Negotiation and Conflict Management - Dissertation Example

Negotiation Part A: The key components of the negotiation process are (a) two parties with their own positions (b) making offers and counteroffers in order to reduce the gap between the two positions and bring the parties closer to a compromise position where they can reach an agreement that may be mutually acceptable to both parties (Gelfland, 2004). The process of negotiation involves two or more parties who are involved in the process of trying to arrive at an agreement after starting off from initial positions that may be divergent from each other. The process of negotiation involves bargaining, wherein each party adopts a position, offers arguments in favour of the position and makes concessions in order to reach a compromise and an agreement. The process of negotiation needs to be judged by three criteria (a) whether it is a wise agreement (b) whether it is efficient and (c) whether it improves the relationship between the parties (Fisher et al ,1981: 4). It is useful when the parties take up a position because taking up positions serves a useful purpose in a negotiation by telling the other side what he wants, providing an anchor in an unsettled situation and leading up to terms that can produce an acceptable agreement (Fisher et al, 1981:4). There are two different aspects involved in a negotiation process. The first is the problem itself and the other is the relationship between the people involved in the negotiation process. In some instances, relationship issues such as the manner in which the parties interact with each other, could interfere with the negotiation process although the problem itself may be a divergent one altogether. Negotiation must be based in reason if it is to be successful (Wiley and Lum, 2007). An agreement that is beneficial to one or both parties can ensue only when the parties are free of decision making biases. Some of these are as follows: (a) an irrational assumption that gains can ensue only at the expense of the other party (b) continuing on an irrational course of action even if it is proving to be detrimental (c) relying only upon readily available information while ignoring other relevant sources of data (d) failing to consider the other party’s perspective and (e) being overly affected by the manner in which information is presented (Bazerman and Neale, 1992:2). The negotiation process of necessity, involves high levels of compromise and a give and take, wherein engaging in an irrational course of action that is clearly detrimental to both parties purely on the basis of existing biases is likely to result in an unsuccessful negotiation process which is unlikely to produce an agreement. The existing bias would prove to be a barrier to the negotiation process and could interfere with the outcomes, because it could prevent the parties from being open and willing to accommodate the other’s positions. Conflict arises when the two parties are unable to arrive at a compromise solution (Zartman, 2007). Beasor offers some useful tips on good negotiation, based upon the results that successful negotiators have been able to achieve. He states that “one of the best pieces of advice I can offer to any negotiator is this: if you don’t ask ....you won’t get.” (Beasor, 2006:2). On this basis, one of the major components in the negotiation process which would ensure that the parties are able to communicate, is to be able to set out a list of objectives, targets and benefits that each one would like to achieve and then asking for it. Secondly, when one party offers a concession, no matter how small, it is bad psychology and negotiation policy to refuse it; rather it should form the basis for requesting and gaining further concessions. The offer of a small concession by one party should be returned with a concession from the other party as well, so that a general atmosphere of goodwill ensues and there is some incentive provided for both parties to move further into the negotiation process. Yet another facilitator of negotiation would be to put all the blame on a third party in order to ensure that the relationship between the primary parties does not suffer. For example, if a lower price is offered, this can be blamed on a third party, i.e., the bank, for instance that it is not providing the required funds, or that top executives are not approving a decision. When the blame is transferred to a third party, then it does not interfere with the relationship between the negotiating parties; neither does it create ill will about the refusal to proceed with a position because the blame for it is shifted to the third party rather than falling on the negotiators themselves. This makes it easier for the other parties to accept the refusal without experiencing feelings of rancour and disappointment, which could adversely affect the negotiation process. Beasor (2006) also suggests that when a negotiation process is starting to fail, the best and the most graceful option that a party can take up is to own up to failure. Since most parties are generally unwilling to admit to a failure and are instead keen to stick to their positions, the net outcome that is achieved when one party admits to having made a mistake is very effective. The other party may find it disconcerting to face up to an opposing side that is humble and gracious enough to admit to a fault and may be more inclined to offer concessions on its own position in order to ensure that an agreement is reached. When the parties reach a deadlock in their negotiations, one of the means to emerge from it is for the parties to stop pursuing a course of action that is proving to be detrimental. One of the examples cited by Bazerman and Neale (1992) in this context is that of the three major American car companies in 1986. Each of the companies was offering rebates targeted at increasing sales volumes and enhancing profits, but with bigger and bigger rebates being offered by the three companies in an attempt to outdo one another, the net result was that all the companies were suffering losses. Lee Iacocca of Chevrolet found a way out of this dilemma by contacting the Press with the message that the rebate program was expiring, however if either of the other two companies continued with it, then Chevrolet would outdo any of their offers. This sent out the message to the other two companies that their sales strategy was proving detrimental and the wise course would