What are the stages of negotiation? What skills do you need to be able to negotiate well? How long does a contract negotiation take? We answer all of these questions and more in the latest episode of Any.Talk.
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Full Transcript
Any.Talk Episode #16: Negotiation
Annie-Mei: Hello and welcome to another episode of Any.Talk. I’m Annie-Mei Forster and today we’re going to be talking about negotiation. We’ve got a few people on the show today.
I’d like to introduce Anywise Principal Consultant Catherine Jong. Hello Cj.
Cj: Hello Annie-Mei.
Annie-Mei: Anywise Principal Consultant Eric Dempster-Hoad. Hello Eric.
Eric: Hi Annie-Mei. Thanks for having me today.
Annie-Mei: And also, General Manager Steven Kouloumendas. Hello Steve.
Steve: Hi Annie-Mei. Thanks for having me.
Annie-Mei: I’ll start with you Eric. Can you talk about what negotiation is in a business context?
Eric: Hi Annie-Mei. Can do. Just apologies, I’m sitting in nature today so there might be some birds trying to participate in the podcast.
Negotiation from a business perspective is a process where parties with conflicting aims or goals establish terms on which they will cooperate. It involves the process of influencing behaviour, of changing a relationship, of getting things achieved. It’s an action-orientated process seeking outcomes.
Annie-Mei: Okay great. And what do you mean by influencing behaviour?
Eric: It’s about approaching a problem from two different sides of that problem and seeking to meet – ideally – in the middle at a mutually-agreed process or outcome that enables progress in whatever it is that you’re negotiating. Be that a contract, be that a project, be that where you’re going to lunch for the day.
Annie-Mei: So how do you approach trying to meet both parties’ goals?
Eric: Approaching it from your own needs to begin with is essential. So understanding your desired outcomes, your minimum outcome that’s acceptable for you, and then trying to come up with your understanding of what the other party’s minimum outcome, desirable outcomes and their achievements are or what their goals are.
If you can understand where they’re coming from and know where you’re coming from, you can see where that overlap is and start to use those key agreed points to then manufacture a way forward to enable everyone’s goals to be met sufficiently. That everyone walks away, not completely happy, but happy enough.
Annie-Mei: Okay thanks Eric. Steve, what happens when both parties can’t agree, and it comes to a bit of a stalemate in the negotiation?
Steve: Yeah, thank you Annie-Mei.
I guess an important aspect of any negotiation is looking and understanding the issues that either party may have, and there may be times where those issues are in direct conflict with one another. This is generally the case where there’s a stalemate on a particular issue. And sometimes it’s understanding where that common ground is.
It may be other issues that have a broader context that can be brought into the equation, to understand where the issues lie. And I guess not necessarily the issue, but the driver behind that issue. So in most cases, there is a reason there’s a negotiation in place. Then that’s always a common reason, whether that’s to negotiate a contract or an outcome, or whether it’s to negotiate a location.
Fundamentally, the parties want to be in the room together and the purpose of the negotiation is to enhance the relationship and gain a better understanding of either party. And come to an agreement for a mutually beneficial outcome. That is the whole purpose of any party wanting to negotiate.
If for any reason there is a stalemate on a particular issue, both parties need to look themselves in the eye and understand whether this issue is an issue that is that important to both parties that it’s not worth pursuing the overall outcome and the goal they’re trying to pursue.
If not, and I often find the best thing for these situations is open, honest communication where either party lays out exactly what they’re trying to achieve and why that issue is so important to each party. That way either party can understand how they can compromise to make sure common ground is found.
Annie-Mei: Okay thanks Steve. When you’re talking about having an open honesty policy and communication, what skills do you need to be able to communicate effectively in negotiation?
Steve: Yeah, another good question. So, any negotiation is like a formal dance in a relationship. So, it’s being able to use those skills, whether it’s conversations had between either party. And many times in a business context it’s not only each party is represented by a number of people in the loop.
Now during negotiations, it’s often best for that communication to be a single person representing either party. So all that communication is channelled within one person on either side. That way that communication is not only continuous but also representative of either party’s firm.
And this person becomes super important in the way they need to be able to communicate with the people on their side.
Annie-Mei: Thanks Steve. Eric, what can be learned through the negotiation process?
Eric: Thanks Annie-Mei.
Look, it depends, I suppose, on the negotiation that you’re undertaking, but if you approach the negotiation in the way we’ve previously discussed around preparing your negotiation, conducting your pre-negotiation work, then a formal negotiation, then post-negotiation. Then in your pre-negotiation work you’re going to try to determine what the other party wants and what you need out of the situation.
And what you can learn out of a negotiation is the ethics and morals of a company somewhat. In that, if they hold true to certain things, that may give you some insight into what they hold and value within their company. And post-negotiation you can get an understanding of what a company values and where their morals and ethics lie, depending on how they treat you post-that negotiation.
