And the winner is?

Negotiation strategies

Remember the coloured words in our previous blog? The Relationship, principled communication, win-win… Different negotiation strategies can be attached to them. Building a highway for the use of adequate negotiation tactics.

The terminology…

By combining few dictionaries: A strategy is “a careful plan or method or series of maneuvers, for obtaining a specific goal or result”. Whereas the use of Tactics refers to “the skill of using available means” to reach those results (The Merriam-Webster Dictionary, 1994. Merriam-Webster, Incorporated. Also: Random House Dictionary).

Map your strategy

Access present relationship with the opposite negotiation party. Decide in which direction you would like to build this relationship. Ask yourself what is the main subject of relationship and, therefore, also of the negotiation? Is it potential conflict? In which stage of development is the subject? Is your relationship highly integrated? Where do you want to go with it?

By such simple mapping you should draw your relationship onto map as either basic pure transactional competition or more advanced not-declared cooperation. By them, you compete to solve the problem, and, by avoiding conflicts, you gradually increase accommodation to the opposite party, ending with both parties seeking for compromises. By further development of the relationship, you elevate level of integration by collaboration combing both, the competition and cooperation in tactical coopetition. Ultimately reaching for problem solving based on mutual interests involving a partnership relations.

Map your strategy towards opposite negotiation party based on several Q&A arising from your everyday coopetition with him. If you are to negotiate with a supplier that provides your business and you don’t know which strategy would work best, you should ask yourself several questions that would help you map your relation and select right negotiation strategy.

Basic questions should do the trick!

Questioner, that you design upon specifics of industry of your company, relation with the counterparty, level of cooperation… all those (a)live issues concerning the quality (and quantity) of relationship with the counterparty in negotiation. For example:

• do you have one or two and even more suppliers? Well, two, since we have a redundancy policy of decreasing risk in procurement. But we are increasing scale of cooperation with the supplier constantly – he supplies over 80% of this particular item!
• do you keep distance to supplier or do you invite the supplier to cooperate? We cooperate!
• do you identify a need to change presently agreed cooperation and subsequently send a RFx to the supplier or you invite the supplier to cooperation with intention to design the change together? Yes, we are cooperating before RFI is required!
• do you always negotiate with the supplier by hiding certain data and information, therefore creating the information asymmetry or are you ultimately transparent (not necessarily “open-book”) in negotiation? We are totally open with the supplier!
• are you each in its own bank or are you partners? We cooperate, not compete!
• do you have short- or long-term contract and agreements? Long-term, for sure!
• are your individual orders large or do you do same quantity several times by small orders? No, we are increasing the scale of order constantly!
• do you control the supplier or you trust him? We know each other well, there is high degree of trust and understanding in our cooperation!
•  is your cooperation limited between you or does the supplier allows you to discuss the relation towards his supplier – you sub-supplier? We cooperate in optimization of quite a portion of a supply chain
• while negotiating, do you seek for problems or you solve the problems? With each meeting we create value!
• In negotiation, do you use the bargaining power or you share goals? We are goal oriented!
• do you share common goal(s)? I.e. reducing costs by increasing efficiency and productivity? Or mutual innovation in R&D? Or even sharing risk & result? Yes!

Don’t forget, communication is (almost) everything!

Negotiation is only possible through effective communication to mediate right message to the opposite party. Conducting proper communication is a right way to involve negotiation parties into the process, prevent from conflict to escalate and deadlock to happen.

Communication adapts to different negotiation strategies and, moreover, to the tactics used in negotiation accordingly. If for the win-win communication in principled negotiation stresses the importance of sharing information as a means of uncovering interests and of helping parties to explore common problems or threats, we can observe even more intensified revealing of the data and information as well as highest level of cooperating communication in partnership relations

What about your communication with the supplier? Are you defining it more partnership or “just” cooperation, coopetition:

•  is integration of your business on level of “best bid” communication, or are you partners, truly knowing your mutual needs and requirements?
• is communication based on RFx or involves joint planning and performance monitoring?
• is cooperation development of your relationship at the moment on level of correct communication or do you approach each other by cooperating on workshops, joint research & development, systematic troubleshooting?

