Negotiations

Negotiation

DICTIONERY MEANING:

The act or process of negotiating: successful negotiation of a contract; entered into labor negotiations.

BUISNESS MEANING:

Process of bargaining that precedes an agreement. Successful negotiation generally results in a Contract between the parties.

REAL ESTATE TERM:

The process of bargaining that precedes an agreement. Successful negotiation generally results in a Contract between the parties.

Example:

 Nelson wishes to purchase a property from Newman. Nelson is willing to pay up to a certain price and desires certain Conditions placed on the sale. Newman will accept anything over a certain price and may be willing to help finance the purchase for a higher price. In negotiation Nelson and Newman attempt to come to an agreement over the price and conditions. When they agree, a sales contract is executed.

Negotiation is the process of two individuals or groups reaching joint agreement about differing needs or ideas. Oliver (1996) described negotiation as "negotiators jointly searching a multidimensional space and then agreeing to a single point in the space."

Negotiation applies knowledge from the fields of communications, sales, marketing, psychology, sociology, politics, and conflict resolution. Whenever an economic transaction takes place or a dispute is settled, negotiation occurs; for example, when consumers purchase automobiles or businesses negotiate salaries with employees.

Negotiation Styles:

Two styles of negotiating, competitive and cooperative, are commonly recognized. No negotiation is purely one type or the other; rather, negotiators typically move back and forth between the two styles based on the situation.

On one end of the negotiation continuum is the competitive style. Competitive negotiation— also called adversarial, no cooperative, distributive bargaining, positional, or hard bargaining— is used to divide limited resources; the assumption is that the pie to be divided is finite.

Competitive strategies assume a "win-lose" situation in which the negotiating parties have opposing interests. Hostile, coercive negotiation tactics are used to force an advantage, and renegotiations binding agreements are not allowed. Concessions, distorted communication, confrontational tactics, and emotional ploys are used.

Skilled competitive negotiators give away less information while acquiring more information, ask more questions, create strategies to get information, act firm, offer less generous opening offers, are slower to give concessions, use confident body language, and conceal feelings. They are more interested in the bargaining position and bottom line of the other negotiating party, and they prepare for negotiations by developing strategy, planning answers to weak points, and preparing alternate strategies.

A buyer-seller home purchase transaction illustrates competitive negotiating. The buyer gathers information to determine home value, quality, expenses, and title status. The seller gathers information to ensure that the prospective buyer qualifies for the loan. The parties negotiate concessions regarding home repairs, items to remain in the house, closing dates, and price. The negotiations stall as the buyer and seller disagree on a closing date; the seller retaliates by keeping the buyer out of the home for several days after the closing date. As a consequence of the competitive strategies used, the relationship between the buyer and seller suffers; however, the end result (sale and purchase of a home) satisfies both parties.

On the other end of the negotiating style continuum is cooperative negotiating, also called integrative problem solving or soft bargaining. Cooperative-negotiation is based on a win-win mentality and is designed to increase joint gain; the pie to be divided is perceived as expanding. Attributes include reasonable and open communication; an assumption that common interests, benefits, and needs exist; trust building; thorough and accurate exchange of information; exploration of issues presented as problems and solutions; mediated discussion; emphasis on coalition formation; pre-negotiation binding agreements; and a search for creative alternative solutions that bring benefits to all players. The risk in cooperative negotiating is vulnerability to a competitive opponent.

Cooperative negotiators require skills in patience; listening; and identification and isolation of cooperative issues, goals, problems, and priorities. Additionally, cooperative negotiators need skills in clarifying similarities and differences in goals and priorities and the ability to trade intelligently, propose many alternatives, and select the best alternative based on quality and mutual acceptability.

Cooperative negotiating might be used, for example, in a hiring situation. An employer contacts a candidate to encourage the candidate to submit his or her credentials for a job opening. Trust is built and common interests are explored as the employer and candidate exchange information about the company and the candidate's qualifications. Creative solutions are explored to accommodate the candidates and employer's special circumstances, including work at home, flexible scheduling, salary, and benefits. The two parties successfully culminate the negotiations with a signed job contract.

The Negotiation Process:

Stages in the negotiation process are (1) orientation and fact finding, (2) resistance, (3) reformulation of strategies, (4) hard bargaining and decision making, (5) agreement, and (6) follow-up (A cuff, 1997). For example, a consumer purchasing an automobile investigates price and performance, and then negotiates with an agent regarding price and delivery date. Resistance surfaces as pricing and delivery expectations are negotiated. Strategies are reformulated as the parties deter mine motivation and constraints. Key issues surface as hard bargaining begins. Problems surface, and solutions—such as creative financing or dealer trades—are created to counter pricing and delivery problems. After details are negotiated, the agreement is ratified. After the sale, the agent may follow up with the buyer to build a relationship and set the stage for future purchase and negotiation. The six stages of the process would be approached differently depending on where the negotiators reside on the style continuum.

Basic strategies, both cooperative and competitive, that can be applied in the negotiation process are the following:

• Use simple language.
• Ask many questions.
• Observe and practice nonverbal behavior.
• Build solid relationships.
• Maintain personal integrity.
• Be patient.
• Conserve concessions.
• Be aware of the power of time, information, saying no, and walking away.
• Pay attention to who the real decision maker is, how negotiators are rewarded, and information sources.
• Listen actively.
• Educate the other party.
• Concentrate on the issues.
• Control the written contract.
• Be creative.
• Appeal to personal motivations and negotiating styles.
• Pay attention to power tactics.
• Be wary of such unethical tactics as raising phony issues; extorting; planting information; and making phony demands, unilateral assumptions, or deliberate mistakes.

