Procurement and Materials Management - Negotiation

Arvind Tiwari

Guest Faculty IIFT

Overview

• Negotiation

• Definition

• Types

• Key Requirements

• Tactics

Negotiation

• We negotiate everyday with everyone

• Started when we were children

• Negotiation with parents for rewards

• Rewards for good work or good performance

• Small rewards for small things but important at that stage

• Moved on negotiation with friends and class mates

• Expectation increased with age and events

Definition

• An interactive process between two or more parties seeking to find common ground on an issue or issues of mutual interest or dispute where the involved parties seek to make or find a mutually acceptable agreement that will be honoured by all the parties concerned.

Definition

• Key

– Process

– Interactive

– Two or more parties

– Common ground

– Mutual interest

– Agreement honoured

Types

• Can be classified in many ways

• With someone who you

– will not deal with again

– may deal with again

– will deal with again and again

We will focus on second and third types.

Styles

• Different types require different negotiation styles

• One can acquire skills and become a successful negotiator for any type of situation

• It also requires practice in actual situations to hone these skills

Key Requirements

• Problem Analysis– Identify and analyse issues for both parties– Expected outcomes

• Preparation– Objectives– Areas of trade– Alternative to objectives– History of relationship

• Past precedents• Outcomes

• Active Listening– Verbal communication– Body language

Key Requirements

• Emotional control– Impacts

• Body language

• Words used

• Tone used

– Can send wrong signals

• Verbal communication– Clear

– Effective

– With reasoning

Key Requirements

• Collaboration and Team work

– Ability to work together with the other side

– Ability to get other members of own team to agree

• Problem Solving

– Approach to find a solution than only pursue objective

• Decision Making Ability

– Should be able to decide in a reasonable time

Key Requirements

• Interpersonal skills

– Good working relationship with those involved

• Ethics & Reliability

– Trust is important for good outcomes

Tactics

• Ensure you are negotiating with the right person or team

– Is not the first of a series.

– Have the authority to decide

– No joint stakeholders who appear later

• Try and find out about the other party team members

– Technical competence

– Personal traits

– Cultural background

Tactics

• Location

– Neutral location preferred though not always possible

• Dress code

– Depends on organisation / country culture

– Should not be an aberration

• Don’t get overawed

• Be polite always

Tactics

• In a multipoint negotiation , prioritise your points

• For each of the points of negotiation

– Know your target . Make a “Wish List”

– Know the acceptable limit

• Know your BATNA – Best Alternative to a Negotiated Agreement

• Essential because if you are not prepared to walk away then the negotiation can become one sided

Tactics

• Remember the negotiation will always go south from the starting point

• So start with your target

• Better to start first to let your position be clear

• If not possible to start still make your point

• Don’t make another offer till a counter offer has been made

• Don’t give bigger concessions than the other party. At most match them

Tactics

• Avoid negotiating and settling point by point

• Make offer / take a position for many points at the same time

• This helps understand other party’s position on various and provides scope for give and take

• Make notes as the negotiation progresses. Important to record all offers and counteroffers even if they get changed during a session

Tactics

• Example

– Advice Seeking

• How would you feel ?– Ideas to solve the problem

– Felt flattered

– Tried to put yourself in other person’s shoes

• Problem Solving– Disarm potentially defensive opponents

– Encourages him to propose solutions

Tactics

– Advice seeking

• Flattery– Increases likability

– Signals respect

– Implicit endorsement of expertise & values

• Perspective Taking– Prompt them to look at it from your point of view

Tactics

• Comfort during negotiations

– Relaxing techniques

– Breaks

• Non aggressive , friendly

• Sharing information

– Take the initiative

– Too much / too little

Tactics

• Show patience

• Understand time pressures

• Break down bigger issues into smaller ones

• Separate problem from self worth

• Avoid threats and manipulative tactics