1.8 Negotiations and relationships (chapter)

CHAPTER EIGHT: NEGOTIATIONS AND RELATIONSHIPS

Learning Outcomes

LO 1: Students will be introduced to the concept of NASAFS and its use in business situations.

LO2: Students will gain insight into the differences between Competitive and Principled negotiations.

LO3: Students will understand what makes a good negotiator and how such an expert may grow business opportunities.

LO4: Students will be made aware of the different styles a negotiator may use and their impacts on a business relationship.

NASAFS

Negotiations are the foundation on which all business deals are made, and they start with a set of interlinked tasks: 

establishing the business goals

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setting a strategy for achieving them

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assuring the related business expertise of those who will be negotiating

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careful preparations

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polished and professional communication

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professionalism in dealings with others

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the ability to handle stress, criticism and pushback.

Business organisations, and the individuals who work in them, succeed in negotiations by building on the foundations of the business relationships they have grown and developed. In

other words, negotiation is about people - and not the products and services they may squabble over.

Therefore, by choosing to become a negotiator for one’s business, one must remain focused on the acronym NASAFS, which stands for the phrase that tells us that communication with business partners, clients and customers is:

NEVER ABOUT SOMETHING, BUT ALWAYS FOR SOMEONE. Consider the situation when one has to return an item of clothing to a retailer because it turned out that a button was missing or a zipper had malfunctioned and was irreparable. The fact that the customer has taken the time and trouble to return the item to the retailer represents a business opportunity: the retailer may, of course, demand the customer present the receipt as proof of purchase in the store before agreeing to discuss the matter, but in the end, the retailer has a choice of how to negotiate the return with the customer. In view of the interlinked tasks we presented at the opening of this chapter, one recognises how much is at stake: 

What is the business goal in allowing returns of purchased items?

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What criteria are to be used in deciding how to assist the customer with a solution?

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What training do employees receive in how to effect such a return strategy?

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What notices should be posted in the shop or printed on receipts to clarify the returns policy?

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What training do employees require in presenting a polite, but professional manner during such a procedure?

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How should the employee conduct oneself in dealing with a dissatisfied customer?

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How should an employee behave, should the dissatisfied customer turn hostile?

From this set of questions, it is clear that there is a great deal of preparation and work to be done in effectively establishing and carrying out a returns policy at a retailer. Yet, within each of the questions listed above, central is always the customer – the business partner with whom one will be dealing. The item of clothing that is being returned is not the focus of this strategy, but should

rather be how to make the customer happy, so that the customer will return to the shop and make another purchase. Additionally, there is the crucial element that every good manager knows: a satisfied customer may return to bring more business, but a customer who leaves the shop angry and feeling mistreated or cheated will not only never return to one’s shop, but even worse: that dissatisfied customer will tell as many friends and family members not to buy from the offending shop ever again, post comments on the Internet, on Facebook, and send SMSs and complaints to others via Messenger and Instagram about their treatment. If the retailer gets the returns policy and procedure wrong – if the retailer fails to negotiate properly with the customer seeking to return the item – then that retailer has damaged the reputation of the shop and endangered the business as a whole. Again: NEVER ABOUT SOMETHING, BUT ALWAYS FOR SOMEONE.

As evident in the story above, the long term success of any business can be predicted by the extent to which that business builds and nurtures its relationships. In fact, every business organisation in any part of the world is, at all times, reliant on its internal and external relationships (e.g., between employees in various departments or business units), between groups (e.g. suppliers of raw materials used in production, representatives from a government agency which conducts health or safety inspections), and individuals (e.g., individual clients, colleagues from other companies one frequently speaks with). Regardless of the type of business, there are always negotiating partners on some level, with whom a business must come to some agreement, in order to run daily operations - employees, delivery companies, government authorities, customers, banks, insurance companies, advertising agencies. The length of the list depends on the nature of one’s business. Important here is that one understands just how dependent a business is on how its leaders and employees interact with these all of the groups and individuals, on the basis of the many and complex relationships it has with them.

