Negotiations

Revision as of 13:50, 17 April 2023

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 can help ensure alignment with key stakeholders and maintain a positive relationship with them, as well as negotiation being large part of resource allocation. It is relevant to organizational structures, and is a tool for risk management for managers. Being skilled at negotiating can prevent conflict in projects but is also useful in our personal lives as it can enable us to buy our dream home, help us launch our start-up or 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 prove an overview of the key factors that determine the trajectory of negotiations, explore the different negotiation styles. 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 limitations of these models.

The Big Idea

Negotiations is when two or more parties exchange goods or services and try to come to an agreement on the exchange rate. It is a valuable tool for reaching an agreement and resolve conflict. Through series of strategies, demands, tactics, demands an agreed exchange is determined for goods or services, but what are the determining factors when it comes to the outcome – is it personality traits, a specific tactic or negotiation style and is there something that will ensure success every time?

The Importance of Negotiations in Project Management

It has become being a skilled negotiator is beneficial for everyone, and relevant to project managers. Most projects have contracts and/or procurement, procurement can mean physical material or products, such as large appliances and supplies, labour, and services. These things involve negotiating and thus a good project manager must be a good negotiator or hire a good negotiator as it has a great influence on the financial side of projects, as well as stakeholder relations and even conflict management. (11) Resource allocation, project budget and timelines are elements that over the course of projects is often re-evaluated, which means that negotiation is not only one of the first steps of projects but is also a process that is repeated when needed over the course of the project. If the project manager is a skilled negotiator it can mean that outside council isn’t needed and can save projects a lot of time and money.

Key Determining Factor in Negotiation

Negotiation is a complex process involving multiple factors that contribute to the outcome of the discussion. A number of 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 and ….

Personalities

The impact of personalities, attitudes, and motivation on the result of a negation process is a topic of interest in research. According to a review of 200 studies, personal characteristics plays 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. A topic of interest to researchers has been how to influence the behaviour of the opposite side. The impression is that consistent high demands and low concessions by the opponent will lead to the same by the negotiator and thus lead to frequent deadlocks. On the other hand, low demands and high concessions by the opponent do not necessary lead to the same behaviour by the negotiator, but in many cases, they do. Threats and strong demands are often detrimental to productive bargaining, as they tend to result in retaliation. Recent work supports and clarifies this process, showing that such behaviours are harmful unless they are seen as legitimate, subtle, or not used to gain an advantage for the user. (1) In negotiations, the concept of egocentrism, or motivational bias, plays a significant role. This bias lead different parties to overweigh the objective that favour themselves, resulting in fairness judgments that are not entirely objective. The degree of egocentrism displayed by the parties involved can directly impact their ability to reach an agreement. Specially, research suggests that the more egocentric the parties are, the more challenging it becomes to achieve a mutually beneficial outcome. (2)

Culture

Nowadays, doing business across different culture “worlds” is the reality of many organizations. Having distributors, suppliers, shareholder, and stakeholders from all over the world increases the complexity decisions, operations, and tactics. (4) Before we dive deeper into what part culture plays in negotiations, it is important to define what culture is, here it 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. (4)

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 prioritizing developing a relationship with their opponents. In contrast, Eastern culture place high value on building an interpersonal relationship with the other parties. The outcomes differ as well, in relation to negotiations. Western societies tend to focus on right and wrong, while Eastern cultures prioritize goodwill. Capitalistic countries focus more on justice and equity, and socialist equality. It the parties negotiating come from the same culture, these norms will most likely influence the process but it they come from different negotiation norms, it may take longer, me more stressful and competitive. (1)

According to research, people can be classified into three different groups based on their origin, these groups are: linear active, multi active and reactive. The first group is task-oriented and highly organized 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 all parts of systems. 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 are 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 focus 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 are introverted and play the role of listeners who have a deep respect approach to conversations and, negotiations in particular. This culture group includes Vietnam, China, Japan, Korea, and Singapore. This group places importance on harmony in communication as well as abating to power hierarchy. Gathering small details to later put together the large picture is characteristic for this group, that is a part of their process 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 ^[1])

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. 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)