Architecting the Enterprise

Leadership – Politics and Negotiation – By Ben Ponne, Business Manager, Asia Pacific, Architecting the Enterprise

Ben Ponne

Politics can be described as the use of power to influence your social environment to better achieve your personal and collective goals. As a leader you will need to use power to align people’s interest and build collaboration between people. One of your most important sources of power is your ability to negotiate. Negotiations are the means by which people deal with their differences. This article describes the key elements of negotiation. It will help you to organise your thoughts and to recognise the various aspects of a negotiation.

Pervasive

Negotiation is very pervasive and you do it on a daily basis, whether you realise it or not. You negotiate the best deal, negotiate your employment contract, negotiate a good idea, negotiate your first date. You probably started negotiating very early in your life. Even as early as a baby you may have started crying when you wanted milk or food. Children are master negotiators and know exactly how to get what they want. Throughout your life you will try to influence and persuade others, and others will try to influence and persuade you.

Win-win solution

A result of a negotiation where one party is better off without making the other party worse is called a win-win solution. Ideally all parties in a negotiation should benefit and walk away as satisfied as possible. The Minimum Common Denominator (MCD) is the point where a negotiation only covers the original positions, or satisfaction levels, of the parties. If this were a simple negotiation then this may be sufficient for both parties. For example, if you buy a hamburger at McDonalds then you usually know what services you can expect and what you need to pay. Also the negotiation process is clear and the “negotiation” is short-term. There is no need to build up a long term relationship and communication between the parties is minimal.

Complex negotiations on the other hand include additional elements, such as:

• A focus on long term relationships with the same parties in which negotiations will repeat over time.
• Multiple issues to resolve with a variety of different interests and options
• Communication between more parties and/or accross more organisations or cultures
• Tangible as well as intangible factors that impact the negotiation.

This means that parties have a lot more space to move. Hence, there is an opportunity to negotiate beyond the MCD and create more value for both parties. The optimal result of a negotiation is where both parties maximise their level of satisfaction. In practice this does not happen very often because negotiations are generally conducted under stressfull sitations where parties try to get the most concessions and fight for the last possible dollar.

Building a positive working relationship and understanding the other party’s interest will facilitate a good outcome. You will not always get what you want but the total value of the negotiation often exceeds your initial position.

Interests, not positions

In many negotiations differences between people or parties are translated as a difference in positions. An example of a positional negotiation is when you haggle about an item in a second hand shop. The positions are put on the table from the start. You offer $5 and the seller asks $80. As the negotiation goes on you increase your offer and the seller decreases his price until you reach an agreement (or until you walk away from the negotiation). This kind of negotiation is also called a distributive negotiation. In distributive negotiations, a gain by one side is made at the expense of the other. A negotiation in which the parties cooperate to achieve maximum benefits by integrating their interests into an agreement, is called an integrative negotiation.

Interests are the underlying motivation, needs and drivers that support a position. Making the distinction between interests and the motivations will allow you to find alternative solutions that maximise the satisfaction of both parties. This is where you start to work on a win-win solution.

Components of a complex negotiation

A complex negotiation usually consists of three separate negotiations.

The communication negotiation

In this part of the negotiation the process is negotiated. This is where you need to agree on the way the negotiation will be conducted and what the goals are of the negotiation.

The relationship negotiation

This is the part of the negotiation where you try to establish trust. The better your relationship with the other party the better you will be able to negotiate towards a win-win solution.

The substance negotiation

This is the part of the negotiation where the value of the negotiation is articulated. It clarifies the interests, the options for mutual gain and the criteria to evaluate these options.

Let’s have a closer look at these three separate negotiations.

Communication

You can’t negotiate without communication. As a negotiator you have to facilitate good, two-way communication. Communication is essential to build a good relationship.

Opening line

Think about your core message and make this part of your opening line. Don’t underestimate your opening line, it gives a good first impression and sets the scene for the negotiation process.

Negotiate the process

Clearly communicate the goal of the meeting and what you would like to achieve together. Make sure you have the right people in the conversation.

Messages to deliver and questions to ask

Your opening line will already give a lasting impression. Consider what other messages you want to deliver? For example:

• I am here to work together with you on a solution.
• I want to negotiate a fair deal for both of us.
• I want to have a good working relationship.

Make a list of questions that you want to ask in order to get more clarity about the party’s interests, options, alternatives and criteria. And most important listen actively! Active listening proves to be one of the most difficult parts of negotiation, especially when emotions run high. Active listening is important to gather information and learn. It also promotes change in their attitudes; it makes them feel heard, it breaks the cycle of argument and repetition, and creates reciprocity or a better chance they will listen to you now.

Let’s use an example to illustrate the elements of the negotiation. Suppose you have just accepted a new job and you will need to move to another city. You found a nice property 20 minutes from the city. The property is a three bedroom house on a 1 acre section and has also a detached self contained flat. It is for rent at $500 per week. You like the property but have concerns about the high rent. You want to negotiate a good agreement with the landlord. You could start taking a position and haggle about the price but you just learned that this might not lead to a win-win situation. Instead you decide to prepare well and focus on the key elements of negotiation.