What is your model of (solving the) conflict?

In all coopetition and therefore in arising negotiation, you can determine a certain extent of conflict. Do you promote compromise, even searching for a consent is combination of the supplier’s assertiveness and cooperation leading towards collaboration or competition or even by imposing his need over yours. Or, on other side, does he avoids the negotiation.

The subject of cooperation is vital in describing the status of opposite negotiation party

How important is the subject of your cooperation? Strategic? Standard, universal, routine commodity? Critical, bottleneck? Leveraging? Define it step-by-step in the transitional matrix:

• what is scale of cooperation? Big – small?
• what are risks associated? High – low?
• does your cooperation exhibits high or low level of potential further development towards partnership?
• what is negotiation power? High – low?

By combining the answers of all the above mentioned Q&A, you can prove qualitatively in your head and also quantitatively (yes, you can measure it!) on the paper, either your supplier or any other opposite party in negotiation matters to you in a strategic or on “standard” manner… And select a corresponding one of three negotiation strategies that should later on imply for negotiation tactics recommended to be used during negotiation in order to get the best result out of it.

To preserve “your face” use and combine just few negotiation strategies!

As we said before, there is no real reason why slotting your negotiation opponents with more than three basics strategies:

How to approach the opponent?	The strategy	Targeted outcome
Tactical	Theory of game	·     seldom W/W, mostly W/L ·     therefore, on long term – if exists -  always L/L
	Main features
	·     focus on means & ends, positions led by rationality. Controlling ·     always weights among the power, risk, position of the opponent in the transition matrix and scope & scale of cooperation with the opponent ·     bargaining power in main lever of the negotiation, therefore explicit action-reaction duel ·     extensive use of different negotiation tactics following different targeted outcomes ·     searching for optimal solution “for me” ·     EQ over IQ? Often combines behavioral approach involving personality traits which defines corresponding negotiation tactic (aggressive, even rude, diplomatic, …) to manipulate perceptions and expectations involved ·     is it just feeling of adopting a bit of Machiavellism where “the end justifies the means”? ·     also avoiding negotiation to buy time…
	Playground
	·     often competition ·     use of different tactic prevent lock-out due to overuse of the bargaining power, therefore enhancing probability of opportunity to reach for W/W outcome ·     concessions may be way out for treats of being stuck at starting positions ·     negotiations are less predictive - a component of discomfort or even fear is present
Integrative	Principled negotiation	·     W/W
	Main features
	·     integrative approach, combining techniques and positive practice approaches to gain the W/W solutions ·     problem solving and creating value - both parties committing to examining and   discussing issues closely when entering into long-term relationship that warrant careful scrutiny ·     joint exploration of key issues of importance ·     extensive communication, willing engagement free from coercion or intimidation ·     separating people from challenge. Less EQ, more rationality ·     not seldom compromising: not searching for optimal outcome for either side. Negotiation parties forgoing their ideal outcomes, settling for an outcome that is moderately satisfactory to each participant ·     rather making (smaller) concessions to smooth the way towards solution, i.e. conceding a point that is not vital to you but is important to the other party. Valuable in ongoing negotiations
	Playground
	·     collabortion. Coopetition is performing, use of the negotiation power is in backstage ·     since transition matrix is only one of many tools of differentiating the opponents, it makes differentiation less important ·     high degree of predictability, but both sides should expect escapes into non-principled negotiation tactics ·     time consuming
Strategic	Partnership	·     common benefits in outcome solution ·     small step dance
	Main features
	·     focus on starting point rather than on position ·     open book (really?)
	Playground
	·     Cooperation, searching for consensus rather than compromise. Not seldom to a point of accommodating the opposite party ·     use of the negotiation power is consciously limited on argumentative differences as defined by (mainly) qualitative, sustainable advantages in partnership ·     predictable process of negotiation, no big surprises ·     small steps or just spending (too much) time in the comfort zone?