How does a business organisation keep all of these kinds of relationships working in a negotiation?

Traditionally, business negotiations were seen as an ‘I win – you lose’ struggle to see which negotiating partner could outmanoeuvre the other and gain the most form the discussions, while the other lost. However, economic crises, such as the .com bust in the 1990s and especially the

series of economic disasters beginning in 2008 have changed perceptions of just what the goal of a negotiation is. Negotiations have therefore moved from being competitive negotiations to a process seeking to create greater economic value between and among the negotiating partners.

This newer development could only be possible by forming positive business relationships that focus more on collaborative negotiations and less on winning a concession.

Collaborative negotiation is better known as Principled Negotiations, and the slides at the end of this chapter will highlight what this means in detail, and allow for better understanding of how it works in the real world.

In essence, Principled Negotiations focus on how a business organisation conducts negotiations, by determining in advance how it will treat its business partners during the negotiation process.

In more simplified terms, any company must decide whether it values the outcome it has set as the goal of a foreseen negotiating process above the value of a potential business partner.

Competitive negotiations work like this: If the company places little value on an existing business relationship (e.g., with a supplier, as the company already has a list of suppliers for a specific item), then that company - even though it sees its interactions with the supplier as a long-term partnership - will also negotiate from a position of strength and be willing to put greater pressure on its supplier for e.g., better prices, better lead times for delivery and better payment terms. However, if the supplier in question is the only one available which can provide the company with a vital raw material, then the negotiation will be conducted from a completely different perspective. The balance of power switches, and the supplier can drive the negotiation as it sees fit.

In Competitive Negotiations, the negotiator does not place any emphasis on the business relationship. Rather, the negotiator will be trying to win as much as possible, regardless of how the other side feels about it or what the economic consequences for the other side will be, as a result. This kind of negotiator will try to gain as much as possible from what is available at the negotiating table.

In contrast, in Principled Negotiations, the company sending its negotiator seeks to form a longterm business relationship, while trying to add value through the negotiation process that will be beneficial to both sides. This style looks to explore opportunities, to enlarge the business benefits for all involved. The 2008 financial crisis made many in business aware of how fragile economies are, how quickly companies can disappear completely and thereby endanger one’s own business. Accordingly, negotiators needed to understand that driving the other side into the ground might leave one’s own company without a supplier, a distributor or even a product to sell.

Thus, in view of negotiations and relationships, there are three key questions that any negotiator needs to ask before initiating any negotiation process: 

Will I have to interact again with my negotiating opponent in the future?

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What will my company gain through a long-term partnership?

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How should I prepare to negotiate if I believe that my opponent does not value our business relationship, but my company does?

The third question points to a common problem confronting many negotiators. This is particularly true when it involves negotiating with one’s customers. While any company needs its customers to stay in business, it is often the case that some customers demand more negotiation concessions than is reasonable. Negotiators in such a situation are sorely disappointed at the concessions they have to make to be able to settle on a contract with such a client.

Now, consider what such bad feelings have as long-term consequences. If one of the negotiating partners leaves the table feeling that s/he has ended up working for nothing - or even with a loss – what does this do to the reputations of both negotiating partners? Principled negotiators must stay focused on their relationships with their customers, and distinguish between the importance of the agreement they seek to get and the relationship, together with how it will look at the close of the process. Principled negotiators know to avoid falling into the trap of trading a good

relationship for a bad agreement, while still aiming to cultivate a good relationship, while striving for a good agreement.

Creating opportunities by building relationships

So, just how does one create more opportunities in a negotiation? Intent, attitude and communication are the keys. If the negotiating sides enter the room intent on forging a strong business relationship, then they will probably interact and cooperate more positively, even on some of the more difficult points they are negotiating. To do so, they must be willing to engage in beneficial communication, and in order to do so, they must commit themselves to keeping a positive attitude towards the other side – even in moments of stress. Inevitably, in getting past the stressful bits, the negotiators will find themselves in a give-and-take of information, facts, figures and explanations, each providing their counterpart with better insight into their particular business needs and objectives. Such conversations, rather than ones bogged down in defending positions on prices or contractual details, allows for more latitude, e.g. room to compromise, while simultaneously increasing an understanding of the other party’s business perceptions.

