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Negotiation has often been viewed, within organizations, as a process which is comprised of a series of distinct, separate events, independent of one another. Negotiations have been seen to live or die on the skills of the individual negotiators. This model suggests that negotiation can be grouped and supported just like any other organizational function.
Organizations need to think systematically about their negotiating activities. If co-ordinated properly, the thousands of negotiations that a typical organization undertakes every year can form a coherent policy. While this may seem an overwhelming proposition, Danny Ertel, a Founding Partner of Vantage Partners LLC, (a consulting spin-off of the Harvard Negotiation Project), suggests that four changes in organizational perspective can facilitate the process. [1] These changes are:
- establish an organization-wide negotiation infrastructure
- broaden the measures used to evaluate negotiators’ performance
- distinguish between an individual deal and an ongoing relationship between the parties
- make negotiators feel comfortable walking away from a deal
The use of these relatively simple steps should help organizations systematize their negotiating processes, which should bring about closer relationships with suppliers and customers.
Establish an Organization-Wide Negotiation Infrastructure
The establishment of an organization-wide negotiation infrastructure should produce powerful results by breaking down the assumption that every negotiation is an individual process. This means that negotiations are no longer immune to the control of the organization, or to the concept of being part of an organized whole.
Broaden the Values Used to Evaluate Negotiators’ Performance
The majority of measures for evaluating negotiators’ success revolve around cost and price. These are the immediately obvious factors by which to measure a successful negotiation. However, the use of these measures places undue emphasis on the negotiation succeeding only in these terms. Negotiators end up thinking in terms of zero-sum games; in order for them to achieve the desired best-price, or best deal, the other party has to lose. This leads to a lack of interest in negotiating a more productive deal, which might focus on elements other than price. A negotiation could be successful through focusing on quality, time to delivery, or improved communication, all of which can increase the benefit to the negotiator’s organization, but in a less immediately obvious way than face-value price.
Focusing on elements such as this can establish a firmer relationship with suppliers and/or customers, who will not feel that they have been forced into an unprofitable position by the negotiations. In the future, they are far more likely to cooperate sympathetically if any previous dealings have dealt with issues other than cost and price. Negotiation should bear the long-term relationship between the parties in mind.
Ertel suggests a seven point measuring system for negotiators, which draws the focus away from limiting factors:
- Relationship – has the negotiation built a developing relationship with the other party, enabling future interactions?
- Communication – has the negotiation established a constructive, communicative environment?
- Interests – has the negotiated agreement satisfied the organization’s interests, while at the same time satisfying the other party’s interests to an acceptable level?
- Options – has the negotiation considered a variety of options and potential solutions that could offer gains for both parties?
- Legitimacy – having considered a number of options, has the negotiation reached a decision that can be justified by both sides?
- BATNA – has the negotiated deal been measured against the Best Alternative To Negotiated Agreement (BATNA)? Does the negotiated deal serve the organization’s interests better than the BATNA?
- Commitment – has the negotiation resulted in a set of workable commitments for both sides?
The use of these seven criteria for evaluating the success of negotiations can have a positive effect on the way in which negotiators approach a negotiation, as it removes the overriding concern of cost and price.
At the same time, the way in which negotiators are rewarded can be based upon these factors as a further incentive to reach more creative, broader negotiation results.
Distinguish Between an Individual Deal and an Ongoing Relationship Between the Parties
It is important that negotiators can distinguish between the deal that is being worked on at present, and the overall relationship with the other party. It can be too easy to get confused between the fear of jeopardizing a relationship with the other party by pushing too hard in a negotiation, and the fear of jeopardizing a negotiation by worrying too much about the relationship with the other party. This confusion can be unproductive, leaving the other party free to skilfully manipulate the situation.
Giving discounts or offering concessions in order to hang on to the future relationship with the other party may well work in the short term, but in reality all it does is teach the other party that they can expect concession after concession in order to keep their business. A precedent is established, which is very difficult to rescind.
Ertel points out that the problem lies in the way in which the deal and the relationship are linked in negotiators’ minds. Rather than the link being viewed as when one is improved, the other has to be sacrificed, the reality is that deals and relationships are more likely to improve or deteriorate together. Strong relationships create a trust between the parties, leading to more valuable agreements, while disadvantageous deals, to either party, create an atmosphere of distrust between the parties, meaning that any future deals are less likely to work.
Negotiators need to look at the deal and the relationship separately. Concentrating on a strong relationship between the parties will help any shaky deals pass through more smoothly, and closing a deal which has advantages for both sides will enhance the relationship.
Make Negotiators Feel Comfortable Walking Away From a Deal
The prevailing climate in organizational negotiations is one that assumes that closing the deal is the most important aspect of the negotiation. Time and money have been invested in setting up the negotiation, and to walk away with nothing to show for that effort is seen as failure. This forces negotiators into thinking that completing the deal is more important than obtaining a good deal.
In order to avoid this situation, negotiators need to be made to understand that they have alternatives to the deal. BATNA, introduced nearly 20 years ago by Roger Fisher and William Ury, shows that negotiation results can be improved by having a best alternative to the negotiated agreement. [2] Quite simply, when crunch time arrives, if the BATNA is better than the negotiated agreement, the negotiator should be liberated by organizational policy to walk away from the deal.
The BATNA means that negotiators can view their role as a decision-making role, rather than a deal-closing role. Rejecting a deal because it fails to meet the standard of the BATNA can be seen as a success. Reaching a deal that is not as good as the BATNA, on the other hand, is a failure.
BATNA’s need to be carefully considered before any negotiations begin, and if there is no immediately obvious BATNA, one needs to be created. Management needs to buy into the concept fully. It is no use if the senior management put forward a BATNA policy, only to have middle managers tell their negotiating team to keep concentrating on closing the deal. The organizational policy has to be fully changed to reflect this.
Ertel realizes that these changes have to be made gradually, with support for the negotiators so that they don’t feel alienated and confused about policy. The main key is putting the negotiation infrastructure in place, which will ensure that the changes in policy are followed through and backed up.
References[1] D. Ertel, ‘Negotiation as a Corporate Capability’, Harvard Business Review on Negotiation and Conflict Resolution (Harvard Business School Press, 2000).
[2] Roger Fisher & William Ury, Getting to Yes: Negotiating Agreement Without Giving In, 2nd Edition, (Arrow, 1997).
