The Negotiation Handbook

Andrea Cordell

• Publisher: Routledge
• Year: 2018
• eBook ISBN: 9781351239523
• Topic: Business
• Subtopic: Operations
• Index: Business

Negotiation is an essential skill for all those operating commercially on behalf of their organisations. The ability to negotiate quotations, tenders, proposals, internal and external stakeholders, licensing agreements and so on, could form a critical part of any employee's role, be it on the buy or supply side.

The Negotiation Handbook is a useful guide for all those wanting to understand how to apply tools and techniques to the negotiation process. This handbook has been subdivided into seven key sections, each representing a key phase in the negotiation process. The models and concepts are presented so that both a pictorial and explanatory commentary is available to the reader.

This practical handbook supports all those working in a commercial capacity, so that they may apply commonly used tools and techniques and gain maximum benefit on behalf of their employers.

PHASE 1
Preparation

Overview

It is assumed that considerable strategic analysis will have taken place prior to the commencement of the negotiation process. Many of the models and frameworks discussed in the corresponding text, The Procurement Models Handbook, may have been used to assist in the development of the negotiation strategy.

Once the planning process has been completed, ratified, sponsored, and a potential source identified, it is then time to make the deal.

This section focuses on the initial key activities that will help to set the scene for the practical negotiation:

Figure 1.0 Phase 1: Preparation

1
Negotiation Strategy

Figure 1.1 Negotiation Strategies Continuum

Overview

Walton and McKersie (1991), first proposed two approaches to negotiation in 1965 when researching industrial relations disputes. This notion was later popularised by Fisher and Ury (1982) in their hugely popular book Getting to Yes. Negotiating Agreement Without Giving In. It is now generally accepted that there are essentially two types of negotiation strategy. These are commonly referred to as:

• Integrative, also known as collaborative, interest-based or win/win.
• Distributive, also known as competitive, position-based or win/lose.

More recently literature has pointed to a third type called ‘win/perceived win’, which is gaining popularity among academics and practitioners and is viewed as a pragmatic, commercially astute alternative.

Elements

These strategies are often explained in terms of a pie; i.e., sharing it out equally or in some cases making it bigger, aka ‘expanding the pie’, or conversely cutting up the pie, which means that one party will miss out.

Integrative (win/win)

This involves joint effort directed at finding a solution that will be seen as beneficial to both parties. Parties engaged in integrative negotiations usually recognise that they have common interests and goals and collaborate in order to ‘share the pie’. Integrative negotiation is characterised by:

• Cooperation
• Focus on the parties commonalties
• Exchange of information and ideas
• Creating options for mutual gain.

Distributive (win/lose)

This is used when each party focuses on who gets how much of what, and concession will only occur in order to obtain a basic agreement. Each party views the other as an adversary and the objective is to ‘obtain as much of the pie’ as possible. Distributive negotiation is characterised by:

• Coercion
• Focus on the parties differences
• Power play
• Lack of concessions.

Win/perceived win

This is adopted when one party wants to ensure they ‘obtain as much of the pie as possible’ but at the same time giving the appearance of ‘sharing the pie’. It is argued that this will ensure competitive advantage while also retaining the dynamics required for a long-term relationship.

So what?

Knowing which approach to take when is referred to as the ‘negotiator’s dilemma’, and it is likely that most negotiations will have both distributive and integrative elements, hence the increasing profile of the win/perceived win concept.

It is essential that an appropriate strategy is identified prior to entering into the negotiation, as this will provide the framework for how it will be conducted, the behaviour exhibited and the types of persuasion methods and tactics selected.

Negotiation application

• Provides a framework for the negotiation plan.
• Sets the tone for the negotiation.
• Gives focus to the required outcomes.

Limitations

There is much debate as to which type of negotiation produces the best outcome, and choice is dependent upon circumstances such as market conditions, relationship and type of product/service. It may also be dependent upon the negotiator’s personality, with some naturally veering towards one type over another.

