Ganesh Management Ltd. - Services: Negotiation

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NEGOTIATION

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Negotiation is a dialogue intended to resolve disputes, to produce an agreement upon courses of action, to bargain for individual or collective advantage, or to craft outcomes to satisfy various interests. It is the primary method of alternative dispute resolution. Negotiation occurs in business, non-profit organizations, government branches, legal proceedings, among nations and in personal situations such as marriage, divorce, parenting, and everyday life. The study of the subject is called negotiation theory. Professional negotiators are often specialized, such as union negotiators, leverage buyout negotiators, peace negotiators, hostage negotiators, or may work under other titles, such as diplomats, legislators or brokers.

Etymology

The word "negotiation" is from the Latin expression, "negotiatus", past participle of negotiare which means "to carry on business".

Approaches to negotiation

Negotiation typically manifests itself with a trained negotiator acting on behalf of a particular organization or position. It can be compared to mediation where a disinterested third party listens to each sides' arguments and attempts to help craft an agreement between the parties. It is also related to arbitration which, as with a legal proceeding, both sides make an argument as to the merits of their "case" and then the arbitrator decides the outcome for both parties. There are many different ways to segment negotiation to gain a greater understanding of the essential parts. One view of negotiation involves three basic elements: process, behavior andsubstance. The process refers to how the parties negotiate: the context of the negotiations, the parties to the negotiations, the tactics used by the parties, and the sequence and stages in which all of these play out. Behavior refers to the relationships among these parties, the communication between them and the styles they adopt. The substance refers to what the parties negotiate over: the agenda, the issues (positions and - more helpfully - interests), the options, and the agreement(s) reached at the end. Another view of negotiation comprises 4 elements: strategy, process and tools, and tactics. Strategy comprises the top level goals - typically including relationship and the final outcome. Processes and tools include the steps that will be followed and the roles taken in both preparing for and negotiating with the other parties. Tactics include more detailed statements and actions and responses to others' statements and actions. Some add to this persuasion and influence, asserting that these have become integral to modern day negotiation success, and so should not be omitted. Skilled negotiators may use a variety of tactics ranging from negotiation hypnosis, to a straight forward presentation of demands or setting of preconditions to more deceptive approaches such as cherry picking. Intimidation and salami tactics may also play a part in swaying the outcome of negotiations. Another negotiation tactic is bad guy/good guy. Bad guy/good guy tactic is when one negotiator acts as a bad guy by using anger and threats. The other negotiator acts as a good guy by being considerate and understanding. The good guy blames the bad guy for all the difficulties while trying to get concessions and agreement from the opponent.

The new creative approach perhaps the most famous negotiation parable involves an argument over an orange. The most obvious approach was to simply cut it in half, each person getting a fair share. But, when the negotiators began talking to each other, exchanging information about their interests, a better solution to the problem became obvious. The person wanting the orange for juice for breakfast took that part and the person wanting the rind for making marmalade took that part.

Both sides ended up with more. Neither agreement is particularly creative. The parable of the orange becomes a story about creativity when both parties decide to cooperate in planting an orange tree or even an orchard. In a similar way, Boeing buys composite plastic wings for its new 787 Dreamliner designed and manufactured by Japanese suppliers, and then sells the completed 787s back to Japanese airlines, all with a nice subsidy from the Japanese government. This is what is meant by creativity in negotiations.

At business schools these days much is being learned about creative processes. Courses are offered and dissertations proffered with “innovation” as the key buzz word at academic conferences and in corporate boardrooms. And, the more heard about innovation and creative processes the greater is the appreciation that the Japanese approach to negotiations, by nature, uses many of the techniques commonly emphasized in any discussion of creative processes.

Indeed, there appears to be a deeply fundamental explanation why the Japanese have been able to build such a successful society despite their lack of natural resources and relative isolation. While Japanese society does have its own obstacles to creativity – hierarchy and collectivism are two – they have developed a negotiation style that in many ways obviates such disadvantages. Indeed, the ten new rules for global negotiations advocated by Hernandez and Graham nicely coincide with an approach that comes naturally to the Japanese:

Accept only creative outcomes
Understand cultures, especially your own.
Don’t just adjust to cultural differences, exploit them.
Gather intelligence and reconnoiter the Tierrain.
Design the information flow and process of meetings.
Invest in personal relationships.
Persuade with questions. Seek information and understanding.
Make no concessions until the end.
Use techniques of creativity
Continue creativity after negotiations.

