THE ART AND CRAFT OF
EFFECTIVE BUSINESS NEGOTIATIONS
The Times of India, November 23, 1993

The need for negotiation arises because of differences in approach and opinion, due to conflicts of interest and on account of the varying needs and wants of different individuals and groups of people.

In the political arena, negotiation is the more acceptable route to conflict resolution than the use of force, and in the process allows for identification of common ground, the consideration of compromise and the possibility of give and take. Settlements are usually reached through an exchange of tangibles such as land and resources, as well as intangibles including matters like autonomy, recognition of justice. The ideal end situation in this type of political negotiation is a 'win : win' one, where both parties involved again, and neither is defeated or humiliated, thus avoiding a possible outbreak of violence.

Negotiation in business plays much the same role in a scenario where trade takes place, and the exchange is one of money, goods and services. As in politics, humiliation in a business negotiation works negatively, usually precluding the possibility of future interaction with the 'winning' part if one can term it such. Winning in this sense is not usually in the 'winner's' interest either.

Information

If there is a key to effective negotiation, it is information. Information clarifies strengths and weaknesses, delineates the parameters of the terms of the negotiation, sharpens each party's perception about the other, and establishes the framework for the major issues involved.

Since having all possible information about one's counterpart in a negotiation is crucial; discreet and consistent gathering of information and data is vital to the preprocess. Data can be gathered through past history, through records of earlier transactions made and deals struck usually available through the network of business associations, references and contracts. A thorough review of the company in terms of its top personnel, facilities and infrastructure and its products is also of great use. Public statements, press reports, budgets and financial data are also excellent sources of information. Not to be forgotten either are the human details that could impinge strongly on the negotiation process: the cultural backgrounds of the individuals involved, their temperament, attitudes and value systems, all of which must be taken into account in the planning of an effective negotiation strategy.

Desk research as outlined above is one route to data collection. Information gathering is also helped along by simply asking direct or indirect questions, and if this, can be done I a social situation, where perhaps defences are down over a drink, so much the better. Care must be taken, however, to ensure that in the process of drawing out information, one does not supply it in equation measure!

Rare is the round negotiations that is compete in one go, Intervals in the process allow for time to think things through, to digest the ramifications of certain courses of action, and most importantly, to consult internally. Practically speaking, all those tea and coffee breaks, lunch and dinner times and overnights often enable people to alter perceptions and reconsider positions. As a general rule, however, changing an opinion is a gradual process, and therefore patience is of the essence of optimum results in negotiation.

Breaks in negotiations can be disadvantageous if the business environment is a rapidly changing one, and a new piece of information entering the equation can work against one, leading to unhappy compromise. In this case, delays should be avoided and matters concluded quickly. Both haste or hesitation are possible dangers here, and are to be carefully avoided depending on the situation.

Blocks in the process of negotiation, when no happy ending seems in sight over a point of issue that is bogging all concerned down, are best temporarily left behind. Moving on and coming back to the controversial area at a later time often works well. The opposition may have to soften its stand, one may have a new outlook on the point in question, and resolution may be both quick and mutually satisfactory.

Another useful tactic at the negotiation table is to create minor and unnecessary requirements, then conceding them with grace, while holding out, and gaining, on major points. Needless to add, this must be done both skilfully and in a manner that is no way obvious.

Building, credibility and confidence go a long way in gaining concessions in the process of negotiation. If, for instance, one can give the impression of future business potential, or that a particular business relationship can be status enhancing, then these points must be brought out subtly, thereby building confidence and gaining concessions.

Group versus Single Approach

If negotiations do not involve complex issues or call for specialist inputs such as those from tax or legal professionals, they can be effectively carried out by one person. This option obviates the risks of possible weaknesses being exposed by several individuals on the same side of the table reacting differently to points under discussion.

However, in a situation where a team of people have worked well at negotiating together over a period of time, effectiveness is only enhanced by virtue of the group approach.

