NEGOTIATION SKILLS

& RESOLVING CONFLICTS

Introduction to Negotiation

Negotiation is a process of communication in which the parties aim to send a message to the other side and influence each other.

Negotiation
Something that we do all the time, not only for business purposes Usually considered as a compromise to settle an argument or issue to benefit ourselves as much as possible

Not always between only two people

Example
When asked a question such as, "What kind of salary are you looking for?" You can respond by saying something like, "I will consider any reasonable offer," or "I am sure that if I do receive an offer, it will be fair or reasonable." If you are prompted to be more specific, then provide a salary range. The bottom of your range shouldn't be lower than your minimum acceptable salary and the top should be a bit higher than your ideal salary. Never say, "I need a minimum of ___ dollars." (That's probably what you will end up getting.)

Continuous Improvement
Process Thinking
-Most of the things done within an organization are the result of processes -Processes can be improved Treat negotiation as a process!

The Negotiation Process

PreNegotiations Preparation Negotiations Agreement or NonAgreement

Ongoing Evaluation & Learning

Postmortem Learning

Learning Capture Learning Reuse

Negotiating as an Organizational capability

How can organization improve its overall negotiating skills

Provide training and preparation resources for negotiators. Clarify organizational goals and expectations and when negotiators should walk away. Insist every negotiating team develop a Best Alternative To Negotiated Agreement(BATNA) and work to improve it. Develop mechanism for capturing and reusing lessons learned from previous negotiations. Develop negotiating performance measures and link them to rewards.

Provide training and resources

Provide preparation checklist Access the lessons learned from earlier negotiating experience. Apprentices assigned to more experienced negotiators can participate in actual deal and sense i.e. art of negotiating of how these things happen. Use of case studies and simulation

Clarify goals and Expectations

Negotiators should have clear direction from senior management Management be clear with expectations Negotiating goals must be aligned with organizational goals and support with right incentives

Clarity Goals and Expectations

Negotiators shouldnt have to guess at organizational goals and expectations. Clear direction from senior management. Ex If management is concerned with improving profit margins but fails to communicate that goal effectively, its field sales force may be negotiating agreements with customers that discount prices to win new accounts.

Insist That Every Negotiating Team Knows Its BATNA

Best Alternative To a Negotiated Agreement. A strong BATNA gives negotiators bargaining power. Companies should insist that their representatives have a clear understanding of their BATNA.

Capture and Reuse Lessons Learned

It is an essential part of the now popular field of knowledge management. Learning how to solve a knotty business problem or how to apply provision of the tax code is timeconsuming, costly, and subject to error. Ex A tax accountant based in New York City is unsure how to treat a financial transaction made by a film producer. A search of her firms database indicates how colleague in the Los Angeles office have successfully handled the same type of transaction.

Capture and Reuse Lessons Learned (Cont.)

When companies are systematic in recording the outcomes of negotiations, something similar are obtained. As reported by Danny Ertel, One major professional services firm is developing a centralized database to help its project managers negotiates scope-and-fee agreements with clients.

Develop Performance Measures and Link Them to Rewards

Companies get what they measure and reward. When companies reward their negotiators for squeezing the lowest possible price out of suppliers, they enjoy short term gains at the expense of relationship values. Their negotiators ignore win-win opportunities in favor of the zero-sum game.

Measures for Evaluating the Success of Negotiations

Relationship

Commitment

Communication

BATNA

Interests

Legitimacy

Options

Who is a Negotiator ?
A negotiator is someone who specializes in mediating agreements between two or more parties. Most negotiators represent a particular party involved, rather than acting as purely neutral mediators. The goal of a negotiator is to reach an agreement which will be mutually agreeable and satisfactory for all parties.

Characteristics of Effective Negotiator

Aligns negotiating goals with organizational goals.

Prepares thoroughly and uses each negotiating phase to prepare further.

Uses negotiating sessions to learn more about the issues at stake and other sides BATNA and reservation price. Has the mental dexterity to identify the interests of both sides, and the creativity to think of value creating options that produce win - win situations.

