NEGOTIATION Sarah Crawley

DEFINITION To discuss with a view to mutual settlement (Collins English Dictionary) Two or more parties Conflict of interest Willingness to negotiate Need to seek agreement Better outcome through influence and persuasion Parties seeking to satisfy tangible and intangible outcomes.

NEGOTIATION GOALS (LEWICKI ET AL 2003) Goals of both parties must be linked to create a base for negotiation Boundaries must be set by both parties Goals must be measurable so achievement can be identified.

DRIVERS OF CHANGE IN PURCHASING Technological advances Quality and customer focus Globalisation Insourcing and outsourcing Strategic cost management Supplier relationship development and network management Value chain and added value focus.

PESTLE Political Economic Socio-cultural Technological Legislative and regulatory Environmental and Ecological.

SWOT Strengths (internal) Weaknesses (internal) Opportunities (external) Threats (external) How should a SWOT analysis be used to assist negotiation?

IMPACT ON NEGOTIATION Fluctuating prices Time preferences Dynamics in exchanges Relative interests of each party Risk aversion factors Bargaining power Constraints of macro-environment and organisational policies and procedures.

NEGOTIATION Pre-contract Contract agreement Contractual and relationship review

EFFECTIVE INFLUENCING Factors to consider when choosing your approach: knowledge of the other party required outcome(s) skill in using different tactics

COLLABORATIVE APPROACH Agreement is reached by: expanding the pie logrolling non-specific compensation bridging cost cutting.

TWO TYPES OF NEGOTIATION 1] Distributive negotiations 2] Integrative negotiations

DISTRIBUTIVE NEGOTIATIONS Often referred to as ‘fixed pie’. Usually involves people who have never had a previous interactive relationship nor are they likely to do so again in the future. Example: purchasing houses or cars Ours and their interest are usually self serving

INTEGRATIVE NEGOTIATION The process usually involves making value for value concessions in conjunction with creative problem solving Form a long term relationship for mutual gain Often described as a ‘win - win’ scenario

FACTORS IMPACTING ON MEETING CLIMATE Balance of power Culture and reputation Expectations Size of the deal and significance of outcome Timing Location and environment Team dynamics Relational or ‘one-off’ situation.

COMMUNICATION TECHNIQUES Open questions to gain information Leading questions to anticipate answers Un-emotive or cool questions Planned questions Window questions to gain insight Directive questions to get specific information Gauging questions to test reaction What techniques have you found useful?

POWER BASES (LEWICKI ET AL 1997] Negotiators can gain power from any social variable in the situation, including: cultural differences ideologies and beliefs institutional norms relationships language and semantics.

INFLUENCING STYLES AND TACTICS Using expert knowledge Applying logic and reason Selling the benefits Personal appeal! Coalition Manoeuvring Coercing.

NEGOTIATION STRATEGIES Collaborate Compete Accommodate Avoid Compromise. Based on Ruble and Thomas 1976.

5 MAIN PERSUASION METHODS Compromise Bargaining Logic Threat Emotion.

NEGOTIATION TACTICS Distributive meetings: find out the other party’s resistance points managing others’ perceptions of you controlling others’ impressions of your position exaggerate your ‘fear of failure’ may play good cop/bad cop.

INITIAL STAGES Plan thoroughly Organise the issues Focus on mutual principles and concerns Be aware that the first offer is often above expectations Focus on long term goals and consequences

MIDDLE STAGES Revise strategies Consider other options Increase power by getting the other side to commit first Add credibility by getting agreements in writing To get through dead ends – set it aside temporarily When asked for a concession – ask for a trade off

ENDING STAGES Counter a persistent negotiator by with drawing an offer Do not expect verbal promises to be adhered to Congratulate the other side!

OBSTACLES TO NEGOTIATION Sometimes people fail to negotiate because they fail to see that they are in a negotiating position Or they may recognise the need for bargaining but negotiate poorly because they do not understand fully the process and lack good negotiation skills

THEREFORE Parties must be aware of their alternatives to a negotiated settlement Weaker parties must feel assured that they will not be overpowered in a negotiation Parties must trust that their needs and interests will be fairly considered in the negotiation process.

PREPARATION FOR NEGOTIATIONS Purpose  What you want to get out of the negotiation  What you think the other person wants  What you and the other person have that can be traded for the purpose of negotiation.  What do you each have that the other wants?  What are you each comfortable giving away?  If you don’t reach agreement with the other person, what alternatives do you have?  Are these good or bad?  How much does it matter if you don’t reach agreement?  Does failure to reach agreement cut you out of future opportunities?  What alternatives the other person might have? What is the history of the relationship?  Could or should this history impact the negotiation?  Will there be any hidden issues that may influence the negotiation?  How will you handle these?  What outcome will people be expecting from the negotiation?  What has the outcome been in the past, and what precedents have been set?  What are the consequences for you of winning or losing this negotiation?  What are the consequences for the other person?  Who has what power in the relationship?  Who controls resources?  Who stands to lose the most if agreement isn’t reached?  What power does the other person have to deliver what you hope for?

POST-NEGOTIATION PHASE Evaluate outcome achieved against aims and objectives Review outcome achieved Analyse individual and team performance Compose a ‘lessons learnt’ document to inform the future Enable authorised others to access the results of your evaluation for their own purposes.