Negotiations

Revision as of 21:20, 8 May 2023

Created by Gudrun Karitas Blomsterberg

Summary

Negations are a part of everyday life, a useful skill in both personal and professional settings. Negotiations are highly relevant to project management, as they encourage alignment with key stakeholders, play a large part in resource allocation and organizational structures, and risk management. Being skilled at negotiating can prevent conflict in projects and enable smoother project execution. It is also useful in our personal lives as it can enable us to buy our dream home, help us launch our start-up, and even give us an advantage when deciding who must do the dishes. Therefore, it is safe to conclude that the art of negotiation is a skill useful and relevant to everyone. This article will provide a review of the relevance of negotiation for project managers and explore the key factors that determine the trajectory of negotiations, such as different personality types and power. Additionally, cultural differences and their impact on negotiations are examined, a relevant topic as negotiations between parties with different cultural backgrounds become more common. Finally, this article will address the benefits and limitations of the negotiation process.

The Big Idea

Negotiations refer to discussions between two or more parties to reach an agreement. The different parties usually come to an agreement through a series of back-and-forth discussions, strategies, demands, and tactics ^[1]. But what are the determining factors when it comes to the outcome – is it personality traits, a specific tactic or negotiation approach, and is there something that will ensure success every time?

The Importance of Negotiations in Project Management

Being a skilled negotiator is beneficial for everyone and especially project managers. Most projects have contracts and/or procurement - procurement can mean physical materials or products, labour, and services. These things involve negotiating and a good project manager must be a skilled negotiator or hire one. It has a great influence on the financial side of projects and is a skill that comes to great use for stakeholder relations and conflict management. Stakeholders play a large part in projects and can directly or indirectly influence the outcome of projects. Project teams are a group of stakeholders that communicates with other groups of stakeholders, they must take into consideration the interests, needs, and opinions of other stakeholders. Stakeholders must be analyzed and engaged with from the start ^[2]. Conflicting interests must be addressed, addressing conflicts at a late stage often leads to disappointment and can be avoided and settled by negotiating ^[3].

Resource allocation, project budget, and timelines are often re-evaluated over the course of projects, where negotiations play a key part. Negotiations are not only a part of the first steps in projects but are repeated when needed over the project’s lifetime. Having a project manager who is a skilled negotiator can save a lot of money and time, as no outside council is needed.

The four perspectives of project management are purpose, people, complexity, and uncertainty. The most relevant to negotiations is people. For a team to perform at its best conflicts need to be addressed, as they are unavoidable^[4] - so it does not come as a surprise that conflict resolution is a tool frequently used by project managers^[2]. Conflicts emerge because of stakeholders’ different views, goals, and interests. Project managers need to develop their soft skills to interact with people, after all around 80% of their time is spent on communication^[4], so it’s important to be able to actively listen, lead, establish a vision, prioritize, and negotiate^[2].

Key Determining Factor in Negotiations

Negotiation is a complex process involving multiple factors that contribute to the outcome of the discussion. Studies have been conducted on that very issue for the purpose of determining the key factors that significantly influence the success of the negotiation. These factors include personality traits, power dynamics, negotiation types, and models.

Single and continuous negotiation

There is no one negotiation style or approach that suits every occasion. The approach during a single-time negotiation differs from a continuous negotiation process. During the single-time negotiation, the main goal is to maximize success in the least amount of time, and the main focus is on the outcome and on “winning the negotiation”. In the latter case, more emphasis is placed on the process, building trust, and encouraging an atmosphere of cooperation. Continuous negotiations are often the case between long-term partnerships, supplier-client, etc., where it is important to consider the consequences of every step as it influences this negotiation, as well as future ones^[5]. The key in a long-term partnership is a good foundation and a mutual relationship based on trust and cooperation^[3].

Personalities

The impact of personalities, attitudes, and motivation on the outcome of a negation process is a topic of interest in research. Rubin and Brown (1975) reviewed 200 studies, to determine whether personal characteristics play a role in the negotiation process and its outcomes. Although gender differences may affect negotiation strategies, no specific character traits were found to consistently link to successful negotiation. The studies that revealed a difference in gender regarding negotiation strategies found that women were not as likely to mirror an opponent’s concessions when bargaining with a passive counterpart, while others find no difference. High-risk takers were competitive and made fewer concessions than low-risk takers. A study by Greenhalgh, Neslin, and Gilkey (1985) examined the effects of 31 personality traits in an attempt to find out which ones affected negotiation the most and did not find a significant relationship between any of the traits and the outcome of negotiations.

Our behaviour influences the decisions and behaviour of the opposite side. Having high demands can lead to frequent deadlocks if it is combined with low concessions by the opponent. Threats and strong demands are often detrimental to productive bargaining, as they tend to result in retaliation. Recent work supports and clarifies this, showing that such behaviours are harmful unless they are seen as legitimate, subtle, or not used to gain an advantage over the opponent^[1]. In negotiations, the concept of egocentrism, sometimes referred to as motivational bias, plays a significant role. This bias leads different parties to overweigh the objective that favours them, resulting in a subjective judgment of fairness. The degree of egocentrism displayed by the parties involved can directly impact their ability to reach an agreement. The more egocentric the parties are, the more challenging it becomes to achieve a mutually beneficial outcome^[6].