Characteristics of Effective Negotiator

Can separate personal issues from negotiating issues.

Can recognize potential barriers to agreement.

Knows how to form coalitions.

Develops a reputation for reliability and trustworthiness.

Four Step Negotiation Checklist

Step #1

Facilitate development of a negotiation plan, which includes the teams key strategies your position going in, and your desired outcome.

Lead the team in implementing the negotiation plan. Step #2

Adjust strategies and methods as needed during negotiations to achieve the desire outcome. Step #3

Facilitate assessment of the negotiation teams activities. Step #4

Example of Negotiation Process

Vantage problem: Faced with the need to cut costs, increase product innovation, and improve overall responsiveness to customer demands, a large manufacturing company undertook a strategic sourcing initiative aimed at consolidating its supply base, creating cross-divisional commodity teams, putting global contracts in place with key suppliers, and instituting standard metrics against which to measure supplier performance.

However, the company soon encountered several challenges. Commodity managers and buyers complained of having no leverage in negotiations, because engineers had designed specific supplier technologies or components into product specs. Engineers and other end-users complained that sourcing and materials management teams were myopically focused on price, and often damaged relationships with critical suppliers by negotiating too aggressively. Suppliers played one division off against another. And to the company lacked a systematic way to evaluate whether an agreement with a supplier was competitive relative to market alternatives

 Solution: Vantage, together with a core team of sourcing executives and business unit leaders, engaged in a rapid diagnostic analysis to better understand the barriers to implementing new negotiation approaches and capabilities. Analysis highlighted the need to formally define a set of critical negotiation activities: setting clearly defined goals; conducting market research to help inform negotiation strategy development; engaging in mid-course deal reviews with cross-functional executive teams; and conducting formal transitions from negotiating teams to teams responsible for working with suppliers once contracts were signed.

To embed common practices, tools, and skills across the organization, negotiation training and coaching workshops were conducted to equip all individuals involved in interacting with suppliers with the skills to effectively prepare for and conduct contract negotiations, as well as ongoing (often informal) negotiations over design changes, individual purchase orders, and scope changes.

The Vantage-led team also designed and implemented an electronic workspace with interactive negotiation job aids, dashboards to enable coordination of negotiation activities across teams and divisions, and a knowledge repository of information about the companys suppliers and lessons learned across negotiations. A small team of negotiation black belts were trained to serve as coaches and change agents to drive continuous improvement across the organization.

Result: Overall supply chain cost reduction of 10% Average annual price reductions of 10-15% Improved contract terms and reduced variability across contracts Identification and/or development of alternate sources for several key commodities

Want Collaboration
Accept- and Actively Manage Conflict

Rising need of collaboration

The quest for harmony and common goals can actually obstruct teamwork. Managers get truly effective collaboration only when they realize that conflict is natural and necessary. Challenge for senior managers how can people in an organization work together across internal boundaries.

Why Collaboration?
To service multinational accounts, you increasingly need seamless collaboration across geographical boundaries. To improve customer satisfaction, you need collaborations among functions ranging from R&D to distribution. To offer solutions tailored to customers needs, you increasingly need collaboration between production and service groups.

Getting Collaboration Right

There are tremendous benefits:
A unified face to customers Faster decision making Reduced costs through shared resources The development of more innovative products.

Using the same strategies a few company only benefit of this , a lot of companies still fail. Most companies respond to challenge of improving collaboration in an entirely the wrong way.

Root Cause: Conflict

Some feel significantly improving collaboration will reduce the conflict, but examples like restructuring initiatives produce more of it. Executives underestimate inevitability of conflicts and also its importance to the organization. Leading to:
Disagreements Competencies Access to information Clashes between parties

Methods that executed can help people and their organization

Strategies for managing disagreements at the point of conflict.
Parties involved are made to manage themselves. Most companies leave it on their employees on how they want to solve the problem At last, a well defined , well designed conflict resolution method will.
Reduce transaction cost Reduce wastage time Reduce ill will struggle to work through differences Will yield the innovative outcomes.

