Negotiation: Meaning, Approaches and Elements

After reading this article you will learn about:- 1. Meaning of Negotiation 2. Approaches to Negotiation 3. Major Elements.

Meaning of Negotiation:

When the parties involved in a conflict want to work toward an amicable resolution, they must engage in a communication process to decide what kind of a deal would be acceptable to both. In other words they must negotiate to reach an agreement. Here what is important is that all the parties concerned must want a solution.

And for this they must put up or encourage proposals, not hold on to whatever grievances they have or whatever arguments they deem right. Arguments cannot be negotiated, only proposals can. This demands that emotions be kept under control. Negotiating is a delicate process and a lot of thinking must go into it, both before it actually gets underway, and while it is going on.

Negotiation is a part of life. People negotiate daily either for individual purposes or for business purposes. But when negotiating for business purpose, which is a very complicated process, one needs to have knowledge and skill of handling such negotiations. Negotiations have become one of the researched topics and a lot of literature can be found on this topic.

Negotiation is the process whereby interested parties resolve disputes; agree upon courses of action, bargain for individual or collective advantage, and/or attempt to craft outcomes, which serve their mutual interests. It is usually regarded as a form of alternative dispute resolution. Negotiations happen in everyday life. Both individuals and business do contain negotiations in the everyday life and everyday business.

In the real world capital planning, corporate borrowing, annual budgeting, and priority setting, all tend to require that people from different organizations-or even our own people with a different point of view-find satisfactory means to reach agreement. Negotiating is also a means of communication between people who can do it for various personal as well as business reasons.

Different forms of negotiations are political, economical, financial negotiations between nations; business negotiations like negotiations for mergers and acquisitions, labor negotiations, consumer negotiations, with government authorities, etc., personal negotiations between people, salary negotiations with employers, with government, etc.

Any negotiation has to be done in a planned and formal way with an objective and purpose.

Meaningless negotiations are waste of time. Most negotiations are repeat performances. We tend to deal with the same bankers, suppliers, clients, directors, managers, etc., for a long time. It is important to recognize and give proper weight to the context in which a negotiation is taking place. If it is within an ongoing relationship, the significance of that relationship must be considered.

A key to negotiation is knowing the other side’s primary and secondary need and using the latter as bargaining chips.

For any negotiation to be successful one has to look into the facts like the purpose of negotiation, persons with whom one is negotiating and the relationship, being unbiased, pursue fairness, best alternative to the negotiated agreement, making the point very clear, the process and method of negotiation should be easy without any complications, if necessary consider expert help too.

Another important factor for negotiation will be to listen to the other parties; active listening helps to understand the negotiating party well and should maintain silence when the other party is negotiating. The negotiation should end with a solution or agreement between the parties, which is acceptable for all the parties.

Any clarifications or special conditions have to be agreed upon so that no future conflicts arise because of the agreement.

Reasons for the failure of negotiation between the parties are mainly due to lack of communication, co-ordination and interest to solve the problem amongst the parties. Generally parties won’t compromise and stick to their already formed agenda and they leave no room for compromise.

Sometimes they negotiate in a wrong way or choose an improper medium for negotiation. In the traditional negotiation there will be a win-lose situation in which one party gains from the other party’s loss. But in the modern era we have the win-win negotiations where both parties profit from the negotiations.

Negotiation has become an art and profession. These days we find professional negotiators and firms indulging in negotiations and they have developed innovative ways and methods for easy negotiation and conflict resolution.

Negotiators use different ways and tactics of negotiating like presenting demands, deadlines, mediation, arbitration, best alternative to a negotiated agreement, collective bargaining, collective action, conciliation, contract, dispute resolution, expert determination, game theory, Nash equilibrium, prisoner’s dilemma, etc.

Many organizations, universities and business schools across the world are teaching negotiation as a subject and also conducting research in this field. We find a lot of literature available on this topic in different resources.

Approaches to Negotiation:

As with conflict management, negotiation can be handled in different ways. The outcome of a negotiation depends on the approach.

Bargaining Orientation:

This approach is based on the premise that one person can win only at the expense of the other – that any victory by one party must be matched by the other’s loss. That is why this is also called the win-lose approach.

Although this approach is marked by competitiveness and may create ill will, this is sometimes the best approach when the other party is determined to take advantage of you or when your interests truly conflict with those of the other party and compromising is not a satisfactory option.

Lose-Lose Orientation:

This is adopted when one negotiating partner feels his own interests are threatened and reacts by doing all he can to ensure that the outcome of the negotiation does not serve the other party’s interests either. In effect, everybody ends up being a loser.

Lose-lose outcomes occur when negotiating partners ignore one another’s needs or when the need to hurt each other outweighs the need to find some kind of an acceptable solution.

Compromise:

A lose-lose situation is hardly a desirable outcome. To avoid this, sometimes people compromise. Both parties give up a part of what they had originally sought, and settle for something less than that. A compromise is the best way out when it is impossible for both parties to convince each other or when even the partial attainment of one party’s goals depends’ on the satisfaction of the other.

Compromise is a good option when disputed resources are limited. For instance, if two managers each need a full-time secretary, but budget restrictions make this impossible; they may have to compromise by sharing one secretary.

Win-Win Orientation:

When the needs of the negotiating parties a 45.1 looks at some of the aspects of this approach. The win -win approach is superior to other problem-solving styles, because everyone ends up feeling satisfied. However, such a solution is only possible when the needs of the parties involved do not conflict.