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Fishing for right negotiation strategy

Let’s clear out – there is only one type of negotiation! 

In business, there are no “internal” or “external” negotiations.

• There is no difference between negotiating on sales or on procurement. At the end of (successful) negotiation, you sign a contract of selling & buying “the thing”, right? 
• Also when you are introducing the proposal for change to your boss or your colleagues, they have to “buy” what you are “selling”, right? 
• When negotiating with unions for right-sizing, you have to reach a right agreement.
• Also a lawyer uses same (negotiation) tactics while addressing the court, the jury or the accused to get the essence for the defense speech…

So you have to talk similar (but not same) language to reach success! 

Besides being argumentative on the subject of negotiation and convincing in communication, the negotiation power can make the difference! And, by rule, it’s on the side of the uniqueness or (and) money. And since money talks on the buying side of the negotiation table, the salesman usually uses more adjectives to try to balance that advantage. So we and up with negotiation tactics…

We said sales… Is there anything different in private life – when negotiating with your children or wife… ? You have to use strategy, tactics and not forget common sense…

“Only” a couple of strategies and a few tactics are used in every negotiation. 
Think about your personality, your communication ability, and the corporate culture of your company… No mater what you have heard in one of the negotiation coachings or trainings - you most likely have few of your favorites - those hadfull that you use most offten. Are few not enough? Hey, how many strategies would you like to have? A state has only one constitution, a company has only one strategy, newspaper has only one editorial policy…. A man has only one face… So, why should you have to have more than one negotiation strategy? You don’t!

Because your reputation does count! Think about yourself… Would you do business with someone who is known for his/her rapacity? You should be aware that you might just be his/her next 'victim'.

It’s important to obtain in preserve “your face” in negotiation. It means you can be recognized as tough, but always a fair negotiator on an overall level. To converge both - reputation and rumors about you…

But, it is a fact: you (need to) diverse the strategies of negotiation against the negotiation opponent, in relation to who sits in front of you. Either it is a business partner, or a company that you would invest your time and effort into because of the opportunities or risks associated, or “just” an universal, therefore easy changeable supplier with a low bargaining power, or you are in negotiation for a critical product, where a mistake of your supplier might jeopardize your business, adjust a pinch of strategies to greet and meet them. With each of them, connect your “editorial policy”:

And with each strategy you should align the tooling, the package of suitable negotiation tactics that should optimize the outcome of negotiation in your favor.

Strategy and tactics - Cooperative or Competitive? Negotiators Dilemma… Really? 
Not really – let’s do COOPETITION! By differencating opponents and within selected strategy changing tactics, you can mix cooperativeness and competitiveness. And by that effecitevlly select the path to the results avoiding pitfalls of the “prisoners dilemma”..

The prisoners dilemma or How to coopetite for best (risk adjusted) result!? 
Two prisoners are awaiting trial for a crime they committed. Each must decide between two courses of action: confess or not. If neither person confesses, in other words, they cooperate with each other; each prisoner will have to serve a prison term of one year. On the other hand, if both prisoners chose to ‘defect’ and turn evidence against one another, both prisoners will be faced with a 2 -year prison term.

With possible outcomes of the dilemma (and probability incounters together with risk awareness of both sides), it is soon clear that selecting tactical approach that is likely to build of even reinforce already existing relationship with an opponent might, with principled communication, consist of all element of conflict prevention or at least resolution, closes the negotiation with win-win situation.

What can we learn out of it? YES, having “one face” while negotiate - the negotiation strategy - is important and right thing to do. BUT YES, don’t be rigid! Design and /or tailor the strategy to “your face” and use it consistently.

Did you pay attention to colored words? Relationship, principled communication, win-win…

Different strategies, but as you travel in upgrading the relationship with your opponent, can be efficiently combined.

In our next blog: negotiation strategies, tactics… Join us!

www.avanton.si

What a weekend!