Culture

Nowadays, doing business across different cultures is the reality of many organizations. Having distributors, suppliers, shareholders, and stakeholders from all over the world increases the complexity of decisions, operations, and tactics. In XX culture is defined as the culmination of knowledge, experiences, beliefs, values, attitudes, meaning, …. Concepts of the universe, and material objects and possessions acquired by a large group of people in the course of generations through individual and group striving^[7].

There seems to be a significant difference in how different negotiation tactics are perceived in different cultures. Western society has an emphasis on efficiency and cost-effectiveness rather than developing a relationship with their opponents. In contrast, Eastern culture places value on building an interpersonal relationship with the other parties. The outcomes differ as well, western societies tend to focus on right and wrong, while Eastern cultures prioritize goodwill. Capitalistic countries focus more on justice and equity, while socialists place an emphasis on equality. If the parties negotiating come from the same culture, these norms will most likely influence the process but if they come from different cultural backgrounds the whole process tends to be more stressful and competitive^[1].

People can be classified into three different groups based on their origin and culture, these groups are: linear active, multi-active, and reactive. The first group is task-oriented and highly organized, this group includes people from countries such as the United States, Germany, Switzerland, and the UK. These negotiators rely on data, well-defined processes, and a clear-cut understanding of every element of a system. Efficiency and practicality are major factors here and this group typically plans every step of the process methodically and focus on one issue at a time. The second group is people-oriented, and communication is at the core of who they are. People from this group come from Hispanic America, Africa, Russia, Italy, and Spain, to name a few. They are known for laying the outlines and focusing on the big picture instead of approaching the negotiation in a systematic way, as well as having a tendency of discussing multiple issues simultaneously. The last group is introverted and assumes the position of listeners who approach conversations and negotiations with a deep sense of respect. This culture group includes Vietnam, China, Japan, Korea, and Singapore. They place importance on harmony in communication, as well as abating to power hierarchies. Gathering small details to then later piece them together to make up the large picture is something that this group does before making their decisions. (10)

But it is not enough just to be aware of these cultural differences. It is important to bear in mind that even though culture plays a large part in how a person perceives the world, the assumptions above are merely a framework based on stereotypes, and people are more multidimensional than that. Respecting their culture and being aware of how they perceive our own culture and how they might take a different approach based on that is important. (12)

Power

Application

Business Case Methodology (own creation; modified from ^[8])

The goal of negotiations should be to ensure that both parties achieve favourable outcomes, not to win at all cost. An experienced negotiator explained how they navigated the process, which included different personalities, various styles and approaches. They emphasized the importance of being prepared and to simply and fearlessly ask for what it is that one wants, as it can obtain significantly better results and creates an environment of honesty. It is also important to have a pre-defined definition of what success is in terms of a project or negotiation.

Good negotiation involves trying to find the third alternative and looking beyond the traditional win/lose outcomes to actively seek this third alternative. We as humas often view relationships in a very “clean cut” way, and in terms of win/lose outcomes. This binary perspective compels us to approach most situations from a standpoint where winning or losing are the only options. However, it is crucial to recognize that there is often a thirds options available, which may require more effort to identify, but an option that might lead to a win-win situation. (5) This alternative can foster synergy and maximize the potential for a mutually beneficial outcome and encouraging a collaborative atmosphere leads to higher benefits for both parties. (10)

According to Steven Covey’s model for negotiating, there are three possible outcomes: win-win, win-lose/lose-win and finally lose-lose. He suggests that in order to cultivate an environment where the outcome is win-win both parties have to have a mature look on the process and believe that there is enough for everybody. Trust plays a key role, both parties must trust each other and finally both parties have to have a ability to look at the situation from the others’ perspective. In order for this win-win outcome to become a reality, both parties have to work together. (11)

To successfully negotiate, it’s important to adopt a patient and positive mindset, as well as gathering relevant information. This information may include deadlines, decision-making authority, alternative solution, motivations, and past negotiation histories. When proposing a different direction, it can be helpful to ask “what if” questions as it sounds less like a commitment. It’s also crucial to understand the power dynamics at play and one’s status in the negotiations. Project managers may have significant decision-making authority, while when one party takes the role of a purchaser, their superior bargaining position supersedes all other roles and confers upon them the highest status. Knowing your opening offer and not revealing your bottom line provides leverage for negotiation.

Directly dealing with the decision-maker usually leads to quicker negotiations, and preparations is key to avoiding surprises and making decision based on emotion instead of facts. A risk management plan can help manage potential challenges. Finally, never reward intimidation tactics but instead be prepared to make concessions when the other party does as well. (5)

As mentioned above negotiators can roughly be categorized into three groups, task-oriented, people-oriented and introverted and approaches to negotiations with these different groups is different.

