NEGOTIATING FRAMEWORK
A STRATEGIC NEGOTIATING FRAMEWORK
The Seven Step Strategy, a Placard
1) Prepare -understand their position, concerns and options
2) Listen - attentively
3) Ask many questions - patiently
4) Carefully, cautiously deliberate before making any first move, any first offer
5) A trading basis should be used to make measured concessions (not unilaterally)
6) Really focus on satisfaction (for all parties)
7) Do be willing to walk away (to your considered alternative)
Seven Step Notes:
1) Preparation – an acronym approach to preparation and planning is presented below in B. The Framework.
The negotiating style needs to be adapted to the circumstances and the culture. Good-hearted, open, cooperative “win/win” facing a cutthroat shyster litigator from New York may be suicidal. Hard-nosed, obdurate “win/lose” tactics facing highly ethical and extremely conscientious Saudi Arabian or Japanese officials is an equally unlikely prescription for success.
2) Listening - especially active listening is hard to do when one is also thinking of how to couch one’s answer. More common in Asia than in the U.S. and Europe is to have in team negotiations a “designated listener.” This is often the elderly gentleman in the back who takes notes, so quietly that he fades away into the background and is hardly noticed at all. He hardly ever speaks, never interrupts during negotiations. Frequently he is a senior decision maker.
3) Asking – From experience in over thirty countries, asking questions is a negotiating imperative overriding cultural differences. Lack of knowledge may help win a battle (“fools rush in where angels fear to tread”), but is unlikely to win a war – let alone lead to building a solid business relationship. Yet “asking questions” – the right ones, in the right way – is often underestimated, regardless of culture. Why?
First, humans naturally take a subjective viewpoint in a negotiation. We are more oriented towards convincing the other parties of the validity of our, of course completely reasonable, position, than in trying to understand their position. When their position is stated, we give it our divided attention, because half our energy is devoted to preparing our counter-statement, even as they speak.
A corollary is that when asked a question, we tend to answer too fast, spontaneously, above all if we feel we are being challenged.
Second, both parties tend to neglect follow-on questions. Asking “why” once is unlikely to get to the root of an issue. Cascading “why” and “what if” questions are far more likely to lead to resolving issues, breaking deadlocks, creative structuring and lasting deals.
4) Caution with the first move, first offer - a standard admonition in negotiating books and seminars is “do not make the first” move, offer, concession or step. In a “win/lose” negotiation this advice may well be worth heeding. In “win/win” this attitude can be counter-productive, cf. the subpage “Three Negotiating Myths."
5) A trading basis for measured concessions is vividly presented with colors in The New Negotiating Edge, Gavin Kennedy, Nicholas Berkley, 1998, paperback (Amazon.com $30).
6) Really focus on satisfaction for all parties – however seeking the “perfect” outcome can be the enemy of achieving “good” promptly. But that does not imply accepting a marginal deal either, cf. below.
7) Do walk away when necessary – Often people start thinking about BATNA (best alternative to a negotiated agreement) only when the negotiation is underway – and stalling. Considering when to walk, and towards what one will walk as an alternative, is an integral part of preparation, before negotiating begins.
"Give me six hours to chop down a tree and I will spend the first four sharpening the axe."
Abraham Lincoln (1809 - 1865)
B. The Framework
Part I. PLANNING: the most neglected phase
SPAN® (der Span, Späne machen) Macro environment
S: Situation of the industry (strategic mapping, profit pools)
Situation der Industrie (strategische Kartographie)
P: Problem/Opportunity
Problem/Gelegenheit
A: Assess its impact on corporate strategy (competitive advantage)
Auswirkung auf die strategische Unternehmungsführung (den Wettbewerbsvorteil)
N: Needs assessment
Notwendigkeiten und Bedürfnisse sondieren
SPADA® (die Spada) Micro environment
S: Select the negotiators, specify the negotiating parameters
Selektion der Unterhändler, Bestimmung der Verhandlungsparameter
P: Project (the deal) vs. Process (the on-going business)
Projekt (die Vereinbarung) vs. Prozeß (das laufende Geschäft)
A: Alternatives and their impact; setting goals
Alternativen und deren Auswirkungen; Festlegen der Ziele
D: Development of a strategy and deployment of resources
Denkansätze für die Verhandlungsstrategie und Decken der Ressourcen dafür
A: Action and Aftermath (follow-up)
Aktion ausführen, An- und Zukunft
Aiming is not enough. You need to hit the target!
