Business negotiations - The Art

Business Negotiation

INSPIRE ONE CONSULTING Sustaining Value. Boosting Profits

Cer$fied Supply Chain Manager

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Negotiation: is constructive dialogue between two or more people or entities with the sole aim of reaching mutually acceptable comprise and steering clear of continued disagreement or dispute or barriers to future communication.

In the process of negotiation, not only are different opinions are taken into account, but

influential factors like individual needs, objectives, interests as well as respect for differences in background and culture.

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Sustaining Value. Boosting Profits


Negotiation:1.  Goals & Objectives2.  Negotiation drivers3.  Negotiation Process

a)  Preparationb)  Discussionc)  Agreement

4.  Interpersonal Skills5.  Negotiation Principles6.  Strategic Thinking



Goals & Objectivesv  Discussion of business contracts or continued relationship

between buyer and seller after a successful sales presentation or transaction respectively.

v  Resolving a dispute which was an outcome of either party’s non fulfillment of their obligations as per earlier arrangement

•  Delayed or non payment for goods or services already delivered and accepted by recipient as in line with actual purchase order

•  Damaged goods or services delivered inconsistent with what the buyer actually ordered.

•  Delayed or late delivery of goods or services beyond the contractual time line.



Negotiation : 1. Goals & ObjectivesCer$fied Supply Chain Manager

Food for thought; v  Negotiation has more to do with persuasion rather than the use

of crude power (bullying or competitive bargaining or Win - Lose) and having both parties feeling good about the achieved outcome (Win – Win).

v  It involves a collection of behavior : communication, sales, marketing, constructive research, psychology, sociology, assertiveness, attention to detail and conflict resolution.

v  Seller will always try to increase their negotiating power through the buyer’s desire to buy while the buyer tries to increase theirs through the seller’s desire to distribute.




Food for thought; cont’dv  Does the other party always seem to know more about you and

your needs than you do about them?

v  Why is it that the other party does not seem to be under the same kind of pressure of time constraints and deadlines?

v  Does the other party seem to have more power, sense of the preparedness, set outcome and authority than you feel you have?

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The most important step you take in a Negotiation is… Understanding what the other party wants and

Knowing what you can live without !



A.  Organizational Needs;

v  Profits and ROI

v  Maintain fair pricing (more value at lower costs)

v  Business flexibility

v  Reliable partnerships (procurement & distribution)

v  Improve product quality

v  Sustained growth in market share



Negotiation : 2. Negotiation Drivers (Needs)Cer$fied Supply Chain Manager

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B. Personal Needs: Abraham Maslow’s hierarchy of needs as a means to motivation, thought process or

decision making.



Human Needs and Behavior (Maslow’s Hierarchy Chart

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Level Needs Mo+va+on & Behavior Level 5 – Self Actualization Fulfillment of Goals & Dreams

Need for Self fulfillment, realizing inner potential and putting experience to purpose

Creativity & Spontaneity Being a self starter, dedicated, enjoying challenges & acceptance of facts

Level 4 – Self Esteem Self Respect & AcceptanceNeed for Reputation, prestige, significance and recognition in society

Intellect & Achievement Display talents & Skills, Have self confidence, appreciate attention

Level 3 – Love & Belonging

Communication & ResponseNeed to belong and to love as well as to be loved. Desire for affection and gratitude

Validation & AcknowledgementsJoin and to be active in clubs, socialization

Level 2 – Safety & Security Health & SecuritySecurity of Body, Employment, Resources, Morality & Family

Survival SkillsWork, Save for the future, improve skills and talents, be responsible

Level 1 – Physiological Needs

Physical SafetyBreathing, Water, Food, Sleep, Sex, Excretion (Biological imperatives to survive)

Basic Survival SkillsKeep yourself healthy, hunger free, clothed and rested in a shelter.



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C. Ladder of Inference: the thinking process that we go through, usually without realizing it, to get from a fact to a decision or action (sometimes subconsciously). From data piece to an observation, then to a deduction and then conclusion or action


Negotiation : 2. Negotiation Drivers (Thought Process)Cer$fied Supply Chain Manager

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a)   Preparationb)  Discussion (problem solving skills, negotiation tact)c)   Agreement and Implementation (procedure, timeline,

constraints, options, expectations, strategic thinking and action plans)


Negotiation : 3. ProcessCer$fied Supply Chain Manager

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i.   Background Information : •  Did we do any Research about the Negotiation?

o  Detailed research about the content, priorities, downsides, moral obligations and confidentiality relative to the negotiation.

o  Do we have experience with this counterpart or kind of negotiation?

o  What is the composition of the team required for the negotiations?

o  Are there any time constraints that could limit exploiting all possibilities?

o  What are our limitations and strong points which the other party could strategically exploit and vice versa?


Negotiation : 3. Process – a) PreparationCer$fied Supply Chain Manager

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i.   Background Information : •  Did we do any research or fact finding? Cont’d..

o  What is our company policy regarding the negotiation content, terms and process?

o  What is our boundary of settlement?o  What are the legal boundaries and constraints?

