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NEGOTIATION STRATEGY

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									NEGOTIATION STRATEGY

1. INTRODUCTION

A. What is meant by negotiating

The dictionary definition of negotiating is 'to confer with a view to finding terms of
agreement. To arrange or bring about a desired result.'

Negotiation is:-
a. A communication with a specific aim
a. A process or system of influencing behaviour.
b. A process whereby parties with differing and often conflicting aims establish the
   terms on which they will co-operate.
c. A process of changing relationship.
d. A logical system of action
e. A set of skills that can be learned and practised so that your ability to negotiate
   improves with each negotiation.

B. When does negotiating begin

Negotiation begins the moment you wake up until the moment you sleep. Our whole lives
are a negotiation. We even negotiate with ourselves 'if I agree to walk tomorrow I can
have that extra chocolate now.' Negotiation is happening in your business life with your
boss/subordinate, at home with your wife/children/brothers/sisters, with your neighbours,
the football team you play for, etc.

Negotiation is not just the meeting you have with the client's surveyor to discuss the loss
and expense caused by whatever variation the Architect issued. It occurs a long time
before you went for that meeting and continues after you agreed it.

C. Why do we need to think strategy

The things that you plan are more likely to go right than things you don't plan. In rare
instances in the construction industry is a negotiation of a one-off process. It invariably
connects with the relationship of all the parties and may change attitudes in the future.
The trivial continuous claiming by a contractor in the later stages for example. Strategy is
needed because every set of circumstances you negotiate has a different background,
different people, different required outcome, etc.

D. Is negotiating claims different from any other negotiation

Essentially they are not, technical content is obviously different but the process that has
to be gone through will follow all or some of the steps outlined below. Construction
professionals concentrate far too much on the technical details of the 'claim' and its
individual merits and not enough on the overall context within the project or the benefit
of trading off against other more achievable objectives.


2. THE PARTIES INVOLVED

A. Who are the parties to a claim

It is important to identify all the parties to a claim rather than just the actual negotiators.
It is only by identifying all parties that you can carry our adequate preparation and study
the needs of each one so that a higher chance of settlement at a satisfactory level is
possible.

The list of the parties to a 'normal' claim can be extraordinarily long. Take, for example,
late arrival of structural drawings for the contractor.


Party                                                   Interest                        Need

Client owner
Client's representative
Contractor owner
Contractor's construction director
Contractor's project manager
Contractor's site manager
Contractor's section manager
Contractor's chief quantity surveyor
Contractor's project quantity surveyor
Contractor's planning engineer
Structural consultant partner
Structural consultant senior engineer
Structural consultant engineer/draughtsman
Resident engineer
Architect's partner
Architect's senior architect
Resident architect
Consultant quantity surveyor partner
Consultant quantity surveyor
Contractor's Sub-contractors
Contractor's suppliers

All these parties have the interest that must be recognised and a NEED that should be
fulfilled
B. What are their needs

In negotiation need operates on 2 levels. There is the need which is being identified here
as the word 'interest'. This interest basically reflects what that person or company thinks
is a just entitlement on the reading of the facts.

The other need is the personal need of the individual carrying out the negotiating. What
he wants out of it, what is important to him.

Both these needs are important but whilst we concentrate on the 'interest' need, we too
often ignore the personal need. We often build up relationships with the individuals with
whom we negotiate and the friendship pr mutual respect that develops is helpful.
However, personal needs are not always obvious and much strategies to satisfy them
which will, at the same time, obtain our 'interest'. Where 'interests' and needs are many
and varied there is still a progression of relative strength and importance of 'interest' and
needs. These should be classified in order of importance. A satisfied need no longer
motivates people's behaviour.

SUMMARY : ALL PARTIES HAVE NEEDS

               A SKILLED NEGOTIATIO LOOKS TO UNDERSTAND HIS
               OPPOSITION'S NEEDS.

               FAILURE TO UNDERSTAND YOUR OPPONENTS NEEDS IS A
               MAJOR REASON FOR NEGOTIATION FAILURE.


3. NEGOTIATING PHILOSOPHY AND STYLES

A. East v. West

'Western' negotiating philosophy is in popular fiction, characterised by the Omega advert
"They were miles apart at the beginning….."

'Eastern' negotiation is caricatured as large meetings of managers spending hours over
cups of tea or whatever and inching their way to agreement with smiles all the way.

An effective negotiator is aware of what are his basic attitudes and how they affect his
general negotiating philosophy. Which is the best way will never achieve a consensus
view amongst all people, but it is important that we recognise the different philosophies
and attitudes in negotiating so that we can be more effective.

Hong Kong has adopted a pragmatic mixture of East and West characterised by plenty of
letter writing and contractor/consultant 'bashing' but usually settling by quiet negotiation
the important aspects.
The philosophy of negotiating of a particular people, nation or culture must be recognised
when dealing outside your normal environment.

These philosophical choices and the negotiating style you use will be determined by what
is wanted from the negotiation i.e.

WIN/WIN
WIN/LOSE
LOSE/LOSE
LOSE/WIN

B. Negotiating styles

Negotiating styles can be characterised as competitive or co-operative. What is often
termed "red or blue". How far along each spectrum you go should depend on the
individual negotiation in hand and the outcome required, and is an important part of your
preparation in deciding tactics. No one negotiating style is the correct one. All people
have a tendency to one style or the other. Which style are you - red or blue?

