Negotiation Excellence

Successful Deal Making

Michael Benoliel

• Publisher: WSPC
• Year: 2011
• ISBN:
  9789814397926
• Topic: Personal Development
• Subtopic: Negotiation

Negotiation Excellence: Successful Deal Making was written by leading negotiation experts from top-rated universities in the USA and in Asia and its objective is to introduce the readers to the theory and best practices of effective negotiation. The book includes chapters ranging from: preparing and planning well for successful negotiations; building relationships and establishing trust between negotiators; negotiating creatively to create mutual value and win-win; understanding and dealing with negotiators from different cultures; and to managing ethical dilemmas.

In addition to emphasizing the link between theory and practice, Negotiation Excellence: Successful Deal Making includes deal examples such as: Renault-Nissan alliance; mega-merger between Arcelor and Mittal Steel; Kraft Foods' acquisition of Cadbury PLC, Walt Disney Company's negotiation with the Hong Kong government; and Komatsu, a Japanese firm's negotiation with Dresser, an American firm.

Contents:

• Introduction: Adding Value through Negotiation (Michael Benoliel)
• Planning and Preparing for Effective Negotiation (Meina Liu & Sabine Chai)
• Setting (and Choosing) the Table: The Influence of the Physical Environment in Negotiation (Graham Brown)
• Negotiation Approaches: Claiming and Creating Value (Jill M Purdy)
• Creativity in Negotiations (Joachim Hüffmeier & Guido Hertel)
• Social Capital in Negotiation: Leveraging the Power of Relational Wealth (Ariel C Avgar & Eun Kyung Lee)
• Trust Building, Diagnosis, and Repair in the Context of Negotiation (Donald L Ferrin, Dejun Tony Kong & Kurt T Dirks)
• Power and Influence in Negotiations (Min Li & Julie Sadler)
• Power and Influence in Sales Negotiation (Ababacar Mbengue, Joël Sohier & Patrice Cottet)
• Negotiation Strategy (Brosh M Teucher)
• Personality and Negotiation (Alice F Stuhlmacher & Christopher K Adair)
• Judgment Bias and Decision Making in Negotiation (William P Bottom, Dejun Tony Kong & Alexandra A Mislin)
• The Role of Gender in Negotiation (E Layne Paddock & Laura J Kray)
• Physiology in Negotiations (Smrithi Prasad & Jayanth Narayanan)
• Understanding Negotiation Ethics (Kelvin Pang & Cynthia S Wang)
• Navigating International Negotiations: A Communications and Social Interaction Style (CSIS) Framework (Nancy R Buchan, Wendi L Adair & Xiao-Ping Chen)
• Building Intercultural Trust at the Negotiating Table (Sujin Jang & Roy Chua)
• Negotiating the Renault-Nissan Alliance: Insights from Renault's Experience (Stephen E Weiss)
• The Arcelor and Mittal Steel Merger Negotiations (Gregor Halff)
• The Emotional Underbelly of Collaboration: When Politics Collide with Need (Daniel L Shapiro)
• The Role of Negotiation in Building Intra-Team and Inter-Team Cooperation (Helena Desivilya Syna)
• The Role of Communication Media in Negotiations (Shira Mor & Alexandra Suppes)
• Negotiation via Email (Noam Ebner)

Readership: Students, researchers and entrepreneurs who are interested in the topics of Negotiation and Persuasion.

1

Planning and Preparing for Effective Negotiation

Meina Liu
University of Maryland

Sabine Chai
Western Kentucky University

Negotiations take place in a wide array of forms, whether to resolve a dispute, get a better deal, or find new solutions that neither party could realize on their own. The first, and often the most important, step toward successful negotiation is planning and preparation. According to Thompson (2009), about 80% of negotiators’ effort should go toward the preparation stage. However, planning and preparation go beyond what negotiators should do before negotiation. Because negotiation is a dynamic communication process where new information, concerns, emotions, and goals may arise, negotiators should also be prepared for dealing with contingencies, as well as factors that may interfere with goal pursuit. The purpose of this chapter, therefore, is to provide guidelines for effective planning and preparation both before and during the negotiation process, including guidelines for assessing the negotiation situation, analyzing the negotiation structure, planning for strategies that facilitate goal attainment, and re-orienting to manage contingencies that may arise during the dynamic, interactive negotiation process.

