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Negotiating strategically

Negotiating strategically

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•-mvAinilemyolManagemerHtXlCVTIVl. 1989. Vol III. No. I.pp
J7-M
Consider Both Relationships andSubstance When Negotiating Strategically
Grant
T.
SavageJohn
D.
BlairRitch i. Sorenson
Texas
Tech University
W
hen David Peterson, director of services for Dicker-son Machinery, arrives at his office, he notes fourj|)poinlmcnts on his schedule. With his lengthy experiencein fiegoliating impoilant contracts for this large-equipmentrepair service, be does not take long to identify the agendalor each appointment.'A sieering
c
luich disk salesman from Roadworks willarrive al 8:30 a.m. Peterson has relied for years on diskssupplied by Catcrpilku and knows those disks can provideihc 8.000 hours of service Dickerson guarantees. Price is anissue in Peterson s selection of a supplier, but more impor-lant is a guarantee on the life span of the part.A mcrting is
sc
hedulod at 9:30 with a met
h.inif
whohjs swapped
a
new (ompany battery tor
o
used baitery fromhib own truck. This "trade" is. of course, against company[)()licy. and the employee has been reprimanded and lold hi-,iH'xl paycheck will ho clocked. However, the mechanicwants to disc uss the matter.A representative tor Taf
c
o.
a
large road-building con-iidctor. is scheduled for 10:00 a,m, Peterson has been inter-ested in this service contract for a couple of years. Hebelieves that if he can secure a short-term service contractwith T.irco, Diekcrson's high-f|ualitv mec hanica! service andguarantees will result in a long-term service relationship witbihe contractor. The night before, Peterson had dinner with
l.itco's
reptt'sentative. and this morning he will provide alout ot service facilities anci discuss the short-term contractwith him.A meeting with fiiiiiia^emcnt representatives forunion negotiations is scheduled for 1.00 p.m. That meetingwjll probtibiy lost .i couple ol hours. Peterson is concernedbecause the cc)m|),iny has losi money on the shop undor-Hoingcontr<3ct talks.,incJ now the union is demanding higherwages and threatening to strike. The t ompany
c
annot afford
.1
(jroiongc'd strike, but it also
c
annot dttorcf to increase poyatI iirrent scTvice firoclut lion r.ites. Negotiating .i contract willtu)i be easy.
Choosing Negotiation Strategies
Peterson's appointments are not unicjue. Researchers.md scholars have examined similar situations. What strategicadvice does tbe negotiation literature offer tor handlingthese four situations?One of the best developed approat hcs is ,i.,'<inK'
iho-ory.
which focuses on maximizing substantive outcomc^s innegotiations,' Peterson would probably do well by foe usingon only tbe best possible outcome for Dickorson Machineryin his meetings with the salesman and the employee: Healrodcly has
a
good contract fora steering wheok lute h. bul ifthesdlesTTian can cjffei a better
deal.
Peterson will takt'it; andin the case of the employee. Peterson will bear him out bulforesees no need to deviate from company polic y.In contrast, an exclusive focus on maximii^ing the(ofiipany's substantive outcomes would probably not workin the other two situations: Tarco m.iy continue being serv-iced elsewhere unless enticed to try Dickerson: and duringthe union negotiations, strategies to maximize outcomes formanageinent only could force a strike.Another well-developed strategic approiic h is
win-win problem solving,
li is designed to maximize outcomesfor both parties and maintain positive relationships.' Thisapproach ccjuld work in the union negotiation, but theoutcome would probably be a compromise, ncii .l true win-win solution.Win-win negotiation probably is not the best strategyin the other three situations. Either Roadwork's salesmanmeets the guarantee and beats current prices, or he doesnot: trying to fiticJ a win-win solution woulcJ probably be awaste of time. Similarly, because the meeting with theemployee will occur after company rules have been applied,a win-win solution is probably not in the company
s
bestinterest. Lastly, an attempt to maximize the company's sub-stantive outcomes in
a
short-term service contract with Tarco{ould hinder long-term contract prospects.
37
 
February, 79S9
Any
one
approach
to
negotiation clearly will
not
work
in all
situations. Executives need
a
framework
for
determining what strategies
are
best
in
different situations.We believe the best strategy depends on desired outcomes.In this article,
we
characterize
the two
major outcomes
at
issue
in the
previous examples as
substantive
and
relation-
ship
outcomes. Although both types
of
outcome have been(iiscussed
in the
literature, relationship outcomes havereceived much less attention.
Our
contention
is
that a
sys-
tematic model
of
strategic choice
for
negotiation mustaccount
for
both substantive and relationship outcomes.
In
articulating such
a
model,
we
suggest that executives
can
approach negotiation strategically
by
assessing
the
negotia-tion context: considering unilateral negotiation strategies;transforming unilateral into interactive negotiation strate-gies:
and
monitoring tactics
and
reevaluating negotiationstrategies.
Assessing
the
Negotiation Context
At ru( itil context for
any
negoliation
is
the manager'scurrent
and
desired relationship with the other party. Unfor-tunately, in their rush to secure the best possible substantiveoutcome, managers often overlook
the
impact
of
the nego-lidtion
on
their relationships. This oversight
can
hurt
a
man-ager's relationship with
the
other party, thus limiting
his or
her ability
to
obtain desired substantive outcomes now
or in
the future.Each interaaion with another negotiator constitutesan
episode
that draws from current and affects future rela-tionships. Intertwined with pure concerns about relation-ships are concerns about substantive outcomes. Many timesnegotiators
are
motivated
to
establish
or
maintain positiverelationships and willingly "share the pie" through mutuallybeneficial collaboration. Other negotiations involve substan-tive outcomes that
can
benefit
one
negotiator only
at the
expense of the other
(a
fixed pie).
These cases
often motivatenegotiators to discount the relationship
and
claim
as
much ofthe
pie
as possible.Most negotiations, however, are neither clearly win-win
nor
win-lose situations,
but
combinations
of
both
(an
indeterminate pie). Such mixed-motive situations,
in
whichboth collaboration and competition may occur, are particu-larly difficult
for
managers
to
handle strategically.-" The rela-tionship that exists prior
to the
negotiation,
the
relationshipthat unfolds during negotiations,
and the
desired relation-ship often will determine whether either negotiator will
be
motivated
to
share
the
pie, grab
it, or
give
it
away.
Assessing The
Negotiation
Context
NtGOTIAIIONCONTEXT:Re dtive Power and Leve of Cont itiMANAGERSSTRATFCYEXISTING NEGOTIATION XSUBSTANTIVESITUATION EPISODE / OUTCOMESOFNEGOTIATIONOTHER PARTY SSTRATEGY
38
 
