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Hi!
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:
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The Value of Trust in Negotiations; and
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Value Creation in Negotiations
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.
In brief:
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How simple negotiation agreements can be ruined due to the lack of trust;
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What are some of the factors that will influence the level of trust between all negotiation parties;
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How to develop mutual trust and respect with your negotiation counterparts. Read on... ...
To read the rest of this newsletter, pls. click here (http://www.psycheselling.com/page4.html).
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,
While the initial agreement was to split the profits equally, after some time, both Curly and Moe raised the question that they should get a bigger share of the profits, since they had worked very hard for the business. And so the 3 partners agreed to renegotiate a new profit split.
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:
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If you concede, you have to ask for something in return
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You must stick to your BATNA (Best Alternative to a Negotiated Agreement), while trying to optimise your outcome
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You sometimes need to invent options that might not be readily available to you; etc.
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.
Besides the giving and taking on the material ends, what both parties may want when negotiating for a long-term collaboration could include:
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If all parties will be treated fairly and with respect;
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If all parties are committed to and honour their agreements;
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If all parties can seek to work out any future differences or disagreements amicably
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:
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Directly ask you for a renegotiation of the terms;
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Put you as a low priority, since they felt they did not get a fair deal;
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Take retaliatory measures by gradually under-delivering on what was agreed; OR
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Simply choose to cancel the agreement and not do business with you
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 Counterparts
We sometimes assume that we either trust or don't trust a certain person. In reality, it's more complex than that.
Trust is more like a magnitude, where we actually choose to trust a person more, or less. For instance, there will be people whom we can trust enough to give them to help us get certain things done, but perhaps not enough to entrust our fortunes and family in their hands if anything untoward happens.
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.
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Show you care. Show that you are aware of what they want, and will also seek ways to give them what they want, within reason;
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Show you can. If you have a track record, not just about how well you fulfil your negotiated agreements, but also how you treat your negotiation counterparts over the long term, this is the tie to flaunt it;
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Keep your word. Don't make promises if you are not sure you can keep them. If you had made a promise, honour your commitment.
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Keep in touch. If there are issues that either party is not quite happy, it will be best if both parties work out the solutions when the problem is small, and NOT wait till the problem gets over-blown and all parties are extremely upset.
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.
What we suggest here is that by all means, if you can give a little less to get what you want, that is great. Just spare a thought for the other party that if you are going to work together in the days or months or years to come, they must not feel that they had been pushed to accepting a raw deal.
Need help in fostering highly committed long-term negotiated agreements? Simply e-mail info@directions-consulting.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
- How simple negotiation agreements can be ruined due to the lack of trust;
- How to balance the need to build trust with the need to achieve optimal outcomes;
- How to develop mutual trust and respect with your negotiation counterparts
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 sales@directions-consulting.com
Pls. check out our web sites www.directions-consulting.com and www.psycheselling.com/page4.html for more inspiration.
Tips for Negotiating:
Value Creation in Negotiations
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
Scenario: we know what we want to achieve, as does our counterpart, but we don’t know each other very well. So how do we get the ball rolling? The first step is to build trust through information sharing. This does not mean you should disclose your entire game plan and hope for the best, but rather you must begin slowly to ensure that your counterpart is on the same page and is ready and willing to reciprocate in sharing information. So what is the easiest way to achieve reciprocal sharing of information?
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.
Multiple Negotiation Issues and Multi-Package Offers/Proposals – Few negotiations revolve around a single issue, and the majority do so around the creation of a partnership that entails multiple issues. A solid partnership must always be based on trust and respect as its cornerstones, even if the only issue concerns negotiating a price. We can always enhance this by focusing on building a durable working relationship, from which both parties continually profit. Issues should be identified and prioritized in the preparation stage, and a larger number of issues will likely increase and enhance the number of resources to be shared, which in turn creates value creating opportunities.
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 agreement.
The process of creating value in our negotiations can only occur once both parties adopt the mindset of creative problem solving.
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:
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If circumstance A happens (if sales exceed this amount), we agree to the following process.
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If things change and circumstance B occurs (sales fall below a certain amount or within some other range), we agree to this next step.
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.
Summary
The ways and means of enhancing our negotiations by adding value to our agreements are most readily achieved when we apply creative problem solving. We create value by working collaboratively to use our differences as an opportunity to enhance the scope of the agreement by expanding issues, making multiple offers, constructive trade-offs and contingency agreements, and looking at how we tackle disagreements.
To find out how you can achieve better negotiation results, you can e-mail info@directions-consulting.com or call +86-136 7190 2505 or WeChat: cydj001
Directions Management Consulting
Directions Management Consulting is the partner of LeadershipIQ in China and Asia. LeadershipIQ helps more than 125,000 leaders every year through the facts drawn from one of the largest ongoing leadership studies ever conducted is used to help companies apply resources where the best possible results be achieved.
In addition, Directions Management Consulting is a leading provider of sales performance, innovation and experiential learning solutions in China and many parts of Asia.
Using the Belbin Team Role Profiling, Directions Management Consulting helps develop high performance teams and leadership at every level.
Psycheselling.com is the sales performance arm of Directions Management Consulting specialising in conducting training, research and consulting services for sales managers and their team.
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Currently, Directions Management Consulting has served clients such as Delphi Packard, InterContinental Hotels Group, Alcoa Wheels, Standard Chartered Bank, Merial, ThyssenKrupp, Lowe's Global Sourcing, Diehl, Kulzer Dental etc..
Directions Management Consulting will increase its efforts to conduct leadership studies in China and other parts of Asia, so that more companies apply resources where the best possible results be achieved in this part of the world.
Enquiries and suggestions, pls. e-mail info@directions-consulting.com or visit www.directions-consulting.com
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