Annie-Mei: Okay thanks Eric. So Cj, when is negotiation needed in other aspects of business?
Cj: I think in other aspects of business, negotiation can help in terms of communication with your other peers and colleagues. And also with other stakeholders and it doesn’t have to be in a negotiating situation, but it can just help to find common ground with other people.
Eric: If we hark back to that broad term – the broad definition – of negotiations, Annie-Mei, and that it’s the process of influencing behaviour, negotiation helps in every aspect of business. And in every aspect of your own personal life really.
Annie-Mei: So Eric, how does negotiation help you in your general life?
Eric: I like to refer to the path of small yeses, Annie-Mei. If you can get someone saying ‘yes’ to small things, then it’s easier to get them to say ‘yes’ to the big thing that you need at the end.
In my personal everyday life, I try to apply it at least, to my two-and-a-half-year-old toddler. If I can get her to say ‘yes’ to little things, sometimes I can negotiate my way through to a ‘big yes’.
Annie-Mei: So what’s an example of a ‘small yes’?
Eric: A ‘small yes’ would be getting her to agree to mum brushing her teeth, as opposed to, ‘do you want to brush your teeth?’ Asking her: ‘would you like your mum to help you brush your teeth?’ tends to get more of a ‘yes’ than ‘would you like to brush your teeth?’
And if I can get her to say ‘yes’ to that, then I can get a ‘yes’ to ‘would you like dad to help you in the bath?’ and then ‘would you like to put your pyjamas on?’, and then ‘would you like to hop into bed?’, the bed being the big one at the end.
Annie-Mei: Cool. So when talking about negotiation and sometimes, obviously, it can go badly. So Steve what are the consequences of bad negotiation?
Steve: Thank you Annie-Mei.
So I think every negotiation is an opportunity to learn more about the other party. It’s also an opportunity to either enhance that relationship or – in some scenarios – realise it’s not the right relationship. In which case, Eric talked before about finding out more about the other party’s values and in exchange, each party’s finding out more about their values.
On some occasions, what you’ll find is that there are conflicting values here and that some of those are at complete odds with one another. In which case, it may outweigh the potential benefit of that negotiation. Those are the scenarios when you call it a breakdown in negotiation or differences of opinion, stalemates, everything like that. And sometimes can go wrong where parties will only realise that they have differing morals or ethics for a particular topic.
Once they enter into those negotiations and everyone would like to think that both parties are on a similar page, but sometimes it’s the negotiation that brings out more of that truth. And that is an ok thing, it may just mean that this negotiation is an opportunity to not set up the future relationship for failure.
Annie-Mei: Okay thanks Steve. So moving on to types of negotiation. Cj did you want to talk about what the different types of negotiation are?
Cj: So one type of negotiation is called the win-lose distributive negotiation. This tends to be slow and competitive. It can lead to tension and erosion of trust, but also collaboration in the relationship.
There’s a second one called the integrative or the mutual win-win negotiation which can be a lot quicker than bargaining and tends to build trust. It generates a lot more value and enhances relationships. Having said that, it does require both of the parties to be a bit more curious and flexible to display a level of skill rather than just arguing to a point.
Annie-Mei: Okay, thanks Cj. Eric, are there different situations where you would go for a certain type of negotiation?
Eric: Thanks Annie-Mei. Ideally, you’d seek to use integrative negotiation always. It’s going to be a quicker negotiation, it’s going to build trust between the two parties, and it’s going to potentially establish a better bedrock for the future relationship. The idea of win-win is sometimes difficult for companies to embrace.
And the other way to look at it is lose-lose. That if both parties walk away from a negotiation equally dissatisfied with it, then that could potentially be a successful negotiation. If no one got everything they wanted but walked away with at least the minimum that they needed.
The distributive negotiation can be a necessary evil – for want of a better term – if you’ve got a significantly detailed contract over an extended period of time that needs to be reviewed in detail. There may be a requirement to run through that in very, very significant detail in more of a competitive mindset. But generally, I’d suggest integrative negotiation is where we should be targeting.
Annie-Mei: Why is it difficult for some companies to embrace integrative negotiation?
Eric: It comes back to that idea of zero-sum gains. If I am not getting everything I want: I am losing.
A story was told to me the other day of a negotiator who went into complex negotiation. She had her goals set very clearly. She thought she understood the opposition’s goals and the dollar value that they were willing to pay. She presented her pitch and they accepted very quickly. And she thought she’d come out with a win.
It was only subsequently, a mentor suggested that potentially because they’d accepted so quickly, they had more room to move (the other party), and that therefore she’d actually failed in her negotiation by not walking away with more money. So that I guess is a distributive mentality. Subsequently, she went in the next contract with that other party and was able to negotiate a higher rate and build an additional longer-term relationship.
