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Contract Negotiations

Managing a Win-Win Situation

By Steve Aranoff & Robert FitzPatrick

In the sales process, whether we’re looking to sell print to a print buyer, sell capital equipment to a printer, or negotiate a partnership agreement to sell to another company, coming to the final agreement generally results from a negotiation. As we have recently been involved in a major re-negotiation of a partnership between two manufacturers, it really got us to think about what a negotiation is, and how it should best be handled.

We have always believed that negotiation and the resulting decision making is part of a process which should move an individual or a group toward common goals. However, people are not alike in their values and beliefs. There can be huge differences even among people within a single organization, and perhaps even greater differences between people in different organizations. In addition, organizations generally take on their own personalities and these cultures may be quite different from any other organization.

So, in successful negotiating, we must be able to operate across such boundaries that involve differences in expectations, perspectives, competing values, and strikingly different goals. Within your own organization, it may not be such a problem to influence a group that should be essentially in agreement; it is quite a different thing to influence another group with goals that may be in conflict with those you want to pursue.

What is a Negotiation All About?
Negotiation is a process whereby two persons or groups strive to reach agreement on issues or courses of action where there is some degree of difference in their interest, goals, values, or beliefs. The job of the negotiator on each side is to build credibility with the negotiator on the other side, find some shared interests, learn the opposing position, and share information that will persuade the other side to agree to an outcome.

One element of common ground that might be advantageous to a negotiator is a common business culture. Members of groups, such as printers or print vendors, might have sufficient shared expectations that reduce conflict and facilitate a collective understanding more easily. In one-on-one negotiation there is no third party, or facilitator, to help with the process; the party you must convince is basically your opponent.

Many failures in negotiations result from misunderstanding the basic fact that right and wrong are defined by each of the parties, not by any third party; and decisions can be developed and implemented only through the relationship and the reasoning together of the two parties.

So, negotiation in its purest sense is bargaining, a process in which two different sides attempt to resolve their differences by finding one set of goals or objectives that each can accept. When this happens, they have found common ground.

There are two classic approaches in this sales negotiation process to get to a yes. These two different bargaining concepts, which we will call positional negotiation and principled negotiation, can be used depending upon the background and skill of the parties involved.

Positional Negotiation
Positional negotiation is essentially adversarial. The negotiators see the process as win-lose, in which any gains by the opponent are losses by the other. Positional negotiation can be illustrated on a personal basis by the bargaining that might accompany the purchase of a new digital printer. The salesman has a list price to begin with. The customer has a desired purchase price. Each wants to make a deal as close to his own figure as possible. If the salesman’s commission is based on the profit margin achieved, it comes directly from the customer’s pocket. The customer wants the lowest possible profit margin, directly taking money from the salesman’s commission. Each gains at the other’s expense. It is a true zero-sum situation and certainly adversarial.

This is an example of hard positional negotiation. The negotiators are demanding and unyielding. Positional negotiation can also be soft. A soft bargainer is quite willing to make concessions to keep the ball rolling. Soft bargaining can be quick, as the two negotiators start at different positions in a bargaining range and compromise toward the middle, as this was where they both expected to end up. How-ever, soft bargainers run a great risk if they happen to encounter a hard bargainer. Furthermore, both hard and soft bargaining are still zero-sum in reality, as both sides must still split a fixed pie in order to get what they want to achieve.

The problem inherent in this positional negotiation is that an opponent may become an actual enemy by a demeaning personal attack. We consider this a big mistake. The goal of every effective negotiator is to get the opponent onto their turf while also moving onto their side of the bargaining table—so their viewpoints will ultimately be similar.

If the negotiation is successful, each negotiator will believe that the agreement is a good one, a so called win-win agreement. So, if you are a good negotiator, your former opponent is going to be advocating a bit of your arguments to his/her boss, and you will be doing the same thing for him/her with your boss. You both win by understanding and adopting parts of each others needs.

Principled Negotiation
Instead of being adversarial, principled negotiation works more like team decision making. In our consulting practice, we have found that there are four specific conditions that are essential if a principled negotiation is to have a successful outcome. There must be mutual trust; a positive relationship; shared interests, goals, or objectives; and a satisfactory position for possible agreement.

Mutual trust comes from experience, either within the negotiation process or from previous contact. If it does not already exist, it must be built. Clearly, one of the objectives of a negotiator is to establish his/her credibility in the eyes of the other negotiator. Your presentation of facts and other evidence must be seen as both an honest app-raisal of the situation and a convincing one.

A positive relationship with the other negotiator is essential if you are to have this kind of influence. This sounds difficult, especially in view of the fact that negotiation has the potential for conflict. However, our experience is that it is both possible and required.

A positive relationship makes possible the development of common strategy; in principled negotiation this means developing similar goals and objectives—instead of negotiating against each other. Basically, the negotiators must form a new team and negotiate together against the problem.

Finally, a position of possible agreement must exist. As a negotiator, you must know what your own minimal position is. This should be both the least favorable agreement you would accept, and the most favorable one you believe the other negotiator would accept. A negotiator must also have an alternative path if things go wrong.

In advance, each negotiator must decide when it is best to cease negotiating and to be satisfied, or call it off. Although the alternatives may change slightly as negotiations proceed, a negotiator will use the alternative agreed upon by his team as a backup throughout the negotiation process. With an alternative in mind, a negotiator never feels cornered or under pressure to yield to pressure from the other side—the predetermined alternative has defined the point at which negotiations are no longer profitable and may be ended.

Once you have established the necessary conditions for negotiations, the principled negotiation will have allowed you to separate the people from the problem; focus on interests, not positions; and generate several options before deciding what to do.

Options allowing both parties to gain something are the best opportunity to expand the pie so that both sides can win. The primary obstacle to expansion of the pie is that convergent thinking may have taken place too early in the process. For example, taking a narrow view of what is possible, or focusing upon obstacles or requirements rather than on possibilities. The successful principled negotiator must do everything possible that keeps options open and deliberately challenges tendencies toward closure. To make this happen, the negotiator must concentrate on actually leading the process, as opposed to being a participant in it.

As in creative problem solving, as long as options are kept open, many avenues for creative ideas may appear. These can result in a win-win agreement whereas one might not have ended quite so well through positional negotiation. One interesting example of using this technique concerns an aging baseball player who wants a salary increase because he is confident he can perform well in the coming season. His manager does not agree. The player offers to bet on his belief. The manager agrees and a deal is struck. Each gets what he wants in the negotiation, by mitigating the level of risk that each is willing to take.

The manager and player could have become dogmatic about their positions. Instead, every effort was made to de-personalize the process, to make it as far divorced from a win-lose conflict as possible, and based on fair principles. Properly principled negotiation was used to solve a problem in which initially opposing viewpoints could have been a disaster. Expanding the pie to include actual performance created options that could be better shared by both sides. As in the baseball example, if you succeed, then both sides will be much better off than by taking the adversarial road.

Sep2007, Digital Output

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