Dr B K Mukhopadhyay
(The author is a Professor of Management and Economics, formerly at IIBM (RBI) Guwahati. He can be contacted at email@example.com)
Dr. Boidurjo Rick Mukhopadhyay
(The author, international award-winning development and management economist, formerly a Gold Medalist in Economics at Gauhati University)
Concept and types of negotiation
A cuff in 2008 defined negotiation as "the process of communicating back and forth for the purpose of reaching a joint agreement about differing needs or ideas". A work by Lax and Sebenius in 1986, however, defines it as "a process of potentially opportunistic interaction by which two or more parties, with some apparent conflict, seek to do better through jointly decided action than they could do otherwise".
There is also a tactical definition by Cellich and Jain, who defined negotiation as "a mechanical exercise of offers and counteroffers that leads to a deal" and also a strategic definition which says the process of negotiation is "sharing information and developing a relationship that may lead to a deal."
Broadly, there are two basic types of negotiation. The most popular one is distributive negotiation, in which the typical task is to allocate a resource, it can be a scarce resource like money or time. This type is also known as 'win-lose' negotiations. This is because each party's objective is to maximize its share of the resource being allocated, so there is always a tussle for who gets how much. Naturally, it becomes tougher when the resources are given already and/or non-negotiable. Commonly in the literature, the terms 'Zero-sum' and 'fixed pie' are other names for distributive negotiations.
The second type of negotiation is integrative and has two steps. First, when people collaboratively attempt to identify additional items or resources that could be added to the overall mix of items being negotiated. This naturally can bring people and teams together while they leverage each other's strengths in negotiation and problem-solving. Second, integrative negotiation is by a large measure an allocation process, similar to the distributive resource allocation process in distributive negotiation mentioned earlier. If the integrative negotiation can subsequently expand the total value during its first step, both parties involved will feel like winners in the second step.
When it comes to listing the top skills and tenets required of an effective manager or a graduate applying for a project manager position or an entrepreneur crafting his first start-up in the most careful way possible – communication, leadership, team building, problem-solving, and delegation often tops the list. However, it is a negotiation that is the single most critical skill that makes things happen. Whether it is pitching ideas in front of investors for a new business or diversification of current operations, negotiating a trade deal or a job contract, resolving small differences at the workplace before they turn into big conflicts, buying or selling property or technology, closing a sale with a customer – all of these require the innate skill of negotiation which demands a separate mention and exploration. Besides, this skill is equally useful in personal life.
What makes an effective negotiator?
Harvard Business School, amongst other institutions, has pointed out five essential skills that could help build strong negotiation and communication capabilities. Firstly, the role of developing strong emotional intelligence skills since positive emotions tend to evidently improve feelings of trust at the bargaining table. On the contrary, the feelings of anxiety and nervousness could cause damage – it is important to keep the emotions in balance and thereby not allow them to get in the way of reaching a 'win-win' outcome. Having more EQ also means the individual would be more able to read between the lines and also develop higher perceptive capabilities.
Secondly, foresight and planning ahead with a clear idea of the desired end result and where the boundaries lie is vital to maintain. Advance and adequate preparation is good practice for a successful negotiation to come about. There is an interesting and useful concept called the Zone of Possible Agreement (ZOPA), or simply the 'bargaining zone'. This refers to the range in a negotiation in which two or more parties can find common ground. A positive bargaining zone exists when the terms that both parties are willing to agree to overlap. On the other hand, a negative bargaining zone exists when neither party's terms overlap. Therefore, if a discussion lands in a negative bargaining zone, the Best Alternative to a Negotiated Agreement (BATNA) is planned (more detail in later sections) when the negotiation is unsuccessful. Again, in order to know BATNA options, advance preparation is required so that the deal is not entirely out of hand during the negotiation scenario and a backup plan is already in place.
Thirdly, the capacity to clearly articulate the value addition in a negotiation is extremely important. During negotiation, all parties aim to secure the biggest pie possible, and as each party tries to maximize their slice, it is implicit that other parties will have less left to take home. When a clear value could be added to a deal, it would mean that the negotiator is offering a possibility to increase the size of the pie altogether.
Much as the planning in advance skill is important as mentioned above, developing a well thought thorough strategy would be the fourth important skill. Every negotiation requires a tailored strategy in order to succeed. This entails what a party can offer to the other on the negotiation table, evaluating the counterpart's vantage point (therefore, understanding how to reach a mutually agreeable common goal), and above all knowing one's value before negotiations begin.
Finally, the ability and humility to learn and reflect on past negotiation experiences [successful or otherwise, alike] is a good practice. This helps in recognising ways to make use of tactics that could prove effective in future negotiations.
The role of strategic negotiation
If we look at certain situations where strategic negotiation becomes essential, A) negotiations with the suppliers for the execution of the project, B) negotiations with stakeholders regarding support for changes in the project, and providing new ideas in order to get the consent of the interested parties. C) negotiation with a possible investor in a new project.
In addition to BATNA options as mentioned earlier in this article, the manager – before and after negotiation – has to work on the following options that break down BATNA a bit more in detail. A) Evaluating a smarter alternative to a negotiated agreement, B) Worst possible alternative to a negotiated agreement, C) Exploring ways to find one possible and most reasonable agreement, and C) Determining and also rethinking price or removal point. These are best done in core teams or in groups where there is an experienced project manager leading or facilitating the process.
The many faces of Negotiation and the Negotiator
Fundamentally, there are three negotiation roles. The first one is the negotiator, in which the manager is actively involved in the dispute resolution or resource allocation negotiations. At times, a negotiation stalls or breaks down. This is often referred to as an impasse. The other option therefore would be to involve a third party – a mediator or arbitrator - to resolve the impasse.
The mediator generally asks questions to generate dialogue. If the negotiation remains stalled, the negotiating parties each fall back on the contingency plans identified prior to the negotiation. The mediator is just a facilitator, not a decision-maker which is actually the job of an arbitrator who can serve as a judge upon listening to both parties.
The manager can also take on the arbitrator role, either as a given role or if it's the last resort in a given situation. Evidently, all these roles in negotiation can be therefore grouped under Planning, Engagement, and Closing.
Don't make every communication an act of negotiation!
It is also equally important to understand that not every communication exchange needs to be a negotiation. Clampitt in his work published in 2001 described three overall types of communication models. A) The Arrow model is about sending a message to someone without any need for feedback. The problem with this is that the manager doesn't know if the receiver actually received and understood the message. B) The Circuit model takes care of this incomplete reception problem by adding a feedback loop to the sender. This is useful, particularly in light of making communications interactive, inclusive, and informative from all ends. In this context and from a negotiation perspective, the assumption works that 'understanding is the same as agreeing'.
Pretty much like most other soft skills, knowing how to boost stimulating and meaningful conversations that result in a positive outcome for both parties is something that can always be continually improvised with practice and time. Apart from having the right technical and practical knowledge, there's also the importance of recognising structures, the techniques, and some dedicated practise – an effective manager will be able to demonstrate and deliver effective, timely negotiation skills to expand the final outcome of a project, an organisation, and in some cases larger societal impact.