“I’ll make you an offer you can't refuse!”
—Vito Corleone in The Godfather
Anil and Manav are friends. They are trying to decide whether to go to the cinema or watch a cricket match.
Anil: |
You are coming to watch the cricket match with me today, aren't you? |
Manav: |
No. I really don't want to. There’s a very good film showing at the Ritz. Come to that instead. |
Anil: |
No, I don't think a film would be as interesting as the cricket match. Surely, you'd rather come to the match? |
Manav: |
No. I think today’s match will be quite boring. Don't you prefer the cinema to cricket? |
Anil: |
I suppose so, but this is a crucial match for our team. You like cricket too, don't you? |
Manav: |
Yes, I do, but the film is on only today. I think you should come with me to the cinema and watch the match tomorrow. How does that sound? |
Anil: |
No. I'm not coming to the film. |
Manav: |
You are, you know. |
Anil: |
I really want to watch the match—I'm not coming to the film! |
Manav: |
Oh yes you are. It’s raining today. |
Anil: |
Oh dear. So it is. Okay, you win but if the weather is good tomorrow, you’ll come to the match with me, won't you? |
Manav: |
Yes. Of course. |
Upon completion of this chapter, you should be able to:
Explain the negotiation process.
Understand the factors aff ecting negotiation.
Know about the subjective factors that aff ect negotiation outcomes.
Understand the stages in the negotiation process.
Identify diff erent skills of initiating, discussing, and concluding the process of bargaining.
Know how to handle deadlocks.
Negotiation is a process of bargaining in which two parties, each of which has something that the other wants, try to reach an agreement on mutually accepted terms. Everyday examples of negotiation are:
The Oxford Dictionary of Business English defines negotiation as:
The Winston Simplified Dictionary defines negotiation as, “the discussion and bargaining that goes on between parties before a contract is settled or a deal is definitely agreed upon”. Alan Fowler defines negotiation as “a process of intervention by which two or more parties who consider that they need to be jointly involved in any outcome, but who initially have different objectives, seek by the use of argument and persuasion to resolve their differences in order to achieve a mutually acceptable solution”1. According to Bill Scott, “A negotiation is a form of meeting between two parties: our party and the other party”2. The objective of most negotiations is to reach an agreement in which both parties together move towards an outcome that is mutually beneficial.
Explain the negotiation process.
Negotiation is a process of bargaining in which two parties, each of which has something that the other wants, try to reach an agreement on mutually accepted terms.
The following points make the nature of negotiation quite clear:
When a manager deals with other managers or customers and suppliers over whom he or she has no authority, he or she tries to reach an agreement through discussion, persuasion, and argument. In other words, the manager must negotiate with the other party.
Suppose you are a manager in the marketing department of a company. You need the help of an analyst from another department to complete an urgent project report. The other department may not be willing to spare the services of the analyst you badly need. You would need to discuss the matter with your colleagues and make your case using convincing arguments, by negotiating with the analyst and the other department. Reaching an agreement is the objective of negotiation.
Reaching an agreement is the objective of negotiation.
Consider the following situation, which shows how negotiations work.
Mr and Mrs Rai wanted to sell their house. They had approached many property dealers in their area. Several agents had seen their property and knew their intentions, including the minimum price they would be willing to accept. The Rais quickly realized that in their area, nearly every property agent had come to know of their desire to sell the house as early as possible. This worked against them, and every time they were made an offer, it was lower than the previous one. They became desperate and began to believe that it would not be possible to sell their house for a reasonable price because they made the mistake of disclosing their keenness to sell. One day, they happened to mention this to one of their friends. He gave them the contact information of a very prominent builder, Mr Devraj, from another part of the city. Mr Devraj answered the Rais’ call and immediately enquired about the location of the plot and the built-up area. Next, he asked them their asking price. He paused, and then said, “Think about the price again”. This made the Rais feel a bit shaky. They had told him the price they wanted, not the prices the property dealers had offered them thus far. Not wanting to lose the chance of selling their house, they reduced their asking price by Rs 5 lakh. Mr Devraj promptly asked, “Is that final?” With some trepidation, they said, “Yes”. In a businesslike tone, he said, “Done” and promised to send them Rs 10 lakh as an advance the next day. He also remarked that he would have the remaining amount sent within a week. The Rais wanted him to see the house, but he said, “There is no need for that; I am familiar with the sector”.