Competitive style is characterised by:

Tough, unreasonable demands
Inflexibility
Demanding of major concessions but giving little
Evasiveness
Treating the opposition as a competitor to be beaten
Emotional appeals or demands
Bluffing and threatening
Having no interest in opposition's needs
Making statements

Co-operative style is characterised by:

Reasonable, sensible demands
Flexibility
Reciprocating concessions
Open, trusting, sharing approach
Regarding opposition as part of the team to settle the problem
Logical, rational approach
Having interest in trying to accommodate the opposition's needs
Asking questions

As discussed above there is no one correct style. It depends entirely on the context of the
negotiations. E.g.
Competitive                                           Co-operative

One factor negotiation, your                          Win/win increase benefits
loss is my gain

No expected continuing relationship                   Long term relationship expected

Emergency                                             Reciprocation of co-operative style

No trust                                              Trust

Rigid time limit                                      More flexibility on time


4. PREPARATION TIME

Systemise the negotiation

Lawyers spend 90% of their time on research and only 10% on direct face to face
negotiation. This illustrates the importance that preparation has in an overall negotiation.
To succeed in preparation it is necessary to be systematic and follow a logical
progression.

Item                                          Comment

1. Decide subject matter                      Is it worthwhile widening the subject to get
                                              an overall better outcome

2. Establish what is wanted                   Don't define so narrowly as to preclude a
   to be achieved                             reasonable and practical settlement

                                              Set high and low objectives

3. Review the assumptions                     Differentiate between FACTS and
   being made by you on your                  ASSUMPTIONS
   points and the opposition on
   his points

4. Research facts                             Check and double-check. Errors reduce
                                              credibility

5. Define the points for negotiation          Categorise as suits your purpose e.g.
                                              Undisputed/75% win/50:50/contentious/
                                              Prepared to lose

6. Decide on the negotiating position         Keep flexible and with options
7. Consider carefully, your own and
   the opposition's needs

8. Decide the strategy and tactics             Rehearse, do mock-ups
   to be used                                  play devil's advocate

9. Negotiate


People generally are good at the content of the negotiation but poor on the process of the
negotiation.

It is important that:
- you prepare your own viewpoint
- consider the opposition's viewpoint
- prepare counters to the opposition's viewpoint


5. NEGOTIATION TACTICS

A. Generally

Negotiation results depend on the strengths of the positions of each party. But they also
depend on the perceived strengths of each party. This is where tactics can help and, used
wisely, they can be a major source of power. As Herb Cohen in his book - You Can
Negotiate Anything - puts it : "Power is based upon perception - if you think you've got it
then you've got it. If you think you don't have it, even if you've got it, then you don't have
it".

Timing in negotiating tactics is all important. Tactics used at the wrong time or badly
presented are counter-productive.

The main purposes of tactics are to change your opposition's position to your advantage
and to resist any change to your position.

B. Preparatory tactics

Many things need to be considered in this place:

Items                                          Comments

1. Make up of negotiation                      Individual or team
   representative
2. What to negotiation                      Agreement on what is mutually acceptable is
                                            good in itself but also builds up trust
                                            between the parties

3. The timing of negotiations               Varies according to specific need but needs
                                            thinking over at each stage

4. The place of negotiation                 This depends on the outcome you are trying
                                            to achieve and what signal you wish to send
                                            to the opposition

5. Use of agenda                            Gives an element of control to the preparer,
                                            but also acts as a limit on what is being
                                            discussed

C. Opening tactics

Opening moves of a negotiation are important because they set the tone of the
negotiation. Depending on the tactics you have decided you can go co-operative, set the
limits of what you want to negotiate or the time phase over which you wish to do it.

Some of the moves are:

Item                                        Comment

Let the opposition give the first offer     You may get a better offer than you
                                            expected

                                            It is a 'sighting shot' - gives you the chance
                                            to adjust your offer

Make your first demand high                 As long as it can be justified logically the
                                            high demand leaves room for negotiation or
                                            throwing in extras at the same price and
                                            makes the opponent reveal his position in
                                            justifying why he thinks your price is too
                                            high

Major demands at the beginning and end      Opposition will give away quickly those
                                            items he has decided to concede

                                            Gives you more chance to attack on the
                                            more contentious items

                                            After a large investment of time the
                                            opposition will not want to collapse the
                                             negotiation and so a final demand may get
                                             through

D. Tactic and counter-tactic

There are many tactics that can be used with effect at the right time. A selection of them
is shown below. However a perceived tactic is no tactic at all and can put you in a weaker
position than before. Equally one should learn to recognise the tactics put up by your
opposition.

When you realise that the opposition are applying negotiating tactics then your verbal
announcement that this is a tactic will likewise weaken his case.

Tactic                                       Counter-tactics

1. Hypothetical question                            Ridicule it

2. Walk out                                  Accept it

3. Invoke competition                        Ask for specific details

4. Nibble                                    Insist on package or put ridiculously high
                                             price on the extras

5. Delaying                                  Set deadlines

6. Bluffing                                  Ask for written confirmation and advise it
                                             will be researched and discussed next time

7. 50:50 split                               Advise your offer is as low (high) as you
                                             can get but offer will be considered

8. Quote authority                           Write it down and advise will check it later
                                             through it doesn't seem particularly relevant
                                             in this case

9. Special circumstances                     OK but then ex-gratia

10. Agent of limited authority               Set deadlines. Go personal for commitment

11. Emotion                                  This is not personal, we are professionals

12. Humour                                   Don't lose sight of objectives
6. REVIEW OF WHAT IS LEFT

All the details of negotiation cannot be covered in one2-hour lecture. Items still to be
discussed are:

Negotiating set-up (offices, etc.)
Phases of the actual negotiation
Communication - verbal, non-verbal, third parties
Listening abilities
Questioning techniques
Concessions


7. FURTHER READING AND ACTION

"Getting to Yes" - Roger Fisher and William Org
"You can negotiate anything" - Herb Cohen

Excellent course of 2 days to go on: Effective Negotiating by Effective Negotiation
Services, 9 Glenhaven Road, Glenhaven N.S.W. 2154, Australia.

								
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