Beyond the practices of the Japanese, credit must also be given to the luminaries in field that have long advocated creativity in negotiations. Howard Raiffa and his colleagues recommend: …the teams should think and plan together informally and do some joint brainstorming, which can be thought of as “dialoguing” or “prenegotiating.”

The two sides make no tradeoffs, commitments, or arguments about how to divide the pie at this early stage. Roger Fisher and William Ury title their Chapter 4 in Getting to Yes, “Invent[ing] Options for Mutual Gain.” David Lax and James Sebenius, in their important new book, 3D-Negotiationsgo past getting to yes, and talk about “creative agreements” and “great agreements.” Lawrence Susskind and his associates recommend “parallel informal negotiations” toward building creative negotiation outcomes. These ideas must be pushed to the forefront in thinking about negotiations. The field generally is still stuck in the past, talking about “making deals” and “solving problems” as above.

Even the use of terms like “win-win” expose the vestiges of the old competitive thinking. The point is that a negotiation is not something that can be won or lost, and the competitive metaphor limits creativity. The problem-solving metaphor does as well. Thus, the first rule of negotiations is: Accept only creative outcomes! Lynda Lawrence at IdeaWorks, a Newport Beach consulting firm has developed a most useful list of ways to generate more ideas during negotiations:

10 Ways to Generate More Ideas

Establish common goals of what this "collaboration" would create. A more workable deal? Some common long term goals? A closer partnership?
Establish the rules of engagement. The purpose of the exercise is to resolve differences in creative ways that work better for both parties. All ideas are possibilities, and research shows that combining ideas from different cultures can result in better outcomes than those from a single culture.
Trust is key, and difficult to establish in many cultures. Certain techniques might speed that process a little. Being offsite, for example. Establishing physical proximity that unconsciously signals intimacy.
Add diversity (gender, culture, extroverts, different work specialties, experts, outsiders) to the group. Indeed, the diversity associated with international teams and alliances is the real goldmine of creativity in negotiations.
Use storytelling. This both helps establish who you are and what point of view you are bringing to this collaboration.
Work in small groups. Add physical movement. Tell the participants to relax, play, sing, have fun, and silence is ok.
Work holistically and using visuals. If, for example, there are three sticking points where neither side is happy, agree to work on those points by spending a short time – 10 minutes – on each point where both sides offer "crazy" suggestions. Use techniques of improvisation. Neither side should be offended by the crazy ideas. No one should criticize. Explain that by exploring crazy ideas that better ideas are often generated.
Sleep on it. This enables the unconscious to work on the problems, and gives negotiators time to collect opinions before meeting again the next day. Other kinds of breaks, coffee, etc. are also helpful. The overnight part is particularly important. Anthropologist and consumer expert Clotaire Rapaille suggests that the transitions between wakefulness and sleep allow new kinds of thinking “…calming their brainwaves, getting them to that tranquil point just before sleep” (page 8).
Doing this process over several sessions allows both sides to feel that progress is being made, and actually generates better and more polished ideas that both sides can invest in.
It is the process of creating something together, rather than the specific proposals, which creates bonding around a shared task and establishes new ways of working together. Each side feels honored and all can feel that something is being accomplished.

Application of principles of creativity will be appropriate in at least three points during negotiations. Above noted was Howard Raiffa’s suggestion that they be used in pre-negotiation meetings. Second, others advocate their use when impasses are reached.

For example, in the negotiations regarding the Rio Urubamba natural gas project in Peru, the involved firms and environmentalist groups reached what at the time seemed to be an irreconcilable difference -- roads and a huge pipeline through the pristine forest would be an ecological disaster.

The creative solution? Think of the remote gas field as an offshore platform, run the pipeline underground, and fly in personnel and equipment as needed. Finally, even when negotiators have arrived at “yes,” a scheduled review of the agreement may actually move the relationship past “yes” to truly creative outcomes. Perhaps such a review might be scheduled six months after implementation of the agreement has begun.