Negotiation Analysis: Know the Situation, Yourself, and Your Opponent

Negotiation is often defined as three “I”s — an interaction between two or more interdependent parties who perceive incompatible goals. Negotiation parties enter the negotiation because they depend on each other to fulfill some needs but also perceive the other party’s interests as conflicting with their own. To reach a mutually acceptable agreement negotiation parties have to cooperate with and understand each other. An essential component of effective preparation is to conduct a well-rounded analysis of the bargaining situation, to understand not only one’s own positions, interests, priorities, and alternatives, but also those of the counterparts.

Analyze the negotiation context: Opportunities and constraints

Negotiations do not take place in a vacuum. The historical, economical, legal, and socio-cultural contexts all determine the codes of conduct that shape negotiators’ perception of what is permitted or not permitted, expected or not expected (Watkins, 2000). A sufficient understanding of the bargaining situation allows the negotiators to identify the rules of the game, resources to draw upon, norms to abide by, as well as constraints to deal with. For example, when Google publically criticized China’s internet censorship as violating free speech rights and threatened to pull out of China in January 2010, China not only made no concessions but also denied any talk with Google regarding its threat. After two months, Google discontinued its operation in mainland China, losing the world’s largest market of online users. This case has been widely considered a lose-lose negotiation. In July 2010, China renewed Google’s operation license when the company stopped automatically redirecting mainland Chinese users to its uncensored Hong Kong page. Below this case is used to illustrate various aspects to consider when analyzing a negotiation situation.

Assess the historical, political, legal, and cultural context in which negotiations take place

Research has shown that the quality of deals negotiators reach is significantly influenced by their bargaining histories (O’Connor, Arnold, and Burris, 2005). Negotiators who reached an impasse in a previous negotiation are more likely to repeat their failures because their prior experiences can influence how negotiators judge their skills, set their goals, and formulate their strategies. When negotiations occur across national boundaries, the diplomatic histories, as well as the power dynamic in international relations, can have a significant impact on the course of the negotiation, including what issues are to be negotiated, what is and is not possible, and even the types of outcomes that may occur. Likewise, differences in the political and legal systems in the host country may entail a completely different set of values and assumptions negotiators have to work with, making communication between parties exponentially more complicated. Corporations conducting business in different countries need to consider all of these issues.

For example, in the controversy between China and Google, a U.S. based company, history cannot but be a quiet guest at the table. The early relationship between China and Western countries (including the U.S.) was marked by a series of unequal treaties that forced China to give up sovereignty in a number of ways in the late 1900s. Considering the cultural context in this case also means understanding that China is a history-conscious nation that values both knowledge of history and learning from it. If foreign entities, such as the U.S. government or U.S. businesses challenge its sovereign rule by asking China to change its policies regarding the internet, the now much stronger Chinese government has to reject and condemn such an attempt. In addition, due to China’s political system, internet censorship is prescribed by law. From China’s perspective, Google should have given sufficient consideration to this issue prior to establishing a contractual relationship with China. When the issue was brought up in the middle of the contractual operation, it was considered non-negotiable by the Chinese government, hence their denial of any talk concerning this issue.

Assess the purpose of the negotiation: Deal-making or dispute resolution?

