Topic 6.

Negotiation - a form of business communication

6.1. The concept of negotiation

6.2. The characteristics of negotiation
6.3. Types of negotiations in organizations
6.4 Models of negotiations

What Is a Negotiation?

Brief History: The word „Negotiation‟ is derived from the Latin word „Negotiationem‟
meaning Bargaining. The act of Negotiation is synonymous with the evolution of the needs and
wants of human individuals. There are absolute evidences that suggest that the early men used
the act of negotiation in conveying their thoughts and ideologies towards the member of their
clans. They used it to acquire possession of a particular need, keeping in view of others priority
as well. The civilization of man soon manifested in powerful negotiations to bring in harmony
and co-operation among them. The act of bargaining soon evolved into Consultation. The further
democratic development of Consultation led to Negotiation.
The history provided evidences relating to the negotiations taking place between buyer
and seller, kings of territories, social gatherings, etc. What is Negotiation? The term
„Negotiation‟ actually means a discussion intended to produce an agreement. This discussion
may encompass parties whose needs being different, come to an interface where they achieve a
common solution. We certainly find examples of day-to-day negotiations whenever we are in
dire need of buying articles and goods for maintaining our living. A negotiating party may as
well be a consumer at one end and the seller at the other end. A transaction is not carried out
unless the wants and needs of the customer are not given certain taste of satisfaction, keeping in
regard of the profit earned. In order to add to this agenda of transaction the key point that is
fundamental is Negotiation.
Negotiations can be called as a way of resolving disputes. It is considered as being
synonymous to settlement, agreement, collaboration and bargaining. It takes place almost in all
spheres of life -be it is business, personal circumstances (married life, parenting, etc.), legal
procedures, government matters, etc.
A negotiation is a strategic discussion that resolves an issue in a way that both parties
find acceptable. In a negotiation, each party tries to persuade the other to agree with his or her
point of view. By negotiating, all involved parties try to avoid arguing but agree to reach some
form of compromise.
Negotiation is a technique of discussing issues among one selves and reaching to a
conclusion benefiting all involved in the discussion. It is one of the most effective ways to
avoid conflicts and tensions. When individuals do not agree with each other, they sit together,
discuss issues on an open forum, negotiate with each other and come to an alternative which
satisfies all. In a layman‟s language it is also termed as bargaining.
Negotiation can be defined as a channel of communication intended to reconcile
differences between parties and to settle conflict jointly. The parties aim at achieving a win-win
position.
Negotiations involve some give and take which means one party will always come out on
top of the negotiation. The other, though, must concede—even if that concession is nominal.
Business Negotiations requires a lot of homework, such as asking what is the need of
negotiation, who all are involved, what are their view points, what are your aims, what is
expected from negotiation, etc.
 Negotiation involves minimum of two parties. The aim of negotiation is understood by
both parties. The parties are willing to arrive at a mutually agreeable outcome. The outcome is
acceptable to both parties.
Negotiator is an individual representing an organization or a position who listens to all
the parties carefully and comes to a conclusion which is willingly acceptable to all is called the
negotiator.

6.2. The characteristics of negotiation

Characteristics of a Negotiation Situation
1. There are two or more parties - that is, two or more individuals, groups, or
organizations. Although people can "negotiate' with themselves - as when someone debates
whether to spend the afternoon studying, playing tennis, or going to the football game - we will
discuss negotiation as an interpersonal or inter-group process.
2. There is a conflict of interest between two or more parties that is, what one wants is
not necessarily what the other one wants and the parties must, therefore, search for a way to
resolve the conflict.
3. The parties negotiate because they think they can use some form of influence to
get a better deal that way than by simply taking what the other side will voluntarily give
them or let them have. Negotiation is largely a voluntary process. It is a strategy pursued by
choice; seldom are we required to negotiate.
4. The parties, at least for the moment, prefer to search for agreement rather than to
fight openly, have one side capitulate, permanently break off contact, or take their dispute to a
higher authority to resolve it.
5. When we negotiate, we expect give and take . We expect that both sides will modify
or give in somewhat on their opening statements, requests, or demands. Although the parties may
at first argue strenuously for what they want, each pushing the other side for concessions, usually
both sides will modify their positions and each will move toward the other.
6. Successful negotiation involves the management of intangibles as well as the
resolving of tangibles (e.g., the price or the terms of agreement). Intangible factors are the
underlying psychological motivations that may directly or indirectly influence the parties during
a negotiation.
Some examples of intangibles are:
(a) The need to 'look good' to the people you represent.
(b) The desire to book more business than any other salesperson in your office.
(c) The fear of setting precedent in the negotiations.

