In project management, mastering the art of negotiation is an indispensable skill for project managers and team members. This skill becomes particularly vital in a matrix or functional organizational structure, where project managers must frequently request resources from functional managers.
Negotiation involves a two-way conversation where both parties aim to secure their interests. It is a delicate give-and-take exercise that requires tact and savvy.
As the popular Kenny Rogers album suggests, knowing when to hold, fold, walk away, or run is critical in the day-to-day decision-making and bargaining processes. These principles align with the essence of negotiation and can serve as valuable guiding principles for successful outcomes.
What is Negotiation?
Definition: Negotiation is the process of exchanging ideas and opinions to arrive at a mutually beneficial agreement when two or more parties have shared and opposed interests. It is a decision-making process that becomes necessary when individual objectives cannot be achieved alone.
Negotiation is ubiquitous in everyday life, such as when people negotiate the best deal at a market. Within a project team, negotiation is used to reach a consensus on project needs and requirements. It is also effective for resolving disputes and claims, fostering trust and harmony if handled correctly.
In procurement, negotiations between contractors and buyers establish processes, obligations, prices, and rights, ultimately leading to a contract signing. Typically, authoritative individuals lead these negotiations, making decisions and signing contracts on behalf of their organizations.
Models of Negotiation
Negotiation has four models, these are:
Win-Lose: This approach to negotiation is competitive in nature, where the negotiator (A) is solely focused on getting what they want, regardless of the impact on the other party (B). This approach can often result in damaged relationships and is too short-sighted for long-term collaboration.
Lose-Win: In this approach, (A) takes a weaker position, often to satisfy the needs of the other party (B). While (A) may hope for a better bargain in the future, this approach can result in lost opportunities for both parties. However, accommodating engagements like this can be beneficial for gaining first-time customers and building trust for future win-win negotiations.
Lose-Lose: This approach involves both parties withdrawing from the opportunity to negotiate, resulting in a loss for both parties. This outcome can occur when neither party is willing to seek common ground or when the negotiation is so contentious that both parties walk away empty-handed.
Win-Win: This collaborative approach is preferred for current and future opportunities. Instead of seeking to dominate, one party turns the other into a negotiating partner by seeking first to understand rather than be understood. This approach can lead to mutual benefits and can create a positive and lasting relationship between both parties.
There is a high level of thinking to provide the best outcome for both parties. One powerful party does not take advantage of the other party.
Stages of Negotiation
Negotiation involves four stages, which are as follows:
1. Preparation Stage
Here, parties are expected to ponder questions such as
- What do we need to do first? In other words, let’s put first things first. Why come to negotiate what basic and essential your role is? An employer, for instance, needs to be sure things are put right as per his obligation to the employee before coming to the negotiation table.
- What are we negotiating about? Know the specifics, e.g., not just a pay rise but a 20% pay rise.
2. Debate Stage
Here, negotiators engage in a crucial exchange of positions that consumes most of the negotiation time. This is where parties distinguish issues from the beliefs of the negotiator, striving to avoid any obstacles that may hinder the deal from being sealed.
As negotiators navigate this stage, they must be mindful of two critical factors that could make or break the negotiation: inhibitors and signaling.
Inhibitors serve as red lights, discouraging the other party from accepting our offer, while signaling serves as a green light, indicating a potential solution that can pave the way for a successful negotiation.
3. Proposal Stage
Here, parties can see what the green light (signaling) entails to guide their decision. It is not a final solution but a build-up of the signaling.
4. Bargain Stage
This is the final condition and offers that close the deal.
Negotiation Examples
Negotiation happens all the time.
For example:
- You went to a car dealer to buy a used car. He offered a car for 10,000 USD for you to ask him to settle for 7,000. Finally, you purchase the car at 8,500 USD.
- You are buying a home and saw approach the property dealer. He showed you a house worth 500,000 USD. You negotiated the price and reduced it to 450,000 USD and bought it.
Some Helpful Negotiation Tips
- Anticipate and prepare for challenging questions that the other party may ask. Take the time to identify potential roadblocks and have well-researched industry resources to support your points.
- Approach the negotiation with professionalism and a collaborative mindset. Make a concerted effort to turn your opponent into a partner rather than an adversary.
- Distinguish the people from the issue at hand. Take the time to understand each party’s interests and needs, and work to invent options that lead to mutual gain. Use objective criteria to support your argument.
- If the negotiation hits a dead end, consider changing the venue for the discussion. Sometimes, a new perspective or environment can help shift your perception or position.
- Above all, be honest and transparent throughout the negotiation. Honesty is critical to building trust and establishing a strong working relationship with your negotiating partner.
Conclusion
Negotiation is a skill possessed by everyone, and the most effective approach is one that prioritizes collaboration. This involves considering both current and future opportunities during the negotiation process.