to 20 %)  Office (management) overhead (5 to 10 %)  Sales tax (3 to 6 %) • Risk estimation (for critical activities and resources) (up to 25%) • Total cost = Direct cost + Indirect cost + Risk estimation • Profit (10 to 20 %) For normal projects • Price = Total cost + Profit • Markup = Office overhead + Profit = (15 to 30 %) • Value Added = Price – External resources = (I + E + O + P) – E =I+O+P • Margin factor = Total project value / Total direct cost For construction projects: Lower Price limit = (1.3 to 1.7) * ERC Margin Factor = 1.3 to 1.5 Loading Full Normal Unused capacity capacity Capacity <60% >85 % 60-85% Parameter Profit Markup Value added Target 1) Profit 1) Overhead 1) Internal Resources 2) Profit 2) Profit Resource External Mixed Internal View 90 Negotiation Skills for Project Managers
  91. 91. Project Price Parameters: Price = Total Cost * Weight Factor 1- Project information: - Scope and requirements - Location and Utilities - HSE requirements - Quality requirements - Duration, etc. 2- Contractor information: - Company strategy or policy - Resource availability - Available and unused capacity (work load) - Overhead ratio - Value added ratio - Mob and De-Mob - Contractor history (CV & Quality manual), etc. 3- Owner information: - Owner strategy or policy - Contract type - Price measurement (LE or $) - Payment condition (Cash flow) - Bonus/ penalty - Future projects - Owner history, etc. 4- Market information: - Competition level - Relationships - Environment conditions - Limitations and constraints, etc. 91 Negotiation Skills for Project Managers