Sunday, May 31, 2009

Negotiation Problems

Problems that arise in negotiations can be many, but usually are concentrated in a few key areas. I often need to remind students that having a plan for potential issues is far more effective than figuring out how to “cross that bridge when we come to it”. There are a few problems that occur more predictably than others and today I will describe a few of them.

Trust – What should you do when you feel the other side is making promises that they don’t intend to keep, or that they are bluffing, or being dishonest in some other way?
1) A good first step is to spell out that the negotiation assumes that any information and representations are truthful and accurate, and that either party should feel free to ask for evidence at any time. This is a step to make the other side think twice.
2) Ask for documentation that can be used to verify claims and representations. Actually DOING what you said you would do (by asking for evidence) lets the other side know that you mean business.
3) Include contingencies in the deal such as security deposits, earnest money, escrow, penalties (for non-performance), or bonuses (for better-than-required performance).
4) If the other side continues to evade and avoid a straight-forward dealing style that you can cope with, indicate that you will walk away from the deal rather than get caught up in a deal with someone you can’t trust. And actually DO IT if you must; if you threaten to walk away and then don’t, they will see that you need the deal badly and at that point will know they can do anything they want.

Communication – Sometimes there are basic communication problems that are overlooked in the heat of negotiation.
1) Are you sure you understand what the other side means? Do you understand what their terms are? So you understand how they value the items at stake? Clarify all of this. Articulate clearly and concisely what you think is in play, and ask them to do the same with you. The ideal situation would be to articulate all the aspects of the deal in a series of simple sentences that you both can review.
2) Keep notes and have a “parking lot” in which you record elements of the deal as they are discussed and agreed to. It reduces the amount of remarks like “I didn’t agree to that” or “We never discussed that”.
3) Be aware of cultural differences between you and the other party. If you have followed this series, you know you should have looked into these before you started.
4) Sometimes it helps to change spokespeople. Not to change the team members necessarily, but the role of spokesperson can be rotated to see if another style of communication may help.
5) Be Empathetic. Be careful to understand the deal from the other side’s perspective. Ask an impartial third party or a colleague to make sure you are being objective. Sometimes, it helps to have a moderator.

Contestants – There are some people that see negotiations as a competition and feel they need to beat you on every term. These are usually people that are inexperienced and don’t know how to judge the value of the deal on the table.
1) Don’t treat them as you would treat someone that is really working with you. Don’t disclose information and let them know it is because they are being so overly aggressive that you really don’t feel that they value your interests at all. This would allow you to use the “trust” toolset as well (see above).
2) If you have been following the series, you’ll remember that you need to know your BATNA and your walk away price, and you need to estimate theirs. Recognize that you have a position that you can tolerate and anything beyond that position is not reasonable. Never be intimidated, just stick to your position and try to work with them to add value and make a good deal.
3) Again, make sure they know that you will walk away if you don’t believe that they, like you, are looking for a fair deal for both parties

Opposers and Resisters – There may be times when you are in a negotiation with someone that doesn’t WANT the deal to work. This happens when they have overvalued their position and can’t come to terms with the reality of the situation. I am reminded of an inventor selling their interest in an invention that they think will change the world when, in reality, there is only a modest market. They can’t be reasoned with and they feel that if all the negotiations fail, they will somehow be better able to realize their dream.
1) Find the benefits for the opposer and communicate them clearly. If you can turn their attention from what they are losing to what they are gaining, it will help put them in a better frame of mind.
2) If there are people on the other side that are not as persistent as the opposer is, try to form a coalition with them. Let them know that they could benefit if they could help the opposer see reason.
3) Since you are ALWAYS looking for ways to increase the value of the deal, and you can see that this opposer values control, you may look for a way to allow them some control or a continuing role in the project after the deal is complete. This might make the deal less difficult for them.

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