Negotiation Excellence: The practical art of cutting deals
Knowledge@SMU, April 04, 2011
It is impossible for everybody to agree on everything – not in our daily lives, and certainly not in the business environment where millions, billions of dollars are potentially at stake, pending outcomes of agreements. Differences remain, yet somehow, conclusions have to be reached.
“The price of failed negotiations is often high – loss of value, missed opportunities, or protracted conflicts,” said Michael Benoliel, a professor of organisational behaviour and human resources at Singapore Management University (SMU). “It is only when negotiators have effective negotiation skills (that) they will be able to negotiate efficiently, create mutually beneficial agreements and resolve disputes constructively. In short, create optimal agreements that create value,” he said.
Benoliel, who teaches negotiation at SMU’s Lee Kong Chian School of Business, is also editor of the recently launched book 'Negotiation Excellence: Successful Deal Making', which pulls together the latest insights, findings and cases on the art of resolving differences.
Sure, the price of failed negotiations can be high, but it is especially painful and costly when the failure happens during the process of putting together two companies. “While there are many reasons why mergers and acquisitions fail to unlock value, an analysis of these factors reveals that the most major mistakes are related to the negotiators’ irrational and self-serving behaviour,” wrote Benoliel in the book’s introduction.
“These include: hubris, over optimism; information availability bias; confirmatory bias; escalation of commitment; and ‘deal fever’ – individuals produce many deals because they are evaluated on the basis of the numbers of the deals done and not on the basis of their intrinsic value,” he added.
A critical element in any negotiation, the authors looked at how “trust” can be built, how can to assess trustworthiness, and how it can be repaired after a violation. Thanks to advances made by researchers in this field, there are now empirical answers to these questions, and in their chapter, the authors explained how 'trust' may be effectively diagnosed, built and repaired in practice.
Can the role of genders make a difference in the negotiation process? The short answer is ‘yes’. Beyond simply pointing out how differences can occur, the authors provided practical advice on how to address those specific issues that could arise in negotiations.
Other chapters in the book explored topics like creativity in negotiations, power and influence in negotiations, negotiation strategy and negotiation ethics. There are also essays on the role of communication media in negotiations and negotiation via emails. In all, the “Negotiation Excellence” combines the effort of 39 contributors in 22 chapters.
“Negotiators can learn when to make the first offer and when to let the other side make the first offer. They can learn how to frame effectively situations and arguments. They can learn the value creating strategies by trading off between issues, adding issues to the negotiation mix, or creating contingent contracts,” Benoliel noted. That said; there are indeed certain intuitive abilities that cannot be imparted, for example, a sense of good timing – when to make an offer or a concession, he added.
By its very nature, no negotiation process is a carbon copy of the other. Yet, there are some fundamental principles and methods to define and measure negotiation outcomes beyond just the dollar sign. For one, before a party enters into a negotiation, it is important to first draw up a “negotiation thesis”. They need to ask themselves: why are they doing this and how will the negotiation create value? This helps to clearly define a specific set of objectives.
In a porous and connected world where cross-border deals are more often the norm than the exception, a lot of negotiation, unsurprisingly, takes place across cultures and languages. This is a point well recognised by Benoliel. However, he is quick to point out that there are differences in negotiation styles not just between Asian and Western negotiators, but also between, say, a Japanese negotiator and his Indian counterpart.
Differences will also occur in communication styles and the way a negotiation is framed. “Asian negotiators, in general, tend to be competitive, adopting a win-lose approach to negotiation. For many, the idea that negotiation is not a competitive sport, that it can produce two winners, is foreign and even naïve,” he said.
Negotiation, as an art, and science, is a dynamic one, as practitioners react and adapt to the changing environment. In this vein, the recent financial crisis served to stress the critical importance of several issues related to the negotiation process: the value of reliable information; the critical role of due-diligence and preparation, as well as the role of agents.
Information You Can Use. Knowledge You Can Trust
This summary is taken from Business Leaders Digest monthly(www.busleadersdigest.com)
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