At the time of the full and final payment, the Rais learnt that they were not able to get the desired price for the house from other, smaller property dealers because the house had an old-fashioned design and would need to be demolished. What these property dealers were offering was the price of the land only. However, Mr Devraj, being a builder, would be able to use the basic architecture and give the house a new look.
The need to negotiate is defined by the situation. Some situations require negotiating, others don't.
Negotiation is necessary when an issue involves more than one person and the problem cannot be resolved by a single person. Whenever two or more persons or parties are involved, they are bound to have different views or aims regarding the outcome. The way to overcome disagreement is by negotiating.
Negotiation can take place only when both concerned parties are willing to meet and discuss the issue at hand. That is, they both must want to reach a decision by discussion, not force or authority.
There are formal and informal situations in negotiation.
A formal negotiation is simpler to handle than unannounced meetings.
Generally, a formal negotiation is for settling a dispute or a conflict between two warring parties, such as for a labour or workers’ strike. Negotiations in such situations are formal; the meeting between the two parties is fixed beforehand and both parties have time to prepare their bargaining points.
Informal negotiations are unannounced and casual meetings, such as when a staff member drops by a colleague’s office and discusses a problem, which they attempt to resolve. This is an informal negotiation because:
The following types of situations will not require negotiation:
However, people often encounter situations in which there is neither direct acceptance nor complete refusal at the outset. In such cases, the two persons deal with each other by discussing the possibility of reaching a mutually acceptable end.
The factors discussed in this section usually affect the outcomes of negotiations.
Understand the factors affecting negotiation.
The location of a negotiation can influence the level of confidence of one party. When the location is one party’s office, for instance, that party has several advantages. They are on home ground, an area of strength. They can access whatever information or material is needed during the course of the negotiation. They can also extend social courtesies as a token of goodwill; this could move the negotiation towards agreement.
Often the outcome of a discussion does not depend wholly on objective factors such as logic and the facts of the matter under consideration. The final outcome may also be determined by subjective factors relating to influence and persuasion.
Know about the subjective factors that affect negotiation outcomes.
Persuasion includes a range of skills for convincing other people of the need to accept or agree to a course of action. It is an essential element of effective business communication. It helps in resolving issues on which there is a difference of opinion, but that need solutions that are in the interest of all. In negotiations, people are gradually persuaded to accept the other party’s view to some extent.
Persuasion includes a range of skills for convincing other people of the need to accept or agree to a course of action.
As you must have seen yourself, persuasion is not one single thing. It is a mixture of skills—attitude, psychology, language, tone, body language, and so on—used to convince the other party to accept one’s view despite their objections or alternate proposals.
Persuasion is not just one single thing. It is a mixture of skills—attitude, psychology, language, tone, body language, and so on—used to convince the other party to accept one’s view despite their objections or alternate proposals.
“You attitude” is an essential aspect of negotiations. Nothing convinces more than facts. But in order to persuade people, the facts should be discussed from the other party’s point of view. A skilled negotiator should be able to highlight how the other person stands to gain from his or her suggestions. He or she must understand the other party’s needs and be able to reconcile what would be a good result for him or her with the needs of the other party. This allows persuasion to end negotiations and discussions with a satisfying conclusion for both sides (creating a win-win situation).
A skilled negotiator must understand the other party’s needs and be able to reconcile what would be a good result for him or her with the needs of the other party.
The range of persuasive skills can be classified under the following broad headings:
At the end of the discussion, both sides should be sure that the final agreement covers all necessary points and they are clearly expressed and understood.
Generally, the process of negotiation moves from the stage of “offer” to that of “agreement” via the stages of “counter-offer”, “concession”, and “compromise”. All discussions that progress successfully from opening differences to a final, mutually acceptable outcome/conclusion usually move through the same general sequence. During informal discussions this sequence may not always be obvious, yet it is there with respect to the most important aspects of negotiations.
Understand the stages in the negotiation process.
At the end of the discussion, both sides should be sure that the final agreement covers all necessary points and they are clearly expressed and understood.
