The Basics of Negotiation

Chuck Thomas PMP

Table of Contents

Introduction1Negotiate1The Processes2Planning Process3Initiation3Stakeholder planning3Knowing Ones Self Planning4Logistical planning4Strategic Planning5Execution Process5Opening Process5Hard Barging Process6Closing Process7Lessons Learned8Pitfalls8Conclusion12References:13

Introduction

Project Managers need to know all the process of negotiation as well as they know the processes laid out in the Project Management Body of Knowledge. (PMBOK). 90% of a project managers job is communication. A lot of that is negotiating with employees, SMES, Sponsors, Suppliers and Governmental Agencies. In this paper I lay out the processes as I understand them from my life experiences and studying. It is my attempt to make the negotiating process more understandable. If these processes are followed they should lead to a mutually conclusive ending to all negotiations. I also have covered many of the pitfalls that project managers make when entering into a negotiation.

Negotiate

We negotiate every day of our lives. Almost every interaction with other requires some kind of negotiation. All of us negotiate many times a day, Five Thing Every Project Manager should Know about Negotiations, By William T. Croddock, edD, PMP, PE, President, Craddock & Associates, Inc PMI White paper. Will you hold the door for the person youre entering the building with or will they? Before we can talk about how to negotiate we need to know what it means to. In my studies I have found several definitions for negotiation:

A formal discussion between people who are trying to reach an agreement: an act of negotiating Merriam-Webster Dictionary

the process of communicating back and forth for the purpose of reaching a joint agreement about differing needs or ideas How to Negotiate Anything with Anyone Anywhere around the World, New York: AMACOM, Acuff,F.L. (2008)

a process by which we attempt to persuade people to give us something we want in exchange for something else International Negotiating; A Primer For American Business Professionals, By Kublin, M New York: International Business Press

a process of potentially opportunistic interaction by which two or more parties, with some apparent conflict, seek to do better through jointly decided action then they could do otherwise The Manger As Negotiator; Bargaining For Cooperation and Competitive gain. By Lax, D.A.,& Sebenius, J.K, New York: The Free Press

One thing that all the definition have in common is that Negotiating is a process, much like project management, negotiating is a temporary endeavor undertaken to solve an Issue, opportunity or challenge between two (2) or more parties. Negotiating is iterative through the life of a project.

The Processes

As in the project management, in negotiations there are all so process groups to negotiating and no one process is less important than the others. There are three (3) process groups in Negotiations,

Planning (pre-meeting)

Engagement (meeting)

Closing. (post-meeting)

Five Thing Every Project Manager should Know about Negotiations, By William T. Croddock, edD, PMP, PE, President , Craddock & Adociates, Inc PMI White paper

These processes have similarities to the five (5) process groups described in the PMBOK Guide, Initiating, Planning Executing, Monitoring and Controlling and closing.

Planning Process

The Planning process of Negotiating is much like that of the Initiating and Planning process of project management.

Initiation

As in the initiation process of project management, we must know are business case, what are we negotiating? During this part of the planning phase it is very important to ask questions, about the issue to be negotiated, you will need to look at it from as many different prospective, so that you can see the best outcome for all involved. Know your BATNA (your Best Alternative To a Negotiated Agreement) This is the standard against which any proposed agreement should be measured Getting To Yes Negotiating Agreement without Giving In, By Roger Fisher and William Ury,

Stakeholder planning

We must know who the stakeholders are in the negotiations and what they would like the outcome to be. Before going into a negotiation, you will need to know what if there are any organization environmental factors that need to be considered, what you company will or will not allow. Know what you can give and what you must have. You also need to know what the other parties need from the negotiations.

Knowing Ones Self Planning

Know thy Self: Know your strengths and weaknesses, and know those of the other parties in the room with you.

Are you a good orator?

Are you good at presentations?

Do you have a poker face?

Do you work better with a large group or small?

Do you work better in a large setting or small?

Are you better with electronic media or print?

Know the answers to these questions and more will help in the next step.

Logistical planning

Planning the meeting, in the last step we ask you to know yourself, now you may understand why. When planning the meeting itself, take into consideration what you know of yourself. If you are not a good orator have someone else give the opening statements, if you like big rooms set the meeting in one, if you like small groups limit the numbers of participants. Work out all the logistics of the meeting before hand, what is and out of scope of the meeting, what will be on the agenda, how long the meeting will take place.

Strategic Planning

Plan your strategy, determining the approach and techniques to us during the negotiation to obtain the best possible results Project Negotiations Deal yourself a Winning Hand, by Joseph a Lukas PMP, PE, CCE and Janice F Lukas, MSEd, PMCenters USA.. PMI White paper The Gambler, Kenny Rogers says if you are going to play the game ya gotta learn to play it right. You gotta know when to hold em, know when to fold em, know when to walk away and know when to run. During this phase determine, who will go first, how much you will lay out on the table, what you will do if things get to heated, what will you opening offer be, what is a deal breaker.