The main characteristics of a succesful negotiation

Open-minded. Flexibility is a source of strength in a fluid, shifting activity like
negotiating. Rigidity can lock us into a position that precludes a final, mutually beneficial
agreement, usually because we have let our own ego get in the way.
Understanding of the negotiating process. Highly effective negotiators recognize that
negotiating is a process, not just something that is done when discussing the terms and
conditions of a solution. Negotiating is much more than haggling about price. It requires an
understanding of the dynamics that affect the process and influence the behavior of people. Great
negotiators invest time learning different tactics and strategies and how each technique
contributes to the overall outcome.
Focus on win-win. Win-win means that both parties feel good about the outcome of the
negotiating process. Some books that state win-win solutions are not possible in business
negotiating; the authors write that someone usually gives away more than they should and the
outcome becomes a win-lose situation. Great negotiators don't believe that. They help their
customer try and solve problems and look for opportunities to give as much value as possible.
They also know how and when to limit their concessions, give-aways, and discounts so they can
work out an agreement that is equitable for both parties.
Patience. Too many people search for the quick fix try to close the sale as fast as possible
so they can move on the next prospect. Great sales negotiators recognize that patience is a virtue
and that rushing the process often leads to an undesirable outcome. They don't hurry to reach an
agreement. Instead, they take time to gather the necessary information. They think carefully
about possible solutions. They take their time during the entire process. This is critical because
major mistakes are made when we try to reach an agreement too quickly. We rush through the
process, not giving the other person's offer ample attention, and often end up with an outcome
that is win-lose. Simply because we were in a hurry.
Creativity. Most great negotiators are also very creative. They use their problem-solving
skills to determine the best solution and look for unique ways to achieve their goal. A friend of
mine was once embroiled in a bitter lawsuit with a company and after months of negotiation, he
came up with a solution that ended the suit. He stretched out beyond the normal answers and
developed an alternative that was accepted by the other party. In other words, he got creative.
Willingness to experiment. Negotiating is a very dynamic process because no two
people are alike. What works extremely well in one situation can backfire in another. That's why
great negotiators practise using a variety of concepts and techniques. They experiment with
different strategies, solutions, and tactics. And a small failure does not prevent them from
experimenting with new ideas in the future.
Confidence. Great negotiators are confident when they enter a negotiation. They aren't
arrogant or rude or cocky-they are simply confident. They have developed a high belief in their
ability to reach an win-win agreement. They are confident that they can handle anything that
comes their way in a negotiation and this confidence is developed through experience. Great
negotiators evaluate themselves regularly. They learn from their mistakes and victories. They
focus on improving their skill. They develop an internal confidence that is unshakable.
Keen listening skills. People will tell you virtually everything you need to know if you
ask the right questions AND listen carefully to their answers. I personally believe that this one
attribute is the most important skill in selling and negotiating. I remember my wife talking to a
prospect on the telephone and at one point during the conversation she sensed that he had more
to say. She waited patiently and listened carefully and the other person eventually gave her
valuable information that helped her close the sale. Unfortunately, too many sales people simply
wait for their turn to talk, or even worse, interrupt their prospect. This lack of listening means
they often miss hearing key information that will assist them in the negotiations.
Negotiating is not a skill that is easily acquired. It takes time, effort and energy. If you
want to improve your negotiating ability you must be ready to work at it. Invest the time learning
the dynamics and science of negotiating. And be prepared to push yourself out of your comfort
zone.
6.3. Types of negotiation in organizations

Types Parties Involved Examples

Day-to-day/ 1. Different levels of Management 1. Negotiation for pay, terms

Managerial 2. In between colleagues and working conditions.
Negotiations 3. Trade unions 2. Description of the job and
4. Legal advisers fixation of responsibility.
3. Increasing productivity.
Commercial 1. Management 1. Striking a contract with the
Negotiations 2. Suppliers customer.
3. Government 2. Negotiations for the price
4. Customers and quality of goods to be
5. Trade unions purchased.
6. Legal advisors 3. Negotiations with financial
7. Public institutions as regarding the
availability of capital.