According to Alan Fowler, the stages of an effective discussion are:
These six stages can be grouped into three basic phases:
Negotiation implies that both parties accept that an agreement between them is needed (required or desirable) before any decision is to be implemented. The direction of the discussion is towards that desired agreement. Hence, it requires careful preparation and handling.
Negotiation implies that both parties accept that an agreement between them is needed (required or desirable) before any decision is to be implemented.
Like all effective communication/discussion, negotiations have to be planned. Tim Hindle, in his book Negotiating Skills, says, “Bear in mind that it is almost impossible for a negotiator to do too much preparation”.3
There are two respects in which the negotiator has to be prepared before the negotiation:
Knowing the real issues at hand helps the negotiator feel confident and fully prepared about two things:
Negotiators should be realistic about their objectives. If they fail to persuade the other side to accept their ideal solution, they should be prepared to lower their expectations. If the ideal is not achievable, they should be very clear and firm about the lowest outcome acceptable to them. It is important for the negotiators to know what points they are willing to concede and what their limits are.
In the preparation stage, negotiators should also plan the best way of arguing their case, considering particularly the other person’s likely viewpoint and objectives. They should assess the strength of each party’s bargaining position. To be well prepared before the actual negotiating process begins, negotiators should:
Most effective negotiations follow a set sequence:
Some scholars do not consider the stages of preparation and implementation to be parts of negotiation. But they constitute two basic phases of the actual process of negotiation—one before initiating the negotiation process and the other after concluding discussions.
Some scholars do not consider preparation and implementation to be parts of negotiation.
Three steps to prevent failure of implementation are:
Some of the elements listed as part of the negotiation process are strategic in nature. They are discussed here as strategies to be used at different stages of negotiation.
Identify different skills of initiating, discussing, and concluding the process of bargaining.
Before the negotiation, the negotiators must plan their strategies.
Instead of talking compulsively, a good negotiator allows the other party to say what they wish and develops a dialogue with them.
One can start the discussion with language such as: “The general point of our discussion is…, which I think has come up because of. … But before I go into details, it would be helpful if you first outline your view”.
The following are some strategies that should be used during the course of the negotiation:
The strategy should be to allow the discussion to move towards agreement. To do this, one must psychologically encourage cooperation throughout the discussion.
Both parties should use impersonal terminology to point out corrections, rather than making personal criticisms.
Tips for reaching a final agreement are:
Be tactful and persuasive to ensure that the final outcome, which is of advantage to you, is also seen by the other party as a benefit to them.
It helps to summarize the agreements and conclusions at the end of the discussion.
Reaching a mutually satisfactory end is the basic objective of any negotiation. If there is no final agreement reached, even after a prolonged discussion, the strategy should be to:
Know how to handle deadlocks.
Several years ago, when Rakesh wanted to build a house in Faridabad, a property dealer showed him a number of plots in different sectors. He liked a particular plot of 500 square yards in Sector 9. The owner of the plot, Mr Roshan Lal Sharma, was a non-resident Indian who had taken extended leave to be in India so that he could sell his plot.
Before going to Mr Sharma, Rakesh wanted to obtain more information about the owner of the plot to strengthen his bargaining power. Mr Sharma was an engineer, and had been abroad for more than 15 years. He had a house in Delhi. Rakesh believed that it would be easy for him to negotiate the deal with Mr Sharma if they could meet in Faridabad. However, Mr Sharma conveyed his inability to come down to Faridabad because of other commitments that day. The property dealer suggested that Rakesh go to Delhi and finalize the deal. Rakesh was very keen to close the deal the same day.
Rakesh, along with his two sons, the property dealer, and Mr Sharma’s dealer, went to Mr Sharma’s house in Delhi to meet him. Rakesh’s dealer introduced him and his sons to Mr Sharma. After the introductions, Mr Sharma excused himself and went into the adjoining room with Rakesh’s dealer, while Rakesh, his sons, and Mr Sharma’s dealer waited in the living room. Mr Sharma enquired about Rakesh and his family and his interest in Faridabad. They spoke within hearing range of the others.