Know you are ready to execute.

Execution Process

The execution process had three (3) process itself and is a lot like the execution and monitoring and controlling process in the PMBOK. The three (3) processes are, opening, hard barging and closure process. This is where the real work begins, if you have done the Planning phase well, you should be ready for anything that happens here

Opening Process

There are three stages to this phase, settling, opening and discussion. These stage work to help reduce stress in the negotiations.

Settling

This the time before the meeting starts when people are in the room visiting, introduction are being made, detail like time limits, breaks, refreshment arrangements are all announced. If a settling stage is not allowed, people can be too tense in unfamiliar surroundings and can become defensive or aggressive Negotiating With Authority The Art of the Deal, By Samuel T. Brown, III, PMP, Global Knowledge Training ,Inc. PMI White paper

Opening

This start with everyone taking their seats and the formal agenda it set, the objectives of the meeting are discussed and everyone comes to the understanding of what is to be accomplished in the negotiations.

Discussion

This is where each side presents it opening offers, it is important here to make all the participants feel valued. Listen to all participants, ask clarifying questions to test assumptions. This is crucial step make sure not to ask for to much or give too much away at this early point. By asking for too much you can offend the other participant, by asking for too little you can reduce your ability to bargain for what you need. This is where knowing what the other participants want or need will help you.

Hard Barging Process

This is where the parties in the negotiations start working their strategic plan as they explore possible outcomes; this is the give and take part of the process, where all parties work for a mutually acceptable agreement. There are two (2) processes here, Elimination and Crisis, all though if all parties have done their homework hopefully the crisis process can be eliminated.

Elimination

This is the give and take, normally starting the minor issue, those that can be easily agreed upon then working toward the harder issues, this is when you need to know when to hold 'em and know when to fold 'em The Gambler Kenny Rogers. Never give something without getting something, remember you are working for mutually acceptable agreement.

Crisis

This phase happens when the parties think they may have or have reached an impasse. There are a few reasons that this might occur. One of the parties may not have the authority to make a certain decision, emotions might be running high, Major points may have not be put on the agenda or new issue arise that where not previously discussed. If all parties have done their homework the hope is the can be avoided, If not this is when you will need to know when to walk away, walking away does not mean all is lost, if there are issues that cannot be resolved in this meeting due to any of the afore mentioned issue then you may choose to table them for a later date. It is important that all parties feel that the negotiations are beneficial, so stepping back and taking stock may be what all involved may need to do.

Closing Process

This is the wrapping up process where all agreements are finalized, and immortalized in writing and signed, this sounds simple right, but there are three (4) process to closing a negotiations , Agreement, Summary, Drafting & Signing, and Lessons Learned.

Agreement

All trades and concessions have been made and an acceptable agreement is reached.

Summary

This is the where all trades and concessions are recapped and agreements are verified. Once this is done and all parties have consented to the summary we move to the next process.

Drafting and Signing

Here we make note of the minutes of the meetings, Draft the proper documentation, send it out and wait for everyone to sign off on it.

Lessons Learned

This when you sit down read over the minutes and the final documentation. From this you can evaluate the process, see what went right and what went wrong and document it for future meetings. Simple things like the temperature of the room, to knowing one of the persons involved is allergic to nuts. Even more strategic things like who likes to go first or who holds their card to their chest and who lays them out on the table.

Pitfalls

Now that we have talked about all the processes of negotiation, we will look at some of the pitfalls and mistakes that are made mostly by project managers and talk about how to avoid them. In the paper Project Negotiations Deal yourself a Winning Hand, by Joseph A. Lukas PMP, PE, CCE and Janice F Lukas, MSEd, PMCenters USA. The author says there are 10 common negotiating mistakes made by project managers and they are as follows in no particular order

Lack of Planning

Neglecting to ask questions

Low aspirations or weak Negotiating skills

Making assumptions

Making low initial demands

Providing too much information

Making the first concession or large concessions

Losing focus during the negotiation

Reaching for a too quick settlement

Misusing power

In the paper Project Negotiations and Dealing yourself a Winning Hand the other give a definition of each one of the mistakes. I am going to point out ways to avoid them.

Lack of Planning

At the beginning of this paper we stressed how important it is to plan out everything. If you are not prepared to start negotiations then postpone them. You will most likely not come out with a fair offer if the other side has all the information. If postponing them all together is not an option then only negotiate the points you are ready for, and table the rest for a later date even if there is cost involved in finishing the negotiation later. It most likely will be cheaper in the long run.