Limitations

While theories offer clear guidelines on the dos and don’ts of negotiation, in is important to keep in mind that our communication style, body language and tone significantly impact how these strategies are perceived and play a large role in the outcome. Despite the emphasis of leaving emotion out, it is important to acknowledge that emotions are an inherent part of human decision-making. Some of the tips on negotiating are very personal and hard to mimic, and thus should not be adopted by everyone, like using humour. Humour is of course something that everyone can do and is a good way to lighten the mood, but people are different and some people aren’t really funny and trying to be or not authentically be yourself can have the opposite of the desired effect. Some of the tips also seem to be a kind of description of a charismatic person, which again is hard to mimic. (5)

The use of tools when negotiating can be effective in providing guidance throughout the negotiation process, but it is important not to rely too heavily on them, as is may lead to a rigid and inflexible approach that may not be able to take into account the uniqueness of each situation. Certain negotiation tools place significant emphasis on data and analysis, which may not always lead to a strong rapport and trust between the negotiating parties

References

1. ↑ ^{1.0 1.1 1.2} Wall Jr, J. A., & Blum, M. W. (1991). Negotiations. Journal of Management, 17(2), 273-303.
2. ↑ ^{2.0 2.1 2.2} The standard for project management. (2021). A Guide To the Project Management Body of Knowledge (pmbok® Guide) – Seventh Edition and the Standard for Project Management (english) (pp. xxvi, 67, 274 Seiten (unknown). Project Management Institute, Inc
3. ↑ ^{3.0 3.1} Züst, R. (2006). No More Muddling Through, No More Muddling Through : Mastering Complex Projects in Engineering and Management. No More Muddling Through. Springer Netherlands.
4. ↑ ^{4.0 4.1} Thuesen, Christian. (2023). People [PowerPoint slides]. 42433 Advanced Project, Program, and Portfolio Management, Technical University of Denmark - DTU, Kgs. Lyngby, Denmark
5. ↑ Zohar, I. (2015). “The art of negotiation” leadership skills required for negotiation in time of crisis. Procedia-Social and Behavioral Sciences, 209, 540-548.
6. ↑ Bazerman, M. H., Curhan, J. R., Moore, D. A., & Valley, K. L. (2000). Negotiation. Annual Review of Psychology, 51(1), 279–314. https://doi.org/10.1146/annurev.psych.51.1.279.
7. ↑ 4. DRAKE, L. E. (1995). NEGOTIATION STYLES IN INTERCULTURAL COMMUNICATION. International Journal of Conflict Management, 6(1), 72–90. https://doi.org/10.1108/eb022756
8. ↑ Cite error: Invalid <ref> tag; no text was provided for refs named MethodologyPic

1. Wall Jr, J. A., & Blum, M. W. (1991). Negotiations. Journal of Management, 17(2), 273-303. 2. Bazerman, M. H., Curhan, J. R., Moore, D. A., & Valley, K. L. (2000). Negotiation. Annual Review of Psychology, 51(1), 279–314. https://doi.org/10.1146/annurev.psych.51.1.279 3. Crump, L. (2011). Negotiation process and negotiation context. International Negotiation, 16(2), 197–227. https://doi.org/10.1163/138234011X573011 4. DRAKE, L. E. (1995). NEGOTIATION STYLES IN INTERCULTURAL COMMUNICATION. International Journal of Conflict Management, 6(1), 72–90. https://doi.org/10.1108/eb022756 5. Englund, R. L. (2010). Negotiating for success: are you prepared? Paper presented at PMI® Global Congress 2010—EMEA, Milan, Italy. Newtown Square, PA: Project Management Institute. 6. Magenau, J. M., & Pinto, J. K. (2007). Power, influence, and negotiation in project management. The Wiley Guide to Project Organization and Project Management Competencies, 2, 89. 7. 8. PERDUE, B. C., DAY, R. L., & MICHAELS, R. E. (1986). NEGOTIATION STYLES OF INDUSTRIAL BUYERS. Industrial Marketing Management, 15(3), 171–176. https://doi.org/10.1016/0019-8501(86)90026-X 9. Craddock, W. T. (2010). Five things every project manager should know about negotiation. Paper presented at PMI® Global Congress 2010—North America, Washington, DC. Newtown Square, PA: Project Management Institute. 10. Ilyas, M. A. B. & Hassan, M. K. (2015). Negotiate to win across cultures. Paper presented at PMI® Global Congress 2015—EMEA, London, England. Newtown Square, PA: Project Management Institute. 11. Key reference: The standard for project management. (2021). A Guide To the Project Management Body of Knowledge (pmbok® Guide) – Seventh Edition and the Standard for Project Management (english) (pp. xxvi, 67, 274 Seiten (unknown). Project Management Institute, Inc. 12. https://www.pon.harvard.edu/freemium/new-free-report-overcoming-cultural-barriers-in-negotiation/ 13. https://www.pon.harvard.edu/daily/negotiation-skills-daily/how-power-affects-negotiators/

Key reference

• Program Management: The standard for program management, 4th Edition (2017)