On returning to the room, Mr Sharma kept silent and seemed to want Rakesh to begin the discussion. Rakesh began by praising the plot, especially the location. He told Mr Sharma that he had decided on this plot after taking a look at many different properties. He also explained that he was leaving for Jamshedpur the same night and, therefore, would like to finalize the deal before that. Mr. Sharma was happy to hear this.
When Rakesh asked Mr Sharma about the price, he did not give Rakesh a straight answer; rather, he put forth a counter-question and asked Rakesh about the prevailing rates and what price he had in mind. Rakesh evaded the question by saying that the rates varied from sector to sector, size to size, and location to location. Mr Sharma said his dealer knew the price of the plot and should have informed him about it. Rakesh said that the dealer had indeed informed him about the price, but that was higher than the rate prevailing in Sector 9. Mr Sharma said that he would like to know what Rakesh’s offer was. Rakesh consulted his dealer and quoted the price suggested by him. Mr Sharma, again, did not accept the price. Rakesh raised his offer by Rs 500 per square yard, and, this time, Mr Sharma readily accepted the offer. Rakesh believed that the deal was completed.
However, while Rakesh was turned towards his dealer, Mr Sharma, rather suddenly, raised the issue of payment of the penalty charges for not constructing the mandatory percentage of the approved plan of construction within the stipulated time as prescribed by the Faridabad Municipal Corporation. He insisted that the buyer should bear the penalty charges on the plot. The penalty amount was for three years. Rakesh found the demand rather unreasonable. He tried to convince Mr Sharma that the demand was not logical. He failed to understand why he, as the buyer, should bear the penalty cost. Mr Sharma, however, kept repeating that this was his personal decision and his decisions were not subject to the questions of logic or correctness. Rakesh’s sons also felt that they should not give in to this demand. The two dealers strongly objected to the demand and thought that Mr Sharma was behaving arrogantly and unreasonably. They suggested that Rakesh drop the proposal and said they would help him buy another plot. At this point, Rakesh excused himself and asked the two dealers to step out with him for a discussion. Mr Sharma also left the room.
Rakesh came back to the room with a smile and, to everybody’s surprise, offered the amount he had brought with him to Mr Sharma as advance money, conveyed his decision to accept the penalty cost, and asked Mr Sharma to finalize the deal. Both his sons were surprised at the sudden change in his perspective. However, everyone was relieved that the deal was finally sealed.
Within three months of Rakesh’s purchase, his plot’s price rose to three times what he had paid for it. By considering the long-term advantages of buying the plot, Rakesh had made a smart decision when he accepted Mr Sharma’s offer. Within a year, the house was ready on the same plot. Rakesh and his wife celebrated their fiftieth wedding anniversary with their family, relations, and friends in their new house that year.
Questions to Answer
A: | Waiter! |
B: | Yes, sir? |
A: | Look, I’ve been sitting here for ten minutes and you still haven't even given me the menu. |
B: | I can't help that. We’re very busy. You’ll have to wait. |
A: | I'm damned if I’ll wait any longer. Bring me the menu immediately. |
B: | I'm sorry, sir. I’ve got those people over there to serve first. |
A: | Right. I'm going then and I won't come to your blasted restaurant again. |
B: | I'm afraid I can't help it if you are unwilling to wait for your turn! |
A and B do not seem to get along too well! What goes wrong? If you were A, how would you handle the situation?
Anoop: | I was just wondering if you were using your scooter this afternoon. |
Bala: | Why? |
Anoop: | Well, I promised Ravi I'd pop over and see him before he went to Delhi. |
Bala: | How about going by bus? |
Anoop: | It’s more expensive than using a scooter and it takes longer. |
Bala: | Oh, yes! It’s more expensive than using my scooter, my petrol, my insurance, my road tax—much more expensive. Why not go by train? Oh yes! Too expensive! |
Anoop: | If you’re not using it, you could lend it to me. Why not? I’ll put some petrol in it for you. |
Bala: | Okay, I can't see any reason why you shouldn't have the scooter, then. Don't forget the petrol. |
Anoop: | Thanks. |
How does Anoop induce Bala to lend him the scooter? He makes suggestions and proposals. List these and also Bala’s counter-arguments.
From the given options, please choose the most appropriate answer:*