Business negotiations - The Art

Business Negotiation
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Negotiation:
is constructive dialogue between two or more
people or entities with the sole aim of reaching
mutually acceptable comprise and steering clear of
continued disagreement or dispute or barriers to
future communication.
In the process of negotiation, not only are
different opinions are taken into account, but
influential factors like individual needs, objectives,
interests as well as respect for differences in
background and culture.
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Negotiation:
1.  Goals & Objectives
2.  Negotiation drivers
3.  Negotiation Process
a)  Preparation
b)  Discussion
c)  Agreement
4.  Interpersonal Skills
5.  Negotiation Principles
6.  Strategic Thinking
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Goals & Objectives
v  Discussion of business contracts or continued relationship
between buyer and seller after a successful sales presentation or
transaction respectively.
v  Resolving a dispute which was an outcome of either party’s non
fulﬁllment of their obligations as per earlier arrangement
•  Delayed or non payment for goods or services already
delivered and accepted by recipient as in line with actual
purchase order
•  Damaged goods or services delivered inconsistent with
what the buyer actually ordered.
•  Delayed or late delivery of goods or services beyond the
contractual time line.
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Negotiation : 1. Goals & Objectives
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Food for thought;
v  Negotiation has more to do with persuasion rather than the use
of crude power (bullying or competitive bargaining or
Win - Lose) and having both parties feeling good about the
achieved outcome (Win – Win).
v  It involves a collection of behavior : communication, sales,
marketing, constructive research, psychology, sociology,
assertiveness, attention to detail and conﬂict resolution.
v  Seller will always try to increase their negotiating power
through the buyer’s desire to buy while the buyer tries to
increase theirs through the seller’s desire to distribute.
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Food for thought; cont’d
v  Does the other party always seem to know more about you and
your needs than you do about them?
v  Why is it that the other party does not seem to be under the
same kind of pressure of time constraints and deadlines?
v  Does the other party seem to have more power, sense of the
preparedness, set outcome and authority than you feel you
have?
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The most important step you take in a Negotiation is…
Understanding what the other party wants and
Knowing what you can live without !
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A.  Organizational Needs;
v  Profits and ROI
v  Maintain fair pricing (more value at lower costs)
v  Business flexibility
v  Reliable partnerships (procurement &
distribution)
v  Improve product quality
v  Sustained growth in market share
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Negotiation : 2. Negotiation Drivers (Needs)
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B. Personal Needs:
Abraham Maslow’s
hierarchy of needs as a
means to motivation,
thought process or
decision making.
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Human Needs and Behavior (Maslow’s Hierarchy Chart
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Level
Needs
Mo+va+on
&
Behavior

Level 5 – Self Actualization Fulfillment of Goals & Dreams
Need for Self fulfillment, realizing inner
potential and putting experience to purpose
Creativity & Spontaneity
Being a self starter, dedicated,
enjoying challenges & acceptance of
facts
Level 4 – Self Esteem Self Respect & Acceptance
Need for Reputation, prestige, significance
and recognition in society
Intellect & Achievement
Display talents & Skills, Have self
confidence, appreciate attention
Level 3 – Love &
Belonging
Communication & Response
Need to belong and to love as well as to be
loved. Desire for affection and gratitude
Validation & Acknowledgements
Join and to be active in clubs,
socialization
Level 2 – Safety & Security Health & Security
Security of Body, Employment, Resources,
Morality & Family
Survival Skills
Work, Save for the future, improve
skills and talents, be responsible
Level 1 – Physiological
Needs
Physical Safety
Breathing, Water, Food, Sleep, Sex,
Excretion (Biological imperatives to
survive)
Basic Survival Skills
Keep yourself healthy, hunger free,
clothed and rested in a shelter.
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C. Ladder of Inference: the thinking process that we go through,
usually without realizing it, to get from a fact to a decision or action
(sometimes subconsciously). From data piece to an observation, then to a
deduction and then conclusion or action
Negotiation : 2. Negotiation Drivers (Thought Process)
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a)  Preparation
b)  Discussion (problem solving skills, negotiation tact)
c)  Agreement and Implementation (procedure, timeline,
constraints, options, expectations, strategic thinking and
action plans)
Negotiation : 3. Process
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i.  Background Information :
•  Did we do any Research about the Negotiation?
o  Detailed research about the content, priorities, downsides,
moral obligations and conﬁdentiality relative to the
negotiation.
o  Do we have experience with this counterpart or kind of
negotiation?
o  What is the composition of the team required for the
negotiations?
o  Are there any time constraints that could limit exploiting
all possibilities?
o  What are our limitations and strong points which the other
party could strategically exploit and vice versa?
Negotiation : 3. Process – a) Preparation
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i.  Background Information :
•  Did we do any research or fact ﬁnding? Cont’d..
o  What is our company policy regarding the negotiation
content, terms and process?
o  What is our boundary of settlement?
o  What are the legal boundaries and constraints?