The following summarize strategies that might be used in various stages of negotiations:

Initial Stages:

• Plan thoroughly.
• Identify and prioritize issues.
• Establish a settlement range.
• Focus on long-term goals and consequences.
• Focus on mutual principles and concerns.
• Be aware that "no" can be the opening position and the first offer is often above expectations.
• Be aware of the reluctant buyer or seller ploy.

Middle Stages:

• Revise strategies.
• Consider many options.
• Increase power by getting the other side to commit first.
• Add credibility by getting agreements in writing.
• Be wary of splitting the difference.
• To handle an impasse, offer to set it aside momentarily.
• To handle a stalemate, alter one of the negotiating points.
• To handle a deadlock, bring in a third party.
• When asked for a concession, ask for a tradeoff.
• Be wary if the other party uses a "higher authority" as a rationale for not meeting negotiating points.
• Be aware of the "vise" tactic ("you'll have to do better than that").

Ending Stages

• Counter the other party's asking for more concessions at the end by addressing all details and communicating the fairness of the deal in closure.
• Counter a persistent negotiator by withdrawing an offer.
• Do not expect the other party to follow through on verbal promises.
• Congratulate the other side.

International Negotiating:

In international negotiations, obstacles arise when negotiating teams possess conflicting perspectives, tactics, and negotiating styles. Negotiators often assume that shared beliefs exist when, in reality, they do not. Examples are different uses of time; individualism versus collectivism; different degrees of role orderliness and conformity; and communication patterns that differ widely worldwide. These cultural factors affect the pace of negotiations; negotiating strategies; degree of emphasis on personal relationships; emotional aspects; decision making; and contractual and administrative elements (Acuff, 1997). The goal of the negotiator should be to "look legitimately to the other side by their standards" (Fisher, 1984).

Collective Bargaining:

Collective bargaining frequently requires a third party to help the parties reach an acceptable solution. In these situations, such strategies as mediation, arbitration, and conflict resolution are used.

EVERYTHING IS NEGOTIABLE:

It's all negotiable. Every new job - every performance review, in fact - is an opportunity to negotiate base salary, various kinds of bonuses, benefits, stock options, and other incentives that add to job satisfaction and provide financial security. Taking control of your job search before your job offer and conducting a smart search that takes into account more than just financial considerations can also lead to that elusive condition called happiness.

Are you prepared to negotiate for happiness? The negotiation process is an opportunity to define, communicate, and achieve what you want out of your job offer. But to get offered the right job that pays what you deserve, you'll need to do your homework. The first step in the negotiation clinic is to understand the negotiation basics.

Negotiation requires gathering information, planning your approach, considering different alternatives and viewpoints, communicating clearly and specifically, and making decisions to reach your goal. In her book, Job Offer! A How-to Negotiation Guide, author Maryanne L. Wegerbauer describes how each party in a negotiation can fulfill specific needs and wants of the other party, a concept called "relative power." According to Wegerbauer, understanding your strengths and resources; being able to respond to the needs of the other party; and knowing your competition enable you to assess your bargaining position more accurately.

Learn the power factors:

What is your power over the other side of the table? Relative power, Wegerbauer says, is a function of the following.

Business climate factors:

- Overall state of the economy and the industry in which you compete
- Overall unemployment rate and the general employment picture
 Demand for industry- and profession-specific knowledge and skills

Company factors:

- Profitability

- Position in the business cycle (startup, growing, stable, turnaround)

Hiring manager factors:

- Urgency of the company's need to fill the position

- Decision-making authority

- Staffing budget

Applicant factors:
- Other opportunities in the job offer
- Technical expertise, unique knowledge/skill set
- Resources (financial depth, networks, etc.)
- Level of competition/availability of other candidates
- Career risk of the job offer

Plan and communicate:

A negotiation is composed of two major steps: planning (research and strategy) and communication (information exchange and agreement). In the planning step, get as much information as you can up front and, using both the company's written and unwritten signals; map your skills against what the company values.

Give it time:

Timing is also important. Remember that the best time to negotiate is after a serious job offer has been made and before you have accepted it. Once you are clear about the initial offer, you can express interest and even enthusiasm, but ask for more time to consider the job offer. Wegerbauer suggests that this request is made "in light of the importance of the decision." Sometimes you can split up the negotiating session into two meetings: one to firm up the job design and responsibilities and the second to go over compensation and benefits. The key message here is not to make an impulsive decision. If they really want you, there's time.

Consider the alternatives:

You should be prepared with a rationale for everything to strengthen your position. Counteroffers are an expected part of many negotiations, so be sure to remain flexible. Keep in mind that different companies can give negotiations more or less latitude. Smaller companies may be more flexible than large, bureaucratic companies. Unionized companies usually have very little room for individual negotiations.

Negotiate for a win-win:

Remember that the negotiation is not about strong-arm tactics or win/lose. It is a two-way process where you and your prospective employer are each trying to get something you need. In a negotiation, you're both designing the terms of a transaction so that each of you will receive the maximum benefit from the final agreement.