business negotiation(ss)principles

Passage One Business Negotiation Principles Negotiation is an art developed through study and practice. Effective negotiation requires an understanding of the social, cultural, political, and economic systems, as well as an expertise in technical, financial, accounting, and legal analysis. Negotiation is here defined as the use of common sense under pressure to achieve objectives. However, reaching explicit agreement on all points is not necessarily the only objective of negotiation; in fact, agreement may be reached on only some of the explicit proposals being negotiated. Even then agreements vary widely in their degree of specificity and in the extent of disagreement which is left unsettled①. The outcome of negotiations is more than merely an explicit agreement. Shown in the following are some principles which are effective rules for the negotiators to observe in the course of business negotiation to reach an agreement finally. Basic Principles • Negotiation takes place within the context of the four Cs, that is, Common Interests (something to negotiate for), Conflicting Interests (something to negotiate about), Compromise (give and take on points), and Criteria or Objectives (determining the objective and the criteria for its achievement). • Negotiation takes place within the context of an environment composed of the political, economic, social, and cultural systems of a country. The strategies and tactics of negotiation are directly influenced by the environment which varies with each country. • Negotiators must develop a broad perspective that includes the larger context within which they negotiate. Such perspective is developed through answering such questions as "Besides the factors directly related to the ongoing negotiation, what other developments influence the approach to negotiation of the opposite group(s) and of various levels of the organization we represent?" For example, in negotiation with a government, the international corporation (IC) should recognize questions such as "What other similar and related projects has the government negotiated in the past? What has been the reaction of political and economic interest groups within the host country to the terms of investment granted to foreign investors in these projects? What pressures are being placed by external groups on the host government for a particular pattern of development of the industry?" • Over time, the four Cs change and the information, know-how, and alternatives available to the IC and the host country also change, resulting in a fresh interpretation of the four Cs, the environment, and perspective. • The unique characteristic of international versus domestic business negotiations is that international negotiations are influenced by a wide diversity of environments that require changing perspectives which determine the selection of appropriate negotiation tactics and strategies to be adopted. Specific groups in different environments have their own concept of what is "right," "reasonable," or "appropriate" in negotiations; each group also has its own expectations of the likely response of an opposing group to the issue, event, or mood determined by its "self reference criterion" - that is, "the unconscious reference to one's own cultural values." Principles of the Mutual Gains Approaches (MGA) According to Lawrence Susskind and Patrick Field, the six simple guidelines that provide the framework for the Mutual Gains Approaches are: · Acknowledge the concerns of the other side. · Encourage joint fact finding. · Offer contingent commitments to minimize impacts if they do occur, and promise to compensate knowable but unintended impacts. · Accept responsibility, admit mistakes, and share power. · Act in a trustworthy fashion at all times. · Focus on building long-term relationships. The six principles of the MGA mean that a good negotiator should: · Take a step back from his own interests and try to delve into the underlying interests as opposed to the positions of the other side, i.e. consider the interests of both sides.② · Try to generate information that is believable to both sides. Decide what information the other side will find compelling. Engage in gathering data, analyzing data, and drawing conclusions with the other side. · Minimize the impact of his actions and decisions upfront, rather than wait to pay the premium later.③The negotiator should avoid an aggressive style that could probably put the counterpart’s representatives in defensive and/or counteroffensive positions. His style should make the other side’s representatives partners, not counterparts. · Accept responsibility, admit mistakes, and share power. · Say what he means and means what he says. The good negotiator should not make promises that he does not intend to keep. He should not ask for commitments that he does not intend to keep. He should not ask for commitments that the other party is unable to honor. · Focus on building long term-relationships if he cares about her reputation and credibility. The six principles of the MGA require the negotiator to avoid the following ploys: · Stonewalling: keeping quiet in the face of a crisis. · Whitewashing: minimizing the effects of his actions. · Smoke screening: concealing the truth. · Setting a false front: entering into a debate or negotiation under false pretences. · Block-and-blaming: distancing him from the problem and blaming somebody else. · Slush-and-burn: deploying all-out warfare against his critics. Principles of Smart Choices The best way to make a smart choice is to divide and conquer. For a negotiator, the divide-and-conquer technique means that he has to · break his decision into its key elements · identify those most relevant into his decision · apply some hard systematic thinking · make his decision An effective decision-making process fulfils six criteria: · It focuses on what is important. · It is logical and consistent. · It acknowledges both subjective and objective factors and blends analytical and intuitive thinking. · It requires only as much information and analysis as is necessary to resolve a practical dilemma. · It encourages and guides the gathering of relevant information and informed opinion. · It is straightforward, reliable, easy to use and flexible. Principles of Alternatives in Decision Making (ADM) and Alternative Dispute Resolution (ADR) Alternatives are the raw materials of wise decision-making. They represent the range of potential choices a decision-maker will have for pursuing his objectives. Alternatives are of vital importance. An excellent decision-maker must establish and maintain a high standard for generating alternatives. The reason a decision maker engages in conflict resolution processes is to produce something better than what can be produced without deploying any conflict resolution process but litigation. For any skilful decision-maker, the alternatives represent an opportunity to explore imaginative solutions to the problem at hand. The science and art of making smart choices by generating alternatives involves the following techniques: · Use your objectives and ask yourself “How can I achieve the objectives I have set?” · Challenge your decision-making constraints. · Set high aspirations. · Do your own thinking first. · Learn from experience. · Ask others for suggestions. · Create alternatives first, evaluate them later. The idea behind litigation is that the truth will emerge when opposing parties present their cases as aggressively as possible. Being adversarial by nature, litigation nurtures distrust, distortion and animosity. Since the 1970s, the options for non-litigious conflict resolution have been multiplied through Alternative Dispute Resolution (ADR). ADR requires good communication. Good communication requires some degree of trust. The idea behind ADR is to save time and money while at the same time resolve the dispute. In ideal circumstances, ADR can preserve long-term relationships, too. According to John R. Allison, the success of ADR depends on the following factors: · Commitment: both disputant parties must be committed to the idea of resolving their dispute without making use of unnecessary litigation. Both parties must be willing to act in good faith. · Relationship: both disputant parties must be interested in advancing their relationship. They must be willing to improve and maintain a good relationship. · Privacy: both disputant parties must be interested in protecting the other side’s reputation. Hearing in a public forum can lead to embarrassing revelations of professional and personal behavior. · Urgency: both disputant parties must be interested in resolving the dispute as fast as possible. · Cost: both disputant parties must be interested in keeping the cost of the dispute and conflict resolution process as low as possible. · Principle: both disputant parties must be interested in resolving the dispute in the way that leads to the maximum possible protection for their reputation. · Participation: both disputant parties must be willing and capable of participating in ADR. Compared to litigation, ADR requires much participation of the disputants. One of the best things about ADR is that it presents opportunities for the disputants to be creative. On the other hand, litigation is a rather adversarial conflict resolution process based on legalistic evaluations. Smaller Players’ Principles Smaller Players’ Principles④ provide ways that smaller players can shape the structure and manage the process when facing an opponent of greater size or power in negotiations. · Never do all-or-nothing deals. The biggest mistake a small player can make is to enter into a single make-or-break negotiation with a larger partner. Doing so just reinforces the larger party’s perception of its own strength and inevitably leads to poor deals. · Make them smaller. Do not treat a larger partner as a single unified entity. The notion of big-company-as-powerful-monolith fails to recognize that large companies are made up of smaller units led by people with their own incentives and interests. · Make yourself bigger. There is strength in numbers. A smaller player dealing with a larger one should build coalitions to fortify its bargaining power. It is essential to diagnose the situation carefully, identify promising allies, and build alliances with them. · Build momentum through a sequence of