We have a great weekend behind us. Alma Mater Europea organised two Seminars for their students of European studies, where Ervin Pfeifer, PhD,  presented in a few hours long seminar with examples the two topics that are one of our main focuses:

• Negotiations (Croatia, Karlovac)

• Smart cost reduction program (Croatia, Zagreb).

It was nice to see so many young students, future managers, cost killers listening and discussing the topics given to them.

Additionally, Business HR devoted an article to the presenter, Ervin Pfeifer, PhD, and his long and comprehensive experience in the world of restructuring, reorganising and making new ideas happen. We recommend you to read it and you will see how experts are build not born.

We look forward to working with Alma Mater Europea and their students in the future!

Manage, not administer the project!

To continue from our previous posts on 13 Rules to succeed in cost reductions, once you got clear view what is the content that you want to cover, stop. You should design the cost reduction program in a way that allows people to come up with all sorts of ideas which lead to cost reduction or increase of EBITDA. As we said in our website (www.avanton.si), the revenues are the blood of the system, not costs. Therefore, we should allow people to come up with ideas that increase our EBITDA. Do not throw them away. But be careful in accepting these ideas into the program. They have to be executable and revenues that should help to achieve your EBITDA goal realistic.  The same goes for "pure" cost reduction ideas also. Do not allow measures at any cost into the program. The program will fail. It should be designed to implement only those ideas that have value for you in the long run. So, planning is essential.
 
How we nailed it with SCORE?

 

 

 

 

 

 

 

 

 

 

 

 

Plan carefully and continuously.

• Board must give clear guidelines. And you have to set clear measurable goals! They are not “just something” to be occupied with. They have to be followed.
• Cost reduction goals have to be anchored to the company strategy as the ultimate authority and provide a lighthouse of where we should be after app. three years journey over rough sea of costs. The ultimate result of your goals is an "ultimate number" which you can easily measure to see whether you are on track.
• Cost-benefit analysis should be performed before the measures are taken into the overall program. You have to plan what you want to achieve and be able to measure the progress and set the milestones you have to check to see whether you are on track. And to do this througout the program.
• Therefore, decompose comprehensive cost reduction approach into inherently integrated manageable smaller steps.
• Declare SCORE program as priority No. 1. This makes good foundation for executive officers to unambiguously plan the resources to execute the designed cost reduction initiatives.

 

 

Set up adequate infrastructure to do planning and monitoring wisely.

These questions should be of help in getting it right.

• What is the right organization of the program – internal or external involvement? How many consultants per 500 employees? For how long? How big the internal team should be? With what competence profile? The organization necessarily should reflect top down involvement. All the hierarchical levels should be represented in the organization.
• What is perfectly managed time schedule of comprehensive all-business-area cost reduction process as regards preparation, identification and elaboration of measures, start of implementation until critical point of relative comfort is reached? We found a three year program a great approach. First year to develop the measures and get them running. The second year to carefully monitor the execution and manage deviations and risks and the third year to slowly incorporate cost management into everyday life at work.
• How to set up immediate planning and reporting system? Joure fix? Time fix? Use easy tools. Develop your own or ask your consultant to provide you with KISS (Keep It Smart and Simple) planning and reporting system that will need no time to learn how to use it, little time to provide data for it and offer enough data to assess whether we are on track and where to push harder.

Lead, not administer.

• Limit the bureaucracy and set up “Undercover” administration of SCORE program:
• Limit yourself to one page approach in planning! 
• Reporting should consist only of 3 numbers per 14 days (if everything on track). 
• Set up TOP Central Think Tank support as a nerve center for entire cost reduction mission. This is the way to include knowledge management across the companies in one group and allow personal contact to replace long reports. It will work better! It did for us.

  

We intentionally have not used a word project anywhere above. But actually all we were talking about was applying the right set of project management techniques to ease the job. You can read tons of materials on project management, which say how you should plan, monitor, manage time, work and risks. But at the end it comes to the person who is in charge, how and where he or she will use them and the competnecies that she/he has.

More about that from a  bit different perspective in our next blog.