•  What triggered the idea of the negotiation? o  Why and who called the negotiation meeting?o  How much information has so far been shared with the

other party ?o  What’s the tipping point between a negotiation and

competitive bargainINSPIRE ONE CONSULTING



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i.   Background Information cont’d : •  What is the mode of communication?

o  Do we have any written communication confirming content, meeting place, settlement terms, authorized personnel, agenda prioritization, allotted time and process of negotiation?

o  How does the history of communication affect our side of the negotiation table?

o  How do we record the progress or point to point outcome of the negotiation?



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i.   Background Information cont’d : •  Who will be your negotiating counterpart in relation to their

psyche, position and decision making capacity or influence in the counterpart company or entity?o  Are there any cultural formalities to consider?

²  Greeting type, language of communication (including voice tone, body movements, eye contact, etc.)…

²  Time management is a major step towards trust, honor & credibility

o  What is the relationship between the other party & our overall business goals?



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ii.   Goals and Direction: •  What is the purpose and ultimate goal of the negotiation?

o  Are the goals clearly outlined, timeframe to achieve, related costs, information boundaries and short or long term gains/pitfalls?

•  What kind of Negotiation strategy are we pursuing?

o  Competitive Bargaining : usually conducted in a situation of conflict within a short timeframe by independent, one sided takers and leads to one side conceding defeat which is a WIN – LOSE situation (one side perceives outcome as positive).



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•  What kind of Negotiation strategy are we pursuing ; cont’do  Competitive Bargaining; cont’d

ª  Is simple, straightforward and involves a few issuesª  Used in scenarios where supply or demand favors single

partyª  When there is an imbalance of needsª  Where monopoly situations exist.ª  Applicable in situations where you don’t expect to deal

with the other party again. ª  One side has the power, controls the resources and

opportunity of alternatives.



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•  What kind of Negotiation strategy are we pursuing ; cont’do  Joint Problem Solving (JPS) : conducted in a spirit of

cooperation to resolve a mutually conflicting situation and come out the other side with a Win – Win (both parties emerge feeling they have achieved their objectives).

JPS is applicable in scenarios where ;ª  Each party clearly understands that they have to “sacrifice

something to achieve their objective” in the negotiationsª  Mutual trust exists based on business inter-dependency



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•  What kind of Negotiation strategy are we pursuing ; cont’dJPS Tactics will usually ensure;

ª  Starting with easy items and difficult issues are treated as problems to resolved for mutual benefit

ª  Initiative to cooperate is offered through information sharing, open minded discussions and common ground agreement

ª  Disagreements postponed for later discussion and any element of bargaining turned into JPS

ª  Determining “what’s in it for them” and transform it into “trust me this is good for you” and “this is the only way you can get it”

ª  Handling major differences with patience, rationale, tact, unemotionally, in good timing and with detailed planning.



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•  What kind of Negotiation strategy are we pursuing ; cont’dJPS Negotiating behavior will usually cover;

ª  Highlighting Win-Win scenarios as they appear and sacrifice credit for mutually beneficial solutions in order to strength relationships.

ª  Maintain track authority incase other party sees cooperation as a sign of weakness.

ª  Offering help solve underlying single sided (other party’s) problems shows commitment to mutual goals

ª  Communication skills to assert the benefits (detailed short/long term) as well as pitfalls of non-cooperation are of great value in an effective JPS negotiator.



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•  What kind of Negotiation strategy are we pursuing ; cont’dJPS Negotiating behavior will usually cover; cont’d…

ª  Establish credible reason for movement within your settlement range. In other words, prepare for conclusive justification of your movement from your “ideal” to the “preferred outcome”o  Maximum supportable position > Ideal Outcomeo  What We’re really asking > Preferred Outcomeo  Last Acceptable Agreement > Minimumo  Deal Breaker > No Deal this time

Examples of reasoning for settlement range movement;o  Because of our long term relationship & future businesso  As a volume discount or packed dealo  To get the process moving (inventory & time costs)



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Each party will put forward their detailed understanding of the documented issues on the negotiation agenda, providing each other equal opportunity to do so. Core aspects include but not limited to;

•  Set the mood : Introduction of the parties involved in their capacities and their obligations related to the matters to be negotiated.

•  Diving into the details of the discussion : highlighting the core purpose, the desired mutual outcome, sometimes the duration of the discussion, the root causes (without blaming any fingers), prioritization of the problems (from simple/high benefit to highly conflicting/minimal benefit), method of documenting the negotiation minutes, implementation of the action plan, etc.


Negotiation : 3. Process – b) DiscussionCer$fied Supply Chain Manager

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Core aspects include but not limited to;•  Questioning at the right time, with the right context and voice tone ;

o  Will get you all the required information to go forwardo  Will help you maintain control of the conversationo  Can express an interest in the other party’s interpretation and

their views on the direction of the matters at hando  Will allow for clarification while encouraging further thought or

reflection about the underlined goals

Questioning skills cover a number of techniques;Structured and Productive Questioning : it’s usually a good idea to inform the respondent of this before you start, by giving some background information and reasoning behind your motive of asking questions. By doing this the respondent becomes more open to questions and willing to answer honestly



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Core aspects - Questioning skills; cont’d•  Encouraging participation : one way is to redirect a question

already on the table to get another perspective as a request to apply the respondent’s professional experience towards a view on problem solving.