Legal Negotiations 1. Government 1. Adhering to the laws of the

2. Management local and national
3. Customers government.

1. Day-to-Day / Managerial Negotiations:-

Such types of negotiations are done within the organization and are related to the internal
problems in the organization. It is in regards to the working relationship between the groups of
employees. Usually, the manager needs to interact with the members at different levels in the
organization structure. For conducting the day-to-day business, internally, the superior needs to
allot job responsibilities, maintain a flow of information, direct the record keeping and many
more activities for smooth functioning. All this requires entering into negotiations with the
parties internal to the organization.
Under this type of negotiation there are several types of parties involve:-
1. Different level of Management.
2. In between colleagues.
3. Trade union.
4. Legal adviser.

2. Commercial Negotiations:-
Such types of negotiations are conducted with external parties. The driving forces behind such
negotiations are usually financial gains. They are based on a give-and-take relationship.
Commercial negotiations successfully end up into contracts. It relates to foregoing of one
resource to get the other.
Under this type of negotiation these types of parties involve:-
1. Management.
2. Suppliers.
3. Government.
4. Customers.
5. Trade union.
6. Legal advisers.
7. Public.
3. Legal Negotiations:-
These negotiations are usually formal and legally binding. Disputes over precedents can become
as significant as the main issue. They are also contractual in nature and relate to gaining legal
ground. Under this type of negotiation these types of parties involve:-
1. Government.
2. Management.
3. Customers.
Customers:- No matter what type of industry you're in, you most likely have people buying
your product or service. Service-based purchases are easier to negotiate with customers because
there's usually a scope of work involved. But if you sell products, that shouldn't stop you from
trying out some effective and relatively simple negotiating techniques. A few things that can be
negotiated with customers include discounts, payment terms, delivery options, warranties, and
insurance, customization and quality standards.
Government:- Almost everyone has faced the frustrating task of negotiating with a
government-local, state, national, or foreign-at some point. International trade negotiations
among national governments and organizations are usually arduous and complicated. We
propose a framework that supports government to government negotiation. With this framework,
governments can keep track of previous negotiations using a database of negotiation records in
an electronic platform. Moreover, the framework supports searching, sharing and learning past
negotiation records as well as the ability to conduct negotiations on a variety of resources,
products and services.
Supplier:- Negotiation in the purchasing process covers the period from when the first
communication is made between the purchasing buyer and the supplier through to the final
signing of the contract. Negotiation can be as simple as trying to obtain a discount on a case of
safety gloves through to the complexities of major capital purchases. A purchasing professional
must aim to be successful in their negotiations with suppliers to obtain the best price with the
best conditions for every item that is purchased.

6.4 Models of negotiations

Negotiations should all be win-win. After all, why shouldn't everyone win?
Unfortunately, it's a myth that every negotiation has a potential win-win outcome.
Many common types of negotiations are win-lose. For example, negotiating the price of a
used car is win-lose.
Example of Win-Lose Negotiations: Used Car Prices A sales person and a customer
negotiate the price of a used car with a fair market value of $25,000. If the car sells for more than
25k the customer loses. If the car sells for less than 25k the sales person loses. If the car sells for
exactly 25k no one wins, no one loses. A win-win outcome isn't in the cards.
There are 7 types of negotiations. It's important to consider which type you're facing —
each demands a different strategy.
1. Win-Lose Negotiations
In game theory they call a win-lose negotiation a zero-sum game.
The vast majority of games are zero-sum.
A common analogy for a zero-sum game is dividing a pie. The pie doesn't get smaller or
bigger — the players play a game to decide who gets the bigger slice.
If you're facing a win-lose negotiation focus your strategy on determining the other
party's minimum requirements (e.g. bottom price).
2. Win-Win Negotiations
Win-win negotiations involve expanding the pie. For example, if two people decide to go
into business together: their partnership negotiations are win-win.
One partner may win and the other may lose. However, a win-win outcome is possible
because they hope to make money on their investment (expand the pie).
Salary negotiations and business-to-business sales can usually be considered win-win.
Win-win negotiations may be just as focused on building a bigger pie as dividing the pie
fairly. Every effort should be made to keep negotiations friendly and constructive.
3. Lose -Lose
 Lose-Lose negotiations involve a situation in which everyone is going to lose.
Lawsuits are often lose-lose.
Let's say you leave your jacket at a restaurant coat-check and they lose it. Your
negotiations for compensation with the restaurant's manager are lose-lose. Your not likely to get
more money than the coat was worth. The restaurant also loses.
Lose-lose negotiations can quickly turn bitter and adversarial. Despite the fact that both
parties will lose it's important to try to maintain a collaborative approach.

