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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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