It's been a long while since I got time to write on my newsletter. Since March 2007, we have been writing monthly newsletters, and since November 2013 we had to change that to a bi-monthly format as we are so swamped with work, as well as the time we had to spend with our respective families.
In any case, I thank you all for the support throughout these years.
As I was in Singapore recently to conduct Negotiations Skills training, a number of case studies stood out whereby the negotiations failed due to a lack of trust. In retrospect, I had also observed that how trust could impact not only the negotiations, but also the long-term relationships between all parties involved.
Hence, this month's topics:
This issue's main article is on "The Value of Trust in Negotiations", and we explore some cases where trust and mistrust had the impact on negotiations.
The Value of Trust in Negotiations
by c.j. Ng
Larry, Curly and Moe are 3 friends who decided to go into business together.
Larry being the brains of the venture, will contribute
towards the strategy, framework and business connections
to the business. Curly will be in charge of the
supply chain and daily operations, including the
selection and management of suppliers. Moe is in
charge of sales and marketing,
Curly started with how he had to put in a lot more hours, since he was taking care of a lot of nitty gritty operations work. Moe then said that he too, put in a lot hours to generate the sales volume for the business. Had he not brought the sales in, the company would not have survived.
Then Curly started to question Moe's expenses, and if Moe was using business resources (such as the car and business entertainment) for his own benefit. Moe became furious at Curly's allegations, and complained to Larry that Curly's suppliers often have product defects, which caused complaints from customers. Moe then questioned Curly if he had been taking kick-backs from the suppliers.
All this while, Larry listed intently to both Moe and Curly, initially staying neutral and trying to mediate between the 2, but eventually becoming more confused as the other 2 parties trade accusations and counter-accusations. Besides the capital that Larry had invested in the business, at stake were also his business connections and his personal reputation with them. Larry was also feeling disappointed that both Moe and Curly did not even acknowledge Larry's contributions to the business strategies and connections that made the venture succeed in the first place.
Eventually, Larry spoke up. "If we are so unhappy with one another, then perhaps we should stop working together." In the heat of the moment, both Moe and Curly agreed immediately to the suggestion, and a promising and profitable business ceased its operations.
Not only did the 3 partners fail to reach a more constructive agreement, they also didn't speak with one another after that. Although all 3 of them were friends before they went into business, and they all had complimenting strengths to run a business successfully, they never work together after that negotiation.
Sustaining a Negotiated Agreement for the Long-Term
Unlike the countless one-off negotiation or bargaining
roles plays that we have done in a typical negotiations training, most of the
real-life negotiations that we make are for the long-term.
Typically, we learn things such as:
While these are great skills that will help us in our negotiations, they do not consider the factors that could impact of a long-term negotiated agreement.
When we negotiate with a customer or a supplier, we actually would like to continually do business with them. When we negotiate on wages with our bosses or our employees, we would like to make sure that all parties can work productively over the long term. When we promise our children that they could watch some TV or play with the iPad if they finished their homework, we honour our promises because we know they will keep their part of their promise for the foreseeable future.
If some OR one of these conditions are not met, then it could result in:
Why We Don't Trust Each Other
In it's simplest form, negotiation can be defined as
"Getting Others to Give You What You Want, by Giving Them What They Want"
While this may sound nice, warm and fuzzy, the truth is that if we could get ourselves to give less, while making the other party to give more, we will then get a better deal.
As such, we don't want the other party to find out about what our bottom-lines are, but we would like to find out what theirs are. We might be focusing so much on what we want, that we try to convince the other party what they want or what they can get is a lot less than they asked for. We then celebrate the fact we had secured a great deal, and gave ourselves a pat on the back.
However, if the other party eventually realised that they had given you what you want, BUT have not quite gotten what they want, they are likely to take some kinds of actions. Some might:
In doing so, this set off a chain reaction that makes you question the "trustworthiness" of the other party, which in turn may be detrimental to the long-term negotiated agreement.
Developing Trust with Your Negotiation
We sometimes assume that we either trust or don't trust a certain person. In reality, it's more complex than that.
Over time, our level of trust with another person could increase, decrease, or pretty much stay the same. In negotiations however, we'd like to have our counterparts increase their trust with us just that little bit, so that we can have a more effective post-negotiation cooperation.
In a nutshell, these are the 4 steps that you can do to nudge trust levels a bit.
