Face To Face Discussions

Face-to-face discussions

 

Establishing trust is a key ingredient in effective negotiations.

 

Fact Finding

 

During the initial phase of a meeting with the potential supplier, professional negotiators limit the discussion to fact finding. 

 

 

Any inconsistencies between the supplier’s proposal and the negotiator’s information are investigated.

 

Fact finding should continue until the negotiator has a complete understanding of the suppliers proposal.

 

The key part in fact finding is that the negotiator find out the supplier’s interest, strengths and weaknesses.

 

Recess

 

During the recess, the negotiating team should reassess its relative strengths and weaknesses as well as those of the supplier.  It also may want to review and refine its cost estimate and any other estimates or assumptions. 

 

Narrowing the differences

 

When the formal negotiations reconvene, the negotiator defines each issue, states the facts, and attempts to convince the supplier’s representatives that the negotiator’s position is reasonable.  

 

If agreement can not be reached on an issue, the negotiator moves onto the next issue. Frequently, discussions on a subsequent issue will unblock an earlier deadlock.

 

During this phase of the negotiating process, problem solving and compromise are used to find creative solutions in which both parties win.

 

In most instances it is possible to reach a satisfactory agreement through the use of these procedures.  If a satisfactory agreement can not be reached, the negotiating team has the choice of adjourning or moving on to hard bargaining.

 

 

 

 

 

 

 

 

 

Hard Bargaining

 

This is the last resort, it involves the use of take-it-or lave it tactics. 

 

It is limited to one-time or adversarial situations where long-term collaborative relationships are not an objective.

 

The negotiating team should review and revise its objectives carefully and professionally, give the supplier the option of accepting or rejecting is final proposal.

 

An experienced negotiator does not bluff unless he or she is willing to have the bluff called.

 

 

 

Techniques

 

Negotiation techniques are a negotiator’s working tools.

 

These tools are used to achieve a negotiator’s goals; in the hands’ of a skilled negotiator these tools are powerful weapons.

The objective of negotiation is agreement.

 

While agreement is a fundamental goal of negotiation, sometimes negotiations end without agreement. 

 

Not reaching an agreement is better than reaching an unsatisfactory agreement.

 

Negotiation techniques can be divided into three categories:

1)     those which are universally applicable

2)     those which are applicable to transactional dealings

3)     and those which are applicable to collaborative and alliance relationships

 

Universally Applicable Techniques

 

These are techniques which apply to all negotiations either transactional or collaborative relationships.

 

Getting to know you

Other cultures could share a lot with us because they spend a good amount of time becoming acquainted with those with whom they are to negotiate before entering into the formal face-to-face phase of negotiations. Negotiators must keep in mind that you are dealing with human beings and not abstract representatives.

 

 

 

 

 

 

Use diversions

A negotiator who knows the seller personally or has carefully studied his or her personal behavior patterns has an advantage.  A skilled negotiator will divert attention from the challenge when tempers get out of hand if he/she knows the seller.

This diversion is most easily accomplished when the participants know which situations are most irritating to their opposites.

 

Use questions effectively

The wise use of questions is one of the most important techniques available in negotiation.

For negotiation questions the correct answer is the answer that furthers the negotiator’s short-term tactics or long-range strategy.

 

Use Positive Statements

For example, assume a negotiator knows that certain questions will evoke an emotional reaction from the seller.  The questions are asked, and an opportunity is created from the proper use of a positive statement.

 

Be a Good Listener

Recognizes a basic need of a seller. By observation a negotiator can gain many clues about a seller’s negotiating position.  Listening can often give negotiator strategies that the seller did not consider as ‘a leg up’ in the negotiating area.

 

Be Considerate of Sellers

Professionals loose no negotiating advantage whatsoever by being fully considerate of sellers personally, letting them save face, and reasonably satisfying their emotional needs.

 

 

Transactional Techniques

 

Transactional Techniques

 

There are two effective books addressing this transactional techniques approach:

  • ·        Gerald Nierenberg’s, The Complete Negotiator
  • ·        Herb Cohen’s You Can Negotiate Anything

 

Two of the traditional tactics which deserve special emphasis are:

1)     Keep the initiative

2)     Never give anything away

 

Keep the Initiative

A negotiator should strive never to lose the initiative automatically obtained when the supplier’s proposal is received and reviewed.