be for all the companies to step back, which was ultimately the end result. Applying Beasor’s (2006) recommendation to honestly admit to having made a mistake and to offer to rectify it is also likely to be helpful to parties that have reached a deadlock. This could be the catalyst that sparks the other party into coming forward to offer concessions so that the negotiating process can move forward. To engage in successful negotiation, the principled negotiation approach suggests that issues be decided through adopting a positional process rather than by using a haggling process where each party focuses on what it says it will and won’t do (Fisher et al, 1981). Thus, each party adopts a position and then tries to reach a compromise that could accommodate the two positions as far as possible. In arriving at an agreement, there are also other issues that will play a role, such as cultural aspects that will influence the kind of biases with which a negotiator approaches a problem and tries to find a way to resolve it. Part B: According to Bazerman and Neale , negotiating rationally means “making the best decisions to maximize your interests” and this includes knowing how to reach “the best agreement not just any agreement.” (page 1). In the case of the dispute between Revelstoke and the Beechforth County Council, it appears clear that the terms of the original agreement have become difficult for both parties to adhere to. The deadlock or stalemate in this instance has arisen for two major causes. First, the parties have objectives that diverge widely from each other. The prices that each party considers reasonable are far removed from each other; Beachforth has started off from £230,000, while Revelstoke’s counter offer begins at £420,000; hence the possibility of arriving at a compromise price that would be acceptable to both parties is slim at best. The two offers of the two parties are so far apart from each other that a lot of negotiation would appear to be necessary before they could arrive at a compromise solution that would be acceptable to both the parties (Zartman, 2000). Secondly, both parties have stated inflexible positions and do not appear to be willing to bend from them, which is only contributing to the deadlock. For instance, Beachforth contends that the other party has been engaging in delaying the work and requesting further funds, but in taking it so far as to claim that its composite claim, if legally pursued, would amount to £680,000, has not taken into consideration the other party’s argument that the delays are being caused by local factors which have only been identified after the commencement of construction. If it had done so, then it would have been somewhat more sensitive and considerate about the issues that were being faced by Revelstoke, so that they would not have been so adamant on their stand and would have tried to revise their offer to be somewhat more accommodating in terms of price. Cultural aspects must also be taken into consideration, because Revelstoke Construction is based in British Columbia in Canada, while Beachforth County Council is in South East England. Berton et al (1999) have pointed out that the differences by actors which may be noted in every component of negotiation, such as structure, strategy, process and outcome. Globalization has highlighted the interdependence of different cultures and enhanced cultural sensitivity to some extent, but on the other hand, it has also increased the likelihood of conflicts arising due to cultural differences (Berton et al, 1999:11-12). Culture can be defined as a set of “shared and enduring meanings, values and beliefs that characterize national, ethnic, or other groups and orient their behaviour.”(Berton et al, 1999:12). This would also arise in the present dispute, because the cultural differences between the two parties would impact upon the process of negotiation by playing a subtle underlying role in how the parties interact with each other. Hofstede’s (1980) basic four dimensions of culture may also be applied in this context; because Canadian society falls more into the American mould wherein there is a higher level of independence and flexibility because the society would be classed as more masculine (Berton et al, 1999:13). Comparatively, Beechforth County Council would fall under the category of a less masculine society where there is a higher degree of collectivity in decision making. The implications of these different dimensions of culture are that in terms of decision making, Revelstoke would be more inclined to be assertive and aggressive in pursuing their goals and the individuals responsible for decision making could be less tactful and willing to compromise in their negotiations. On the other hand, Beechforth County Council would engage in a process of collective decision making, where the figures they have cited also take into account estimates provided by independent contractors and other entities who would be responsible for provision of services under the contract undertaken by the County Council. In connection with the present deadlock in negotiations, the fact that both parties are adhering rigidly to their respective stands in terms of price is proving to be detrimental to both parties because it could result in legal action that would in the long run, be more expensive for both parties. As opposed to paying some more attention to the problems that Beechforth County Council is facing, Revelstoke is instead focusing on a projected legal outcome that it is claiming will be about £680,000. It appears likely that the stand Revelstoke is adopting may be the result of its masculine cultural antecedents which makes it more assertive, pushy and individualistic. The cultural element appears to be playing out unconsciously, so that Revelstoke is putting forward arguments and conditions that would be difficult for Beechforth Council to even be favourably disposed to, let alone agree to. By contending that it would be able to claim as much as £680,000 if it is not allowed to get away with its offer of £280,000 which is almost half of what Beechforth County Council is claiming, Revelstoke is not handling the negotiation favourably in a manner that is likely to elicit some concessions or cooperation from the other party. There is a strong likelihood that this inflexible position adopted by Revelstoke is working against its interests and putting a damper on the negotiation process rather than