Neglecting to ask Question

How can you plan properly if you do not ask question. Keep asking question till you have a full understanding of the issues and what everyone involved would like out of the negotiations

Low Aspirations or Weak Negotiating Skills

If the any of the parties have low aspirations (no concern over the outcome) or weak negotiating skills, that includes you, dont take advantage of the situation as the tables may be turned on you in the next meeting. If you have weak negotiation skills take someone with stronger skills and let them lead the charge. You may want to set up signals or step out of the room it static plans need to change.

Making Assumptions

This cannot be avoided in any negotiation, no party will give up all their information and therefore some assumptions must be made prior to the meeting. To clear up or clarify your assumptions, go back to mistake #2 ask questions.

Make Low Initial Demands

Making too low initial demands leaves you no place to go in the bargaining process, if you have asked all the right questions and did all your planning you should be able to avoid this mistake.

Providing Too Much Information

By laying all your cards on the table, you put yourself in a position of weakness. This also can put you in a take it or leave it situation which is not negotiating.

Making the first concession or large concessions

Typically the person who give the largest or the first concession loses. Never give something without getting something in return. Make sure you leave yourself enough room to get to the desired outcome. A classic example of this mistake is when Neville Chamberlain, Prime Minister of England and Adolph Hitler were negotiating over the territory of Czechoslovakia. Chamberlain, eager to avoid war, gave in to all of Hitlers demands and we all know what followed

Losing focus during the negotiation

Makes sure you are discussing the issues and not each others positions. Separate the people from the issue and try to work together for the common goal that was discussed in the opening of the negotiations. Look at it from the other parties point of view. But always keep in mind your goals. Having a good plan and sticking to it will help keep you focused on the issue at hand.

Reaching a quick settlement

A skilled negotiator may be able to get a quick settlement, and if that is not you, it may not be in your favor. Consider the car salesman, he is a skilled negotiator. You go in to buy a car, have done your homework, and know what you want and what you want to pay. How often do you think the customer actually wins when buying a car from a sales person? Not many, I would surmise. I spent 8 hours negotiating with a car salesman before I closed the deal on my last car and I know I got a good deal, but I do not know if I got the best deal. The sales person took me to my walk away point 3 times before he conceded on the price.

Misusing power

Remember to day you may have the power now, but tomorrow they may have the power. To use your authority or your ability to reward or punish as a way to sway a negotiation will, 9 out of 10 times, come back to you in the future and, generally, never in a good way. More negotiation will get done if all feel like equals in the room.

Conclusion

This paper gives the basic processes of all negotiations. It lays out the three (3) main processes the Planning, Executing, and Closing Processes. It breaks down these processes into their sub-processes. If project managers follow the processes laid out here in they should be able to negotiate with employees, SMES, Sponsors, Suppliers and Governmental Agencies. As well as being aware of the top ten mistakes made by negotiators and ways that they may be mitigated or avoided.

References:

Attitude-Based Strategic Negotiation for Conflict Management in Construction Projects, by Saied Yousef, University of Waterloo, Waterloo, Ontario Canada, Keith W Hipe,l University of Waterloo, Waterloo, Ontario Canada and Tarek Hegazy, University of Waterloo, Waterloo, Ontario Canada PMI White paper

Exploring Negotiation Through Boundary Objects in Global Design Project Networks, by Melissa K. Di Marco, Columbia University, Department of Civil Engineering and Engineering Mechanics, New Your, NY, USA, Pauli Alin, Aalto University, SimLab, Department Of Industrial Engineering and Management, Espoo, Finland, and John E Taylor, Virginia Tech Charles E. Via Jr. Department of Civil and Environmental Engineering , Blacksburg, VA, USA PMI White paper

Five Thing Every Project Manager should Know about Negotiations, By William T. Croddock, edD, PMP, PE, President , Craddock & Adociates, Inc PMI White paper

Getting To Yes Negotiating Agreement without Giving In, By Roger Fisher and William Ury,

How to Negotiate Anything with Anyone Anywhere around the World, New York: AMACOM, Acuff,F.L. (2008)

International Negotiating; A Primer For American Business Professionals, By Kublin, M New York: International Business Press

Merriam-Webster Dictionary

Negotiating With Authority The Art of the Deal, By Samual T. Brown, III, PMP, Global Knowledge Training ,Inc. PMI White paper

PMBOK, Guide 5th edtion by Project Management Institute

Chuck Thomas PMP, Business Negotiation, BU, ITT-Tech, Wyoming Campus

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Project Negotiations Deal yourself a Winning Hand, by Joseph a Lukas PMP, PE, CCE and Janice F Lukas, MSEd, PMCenters USA.. PMI White paper

The Manger as Negotiator; Bargaining For Cooperation and Competitive gain. By Lax, D.A.,& Sebenius, J.K, New York: The Free Press.