4. Adversarial Negotiations
Adversarial negotiations are highly competitive in nature.
Win-lose and lose-lose negotiations are most likely to be adversarial. Nobody wants to
lose, this tends to drive intense competition.
In some cases, win-win negotiations are also adversarial. For example, high stakes
business-to-business sales negotiations often become adversarial (customer vs seller).
In extreme cases, negotiations are adversarial because the parties involved intensely
dislike each other. In such cases, negotiators may not be interested in winning. Instead, they may
seek to maximize the losses of the other party. Negotiations between political rivals may turn
destructive in this way.
Adversarial negotiations require battle strategies.

5. Collaborative Negotiations
Collaborative negotiations are creative and friendly. For example, business partnership
negotiations are often collaborative. Win-win negotiations that are expected to yield big wins
tend to be collaborative. Collaborative negotiations rely on persuasive techniques, optimism and
creativity.

6. Multi-Party Negotiations
Multi-Party negotiations are complex negotiations between two or more parties. They can
be extremely challenging and may take years to complete. International treaties between nations
are often multi-party. Multi-party negotiations require advanced diplomatic techniques.
7. Bad Faith Negotiation
Bad faith negotiation occurs when a party makes commitments that they have no
intention of keeping. Bad faith negotiation is often used as a delay or diversionary tactic. For
example, a country may sign an environmental treaty with no intention of implementing it just to
relieve political pressure from its citizens.
If you suspect that the other side is negotiating in bad faith, it's time to start thinking
about penalties in your agreement.
Differences be tween two party negotiations and multiparty negotiations

 Number of parties

Multiparty negotiations have more negotiators at the table. This creates challenges for managing
several different perspectives and ensuring that each party has adequate time to speak and be
heard. Each party may be acting as a principal (representing his own interests) or an agent
(representing the interests of at least one other party called constituency). In addition, parties
may have different social rules outside the negotiation that may lead to either equal or unequal
levels of power and status in the negotiation. If the parties are all equals, the exchange within the
negotiation should be more open.

 Informational and computational complexity

There are more issues, more perspectives on issues, and more total information. The negotiation
situation tends to become less lucid, more complex, and more demanding. As size increases,
there will be more values, interests, and perceptions to be integrated or accommodated. Keeping
track of all that information, the perspectives of each side, and the parameters into which a
solution must fit becomes a major challenge for the negotiators.

 Social complexity

The social environment changes from a one-on-one dialogue to a small-group discussion.

1. How the process evolves may depend on the motivational orientation of the parties
toward each other.
2. Social pressures may develop for the group to act cohesively, yet the members are in
conflict with each other and cannot be cohesive unless they can find an acceptable
solution. Members compare themselves with one another, evaluate themselves against
one another, and try to use a variety of influence tactics to persuade one another toward
their point of view. Strong pressures for conformity develop as members pressure other
members to adopt a common perspective or definition of the problem or endorse a
particular solution. In addition, the group can develop dysfunctional dynamics. To
hesitate to create conflict can led to an illusion of consensus in which each party believed
that he was the only dissenting member in a fairly strong emerging agreement about what
actions to take. Afraid to express their dissent for fear of looking weak and foolish (face -
saving dynamics), group members self-censored their reservation and concerns, thereby
reinforcing the apparent surface consensus and leading to a decision with disastrous
consequences.