Zielen ist nicht genug, man muß auch treffen!
C-CC Consider the Cultural Context
- historical influence on the negotiating styles of the different parties
... the Orient (Japan, China, India, the Middle East)
... the Occident (Greece & Rome; France & Russia)
- contemporary influences on the negotiating styles
... national and regional (Germany vs. U.S.; Wall St. vs. Silicon Valley)
... industry and corporate (Ag-business vs. computers; IBM vs. Apple)
- empathy
...self-awareness of one’s own cultural baggage (know thyself)
... an understanding of their cultural baggage
C -BC: Consider the Benefit Context
FOR THE NEGOTIATOR (= NGR.)
Y AXIS
(Ngr. low, Co. high) (Ngr. high, Co. high) destructive conflict best chance of success
P
O B
T E
E N
N E
T F
I I
A T
L (Ngr. low, Co. low) (Ngr. high, Co. low)
negotiation perceived as irrelevant destructive conflict, abusive pursuit of self-interest
X AXIS – P O T E N T I A L B E N E F I T F O R T H E C O M P A N Y (= CO.)
Id-KFS: Identify the Key Factors for Success
What are the key factors for this negotiation in terms of (acronyms and words marked with an asterisk (*) are explained in the glossary):
- management
... organization (national, international)
... human resources (work force)
... strategic fit
... competitive response
- marketing
... the 5 Ps (Product, Place, Positioning, Promotion, Price)
... the 4 Cs (Customer value, Communication, Channel management, CRM*)
... RMS (Relative Market Share)
- production
... plant and equipment
... design capabilities
... R & D*, innovation
... outsourcing
... logistics
- finance
... cash flow
... ROI*
... stock price
In view of the above, what are the KFS of this negotiation:
- from our organization’s point of view?
- from the other party’s point of view?
How will the KFS determine our negotiating strategy?
P-ASAP Plan As Soon As Possible
A sk questions. A cquire information.
S elect the negotiator(s) S et their roles and guidelines
A genda items and alternatives A genda minutes (keeping a record)
P lan the negotiation for P erformance and profit enhancement.
“The plan is nothing. Planning is everything.” Eisenhower (1890-1969)
Begin planning the negotiation as soon as possible.
PLAN – ASAP!
Part II. WIN-LOSE: strategy and tactics
SCENARIO generation
- buyer
- seller
BATNA determination
- your own
- guestimating theirs
POWER PLAYS
- authority (perception thereof)
- time (patience and persistence; pushing deadlines; deadlock)
- money (its value over time – DCF,* IRR,* NPV*)
- competitive intelligence (the hidden agenda)
- concessions (demanding and conceding them)
- reverse auction and other bidding techniques
- bogeys* and bluffs
- escalation and walkouts
- unpleasant plays
... Boulwarism*
... Cornelian dilemma*
... Hobson´s choice*
... Morton´s fork*
... Sibylline books*
- last minute nibbles
- contractual fine print and escape clauses
WARNING
Careful: Don’t get carried away! There is a fine line between being viewed as harmlessly nibbling or dangerously nocuous.
Vorsicht, nicht übertreiben! Der Unterscheid dazwischen, als einen Schacher oder als einen Schächer betrachtet zu werden, besteht aus nur einem Umlaut.