But, the point is time must be set aside for a creative discussion of how to improve on the agreed to relationship? The emphasis of such a session should always be putting new ideas on the table – the answers to the question “what haven’t we thought of?” Other Negotiation Styles Shell identified five styles/responses to negotiation. Individuals can often have strong dispositions towards numerous styles; the style used during a negotiation depends on the context and the interests of the other party, among other factors. In addition, styles can change over time.

Accommodating: Individuals who enjoy solving the other party’s problems and preserving personal relationships. Accommodators are sensitive to the emotional states, body language, and verbal signals of the other parties. They can, however, feel taken advantage of in situations when the other party places little emphasis on the relationship.
Avoiding: Individuals who do not like to negotiate and don’t do it unless warranted. When negotiating, avoiders tend to defer and dodge the confrontational aspects of negotiating; however, they may be perceived as tactful and diplomatic.
Collaborating: Individuals who enjoy negotiations that involve solving tough problems in creative ways. Collaborators are good at using negotiations to understand the concerns and interests of the other parties. They can, however, create problems by transforming simple situations into more complex ones.
Competing: Individuals who enjoy negotiations because they present an opportunity to win something. Competitive negotiators have strong instincts for all aspects of negotiating and are often strategic. Because their style can dominate the bargaining process, competitive negotiators often neglect the importance of relationships.
Compromising: Individuals who are eager to close the deal by doing what is fair and equal for all parties involved in the negotiation. Compromisers can be useful when there is limited time to complete the deal; however, compromisers often unnecessarily rush the negotiation process and make concessions too quickly.

Positive effect in negotiation Even before the negotiation process starts, people in a positive mood have more confidence and higher tendencies to plan to use a cooperative strategy. During the negotiation, negotiators who are in a positive mood tend to enjoy the interaction more, show less contentious behavior, use less aggressive tactics and more cooperative strategies.

This in turn increases the likelihood that parties will reach their instrumental goals, and enhance the ability to find integrative gains. Indeed, compared with negotiators with negative or natural affectivity, negotiators with positive affectivity reached more agreements and tended to honor those agreements more.

Those favorable outcomes are due to better decision making processes, such as flexible thinking, creative problem solving, respect for others' perspectives, willingness to take risks and higher confidence. Post negotiation positive affect has beneficial consequences as well. It increases satisfaction with achieved outcome and influences one’s desire for future interactions. The PA aroused by reaching an agreement facilitates the dyadic relationship, which result in affective commitment that sets the stage for subsequent interactions.

PA also has its drawbacks: it distorts perception of self performance, such that performance is judged to be relatively better than it actually is. Thus, studies involving self reports on achieved outcomes might be biased. Negative effect in negotiation Negative effect has detrimental effects on various stages in the negotiation process. Although various negative emotions affect negotiation outcomes, by far the most researched is anger.

Angry negotiators plan to use more competitive strategies and to cooperate less, even before the negotiation starts. These competitive strategies are related to reduced joint outcomes. During negotiations, anger disrupts the process by reducing the level of trust, clouding parties' judgment, narrowing parties' focus of attention and changing their central goal from reaching agreement to retaliating against the other side.

Angry negotiators pay less attention to opponent’s interests and are less accurate in judging their interests, thus achieve lower joint gains. Moreover, because anger makes negotiators more self-centered in their preferences, it increases the likelihood that they will reject profitable offers. Anger doesn’t help in achieving negotiation goals either: it reduces joint gains and does not help to boost personal gains, as angry negotiators don’t succeed in claiming more for themselves. Moreover, negative emotions lead to acceptance of settlements that are not in the positive utility function but rather have a negative utility.

However, expression of negative emotions during negotiation can sometimes be beneficial: legitimately expressed anger can be an effective way to show one's commitment, sincerity, and needs. Moreover, although NA reduces gains in integrative tasks, it is a better strategy than PA in distributive tasks (such as zero-sum). In his work on negative affect arousal and white noise, Seidner found support for the existence of a negative affect arousal mechanism through observations regarding the devaluation of speakers from other ethnic origins." Negotiation may be negatively affected, in turn, by submerged hostility toward an ethnic or gender group.