deals. Negotiating the right deals early makes it easier to negotiate subsequent deals at better terms. But early deals with the wrong partners can make everything that follows an uphill battle. · Harness the power of competition. Spreading the word that you might do a deal with someone else sets the stage for judicious use of competition in negotiating the terms of deals. · Constrain yourself. By entering into binding prior agreements, smaller negotiators can buttress their bargaining power with larger counterparts. · Hold the informational high ground. The right information, processed and organized for easy access, is a potent source of strength in negotiations with larger counterparts. It is essential to be better prepared than the larger player and gain and hold the informational high ground. · Take control of the process. Articulating the reasons that both parties came to the table in the first place establishes a sense of momentum. Flesh out the offer thoroughly and work out the basic structure of the deal before raising the subject of money. · Negotiate with implementation in mind. Try not to burn your bridges, and try to preserve the strength of your alternatives in case serious problems arise during implementation. · Build superior organizational capabilities. It is essential to forge relationships with skilled external advisers, such as lawyers and investment bankers. Notes: ① Even then agreements vary widely in their degree of specificity and in the extent of disagreement which is left unsettled. degree of specificity 具体细节，具体程度 extent of disagreement 分歧程度 ② Take a step back from his own interests and try to delve into the underlying interests — as opposed to the positions — of the other side, i.e. consider the interests of both sides. take a step back from sth: slow down; not to hurry in possessing delve into the underlying interest 考虑根本利益，underlying 基本的 as opposed to 相对于 ③ Minimize the impact of his actions and decisions upfront, rather than wait to pay the premium later. upfront 原意为: down payment 首付款, 此处与decision连用意指: 决策带来的后果 to pay the premium later 原意为: 事后交保险费, 此处意为: 于事无补 ④ Smaller Players’ Principles 弱势方原则 small player: negotiators of one party of smaller size or power than the other party in negotiations (谈判的) 弱势方 Passage Two Principles That Make You a Smarter Negotiator Business is negotiation. You will negotiate to buy, to sell, to conclude contracts with suppliers, to fix the staff salaries and so on. Business life is a permanent negotiation with other people who are defending their own interests. If you have only diverging interests and no common interests, it is not useful to negotiate. The reason for negotiation is that behind opposed positions lie shared and compatible interests, as well as conflicting ones. Carefully analyze the situation before engaging a real negotiation, identify the other party’s and your interest, and try to seek a wise solution to reconcile interests. Besides interest concerns, the way that you conduct yourself in a negotiation can dramatically affect the outcome. The following are five essential principles distilled by Roger Dawson who has been teaching negotiating to business leaders throughout North American since 1982. These principles are always at work for you and will help you smoothly get what you want: Get the Other Side to Commit First You are usually better off if you can get the other side to commit to a position first. Several reasons are obvious: · Their first offer may be much better than you expected. · It gives you information about them before you have to tell them anything. · It enables you to bracket their proposal. If they state a price first, you can bracket them, so if you end up splitting the difference, you will get what you want. If they can get you to commit first, they can then bracket your proposal①. Then if you end up splitting the difference, they get what they wanted. The less you know about the other side or the proposition that you're negotiating, the more important the principle of not going first becomes. If the Beatles' manager Brian Epstein had understood this principle he could have made four millions more on their first movie. United Artists wanted to cash in on the popularity of the singing group but was reluctant to go out on a limb because United Artists didn't know how long the Beatles would stay popular. They could have been a fleeting success that fizzled out long before their movie hit the screens.