Such a team, of course, must be carefully selected, and in a situation where the other party also has a team at the table, there are the additional benefits of further interaction.

Deadlines

Setting a deadline for settlement is an important tool for effective negotiation… and an even more important tool in getting the other party to agree to their least acceptable position in the shortest time possible!

Signals

As in any situation, watch out for these. Listening is crucial not only to what the other person is saying, but also to what is not being said, what is being underplayed, masked or dressed up. When information forthcoming is vague, specific questions should be asked. One should also look carefully out for body language cues and for verbal nuances where the language chosen and tone of voice are actually saying more than is being said. Certain positions and attitudes are apparent in this way, and a particular turn of phrase or verbal slip may leave behind valuable clues - it is not too much to say that one should watch out for a change in the pace of blinking as well!

Being a good listener means hearing the other person out completely, and with empathy, never being impatient to pose overly quick counter arguments.

Being abrasive, or ridiculing or embarrassing the other person gets one nowhere, it only hardens the other person's negotiating position and makes for ill will. Emotional issues are another no-no. Neither should one be keen to flaunt one's knowledge (particularly if greater) or expose the other person's ignorance. Absolute and definitive statements should be strictly avoided, and expressions such as "perhaps", "do you think" and "maybe" are far better, softening reaction to response and minimising friction.

Threats

Threats are only recommended at the negotiating table when one is completely sure about one's strengths, and when they assist in getting the opposite party to setting at a point in the negotiations where resistance levels were very high.

Threats, however, are only as good (or bad) as one's ability to carry them out. One has to be capable of creating illusions of having options that are non-existent, while keeping the actual set of options wide open. Bridges are not to be burnt in the negotiating process, bluffs must be judiciously used as they often back-fire. One may bluff if one has to, but never blink when bluffing!

Analysis

This is an important area of negotiation. When applied to areas of agreement, analysis is relatively simple, the trick is to be able to focus on areas of difference, and through this on to areas of potential mutual gain.

The opposite party's objections should be analysed, and the underlying reasons understood for resolution and settlement to be the outcome.

Alternatives

Knowing what constitutes the other party's alternatives makes for successful negotiations.

If, for example, one is aware of the other party's options as regards alternative buyers or suppliers, and what the disadvantages or advantages involved may be, one automatically strengthens one's negotiating position. Knowing the significance to the other party of the deal in question is another crucial area I understanding how far one can stretch to obtain the maximum in the negotiating process. Simultaneously, one has to be careful in not giving away one's own needs. While letting the other side be eminently aware of one's options and alternatives, and just that little bit nervous in thinking one is ready and willing to take the deal elsewhere.

Minimum acceptable levels are another important aspect here. One needs to find out the other party's minimum acceptable level, while having determined one's own. One's maximum desired level must also be defined.

One can then start at the maximum desired level, and see whether one can maintain this while getting the other side to reach their minimum level of acceptance. In the process it will be a plus point of the major kind if one were able to let the other party feel that the bottom of one's negotiating position is actually the top!

Arriving at an understanding of the opposite party's minimum acceptable level means that one has to have a thorough grasp of the relevant background information. In a price negotiation, for example, data on input costs would be important. There are times of course, that mere knowledge of input costs is insufficient, as there are other determinants at play, for example choice of currency or place of business. Also in negotiating for say government contracts, there are more factors involved besides actual business issues.

Cultural Factors

In a global negotiation situation, it is vital to know the cultural background of the concerned individuals and how this influences their negotiating style. The Japanese, for example often protect till the very end, and then come up with their best price en route to the airport!

Negotiating Grounds

In a negotiating situation that requires travel, one is usually stronger on home ground. If it is the other party that has made the journey, they are under greater pressure to return home with a successful deal, and therefore more prone to give in to their least acceptable position.

All in all, there is a lot that goes into the negotiating process, and while much of it is an art, one has to admit that it is also a crafty business.

 

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