Part III. WIN/WIN: strategy and tactics
RISKS
- immediate pitfalls
... buyer
... seller
- the insidious long term (cultural and political factors)
CREATIVE STRUCTURING
- active listening plus
- needs and wants (buyer and seller)
- pushing constraints (brainstorming and thinking outside the box)
- cross-marketing (compatible customers, re-segmenting the market)
- shared positioning (branding)
- shared promotion (advertising and public relations)
- channel management commonalities
- value chain comparisons
- consolidating costs (complementary suppliers, logistics)
- experience curve effects
- offshoring (capability outsourcing)
- profit pool commonalities
- financial options (equity, barter, interlocking boards)
WARNING
Again, be careful not to get carried away! The intellectual challenge of creating the perfect deal, anticipating every contingency, can get in the way of getting on with the business. Amiable parties can easily amend an imperfect contract to respond to changed circumstances. The “perfect” contract can still result in deadlock if the relationship has degenerated into implacable hostility.
Part IV. FOLLOW UP the second most neglected phase
PROJECT (the negotiation) VS. PROCESS (the on-going business)
- due diligence
- closing the deal (contract review)
- communicating the deal (management buy-in)
- getting off to a running start (overcoming buyer/seller remorse)
BEST PRACTICES (the firm as a learning organization, institutional memory)
- establish procedures for concluded negotiations
... to publicize internally successful approaches
... to learn from mistakes (without “scapegoating”)
RELATIONSHIP MAINTENANCE
- coping with change
... external (business and regulatory environment, political issues)
... internal (new CEO, mission, vision, strategy, innovation)
- quanxi*
CONFLICT RESOLUTION
- mediation
- arbitration
- litigation
SNAFU (der GAU)
S: Situation Situation
N: Needs, theirs and ours Notwendigkeiten und Bedürfnisse,
ihre u. unsere
A: Alternatives and Arbitration Alternativen u. Schlichtungsverfahren
F: Force and pressure Forsche, Druckmittel
U: Umbrellas and thunderstorms Umbruch und Gewitterschutz
Bridges strongly believes the sine qua non of conflict avoidance is quanxi, closely followed by the ameliorative effect of a binding arbitration clause. The former is explained in the glossary below. The later is treated in the “Note on Arbitration” at “Negotiation Strategy” under “Expertise.”
"Auch aus Steinen, die in den Weg gelegt werden, kann man Schönes bauen."
Johann Wolfgang von Goethe (1749-1832)
GLOSSARY
ASAP – a standard American abbreviation for “as soon as possible.”
BATNA – “best alternative to a negotiated agreement” The term was introduced in Getting to Yes, Negotiating Agreement Without Giving In by Roger Fischer and William Ury, Penguin Books, 1981.
Bogey – In negotiation a bogey is the claim “This is all I have.” The word originally meant a goblin or phantom, an object of dread. In World War II it came to refer to an unidentified plane on the radar screen. The word also refers to a number, budget or other estimated performance figure used by management in planning. Finally, a bogey can be a quota restricting output through the informal agreement of the employees. (Webster’s III).
Boulwarism - a “take it or leave it” offer or counter-offer that is not negotiable. The term stems from Lemuel Boulware, a former vice president of General Electric (GE). He became (in)famous for telling the International Union of Electrical Workers (IUE) at the onset of negotiations that GE had already evaluated the needs of the workers. Consequently he was immediately making GE´s "first, last and best offer.”
Cornelian dilemma - (choix cornélien) is a dilemma in which someone is obliged to choose between two courses of action either of which will have a detrimental effect on themselves or on someone near to them. In classical drama, this will typically involve the protagonist experiencing an inner conflict that forces them to choose between love and honour or inclination and duty.
The Cornelian dilemma is named after French dramatist Pierre Corneille, in whose play Le Cid (1636) the protagonist, Rodrigue, is torn between two desires—that of keeping his girlfriend Chimène's love and that of avenging his father, who has been wronged by Chimène's father. Rodrigue can either seek revenge and lose the love of his beloved, or renounce revenge and lose his honour.” (Quoted from Wikipedia)
CRM – customer relationship management
DCF – discounted cash flow
Hobson´s choice - “a free choice in which only one option is offered. As a person may refuse to take that option the choice is therefore between taking the option or not; "take it or leave it". The phrase is said to originate from Thomas Hobson (1544–1631), a livery stable owner at Cambridge, England. To rotate the use of his horses he offered customers the choice of either taking the horse in the stall nearest the door or taking none at all.” (Quoted from Wikipedia)