② So they planned it as an inexpensively made exploitation movie and budgeted only $300,000 to make it. This was clearly not enough to pay the Beatles a high salary. So United Artists planned to offer the Beatles as much as 25 percent of the profits. The Beatles were such a worldwide sensation in 1963 that the producer was very reluctant to ask them to name their price first, but he had the courage to stay with the rule. He asked Epstein what percentage of the profits he thought would be fair. Brian Epstein didn't know the movie business and should have been smart enough to play Reluctant Buyer. He should have said, “I don't think they'd be interested in taking the time to make a movie, but if you'll give me your very best offer, I'll take it to them and see what I can do for you with them.” Instead, his ego wouldn't let him play dumb, so he assertively stated that they would have to get 7.5 percent of the profits or they wouldn't do it. This slight tactical error cost the group millions when the director Richard Lester, to every one's surprise, created a brilliantly humorous portrait of a day in the group's life that became a worldwide success. If both sides have learned that they shouldn't go first, you can't sit there forever with both sides refusing to put a number on the table, but as a rule you should always find out what the other side wants to do first. Act Dumb, Not Smart③ To Power Negotiators, smart is dumb and dumb is smart. When you are negotiating, you're better off acting as if you know less than everybody else does, not more. The dumber you act, the better off you are unless your apparent I.Q. sinks to a point where you lack any credibility. There is a good reason for this. With a few rare exceptions, human beings tend to help people that they see as less intelligent or informed, rather than taking advantage of them. Of course there are a few ruthless people out there who will try to take advantage of weak people, but most people want to compete with people they see as brighter and help people they see as less bright. So, the reason for acting dumb is that it diffuses the competitive spirit of the other side. How can you fight with someone who is asking you to help him negotiate with you? How can you carry on any type of competitive banter with a person who says, “I don't know, what do you think?” Most people, when faced with this situation, feel sorry for the other person and go out of their way to help him or her. The negotiators who let their egos take control of them and come across as a sharp, sophisticated negotiator commit to several things that work against them in a negotiation. These include being the following: A fast decision-maker who doesn't need time to think things over. · Someone who would not have to check with anyone else before going ahead. · Someone who doesn't have to consult with experts before committing. · Someone who would never stoop to pleading for a concession. · Someone who would never be overridden by a supervisor. · Someone who doesn't have to keep extensive notes about the progress of the negotiation and refer to them frequently. The Power Negotiator who understands the importance of acting dumb retains these options: Requesting time to think it over so that he or she can thoroughly think through the dangers of accepting or the opportunities that making additional demands might bring. · Deferring a decision while he or she checks with a committee or board of directors. · Asking for time to let legal or technical experts review the proposal. · Pleading for additional concessions. · Using Good Guy/Bad Guy to put pressure on the other side without confrontation.④ · Taking time to think under the guise of reviewing notes about the negotiation. Win-win negotiating depends on the willingness of each side to be truly empathetic to the other side's position. That's not going to happen if both sides continue to compete with each other. Power Negotiators know that acting dumb diffuses that competitive spirit and opens the door to win-win solutions. Think in Real Money Terms but Talk Funny Money⑤ There are all kinds of ways of describing the price of something. If you went to the Boeing Aircraft Company and asked them what it costs to fly a 747 coast to coast, they wouldn't tell you “Fifty-two thousand dollars.” They would tell you eleven cents per passenger mile. Sales-people call that breaking it down to the ridiculous. ⑥Power Negotiators think in real money terms. When that supplier tells you about a small increase on an item, it may not seem important enough to spend much time on. Until you start thinking of how many of those items you buy during a year. Then you find that there's enough money sitting on the table to make it well worth your while to do some Power Negotiating. Here are some other examples of funny money: · Interest rates expressed as a percentage rather than a dollar amount. · The amount of the monthly payments being emphasized rather than the true cost of the item. · Cost per brick, tile, or square foot rather than the total cost of materials. · An hourly increase in pay per person rather than the annual cost of the increase to the company. · Insurance premiums as a monthly amount rather than an annual cost. · The price of land expressed as the monthly payment. Businesses know that if you do not have to pull real money out of your purse or pocket, you're inclined to spend more. It's why casinos the world over have you convert your real money to gaming chips. It's why restaurants are happy to let you use a credit card although they have to pay a percentage to the credit card company. Department stores often push their clerks to sign up customers for their credit cards because they knew that credit card customers will spend more and they will also buy better quality merchandise than a cash customer. Their motivation wasn't entirely financial in pushing credit cards. They also knew that because credit card customers would buy better