In a typical business negotiation, parties come together to attempt to exchange resources, or make a deal. Negotiators use distributive bargaining strategies to claim greater value for themselves, whereas they use integrative bargaining strategies to expand the pie for both parties. In other situations, negotiations take place to resolve a dispute because a claim has been made by one party and has been rejected by the other party; the two parties’ alternatives to a mutual agreement are often linked, or identical. If neither party is willing to revise the original position, they either are deadlocked or go to a third party for intervention. In the Google-China case, business negotiations are embedded in a political context in which China and the U.S., two of the world’s biggest countries, have had long-standing value-based disputes concerning human rights. When Google brought up the human rights violation issue, it automatically turned a business transaction into a political dispute, which pushed China away from making any possible concessions, due to their political implications. As a result of insufficient consideration of the surrounding political contexts, Google had to eat its words and suspended its accusation of and resistance against China’s censorship. After all, as a for-profit corporate entity, its primary interests are market values, rather than political power.

Assess the nature of the conflict: Are ideologies involved?

Conflicts and disputes may simply involve competition over scarce resources. However, many conflict situations, especially those between members of diverse cultural, ethnic, or social groups, also involve ideologies. As negotiators uphold fundamentally different assumptions, moral standards, and beliefs, the likelihood of reaching an impasse is significantly increased, often accompanied by increased tensions and emotions. Effective planning for such negotiations, therefore, involves an analysis of the relationship between interests and ideologies. Negotiators can manage to find an interest-based resolution by totally ignoring ideological differences, or to find a resolution on both aspects by identifying a common ground in each other’s value systems, or when ideological differences are the only issue at table, to work toward not a resolution, but an open dialogue that involves recognizing and appreciating each other’s values and beliefs. In the Google-China case, a resolution was temporarily reached by re-focusing on business interests and ignoring ideological differences concerning human rights. In other situations, however, finding an interest-based resolution without openly discussing ideological differences to instill mutual understanding and respect may prove short-lived because it means the problem still exists and is likely to arise again in the future. For example, in a dispute between a conservative Christian employee who condemns homosexuality in a poster inside his office cubicle and a Diversity Manager who is in charge of a diversity campaign featuring progay-rights posters and later fired the Christian employee for insubordination, discussing what constitutes diversity and freedom is as important as finding an interest-based resolution (Kovick and Harvey, 2009).

Assess the temporality of the negotiation: One-shot or long-term?

In a one-shot negotiation, such as bargaining with a street vendor over the price of an antique-like sugar bowl, what happens at the bargaining table has no future ramifications. However, when negotiators come from a common social network, or when they negotiated in the past, or must renegotiate at a future time (e.g., to renew a contract), parties must consider the impact of their relational history on the current negotiation, or the impact of their negotiation on their future work relationship. For a long-term work relationship, what matters during the negotiation goes beyond tangible, quantifiable issues; intangible issues, such as negotiators’ reputation, interpersonal trust, face concerns, and relational harmony may be equally, if not more, important. In the Google-China case, although Google pulled itself out of China’s market for a while, it did not “burn the bridges” and was able to have its operation license renewed once the company stopped resisting censorship.

Assess external constraints: Is time an issue?

Negotiations are often associated with some time-related costs. Negotiating under time pressure may activate a need for closure (i.e., an epistemic state of wanting a quick solution). Negotiators are more likely to rely on heuristics rather than engage in thoughtful, motivated information processing in their decision-making (De Dreu, 2004). As a result, they may either prematurely end the negotiation with an impasse, or reduce their aspiration level and conform. Assessing time-related constraints, therefore, can help negotiators to guard against such irrational tendencies. In addition, an assessment of time-related costs for both parties may even help negotiators to turn constraints into opportunities: If time puts more constraints on the counterpart than self, negotiators may gain concessions by highlighting the undesirability of a delay in agreement; if delays cause higher costs on one’s own part, negotiators may set a deadline for the negotiation. In the Google-China case, Google gave up its original position and conformed to China’s internet censorship when its operation license was about to expire.

Assess external constraints: Place

In addition to time constraints, where negotiations take place also matters. Negotiating on one’s own territory is typically considered an advantage, as the outside party may experience greater uncertainty and perceive less power. However, negotiating on the opponent’s territory may have advantages as well, as the outside party may be better prepared, more alert, less concerned about hospitality and information leakage, and more flexible in “walking away” (Sims, 2005). In the Google-China case, although Google may have experienced greater pressure to conform, it also had greater flexibility in “pulling out” or “coming back”. Nevertheless, negotiators also have been advised to find a private neutral territory when possible.