These kinds of negotiating experiences are truly collaborative and collaborating parties are – over time - more likely to expand the scope of their negotiations even more. This is where the magic happens. This is the point in a business relationship when business opponents become business partners and figure out ways of growing their businesses in a mutually beneficial way, e.g. in making a potential supplier into an approved go-to supplier on any new business, in agreeing to offer positive references for one’s counterpart for a contract with another company, in deciding to include one’s counterpart in on a new bid for a contract.

In short, whenever the negotiating parties’ tactics for starting a negotiations process include the decision to negotiate from the standpoint that they are there to form positive business relationships, then the agreements they can reach together will likely offer them both a new business partnership as a key outcome. By creating mutual value around the negotiating table, one strengthens one’s own company and one’s self as a professional, and simultaneously grows one’s reputation in the business world. Many areas of business are ones in which the experts

know each other personally or know of each other. Reputations in business for being ‘a go-to person’ can help a negotiator before they even enter a room.

Building relationships through a negotiation process means knowing how to successfully negotiate at all. Negotiation can only happen when a set of conditions is fulfilled:

1. There must be - at least - two sides (parties) 2. There must be a gap (e.g., something to be negotiated, compromised on, disagreed on) 3. There must be a willingness to overcome that gap (e.g., to negotiate)

Negotiation is, therefore, a process where two or more sides with different business needs and objectives discuss, debate and deliberate over an issue, in order to find a mutually acceptable answer or resolution to close their gap of disagreement.

Negotiations require one to use a wide range of skills and, while a negotiation may itself be quite complex and difficult, every person starts to develop these skills from birth. Children are, in fact, the best negotiators. They know exactly what they want, are more than willing to manipulate their parents, siblings, friends and teachers, and employ a wide range of tactics to win: they cry, scream, stamp their feet, throw things, threaten, lie, refuse to talk, leave the room suddenly, and even fake attitude, behaviour and emotions in an instant. While business negotiations do not include this wide a range of behaviours, there are many similarities, depending on the negotiator’s personality, ethics, culture and levels of stress. In any case, these skills are vital in one’s private and business lives. Without them, we could not achieve our goals at all.

As has been discussed previously, negotiations are not only a process used to (re)solve issues between business parties. In addition to providing opportunities for building good business relationships with others, negotiations can end with both sides appreciating the benefits of having won the right solutions for their business needs. These solutions can provide long-term profits, with minimised risk, easier business process and financial terms and a smoother flow of communication and issue resolution, should any arise.

The expert negotiator

In getting to such a beneficial conclusion, negotiation requires individuals who know what they are doing. Expert negotiators excel at written and verbal communication – in style and substance – but they also understand how to read and use non-verbal communication methods. Expert negotiators are mindful, meaning they are conscious of their words and actions, as well as those of their business counterparts across the table. They also know how to communicate assertively and to think before they speak.

In a nutshell, expert negotiators can be described as: 

win-win focused - understand that every negotiation is an opportunity within an opportunity

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honest - able to build trust through word and deed

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flexible - able to adapt to the unexpected positive and negative in the negotiation

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ambassadors - understand that they are the face of their company to outsiders

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creative - able to come up with ideas and solutions to (re)solve issues that arise

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careful planners - understand the importance of gathering pertinent information

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aware - not only of their own strengths and weaknesses, but of those of their opponents

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team players - understand that they represent their company first

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sound communicators - understand how to respectfully explain complicated subjects simply and clearly

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assertive - understand the difference between aggressive and assertive communication and know how to use it

Communication styles and their consequences

As refers to the final point, we must note here that assertive communication is never aggressive.