The Donts of Collaboration

Conducting teamwork training workshops
Ignoring constraints Objectives and resources Giving incentives for collaborative activity Just bringing people together using technology

The Dos of Collaboration

Collaboration as a culture and not a department
A common framework of collaboration Trade off based approach using criteria Consider objectives of other groups and teams

Examples

Intel

o o o o o

Clearly accept conflicts Use the common language approach Training sessions with case studies Employees exposed to various tools Never play the blame game

 Blue cross and blue shield o o o o o o Starting to outsource more services Evaluate alternatives against criteria Prioritize each alternative Use the trade off approach Used by all decision makers Higher chances of a consensus

Collaboration tool used by Blue cross and blue shield

COLLABORATION AT BLUE CROSS AND BLUE SHIELD

IMPLEMENTATION <6 MONTHS 6 - 12 MONTHS >12 MONTHS

COST 12000$ 13000$ 15000$

INTEGRATION EASY MODERATE DIFFICULT

USABILITY HIGH LOW MEDIUM

SCALABILITY HIGH LOW MEDIUM

MANPOWER LOW HIGH MEDIUM

PARTICIPANT 1 PARTICIPANT 2

IBM: Coaching for Conflict

The problem could be that.. The people your Are there ways to If you hear someone report is dealing with break this decision reporting to you that remain concerned apart into a series of Everyone still insists that unless they have sub issues and assign on being a decision a formal voice in decision making roles maker making the decision around those sub their needs and issues? interests wont be taken into account.

You could say that

Strategies for managing conflict upon escalation

Equipped with common conflict resolution methods, trade off criteria and by systematic coaching people are better able to resolve conflict on their own. Managers must ensure that upon escalation, conflict is resolved constructively and effectively and in ways that model desired behaviors. Establish and enforce a requirement of joint escalation.

How to avoid conflict?

The best way to avoid this kind of debilitating deadlock is for people to present a disagreement jointly to their bosses. It will guarantee that the ultimate decision maker has access to a wide array of perspectives on the conflict, its causes and the various ways it might be resolved. Companies that require people to share responsibility for the escalation of a conflict often see a decrease in the number of problems that are pushed up the management chain.

 Unilateral escalations at Telus- who should be dealing with what? Who should be talking to whom? They made joint escalation a central tenet of its new organization wide protocols for conflict resolution. Managers had to jointly describe the problem and what had been done so far and the solutions(requirement of systematic documents.) Send a joint write up to the bosses and be ready.

 Ensure that managers resolve escalated conflicts directly with their counterparts. Example- The three salespersons conflict over pricing. The bosses put forward a biased viewpoint leaving the answer to be given by the managers. In the end the decision was taken by the senior management which brought resentment into the management chain. This is disastrous for a company that needs to move forward quickly. So, resolve the conflict swiftly and decisively by yourself.

 The solution to these problems is Commitment by Managers-codified in a formal policy to deal with escalated conflicts directly with their counterparts. In 1990s, IBMs sales and delivery organization became increasingly complex because of reintegration of divisions. This led to the creation of Market Growth Workshop. (Not successful right away). This brought about frontline product specialists to resolve cross unit conflicts.

 Make the process for escalated conflict resolution transparent. How was the decision made? Based on what kinds of assumptions? With what kind of trade offs? A managerial black box. Clear communication about the resolution of the conflict can increase peoples willingness and ability to implement decisions

 IBMs Market Growth Workshops have evolved into a more structured approach to manage escalated conflict known as Cross Team Workouts(to increase transparency). The meetings(held for sales and delivery issues) provide a public forum for resolving conflicts over account strategy, solution configuration, pricing and delivery. The most complex and strategic issues reach the global forum. IBM has designated a Managing Director in sales and a global relationship partner in IBM global services as the ultimate point of resolution for escalated conflicts.

Tapping the learning latent in conflict

At Johnson & Johnson , conflict is recognized as a positive aspect of cross company collaboration. Example- outsourcing of clinical research services. Trends are spotted and information about them is disseminated throughout J&J more quickly. Better to partner with suppliers as it structures its collaboration and realizes more value from its relationship.

Thank You