encouraging it; thereby producing a deadlock. However, the fault for the difficulties in negotiations and the deadlock is not the fault of only Revelstoke. It may also be noted that after its initial offer of £230,000, when Beechforth responded with a counter offer of £480,000, Revelstoke has responded with a counter offer that is higher, i.e., £280,000. One of the tips that Beasor (2006) offers is that when the other party has made an offer, no matter how small, it must never, never be refused. He states that such an offer must be accepted by the other party with a corresponding concession and a script such as “Thanks for the offer......it’s certainly a step in the right direction and I appreciate your flexibility.....but clearly this is a tough deal and we’ve still got a long way to go before we can get to an agreement. What else can you put on the table?” (Beasor, 2006:3). Admittedly, the counter offer out forward by Revelstoke is relatively small as compared to its initial offer, because the level of increase in the offer is only £50,000. The proper response from Beechforth County Council should have been along the lines of successful negotiators which has been spelt out by Beasor (2006) as cited above, graciously acknowledging the offer that has been made, even if it is a small one. But instead of responding with a gracious thank-you and offering a corresponding small reduction in the price they are citing as well, for example £370,000 or a similar sum, Beechforth has responded with inflexibility and rigidity by making a counter offer that is not really a counter offer at all, but a mere reiteration of its original price. Had Beechforth responded with a concession similar to that offered by Revelstoke, it would have improved the negotiation process and made the other party feel more favourably disposed to making further concessions. But by stubbornly adhering to its original position and price, Beechforth has not demonstrated the same level of willingness to compromise and levels of flexibility which Revelstoke is demonstrating in this present instance. As Beasor (2006:3) states, in the process of negotiation, it is bad policy to refuse anything that has been offered, and if initially, 5% has been accepted, it does not mean that this would prevent a process that could later result in an acceptance of 10%. In other words, a partial acceptance midway during the negotiation process does not automatically mean that it’s a final acceptance and there is no more scope to press for further concessions. By adhering to its original price, Beechforth is retaining an inflexible stand which does not bode well for the negotiation process, because it has assumed that accepting a lower price would mean that it is compromising its position. Therefore, Revelstoke’s counter offer of £280,000 did not necessarily mean that this was its final price; therefore Beechforth should have also been more flexible on its price and made some small concessions. Beechforth has however, adhered to another of Beasor’s recommendations in improving the efficacy of negotiation; it has passed on the responsibility for its inability to lower its final price on to local third parties, so that the difficulties posed by these local factors and parties have emerged only after the construction process has commenced. In supporting its position in demanding that Revelstoke pay a sum of £420,000, it contends that because of the rise in prices resulting from local parties and entities, it is forced to adhere to its asked price requirement. Since it is passing on the responsibility for its inflexibility to third parties, this would help to improve the negotiation process by preserving the relationship between the two primary parties. Revelstoke and Beechforth may be experiencing problems in arriving at an agreement because they are engaging in positional bargaining since it deals with a negotiator’s interests in substance, as well as their relationship, since it trades off one against the other (Fisher et al, 1981: 21). In order to preserve the relationship, it would be necessary for the negotiations to separate the relationship from the problem itself. A negotiation can be improved by focusing on the problem and separating the relationship such that it is based on “accurate perceptions, clear communication, appropriate emotions and a forward looking, purposive outlook.” (Fisher et al, 1981:21). The psychological problems associated with communication in negotiation need to be dealt with separately; for instance misunderstandings can be solved with better communication, while ways can be devised for people to let off steam if their emotions are running high. These views offered by Fisher et al (1981) can also be applied to the current situation. Both Revelstoke and Beechforth appear to have adopted inflexible positions and appear to be unable to separate the substance of the problem itself from the relationship between the parties. The two parties have both adopted their positions at the start of the negotiation process and have tried to improve their chances of a settlement being reached which is in their favour by stubbornly holding on to their own positions and making small concessions only to the extent that it is necessary to continue the negotiations (Fisher et al, 1981). This is the position adopted by Revelstoke which has made only a small concession of £50,000 to the extent that it is necessary to continue the negotiations. References: Bazerman, Max H and Neale, Margaret A, 1992. “Negotiating rationally”, The Free Press Beasor, Tom, 2006. “Great negotiators: how the most successful business negotiators think and behave”, Gower Publishing Company. Berton, Peter, Kimura, Hiroshi and Zartman, I William, 1999. “International Negotiation”, St. Martin’s Press. Fisher, Roger, Ury, William and Patton, Bruce, 1981. “Getting to yes: negotiating agreement without giving in”, Houghton Mifflin Company. Gelfand, Meichele J, 2004. “The Handbook of Negotiation and Culture”, Stanford University Press. Hofstede, Geert, 1980. “Culture’s consequences: International differences in work related values”, Sage. John Wiley, John and Grande, Lum, 2004. “The Negotiation Fieldbook: Simple Strategies to Help Negotiate Everything”, McGraw-Hill Publishing Zartman, I. William, 2007. “Negotiation and Conflict Management: Essays on Theory and Practice”, Hodder Mobius Zartman, I. William, 2000. “Power and Negotiation”, University of Michigan Press Read More