Depending on with whom one negotiates with, we - oftentimes without even noticing it automatically slip into a negotiating communication style. With those who have power over use,

like parents or one’s boss, we often use a passive style. With siblings and rivals, we might become quickly aggressive. These are examples of normal human behaviour, but in negotiations, it is better to use an assertive style, as it will increase one’s ability to negotiate a successful business outcome.

During a negotiation, passive style communicators can confuse and anger their counterparts easily, even though the individual attempting to be passive is actually attempting to avoid confrontation and conflict. This failure is because passive communicators are inclined to speak using ambiguous (e.g., unclear) language. Moreover, their body language and facial expressions show that they have adopted the behaviour of an inferior. This makes their counterparts believe that the passive communicator will give in to any demands quickly and easily. In contrast, the ambiguous language the passive communicator uses means that the counterpart feels that s/he is not receiving straight, honest answers or information, and therefore grows increasingly frustrated and angry. Little, if nothing, is achieved.

The opposite is the case with an aggressive communicator, who invariably takes a ‘my way or the highway’, confrontational approach to one’s counterpart. The language and behaviour of such a negotiator not only tends to alienate their counterpart, but can even lead to the complete breakdown and failure of a negotiation. Furthermore, aggressive communication in the negotiation room is bad advertising for one’s company and one’s self as a professional. Such behaviour - and a reputation for it - can drive potential customers and business partners away.

In contrast, assertive communicators exude confidence with a style and grace that shows consideration and respect for one’s company, for one’s self and for one’s counterpart and their company. Such communicators use a strong, stable tone of voice, expressing themselves clearly to avoid misunderstandings, while avoiding making overemotional or hypercritical comments.

Instead, assertive communicators will present their views, wants and goals clearly, without focusing on what their counterpart is not doing to their own satisfaction. The assertive communicator looks for the good in the other side, in the business prospects at hand and in potential opportunities in the post-contractual future.

In learning to communicate assertively in one’s private life, one can lay the foundation for becoming a better negotiator in business, too.

Remember not to: 

confuse negotiation with confrontation - stay calm, professional and patient

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be overemotional - focus on the issue and avoid personalising the conversation

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become angry, intimidating or exasperated

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attack one’s counterpart as the reason why a negotiation is not going well.

On the other hand, remember to: 

be clear about what is being proposed and what is needed from the other side

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be prepared - what does the other side need from the deal to sign the contract or agree

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focus on the big picture, and not only on the details

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be consistent - goals, expectations and objectives should be clear and unwavering

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set rules and procedures (e.g., a clear agenda) for the negotiation and keep them

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use effective oral, written and meta communication skills

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be willing to reach a compromise with mutually beneficial outcomes

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ask questions, seek clarifications and get explanations for No and resistances

In negotiating, one’s chosen strategy will depend on how one sees one’s self as a professional and with whom one is negotiating with, as well as the type of relationship the negotiator and/or the company already has with the counterpart.

Recommended reading

For more information on the topics introduced in this chapter, you may wish to read some of the following:

Barry, B., Fulmer, I.S. and van Kleef, G.A. (2004). I laughed, I cried, I settled: The role of emotion in negotiation, in Gelfand, M.J. and Brett, J.M. (Eds.), The Handbook of Negotiation and Culture, Stanford University Press, Palo Alto, CA, 71-94.

Brams, S. J., and A.D. Taylor (1999). The Win-Win Solution: Guaranteeing Fair Shares to Everybody, New York: Norton.

Covey, S. (1988). The seven habits of highly effective people. Free Press.

Fisher, R., W. Ury, and B. Patton (1981). Getting to Yes (2nd ed.). New York. Penguin.

Manwaring, M. (2006). “The cognitive demands of a negotiation curriculum. What does it mean to “get” to getting to yes?” Negotiation Journal 22(1), 67-88.

Sebenius, J.K. (2001). “Six habits of merely effective negotiators”. Harvard Business Review 79(4), 87-95.