•  Using Silence : a pause of at least 3 seconds just before raising the question can help emphasize the importance of what is to be asked

•  Lean Questioning : although sometimes stressful to the respondents, the 5 Whys methodology has proved to be an effective way of root cause analysis. It involves clear, consistent and repeated questioning based on the previous answer to peel away the layers of symptoms to root of the problem



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Core aspects include but not limited to; cont’d•  Listening : ability to accurately receive and interpret messages

in the communication process. Good listening skills can lead to; better customer satisfaction, greater productivity with fewer mistakes, increased sharing of information that in turn can lead to more creative and innovative work.

o  Failing to listen closely; will only let you hear what you chose to hear, will not be able to recognize the difference between a statement, an objection, order or question.

o  Listen patiently for ideas rather than words, without prejudice (impartiality), and understand the other person’s point of view (Keep Really Calm).



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Core aspects – Listening & Clarification; cont’d•  Listening cont’d:

o  Look out for the non- verbal communication because it is the reflection of emotion, trust, acknowledgement, natural or culture specific interpretation and some underlying information.

•  Clarification involves offering back to the speaker the essential meaning, as understood by the listener, of what they have just said thereby reassuring the speaker that the listener is attempting to understand the messages they are expressing and resolving any areas of confusion or misunderstanding.



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Common Stages;


Problem Introduction

Resistance

Hard Bargaining

Strategy Reform

Decision making

Action Plan

Progress Review


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v  Work out the details of the negotiation clearly and ensure understanding of content, obligations and implications (procedure, timeline, constraints, options, expectations, boundaries…)

v  Negotiators ratify the agreement with their respective sides

v  Ratification may be by the CEO, legal or financial management team

v  Follow up to implementation is very important as it sets the stage for the kind of negotiation the next one is going to be.

o  It is an opportunity for relationship and credibility building as you pledge to honor your part of the agreement within the agreed terms and conditions.


Negotiation : 3. Process – c) AgreementCer$fied Supply Chain Manager

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BE SMART

Specific : All points of the Agreement are intricately tied down

Measurable : you have defined all parameters in their entirety

Achievable : All the parameters are attainable as per terms & conditionsRealistic : targets and timings specified are within reason

Timed : All parameters are time relaxed


Negotiation : 3. Process – c) AgreementCer$fied Supply Chain Manager

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Skills that can give you an edge in a negotiation; v Effective Verbal communication.

v Listening

v Non Verbal Communication

v Reducing misunderstandings (Reflection & Clarification). v Relationship Building based on mutual respect.

v Problem Solving.

v Decision Making.

v Assertiveness.

v Dealing with Difficult Situations


Negotiation : 4. Interpersonal SkillsCer$fied Supply Chain Manager

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1.  Never give a concession – trade it…reluctantly

2.  Leave the other party feeling they have done a good deal

3.  Watch out for danger phrases

4.  Once you start backing down, it’s difficult to climb back up

5.  Maintain a sense of calm & neutrality in the early stages of the negotiation

6.  Absorb attacks by taking notes, nodding (indicate understanding but not necessarily acceptance)


Negotiation : 5. Simple PrinciplesCer$fied Supply Chain Manager

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7.  If you want time to think – read your notes or make a phone call

8.  Never make an offer till you have the entire cost of what the seller/buyer requirement is all about

9.  Remember even deadlines are negotiable

10.  Anything that the other side accepts as a “constant” can nearly always be turned into a variable and vice versa.


“It’s all about Settling the past to secure the future for generations to come”

Negotiation : 5. Simple PrinciplesCer$fied Supply Chain Manager

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Strategy : is deciding where you want to be and how you’re going to get there, and then taking the action necessary to do so. So what do you need to do to develop a strategy?

First, you need to know where you are now (Current position). So gather as much information as you can about where you really are, and don’t accept anecdote as truth. Demand evidence (data driven)!

Second , identify the ideal future position at a particular point in time. The more detail you can include the more you know what you want (Visualization, Charts, Process Mapping, etc. are most commonly used in Lean improvement processes)


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6. Strategic ThinkingCer$fied Supply Chain Manager

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Next, from your ideal future position, think about what is really important to you or the company. Where do you or it really need to be? Prioritization. Now it’s time to work out the intermediate milestones from ‘now’ to ‘then’.

Now you know where you need to be in five years’ time, where would you need to be in one, two, or three years in order to get there? Concentrate on ‘milestones’ rather than ‘actions’, that is, things you will have achieved, rather than what you’re going to do in practical terms.

Finally, it’s time to work out actions and Implement: what you need to do to get from ‘now’ to your first intermediate milestone, then from there to the next and so on. Always review your progress!


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6. Strategic ThinkingCer$fied Supply Chain Manager