Last but not least, we are definitely NOT saying that
one should be a doormat and be always be accommodative
of the other party's needs at the expense of yours.
That will also have negative repercussions that will be
detrimental over the long term, especially if you find
that you have been fleeced.
Need help in fostering highly committed long-term negotiated agreements? Simply e-mail email@example.com or call +86-136 7190 2505 or WeChat: cydj001 and arrange to have a deeper discussion.
Power Breakfast Hour: 11 Nov 2015
The Value of Trust in Negotiations
VENUE: Crowne Plaza Shanghai • 400 Panyu Road (near Fahuazhen Road) • 上海银星皇冠酒店 • 番禺路 400 号 （靠法华镇路）
DATE: Wednesday, 11 Nov 2015
TIME: 08:00 a.m. - 10:00 a.m.
PRICE: RMB 200 ONLY!
To make this a more conducive discussion, we are expecting a small group of about 15 people only. The room can only take in 18, so please register early to avoid disappointments. Please e-mail your registrations too firstname.lastname@example.org
Tips for Negotiating:
Our efforts to create value in any negotiation will be highly limited if they don't from a collaborative approach with our negotiation counterpart. We don’t just want to make a shaky agreement with an angry and resentful partner, but to create a relationship that is solid and durable, and benefits everyone. Ideal is if we can leave the table shaking hands, smiling and feeling pleased that we worked together to make the best possible deal for both of us. All too often the natural consequence of competitive negotiating is that one or both sides feel cheated or at least hard done by, and they and their colleagues invest time into figuring out how to live up to the letter but not the spirit of the contract. The result? They claim value at almost every opportunity, stripping the deal of value. So let’s examine several successful and necessary strategies to make this work.
Creating Value Begins with Information Sharing
Ask and Answer Questions – Neither side can proceed effectively until each begins to fully understand the other, and the only way to begin this process is to ask intelligent questions. We will already have determined the questions we want to ask in our preparatory stage, which should be analytical and problem-solving in nature. One or both parties are likely to have a problem or challenge, and we want to find the best means of addressing this through a mutually attractive solution. Likewise, we are anticipating the questions they will be asking us. The more information each party can glean about the other, the more readily they will be able to find creative solutions that address the needs and objectives of both.
A negotiation is not one-sided, and if we expect to receive information, we must also be willing to share it. Reciprocity is the key to successful fact finding, as this is the only way we will be able to find creative solutions that benefit both parties.
One error that many negotiators make is to present or propose a single offer, which can act as an anchor where everything revolves around it because it has such a narrow scope. Talks can easily be affected because there is a limiting attitude in working with a single offer. However, if we present a package containing multiple offers or proposals simultaneously, we are much more able to creatively discuss trade-offs in addressing the issues we face. A multiple negotiation package will enable us to add more value to an agreement because we will be able to compare and distinguish issues when we discuss trade-offs. When more issues are put onto the table, we have more flexibility to negotiate trade-offs such as time preferences, valuations, forecasts and capabilities.
We must also resist the temptation to compromise, as
this does not yield value and will diminish the
resources to be negotiated. We must instead
negotiate trade-offs that are of greater relative
value to us, or at the very least of equal relative
value. Anything less will reduce the value of the
Use Your Differences as Strengths – Contingency Contracts
Negotiations often break down because the negotiating parties use their differences as a divisive means to drive a wedge between them. Instead, try using a contingency contract to build some bridges. A contingency contract addresses our differences and expectations, as a contingency itself is premised on an ‘if’ – ‘then’ tier-type design and considers changes in circumstances. Here, we draw up an agreement to address our different viewpoint by saying that:
This type of contract can be a multi-tiered structure of many layers and isn't as easy to manage, but it does allow us greater latitude and flexibility in keeping negotiations moving forward and is a viable means of addressing the differences in negotiation expectations.
Use Risk and Time Differences to Create Value
Many people, including negotiators, are averse to risk. One party will signal their aversion to risk by stating that they are adamant about a certain issue, such as how they might split profits since they have different forecasts. This should not be viewed as an obstacle but rather an opportunity to make a trade-off and gain something in return. Different attitudes about their perceptions of risk should not act as a barrier to an agreement, but should open the door to negotiate a productive trade-off by offering alternatives to enhance value.
This concept also applies to differences in time
expectations. They may insist on guaranteed
delivery on a specific date, and we agree to this by
rearranging a payment schedule that is more suitable
to us in return.
Directions Management Consulting
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