quality merchandise, it would satisfy them more, and they would be more pleased with their purchases. So, when you're negotiating, break the investment down to the ridiculous because it does sound like less money, but learn to think in real money terms. Don't let people use the Funny Money Gambit on you. Concentrate on the Issues Power Negotiators know that they should always concentrate on the issues and not be distracted by the actions of the other negotiators. Have you ever watched tennis on television and seen a highly emotional star like John McEnroe jumping up and down at the other end of the court. You wonder to yourself, “How on Earth can anybody play tennis against somebody like that? It's such a game of concentration, it doesn't seem fair.” The answer is that good tennis players understand that only one thing affects the outcome of the game of tennis. That's the movement of the ball across the net. What the other player is doing doesn't affect the outcome of the game at all, as long as you know what the ball is doing. So in that way, tennis players learn to concentrate on the ball, not on the other person. When you're negotiating, the ball is the movement of the goal concessions across the negotiating table. It's the only thing that affects the outcome of the game; but it's so easy to be thrown off by what the other people are doing, rather than concentrating on the issues in a negotiation. It's inconceivable that a full-time professional negotiator, say an international negotiator, would walk out of negotiations because he doesn't think the other people are fair. Power Negotiators don't do that. They concentrate on the issues, not on the personalities. You should always be thinking, “Where are we now, compared to where we were an hour ago or yesterday or last week?” Secretary of State Warren Christopher said, “It's okay to get upset when you're negotiating, as long as you're in control, and you're doing it as a specific negotiating tactic.” It's when you're upset and out of control that you always lose. That's why salespeople will have this happen to them. They lose an account. They take it into their sales manager, and they say, “Well, we lost this one. Don't waste any time trying to save it. I did everything I could. If anybody could have saved it, I would have saved it.” So, the sales manager says, “Well, just as a public relations gesture, let me give the other side a call anyway.” The sales manager can hold it together, not necessarily because he's any brighter or sharper than the salesperson, but because he hasn't become emotionally involved with the people the way the salesperson has. Don't do that. Learn to concentrate on the issues. Always Congratulate the Other Side When you're through negotiating, you should always congratulate the other side. However poorly you think the other person may have done in the negotiations, congratulate them. Say, “Wow, did you do a fantastic job negotiating that. I realize that I didn't get as good a deal as I could have done, but frankly, it was worth it because I learned so much about negotiating. You were brilliant.” You want the other person to feel that he or she won in the negotiations. A founder of a large magazine publishing company once told his salespeople how they should never gloat (心满意足) in a negotiation, he said, “I once sold my first magazine to a huge New York magazine publisher. I flew up there to sign the final contract, and after we signed it, I told them that if they had been better negotiators, I would have taken less. They said to me, ‘if you'd have been a better negotiator, we would have paid you a lot more.’ That was 25 years ago and it still burns me up when I think about it today.” However harmless it may seem, be sensitive to how you're reacting to the deal. Never gloat and always congratulate. Be aware that negotiations are not based on the principle of “all-or-nothing.” Pure allocation struggles that focus on destroying the other party should not come into play because they do not focus on building fair and constructive business relations. Some people disagree with the idea “you should always congratulate”, saying that it was manipulative to congratulate the other side when you didn't really think that they had won. This is not true. It should be regarded as the ultimate in courtesy for the conqueror to congratulate the vanquished. When the British army and navy went down the Atlantic to recapture the Falkland Islands from the Argentineans, it was quite a rout. Within a few days, the Argentine navy lost most of its ships and the victory for the English was absolute. The evening after the Argentinean admiral surrendered, the English admiral invited him on board to dine with his officers and congratulated him on a splendid campaign. Power Negotiators always want the other parties thinking that they won in the negotiations. It starts by asking for more than you expect to get. It continues through all of the other Gambits that are designed to serve the perception that they're winning. It ends with congratulating the other side. If you let these five principles guide your conduct when you're negotiating, they will serve you well and help you become a Power Negotiator.