Assess external constraints: Communication channels

With the rapid development of new technologies, negotiations are increasingly conducted in mediated contexts for greater convenience. Negotiators should be mindful of the properties of various communication channels (e.g., telephone, videoconference, email, instant messages) as well as their potential influence on negotiation process and outcomes to make a sound choice. For example, face-to-face negotiations are often deemed necessary if the two parties have not established a prior relationship, because mediated communication may pose barriers (e.g., lack of synchronicity, insufficient audio and/or visual cues) for the two parties to develop rapport and cultivate trust. When communication media have to be used, negotiators should consider strategies that enhance social awareness to counter the effects of barriers.

Analyze the negotiation structure and components

Diagnosis of the negotiation context should be complemented with a careful analysis of the structure of the negotiation, including who are the involved parties, what issues are to be negotiated, what are each party’s positions, interests, and preferences for these issues, and what are their best alternatives to a negotiated agreement (BATNA).

Identify the negotiation parties

A party to a negotiation is any person or group pursing distinct goals in the context of a specific negotiation. Who the parties are may be obvious in some negotiations, but is not necessarily so in others (Thompson, 2009). For example, in the Google-China case mentioned above, the obvious parties are Google and the Chinese government. In the course of the conflict, however, a number of other parties were involved, including members of the Chinese and the U.S. public and media, the U.S. Congress, politicians and other public figures in both the U.S. and China, and Google’s biggest competitor in China, Baidu. Although most of these parties were not present at the negotiation table, they influenced the negotiation dynamic in various ways. For example, when U.S. Secretary of State Hillary Clinton criticized China’s practice of internet censorship and Chinese media responded by criticizing the U.S. for forcing their values on other parts of the world, this exchange clearly goes beyond a conflict between a business and the legislative agencies of its host country.

Influential parties that are nevertheless not present in the actual negotiation are known as the hidden table (Friedman, 1992). Identifying these parties in the preparation phase of a negotiation can avoid ugly surprises down the road. Even if the negotiation is expected to be between two parties only, negotiators need to analyze whether there are other parties that may enter the negotiation later on. Each new party will change the dynamics of the negotiation as they bring in their own interests and potentially form coalitions. Mapping out the relationships between multiple parties in terms of their incentives, interests, and power will be very helpful to identify strategies for managing the dynamic multi-party or team negotiation process. In addition, as soon as a party consists of more than one person, it is unlikely to be monolithic (Thompson, 2009). Different sub-groups may have different priorities and preferences, different approaches to conflict resolution, and very importantly, different amounts of say in the final decision. Negotiators need to find out as much as possible about the inner dynamics of the other parties involved because this knowledge will allow them to make educated choices in whom to approach about what issues and at what stage in the negotiation process.

Define the issues

The number of issues each party brings into the negotiation tends to have a strong influence on the strategies negotiators choose. Single-issue negotiations, also referred to as zero-sum, distributive negotiations, generally entail a competitive, win-lose approach (Lewicki, Saunders and Barry, 2006). The underlying assumption is that both parties are seeking to maximize their own share of a fixed amount of resources; as such, negotiation parties’ goals are in fundamental conflict with each other. When focusing on a single issue, negotiators tend to come with a clear position and fight for it. Negotiations involving more than one issue are likely to be nonzero-sum, integrative negotiations. When negotiators add multiple issues to a negotiation, or unbundle one single issue into multiple issues, they are more likely to focus on interests (i.e., their needs and concerns), as well as the relative importance of these issues, rather than being deadlocked in a rigid position. As such, negotiators tend to be more cooperative, striving for a win-win outcome based on the assumption that both parties’ needs and concerns can be met (Walton and McKersie, 1965). Instead of focusing on claiming value, negotiators tend to explore ways of creating value, or “expanding the pie” in multi-issue, non-zero-sum situations. For example, in a negotiation concerning the purchase of a new car, if both b...