•  What triggered the idea of the negotiation?
o  Why and who called the negotiation meeting?
o  How much information has so far been shared with the
other party ?
o  What’s the tipping point between a negotiation and
competitive bargain
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i.  Background Information cont’d :
•  What is the mode of communication?
o  Do we have any written communication conﬁrming
content, meeting place, settlement terms, authorized
personnel, agenda prioritization, allotted time and
process of negotiation?
o  How does the history of communication affect our side
of the negotiation table?
o  How do we record the progress or point to point
outcome of the negotiation?
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i.  Background Information cont’d :
•  Who will be your negotiating counterpart in relation to their
psyche, position and decision making capacity or inﬂuence
in the counterpart company or entity?
o  Are there any cultural formalities to consider?
²  Greeting type, language of communication
(including voice tone, body movements, eye
contact, etc.)…
²  Time management is a major step towards trust,
honor & credibility
o  What is the relationship between the other party & our
overall business goals?
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ii.  Goals and Direction:
•  What is the purpose and ultimate goal of the negotiation?
o  Are the goals clearly outlined, timeframe to achieve,
related costs, information boundaries and short or long
term gains/pitfalls?
•  What kind of Negotiation strategy are we pursuing?
o  Competitive Bargaining : usually conducted in a
situation of conﬂict within a short timeframe by
independent, one sided takers and leads to one side
conceding defeat which is a WIN – LOSE situation
(one side perceives outcome as positive).
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•  What kind of Negotiation strategy are we pursuing ; cont’d
o  Competitive Bargaining; cont’d
ª  Is simple, straightforward and involves a few issues
ª  Used in scenarios where supply or demand favors single
party
ª  When there is an imbalance of needs
ª  Where monopoly situations exist.
ª  Applicable in situations where you don’t expect to deal
with the other party again.
ª  One side has the power, controls the resources and
opportunity of alternatives.
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o  Joint Problem Solving (JPS) : conducted in a spirit of
cooperation to resolve a mutually conflicting situation and
come out the other side with a Win – Win (both parties
emerge feeling they have achieved their objectives).
JPS is applicable in scenarios where ;
ª  Each party clearly understands that they have to “sacrifice
something to achieve their objective” in the negotiations
ª  Mutual trust exists based on business inter-dependency
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JPS Tactics will usually ensure;
ª  Starting with easy items and difficult issues are treated as
problems to resolved for mutual benefit
ª  Initiative to cooperate is offered through information sharing,
open minded discussions and common ground agreement
ª  Disagreements postponed for later discussion and any element
of bargaining turned into JPS
ª  Determining “what’s in it for them” and transform it into “trust
me this is good for you” and “this is the only way you can get
it”
ª  Handling major differences with patience, rationale, tact,
unemotionally, in good timing and with detailed planning.
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JPS Negotiating behavior will usually cover;
ª  Highlighting Win-Win scenarios as they appear and sacrifice
credit for mutually beneficial solutions in order to strength
relationships.
ª  Maintain track authority incase other party sees cooperation as
a sign of weakness.
ª  Offering help solve underlying single sided (other party’s)
problems shows commitment to mutual goals
ª  Communication skills to assert the benefits (detailed short/long
term) as well as pitfalls of non-cooperation are of great value in
an effective JPS negotiator.
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JPS Negotiating behavior will usually cover; cont’d…
ª  Establish credible reason for movement within your settlement
range. In other words, prepare for conclusive justiﬁcation of
your movement from your “ideal” to the “preferred outcome”
o  Maximum supportable position > Ideal Outcome
o  What We’re really asking > Preferred Outcome
o  Last Acceptable Agreement > Minimum
o  Deal Breaker > No Deal this time
Examples of reasoning for settlement range movement;
o  Because of our long term relationship & future business
o  As a volume discount or packed deal
o  To get the process moving (inventory & time costs)
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Each party will put forward their detailed understanding of the
documented issues on the negotiation agenda, providing each
other equal opportunity to do so.
Core aspects include but not limited to;
•  Set the mood : Introduction of the parties involved in their
capacities and their obligations related to the matters to be
negotiated.
•  Diving into the details of the discussion : highlighting the core
purpose, the desired mutual outcome, sometimes the duration
of the discussion, the root causes (without blaming any
fingers), prioritization of the problems (from simple/high
benefit to highly conflicting/minimal benefit), method of
documenting the negotiation minutes, implementation of the
action plan, etc.
Negotiation : 3. Process – b) Discussion
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Core aspects include but not limited to;
•  Questioning at the right time, with the right context and voice tone ;
o  Will get you all the required information to go forward
o  Will help you maintain control of the conversation
o  Can express an interest in the other party’s interpretation and
their views on the direction of the matters at hand
o  Will allow for clarification while encouraging further thought or
reflection about the underlined goals
Questioning skills cover a number of techniques;
Structured and Productive Questioning : it’s usually a good
idea to inform the respondent of this before you start, by giving
some background information and reasoning behind your
motive of asking questions. By doing this the respondent
becomes more open to questions and willing to answer honestly
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Core aspects - Questioning skills; cont’d
•  Encouraging participation : one way is to redirect a question
already on the table to get another perspective as a request to
apply the respondent’s professional experience towards a view
on problem solving.