Further reading

You can read more about negotiation strategy in:

Fisher, R., Ury, W. and Patton, B. (1982). Getting to Yes: Negotiating an Agreement Without Giving In. 1st edition. London: Hutchinson Paperback.

Walton, R.E. and McKersie, R.B. (1991). A Behavioural Theory of Labor Negotiations: An Analysis of a Social Interaction System. 2nd edition. Ithaca, NY: Cornell University Press.

Associated template

The following template can be used to develop the negotiation strategy:

• Template 1: Strategy Adoption Matrix.

2
Negotiation Team

Figure 1.2 The negotiation team

Overview

Establishing the team is a critical part of the negotiation process as personalities, skills and role apportionment need to be taken into consideration. It is likely that a number of participants will have been involved in the build-up to the negotiation; however, not everyone can have a seat at the table itself.

Relationships, positioning and differing perspectives among team members can complicate the ways in which the strategy and tactics are used in order to work towards a negotiated settlement. It is therefore important to ensure that all participants understand what their role is and their scope of responsibility.

Elements

Figure 1.3 Elements of the negotiation team

So what?

A study by Thompson, Peterson and Brodt (1996) found that when teams rather than individuals negotiate they are likely to engender an integrative approach. It is thought that this may be due to the increased flow of information between the parties.

Negotiation application

• The negotiation requires a diverse set of knowledge, abilities, or expertise.
• A range of interests must be represented at the table.
• To display a dominant position to the other party.
• To signal to the other side the seriousness of the negotiation.
• To show the depth of relationship among the party.
• Some cultures require that team rather than individuals negotiate.

Limitations

Academics assert that teams in general need to be heterogeneous rather than homogenous in make-up, and that the optimum team number is somewhere between five and seven members. This could suggest that anything outside of these parameters is ineffective, but further research is needed to support such an assertion.

Further reading

You can read more about negotiation teams in:

Thompson, L., Peterson, E. and Brodt, S.E. (1996). Team negotiations: an examination of integrative and distributive bargaining. Journal of Personality and Social Psychology, 70, 66–78.

Associated template

The following template can be used to support the development of the negotiation team:

• Template 2: Negotiation Roles

3
Negotiation Agenda

Figure 1.4 The negotiation agenda

Overview

Managing the negotiation meeting(s) will involve careful consideration of the various resources required, such as attendees, room layout and timings. Much of this is covered by the agenda, which can be prepared in advance. It may then be used as a checklist and also as a conditioning tool if shared with the other party beforehand.

One of the biggest agenda dilemmas is whether to introduce the ‘big ticket’ items early on, or to leave them to the end. This may be determined by whether you are negotiating from a buyer or seller perspective.

Elements

Factors that need to be considered when preparing the agenda are:

Structure

A typical negotiation agenda might include the following items:

• Attendees
• Introductions
• Negotiation variables to be discussed
• Breakout
• Review negotiation position
• Summarise negotiation position
• Wrap up and close.

Home or away

This refers to whether the staging of the event takes place on home ground or away at the other party’s site. There are advantages and disadvantages to both:

Home advantages:

• Feel confident in home surroundings
• In control of the negotiating environment
• Immediate access to resources such as documentation/IT.

Home disadvantages:

• Inability to access the other party’s resources
• Visiting party may feel more pressurised and therefore more defensive.

Away advantages:

• Immediate access to the other party’s resources
• Home team likely to feel more comfortable and therefore less defensive.

Away disadvantages:

• Could feel less confident when not on home ground
• Unable to access own resources such as IT, key stakeholders, etc.

Room ergonomics

This refers to...

Table of contents

• Cover
• Title
• Copyright
• Contents
• List of figures
• List of templates
• Acknowledgements
• Introduction
• PHASE 1 Preparation
• PHASE 2 Relationship building
• PHASE 3 Information gathering
• PHASE 4 Information using
• PHASE 5 Bidding
• PHASE 6 Closing the deal
• PHASE 7 Implementing the deal
• Templates
• Bibliography and suggested further reading
• Index