Consider
Both
Retationshipi
and
Substance
When Negotiating
Strategically
In any case, managers should keep existing anddesired relationships in mind as they bid for substantiveoutcomes. For example, when negotiators are on the losingenti of a win-lose negotiation, they should examine theimplications of taking a short-term loss. During his thirdappointment, Peterson's willingness to make only minimalgains in service contracts for the short term may create aposilivf relationship that will lead to
a
lucrative, long-termcontract with Tarco. The relative importance of possiblesubstantive and relationship outcomes should help execu-tives decide whether and how to negotiate. To guide theirdecision process, managers should begin by assessing ihoirrelative power and the level of conflict between them andthe other party. Both are key determinants of their currentrcLitionship with the other party.Exhibit
1
illustrates the negotiation context, showingihose aspects of the situation and negotialion episode that'^hape relationship
and
substantive outcomes. Exisling levelsof power
and
conflict influence
(1)
the relationship betweenthe executive and the other party and (2) (he negotiationstrategies they choose. These strategies are implementecithrough appropriate tactics during
a
negoliation episocie
a
one-on-one encounter,
a
telephone
call,
or
a
meeting withrtiultiple parties — and result in substantive and relationshipoutcomes.The multiplearrows linking strategies, tactics.and thetU'HOtialion episode in Exhibit
1
show the monitoring proc-ess through which both the manager and the other partyrefine their strategies and tactics during an episode. A com-plex .lnd lengthy negotialion.such asj union tontratt nego-
li.ition.
m.iy include many episodes;
a
simple negotiationm.iy be (omj^leted within one episode. Each episode,nonetheless, influences future negotiations by changing themanager's and the other party
s
relative power, the level ofconflict between them. ,ind their relationship.
Relative Power
The relative power of the negotiators establishes animportant aspect of their relationship: the extent of each|).irty
s
defiendence on the olher. Researchers have foundlh.il individuals assess their power in a relationship and( hoose whether Io (ompete, iK(ommo(Jate, tollaborote. orwithdraw when negotiating with others.' Managers canassess their power relative to the other party by comparingtheir respective abilities to induce compliance through thecontrol of human .ind material resources. To what extent cioihey
each
control key material resources? To what extent doihey each control the deployment, arrangement, andadvancement of people within the organization?*"These questions will help managers determinewhether their relationship with the other party Is based onindependence, dependence, or interdependence. Addi-tionally, these questions should help executives considerhow
and
whether their relationship with the other parlyshould be strengthened orweakened.Often managers willfind themselves or their organisations in interdependenirelationships that have both beneficial and detrimcnl.ilaspects. These relationships are called mixed-motive situa-tions in the negotiation literature because they provideincentives for both competitive and cooperative actions.In his relationship with the Roadwork salesman.Peterson has considerable power. He is satisfied wiih hiscurrent vendor and has other vendors wanting to sell himthe same product. The numerous choices available allowhim to make demancJs on the salesman. Similarly. Petersonli.ts more relative power than the mechanic. On the olher
hand,
he has relatively little power wiih Tarco. since thecontractor
can
choose from
a
number of equipment-serviceshops. Moreover. Tarco's representative did noi make theinitial contact and has not actively sought Dickerson'sservices.
Level
ol Conflict
The levei of conflict underlying a potentkil negoti.i-lion establishes how the negotiators perceive the affectivedimension of their relationship — ihat is. ils degree of sup-fjorliveness or hostility. Managers can assess the relaliori-shi[is level of conflict by identifying the difleretices between
edc h
party's interests. On what issues do both parties agree?On what issues do they disagree? How intense and howingrained are these differences?"Answers to these c]uestions will reve.il whcMhcrnegotiations will easily resolve differences and whether iherelationship is perceived as supportive or hostile. Thesequestions, like the questions about relative power, shouldalso help exec utivesccinsidcn how <in</whether ihe relation-ship should bestrenglhenecl or weakened. Very tew negcili-ations begin with
a
neutral relationship.Indexed,the affectiveslate of the relationship may be
a
primary reason fcjr nego-tiating with
a
powerful other party. es[iec
i.illy
if ihe rcLiticm-ship has deteriorated or been parliciiLirlv supportivc-In Peterson's case, neutral to positive relationshipsexist with the Roadwork salesman and the Tarco representa-
tive.
However, his relationships with the mechanic and theunion are potentially hostile. Eorexomfile. mtin.igemeni andunion representatives have .ilreacK h.id (ontronl.ilions.Their conflict may escalate if the relationship is notand both sides are not willing to make concessions."
39

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