 

The negotiator should constantly ‘carry the game’ to the supplier and keep the supplier on the defensive by confronting its representatives with point after point, making the supplier continually justify its position.

 

The more the negotiator bores in and the more pressure he or she maintains, the better his or her bargaining position will be.

 

Never give anything away

As strategy a successful negotiator periodically lets the seller maneuver him or her into accepting one of the seller’s proposals.  A good negotiator does not feel obligated to match every concession made by the seller. Consequently, in the exchange process, a successful negotiator makes fewer concessions than does his or her less successful adversary.

 

 

Frame the question

Herb Cohen, author, points out that a successful negotiator “does not allow” the other side to frame the issue. Him or her takes control and say’s “Those certainly may be viable options, but let’s develop some others as well broadening the perspective.

 

The dynamics of a transactional negotiation

 

The seller’s positions are generally all higher than the corresponding positions of the buying firm. The closer the two objectives are initially, the easier the negotiations.  As negotiations proceed, the seller tends to make concession from its maximum position toward its objective.  Simultaneously, the buying firm’s negotiations reduce their demands, moving from the minimum position toward their objective.

 

If the negotiator believes there is a possibility of actually achieving the minimum position, he/she or they should open with a position below that point – provided that such a position can be logically supported.

 

Collaborative and Alliance Negotiating Techniques

 

Getting to yes is the most widely read book written on collaborative negotiations by Roger Fisher and William Ury.

 

The book highlights focusing on basic interest.

  1. 1.      Separate the people
  2. 2.      Focus on interest, not positions
  3. 3.      Invent options for mutual gain
  4. 4.      Insist on using objective criteria

 

Experience shows that applying these techniques to collaborative negotiations results in wise agreements and provide the basis of success for long-term relationships.  Many of these relationships blossom into preferred partnerships and even into strategic supply alliances.

 

 

 

Separate the people from the problem

Divide the negotiation into two parts: the people issue and the technical issues

 

Emotions frequently get in the way of successful negotiations.  Allow both sides to share and vent about struggles… without ending negotiations.

 

Negotiations are difficult and emotions may get elevated.

 

Focus on Interest

During the fact-finding phase of face-to-face negotiations, a professional negotiator learns the seller’s interest while disclosing his/her own interest {but not objectives}.

 

Harvard Business School’s James k. Sebenius says that “interest-driven bargainers see the process primarily as a reconciliation of underlying interest: you have one set of interests, I have another and through joint problem solving we should be better able to meet both sets of interest and thus create new value.

 

Invent Options for Mutual Gain

 

Options for mutual gain are created when both parties come up with creative solutions where both parties can gain or benefit.  Two rules of thumb with this are:

Develop many options

Remain in option generation past the point of comfort.

 

Many of the most creative ideas require time and even discomfort to develop. Only after a list including one or more truly creative ideas has been developed should the negotiators attempt to select from the list.

 

Use Objective Criteria

When a long term relationship is an objective of both negotiating parties, the use of objective criteria will prevent much positional negotiation – the possibility of disrupting or destroying the relationship. 

 

Example: if the price is the issue under discussion, possible objective criteria could include 1) the supplier’s agreed to allowable costs plus a reasonable profit 2) development of a cost model to be used as the basis of the price 3) a market-based pricing methodology or 4) target pricing {design to cost} – discussed in chapter 14:

 

After the identification of four possible objective criteria, the issue now becomes a discussion of which criterion or combination of them should be applied.

 

 

 

 

 

 

 

Benefits are NOT divided equally:

In some supply management circles, there is a common misunderstanding that successful negotiation means an equal distribution of the benefits.  While both buyer and seller should benefit from a well-negotiated contract, the benefits are seldom 50/50.  On the basis of years of observation, 60-70 percent of the benefits of a typical negotiated contract go to the more skillful negotiator, leaving 30-40 percent for the less skilled negotiator.  Both parties are better off than they would be if here was no agreement.  This whole situation creates a win-win outcome.