This approach works well when the following five steps are followed:

a. Determine the Needs of Both Parties:

If both parties can identify what issues are important to the other, they would find it easier to work toward a mutually acceptable solution.

b. Develop a List of Possible Solutions:

Once the basic issues have been identified, the two parties can sit together and come up with several solutions that would satisfy everyone’s needs. All possible solutions are put down, without any of them being evaluated

c. Choose the Most Appropriate Solutions:

At this stage each solution is evaluated and the ones that are most promising are adopted.

d. Implement the Solution:

Once the best solution is decided upon, make sure everyone understands it, and then implement it.

e. Follow up on the Solution:

Even the best plans need to be monitored after they have been implemented. A while after the plan has been put into action, meet with the other parties involved and discuss how the solution is working out. If anyone’s needs are still unmet, you could go back to the problem-solving procedure and identify another solution.

Figure 4.1 shows the characteristics of different negotiating styles

Major Elements of Negotiation Preparation:

Success in negotiation, like other things in life, does not just happen. A good deal of preparation is necessary to ensure that your endeavors are successful. Being well-prepared breeds confidence and a confident manner can always give you an edge in any communication process. Preparation involves several activities

Understand the People Involved:

It is important to know something about the people with whom we must negotiate and the organization they represent. What are their roles, their objectives? What problems will they raise? Are they in a position to make a difference or will they have to consult someone else?

The answers to these questions will help you to better handle the issues that come up during the actual negotiation. How the other party sees you is important too. He is likely to respect you more if he perceives you as being professional, confident and as having the requisite authority to negotiate

Know Your Objectives:

Having your objectives clearly in mind is very important. Identify the objectives; decide what the priorities are, what the variables are and what should be your attitude to each. The variables are the different factors involved in the negotiation – the raw material, so to speak, of negotiation.

To be well prepared you must know exactly how much you are willing to concede or compromise on each factor. You must also have ready all the arguments you may need to justify your point of view, particularly on those points which you want to win.

Conduct:

Two factors that operate during the actual negotiation are the tactics of negotiation and the interpersonal behavior that accompanies them. Negotiation tactics hinge on the variables – some of which are conceded by us and some by the other party.

Variables that are traded are referred to as ‘concessions.’ Negotiation is in fact, the process of trading concessions. To negotiate skillfully you must have knowledge of all the variables and their possible use as concessions. As you start the process of negotiation bear in mind four important principles.

a. Aim High:

It pays off to aim for the best deal you can imagine. You can always trade down. If you start too low, it is difficult to trade up, particularly at a late stage in the process. In complex negotiations where there are a large number of variables, it is worthwhile to separate the variables into three priority categories.

i. The ‘musts’; those that we must get, if the deal is to be accepted by us at all.

ii. The ‘ideals’: what we hope to get, to make the ideal deal;

iii. The ‘loss leaders’: what we are prepared to trade in order to reach a deal.

b. Get the Other Person’s Shopping List:

It is important to identify what the other party wants, and what he is likely to concede. This will help you to assess the situation better.

c. Keep the Whole Package in Mind:

Focus on the total situation – your views and the other party’s – so that you proceed conscious of everything (or as much as possible) that will be involved.

d. Keep Searching for Variables:

Remain flexible. What you plan beforehand should never act like a straightjacket. Sometimes matters proceed along the lines you expect; many times they don’t. Adapting and fine-tuning may always be required.

When the negotiation starts the two parties are at opposite ends of the scale. However, by the time the negotiation closes, they are expected to settle on something they can both relate to as a ‘good deal.’ This is the point of balance which is usually a range of solutions around the middle point of the scale, as illustrated in Figure 4.1.

Both parties usually recognize that the two extreme points from which they start their initial stance – are unrealistic. Negotiation can thus be represented as the to and fro process that moves up and down the line and dictates where things finally settle.

Sometimes the first round of negotiation only serves to induce both parties to shift to a more reasonable initial stance. As negotiation is essentially a communication process, its success, to a great extent, will depend on how well the two parties can build what are called bridges of rapport.’ These bridges help them to see each other’s point of view and to relate to each other.

To build these bridges to an acceptable agreement you must:

i. Do your homework beforehand – research the opposition, the topic, and your own team’s blind spots or hang-ups – so you don’t waste anyone’s time.

ii. Identify your priorities, your needs, and your top and bottom line beforehand.

iii. Come prepared with all necessary documents and agreements.

iv. Generate a range of options before deciding upon one; don’t try to determine a single, correct solution. Instead, think of a wide range of possibilities that could please both sides.

v. Open the discussion on a neutral note to allay any hostility.

vi. Listen actively and keep an open mind rather than deal from a position of ‘entrenched antagonism.’

vii. Remember the likeability factor (like likes like). If the opposing side likes you, you stand a much better chance of achieving your goals within reason. However, don’t make that your primary goal.

viii. Keep your emotions in check; ignore, rather than respond to personal attacks.

ix. Show respect for the other person’s views: don’t browbeat, denigrate, or insult the opposing team.

x. Avoid manipulating because it creates bitterness rather than harmony.

xi. Encourage the other party to look at the issue from your perspective.

xii. Look out for positive signals of cooperation from the other side and build on these.

xiii. State the areas where agreement has been reached and list the issues that are still being negotiated.

Overall, success in negotiation comes largely from good listening skills, the ability to communicate persuasively and good interpersonal skills. Negotiations will not produce the desired effect unless those involved consciously address both the solid facts and the human dimension.

Communication can be described as an exchange of what we might call “messages,” and it has been found that such “messages” have both a factual and an interpersonal dimension. It is the interpersonal dimension that governs the factual one in human communication.

Now that we’ve considered some of the aspects of negotiation, let us look at an actual negotiation. This will give you some idea of the strategies adopted by successful negotiators.