 Procedural complexity

Less clear procedural rules. Consequences:

1. Negotiations will take longer
2. The greater the number of parties, the more complex and out of control the process can
be
3. There must devote explicit discussion time to how parties will manage the process to
arrive at the type of solution or agreement they want.
4. Parties will have to decide how they want to approach multiple issues on the table.

 Strategic complexity

The negotiator must consider the strategies of all the other parties at the table and decide whether
to deal with each of them separately or as a group. The actual process of dealing with each of
them usually involves into a series of one-on-one negotiations, but conducted within the view of
all the other group members. Consequences are:
1. These exchanges are subject to surveillance by the audience. The social environment may
lead negotiators to adopt distributive strategies and tactics simply to show their
toughness. Negotiators in the group may become strongly positional, driving a
competitive escalation.
2. Negotiators who have some way to control the number of parties at the table may begin
to act strategically, using this control to serve their objectives. Additional parties may be
invited to add support or credence to the negotiator‟s position, to provide “independent”
testimony.
 3. Engage in coalition building as a way to marshal support, dominate the negotiation
process or shape the desired settlement. Ways coalitions have to show power:
a. Agreeing to help each other achieve their common or individual objectives
b. Dominating discussion time
c. Agreeing to support each other as particular solutions and negotiated agreements
emerge
Relationships are the most significant force in shaping which parties will enter coalitions with
each other in a multiparty negotiation
Consensus may be seen as a snowball coalition.
What is an effective group?

1. Test assumptions and inferences. Unchecked assumptions and inferences can lead to
unfounded conclusions
2. Share as much relevant information as possible (related to interests)
3. Focus on interests, not positions
4. Explain the reasons behind one‟s statements, questions, and answers. Disclose interests,
the reasons why those things are important.
5. Be specific, use examples. Generalities can lead to misunderstanding or ambiguity that
can send problem solving off the track.
6. Agree on the meaning of important words
7. Disagree openly with any member of the group. If parties withhold their disagreement,
conflict is forced undergroud
8. Make statements, then invite questions and comments
9. Jointly design ways to test disagreements and solutions
10. Discuss undiscussable issues
11. Keep the discussion focused
12. Do not take cheap shots or otherwise distract the group. Keep distractions to a minimum
13. Expect to have all members participate in all phases of the process
14. Exchange relevant information with non-group members
15. Make decisions by consensus
16. Conduct a self-critique. Postmortem evaluation
Managing multiparty negotiations?

The pre-negotiation stage

 Participants
 Coalitions
 Defining group member roles
 Understanding the costs and consequences of no agreement
 Learning the issues and constructing an agenda

The formal negotiation stage - Managing the group process and outcome

 Appoint an appropriate chair

 Use and restructure the agenda
 Ensure a diversity of information and perspectives

1. Collect your thoughts and composure before speaking.

 2. Try to understand the other person‟s position
3. Try to think of ways that you both can win
4. Consider how important this issue is to you
5. Remember that you will probably have to work together with these people in the future

 Ensure consideration of all the available information

o Unwillingness to tolerate conflicting points of view and perspectives
o Side conversations
o No means for defusing an emotionally charged discussion
o Coming to a meeting unprepared

1. Be specific about the problem behavior. Offer clear, specific examples

2. Phrase the problem as one that is affecting the entire team, rather than just you. Use we
instead of you
3. Focus on behaviors the other can control
4. Wait to give constructive criticism until the individual can truly hear and accept it
5. Keep feedback professional
6. Make sure the other has heard and understood your comments
The agreement stage

o Select the best option

o Develop an action plan
o Implement the action plan
o Evaluate outcomes and the process

 What the chair can do to help

o Move the group toward selecting one or more of the options
o Shape and draft the tentative agreement
o Discuss whatever implementation and follow-up or next steps need to occur
o Thank the group for their participation, their hard work, and their efforts
o Organize and facilitate the postmortem

6. Bad Faith Negotiation

Bad faith negotiation occurs when a party makes commitments that they have no intention of
keeping.

Bad faith negotiation is often used as a delay or diversionary tactic. For example, a country may
sign an environmental treaty with no intention of implementing it just to relieve political
pressure from its citizens.