•  Using Silence : a pause of at least 3 seconds just before raising
the question can help emphasize the importance of what is to
be asked
•  Lean Questioning : although sometimes stressful to the
respondents, the 5 Whys methodology has proved to be an
effective way of root cause analysis. It involves clear,
consistent and repeated questioning based on the previous
answer to peel away the layers of symptoms to root of the
problem
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Core aspects include but not limited to; cont’d
•  Listening : ability to accurately receive and interpret messages
in the communication process. Good listening skills can lead to;
better customer satisfaction, greater productivity with fewer
mistakes, increased sharing of information that in turn can lead
to more creative and innovative work.
o  Failing to listen closely; will only let you hear what you
chose to hear, will not be able to recognize the difference
between a statement, an objection, order or question.
o  Listen patiently for ideas rather than words, without
prejudice (impartiality), and understand the other person’s
point of view (Keep Really Calm).
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Core aspects – Listening & Clarification; cont’d
•  Listening cont’d:
o  Look out for the non- verbal communication because it is
the reflection of emotion, trust, acknowledgement, natural
or culture specific interpretation and some underlying
information.
•  Clarification involves offering back to the speaker the essential
meaning, as understood by the listener, of what they have just
said thereby reassuring the speaker that the listener is
attempting to understand the messages they are expressing and
resolving any areas of confusion or misunderstanding.
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Common Stages;
Problem
Introduction
Resistance
Hard
Bargaining
Strategy
Reform
Decision
making
Action Plan
Progress
Review
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v  Work out the details of the negotiation clearly and ensure
understanding of content, obligations and implications (procedure,
timeline, constraints, options, expectations, boundaries…)
v  Negotiators ratify the agreement with their respective sides
v  Ratification may be by the CEO, legal or financial management
team
v  Follow up to implementation is very important as it sets the stage
for the kind of negotiation the next one is going to be.
o  It is an opportunity for relationship and credibility building
as you pledge to honor your part of the agreement within
the agreed terms and conditions.
Negotiation : 3. Process – c) Agreement
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BE SMART
Specific : All points of the Agreement are intricately tied down
Measurable : you have defined all parameters in their entirety
Achievable : All the parameters are attainable as per terms & conditions
Realistic : targets and timings specified are within reason
Timed : All parameters are time relaxed
Negotiation : 3. Process – c) Agreement
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Skills that can give you an edge in a negotiation;
v Effective Verbal communication.
v Listening
v Non Verbal Communication
v Reducing misunderstandings (Reflection & Clarification).
v Relationship Building based on mutual respect.
v Problem Solving.
v Decision Making.
v Assertiveness.
v Dealing with Difficult Situations
Negotiation : 4. Interpersonal Skills
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1.  Never give a concession – trade it…reluctantly
2.  Leave the other party feeling they have done a good deal
3.  Watch out for danger phrases
4.  Once you start backing down, it’s difﬁcult to climb back up
5.  Maintain a sense of calm & neutrality in the early stages of
the negotiation
6.  Absorb attacks by taking notes, nodding (indicate
understanding but not necessarily acceptance)
Negotiation : 5. Simple Principles
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7.  If you want time to think – read your notes or make a phone call
8.  Never make an offer till you have the entire cost of what the
seller/buyer requirement is all about
9.  Remember even deadlines are negotiable
10.  Anything that the other side accepts as a “constant” can nearly
always be turned into a variable and vice versa.
“It’s all about Settling the past to secure the
future for generations to come”
Negotiation : 5. Simple Principles
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Strategy : is deciding where you want to be and how you’re going to get
there, and then taking the action necessary to do so.
So what do you need to do to develop a strategy?
First, you need to know where you are now (Current position). So
gather as much information as you can about where you really are, and
don’t accept anecdote as truth. Demand evidence (data driven)!
Second , identify the ideal future position at a particular point in time.
The more detail you can include the more you know what you want
(Visualization, Charts, Process Mapping, etc. are most commonly used in
Lean improvement processes)
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EXECUTE
REVIEW
ANALYZE
PLAN

6. Strategic Thinking
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Next, from your ideal future position, think about what is really
important to you or the company. Where do you or it really need to be?
Prioritization. Now it’s time to work out the intermediate milestones
from ‘now’ to ‘then’.
Now you know where you need to be in five years’ time, where would
you need to be in one, two, or three years in order to get there?
Concentrate on ‘milestones’rather than ‘actions’, that is, things you will
have achieved, rather than what you’re going to do in practical terms.
Finally, it’s time to work out actions and Implement: what you need to
do to get from ‘now’ to your first intermediate milestone, then from
there to the next and so on. Always review your progress!
DEVELO
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EXECUTE
REVIEW
ANALYZE
PLAN

6. Strategic Thinking
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