So if she took the long-term approach of a more integrative win-win option: she got the contract to begin with, the other party got what they needed out of her, she gave good work and they subsequently developed a long-term great relationship. That enabled her to make more money at a higher rate later. As opposed to if she’d gone a little bit harder at the start, got a little bit more money and the other party – in theory – lost. She may have only got that one contract.
Annie-Mei: Okay, thanks Eric. We might move on now to the process of negotiation. So Steve, can you talk about what the stages of negotiation are?
Steve: In a broad process step would define a pre-negotiation, a formal negotiation, and then followed by a post-negotiation. Now this is all predicated on that process talking about a single event, such as a contract in business terms.
All of that is that pre-negotiation phase is all about preparing for what you want out of a negotiation. So this is a really important phase and it speaks to what Eric was just talking about having a clear picture of what you are trying to achieve out of a negotiation.
Developing that in your own right without that being influenced by what the other party is trying to get. Understanding what you want and being able to describe that as you start to communicate that. A part of that pre-negotiation is communicating everything you’re trying to achieve and also listening.
So once you’ve understood what you want to achieve, starting to broker that relationship with the other side and listening to what they want to achieve. This is almost that preamble work where you can start to formulate and understand where things align, where the value is for each party, what each party is trying to achieve, and only then can you move to that more formal aspect of negotiation which is more about the giving-and-taking and discussing each one of those facets in more detail.
Once that formal part is done, it’s really about the post-negotiation. Most post-negotiation should wrap up with congratulations and a formal way to say, ‘this has been a successful negotiation’. And it really sets the tone for the rest of the relationship. There’s not too much more in that post-negotiation. And as an event contract signature and breaking a champagne bottle on the side of the table.
Annie-Mei: Okay, thanks Steve. Cj how long is the negotiation process?
Cj: So negotiations, they can take as long as they’re required in commercial situations, just as long as there are defined timelines that are met. So it’s critical to allow time for each phase of the negotiation and just make sure that each of the parties agree on the timeline. It’s important not to rush into a negotiation and that it’s planned out and prepared properly. Also not to make any assumptions because that can lead to a bad deal.
So in terms of length it takes as long as it needs to, but it should be pretty defined by the set timelines.
Annie-Mei: Okay thanks Cj. Eric what are some factors that can slow down negotiation?
Eric: I guess there are two broad factors. It can be a deliberate ploy. So one party can choose to try to draw out negotiations using delaying tactics. Whether that’s because they believe if they can push things towards a certain date that the other party’s going to have to fold for financial reasons or other reasons.
Some other factors can be insistence participation by one or more of the parties, so they’re not really invested in the negotiation. Poor communication is a huge one. As Steve said earlier, in that preparation phase and into the execution or the commencements of negotiations, it’s really important that you’re clearly articulating your position, your desires and what you require. And listening to the other party to make sure that everyone understands the goals of both parties.
Alternatively, it can just be intransigence. Someone or a party that is just unwilling to budge on a specific issue and seeking to hold firm to whatever the position is that they think they have to hold to.
Annie-Mei: Okay great, thanks Eric. So Steve, do you enjoy the negotiation process?
Steve: Yeah I really enjoy the negotiation process and fundamentally because it’s all about communicating and developing the relationship further. It can cause friction at times if there are differences of opinion on particular issues. But fundamentally, most of those in my opinion are never insurmountable enough to not enjoy the process of it.
And even those ones that do lead to a complete halt to the negotiation, I enjoy that process just as much because it’s an opportunity to not start the relationship on the wrong foot. And it’s an opportunity to not live with any regrets later on to enter a relationship that was developed in either bed faith or with one party putting more pressure on the other party.
Annie-Mei: And what about you Cj and Eric, do you enjoy the negotiation process?
Eric: I’d tend to agree with Steve on this one, Annie-Mei. I enjoy the process, I enjoy the underlying communication and listening that goes along with it. Influencing relationships is a really challenging thing to attempt to do and that’s always fun. Successful negotiations are clearly more fun than unsuccessful negotiations, like trying to get your toddler to bed at two o’clock in the morning and you can’t negotiate that successfully. That’s less than fun. But negotiations – I do enjoy them.
Cj: Thanks Annie-Mei. Yeah I can say that it’s a fun process, most of the time. And it gives you a chance to learn about the other party and also build some rapport. Also improve your skills for negotiating the next contract. I think it’s always a good thing to keep learning as an individual and with your company as well.
Annie-Mei: Okay thanks guys. Alright so thank you to Steve, Cj and Eric for talking today about negotiation.
Steve: Thank you.
Eric: Thanks very much Annie-Mei.
Cj: Thanks Annie-Mei.