Interests

Interests are the motivators, needs, drivers, concerns and fears of the negotiating parties. Suppose you managed to do some research and came up with the following list of interests:

Your Interests

• Lowest possible rent.
• Have a rental property close to the city.
• Move as quick as possible.
• Suitable for a family (2 adults and 2 children).
• Schools for the children nearby.
• Well maintained.
• My plan is to rent for 1 year and then buy a house in the area.
• I want to minimise the risk that the landlord may give short-term notice.

Landlord Interests

• Rent that gives a good return on my investment – highest rent.
• Increase the value of the property.
• Quickly find a tenant as property is empty at the moment.
• Stable tenants, preferably longer term.
• Tenants that maintain the property well.
• Has fear that tenants may damage the house.
• House needs to be painted outside soon.

Alternatives

Alternatives are the possibilities each party has if no agreement is reached. As a negotiator you will be very weak if you don’t have alternatives to this negotiation. Keep your alternatives in mind when negotiating. Identify your BATNA (Best Alternative To a Negotiated Agreement) so that you can walk away from this negotiation if the alternative is better. Without a BATNA you will be very weak. Also think about the alternatives for the landlord. When is he or she likely to walk away from the negotiation.

Your alternatives

• Search for another rental property.
• Commute to new job location.
• Buy a property straight away.

Landlord alternatives

• Search for other tenants.
• Paint the house first and ask higher rent.
• Sell the house.

Options

Options are possible solutions to satisfy the interests. Note that options are different from alternatives. Options are solutions that serve the interests, and alternatives are solutions when no agreement is reached. Some options would be to:

• Lower the rent and offer to move in early.
• Rent for 1 year and buy the rental.
• Lower the rent and offer full year contract.
• Lower the rent and take on outdoor paint job.
• Lower the rent and pay (part of rent) upfront.
• Negotiate that the flat can be rented out to a third party to compensate for the high rent.

Think about the value of these options for the landlord. For example, moving in early could add one month of rent, or $2000.= value for the landlord. This could justify (legitimacy) a discount of $50.= per week on the rent.

You will need to support your options with hard criteria so that a “fair” deal can be negotiated.

Criteria (Legitimacy)

These are criteria, such as precedents, benchmarks, and standards that serve as “objective” means to filter or narrow the options.

Criteria

• The average rent for a 3 bedroom comparable property in the area is $450.=.
• There are currently 6 comparable rentals available in the area.
• A quote for a paintjob of the house indicates that this would cost $8000.= if a tradesman would do the job.
• Commuting to the city will cost approximately $175.= per month.
• Yearly education fees for children are $250.= cheaper than in the city.
• Tenants turnover is high in the area. The average tenant stays 6 months in a property.
• Move in early would add $2000.= compared to leaving the property empty. Discount on rent of $X over the rest of the year would save both parties $Y.

Try to find objective criteria that support the options. This is where the objectivity comes in. Make copies of market reports and newspaper rental adds. Remember that you will work “with” the landlord to find a “fair” solution for both parties. You don’t compete with willpower or brute force.

Once you have done your criteria then go back to your interests, options and alternatives. This is an iterative process and you will find new items as you go along.

Relationship

All negotiations affect the relationship between the parties involved. Therefore you need to carefully consider the relationship in your negotiation. You may negotiate aggressively with a vendor in a second hand shop because you don’t care too much about the future relationship but in most negotiations you want to maintain a good relationship.

Trust and credibility are important factors in each negotiation. As long as trust and credibility are not established it becomes difficult for the negotiatior to propose creative options. Some constructive behaviours are:

Rationality

• Balance emotions with reason.
• Separate relationship with substance (interests, options, criteria).
• Understanding.
• How they see and feel things.
• Empathy is not the same as agreement.
• Discuss past history.

Communication

• Consult and listen before deciding.
• Be responsible for trust building.
• Identify and manage risks together.

Reliability

• Trust on them based on risk analysis.
• Fulfill your commitments.
• Balance benefits over time.

Persuation

• Attack problems, not people.
• Move forward with small, slow, and verifiable steps.

Acceptance

• Right to be, think or feel different.
• Identify points in common.
• Acceptance is not the same as an agreement.

Commitments

Commitments are made at the end of the process. Usually commitments automatically flow out of the process, so make sure you first negotiate and commit on the process. Only make commitments after all other elements of the negotiation are fuly explored. Often it is useful to make a draft agreement without going into the details yet.

You could also make an offer. Such an offer should not surprise the other party but should emerge out of the process. Again, communication is key. It is the way in which you make the offer. For example, “Could something like this work for you?” or “What do you think of an agreement along the lines of this draft?” Keep the conversation open and include them in the process.

What next?

Negotiating is a very pervasive part of politics and therefore leadership. It is something leaders do on a daily basis to deal with differences. This article gives you the key elements of complex negotiations. Remember, preparation and clear goal setting are essential for successful negotiation, whether you go into your next business meeting or whether you discuss private issues. Use these elements to prepare your next negotiations and you will clearly notice the difference.

Ben Ponne for the AtE Team

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