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In The Media - Commercial and Workplace Mediation | Workplace Dispute Resolution and Conflict Management :: The Resolution Centre
When Win-Win becomes Lose-Lose
My Business, Katie Graham, December 2005

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Getting what you want in a negotiation is never easy. With a little preparation, you can at least avoid the dreaded scenario where everyone walks away dissatisfied.

ALAN, THE DIRECTOR of a logistics company, was in the driving seat of a negotiation that would see his company achieve its growth target. He was in a great position – the company had just been bought by a much larger parent company, giving it vital capital to go after a strategic acquisition and extend its reach. Alan was confident he had found the right acquisition: a region of courier runs from another logistics company.

But less than four weeks after the negotiations began, Alan was suddenly offering to purchase the other company’s whole outfit, -runs, warehouse, the works. All business owners and senior management have commenced a negotiation with a clear strategy that they believe incorporates their business objectives and encouraged collaboration, only to find that the terms of the negotiation no longer reflected their initial intentions. Worse, the deal was in danger of not being closed and conflict had arisen.

Alan had become emotionally involved in the negotiation due to the excitement of fulfilling his company’s growth objectives. In his excitement, he had begun negotiating outside the scope of the original intentions.

Executives and business managers need to recognize the early signs of a negotiation in danger of crumbling, and to take action to get things back on track. A successful business negotiation takes an integrative approach that establishes a firm foundation for a long term-relationship.

Confusion, tension, unexplained time delays or undue pressure are all early warning signs that a negotiation is becoming unfair, or could result in an impasse. An environment of turmoil or competition can propel a negotiation off-course. However, the most common cause of a negotiation derailing is the tendency for the players to get trapped in their own perspectives.

In Alan’s case, the excitement around achieving a long-held ambition for growth contributed to the shift in course of the negotiation. Tension and conflict arose for Alan within his own board, with half the members favouring the total buyout of the opponent and the other half sticking to the original plan. They were all caught up in the momentum, combined with pressure from the vendor. The situation was in desperate need of a pause to regroup.

Consider the situation of Peter, a niche auto parts manufacturer who supplies his product to a large automotive company. Peter signed a complex service level agreement, committing to meet, measure and report on his key performance indicators (KPIs), in order to be paid. However, it soon became clear to Peter that the detailed service level was costly to track and document. The KPIs proved impossible to meet, and he faced laying off an employee or potentially losing his business.

Stepping back
To overcome obstacles that arise in a negotiation and return to collaborating for mutual benefit, managers can employ simple strategies within their own business or team.

Firstly, pause the proceedings to allow time to assess the situation objectively, review the stakeholders and the original objective of the negotiation. Of course, it is important to explain the pause to the other party; don’t just leave them hanging.

For Alan’s company, the specific objective was to buy just the courier runs to achieve their desired growth. It wasn’t necessary to pay a huge sum of money for the whole company, including payment for goodwill. They already had the skills and the backing of the parent company to do it themselves and grow organically.

Secondly, assess any implicit interests or agenda of the opponent - the individual with whom you are negotiating. Establishing a personal profile of each participant in a negotiation can lead to valuable negotiating tactics and help break large issues into multiple tradeable items.

Alan and his company had failed to realize that the pressure from the couriers to buy the lot was driven its directors’ aim to get out quick and retire. Had Alan realised this, it would have given him a valuable negotiating tool and a potentially great deal for a quick sale.

Peter, the auto parts supplier, was facing conflict with the large automotive company, which was reminding Peter of what he had agreed to do and was not achieving. Peter needed to recognize that while there was an organisational objective of documentation and measurement behind his agreement, there was also a person with whom he was negotiating - a person who also had a family and to whom Peter could appeal.

Thirdly, if negotiations are going pear-shaped due to inexperience, ambition or momentum, consider using a “quasi-mediator”, such as a stakeholder from a parent company or other professional. This third person can watch out for excessive concessions and refocus the negotiation on the original objectives, as well as provide an accuracy check on all the details.

Alan brought in a neutral third person as a facilitator to help his organization get back to basics. The facilitator met with all the stakeholders, from the board to the parent company, to reaffirm the underlying business strategy and to redefine what was best for the business and for each stakeholder. The facilitator was able to achieve buy-in from each party involved, to help re-establish the right path for the negotiation. Back at the negotiating table, the facilitator, now acting as negotiator, was able to turn things around for Alan, who had all but given his commitment to buy his opponent in total. The negotiator conveyed the change in plans and outlined the direction for the discussions to follow. This helped the vendor to re-establish his initial offer, gave some trading power back to Alan and his company, and paved the way for Alan to close the deal – on the courier runs they originally wanted.

Peter’s buyer at the automotive company was willing to talk, so Peter laid his cards on the table. He explained that his family business was in danger of collapsing and his few loyal employees faced unemployment. He explained that his family business was in danger of collapsing and his few loyal employees faced unemployment. He explained that the agreement was putting his small business in mortal danger. The two parties got back to basics, throwing away the original, over-complicated agreement and worked out what was possible, what Peter’s company could achieve and how they could work together to overcome the problems.

How to re-create the Negotiation Content
After a pause, a dispute or derailment, followed by adequate mediation and regrouping, it’s time to get the negotiation back on track. Each party should express a desire for a consensual win, then break the initial bigger issues into smaller issues that may be traded. In a formal forum, encourage creativity and ideas, invent options for mutual gain, and ensure that issues have objective criteria and can be measured. In an acquisition, this can be done by breaking down an aggregated figure of goodwill to allow flexibility of trade and a greater likelihood for achieving individual needs according to perceived value.

Once the issues have been re-established, the parties of a negotiation need to define their bargaining zones and their alternatives for each component. Assess the reservation price, market values, the industry’s predicament and the effects of the negotiation falling through; this will help determine the walk-away point.

Armed with revised content and market knowledge, the negotiating parties can then prepare to present multiple offers that are most likely to create mutual gain for both parties.

At the Negotiating Table
It is important that the level of effort made to get a negotiation back on track is maintained when the parties return to the boardroom, and throughout the remainder of the negotiation. Behaviour that will ensure the smooth continuation of negotiation includes:

  • flexibility in addressing independent issues rather than strictly adhering to sequenced items;
  • avoiding negative language;
  • testing understanding by paraphrasing and summarizing;
  • asking questions to gain control and ensure understanding;
  • ensuring the agreement is administered in writing.

Above all else, use a checklist to ensure all the issues are covered, and adopt an open trading style.

Of course, any negotiation – whether an acquisition, a business alliance or an employer/employee relationship – requires maintenance once the parties have left the bargaining table. As businesses focus even more in their core competencies and as external alliances increase, business managers have a greater. A thorough and formal critique of the process, the outcomes and the lessons learned from a negotiation will help improve all future business collaborations and relationships.

Katie Graham is Managing Director and Founder of The Resolution Centre, (www.resolutioncentre.com.au), a professional services firm specializing in alternative dispute resolution, human resource management, change management and professional negotiations and can be contacted at:
katie.graham@resolutioncentre.com.au
or phone 1300 554 381

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