Value Negotiation: How to Finally Get the Win-Win Right 6/x

Horacio Falcao

Part 5.

07/ Relationships

  • The value pursuit (let’s learn some new terms):

  • Value discovery – negotiators need to discover and understand all parties’ interests the parties truly attribute value to. Mistakes will propagate through the entire process, so quite some time needs to be spent here.

  • Value creation – once the interests have been identified, negotiators can come up with options to create value or satisfy their interests.

  • Value claiming – once value is created, the parties can use legitimacy to work out who gets what and how much.

  • Committing on closing the deal, even if it unfair (and some new demands are thrown in immediately prior to closing), is wrong, as both parties should still realise that it’s never too late to walk away from an unfair deal. [MK: and ensure there’s a reasonable contract termination clause in the documents.]

Relationship Redefined

  • People don’t have relationships with companies, they have relationships with people.

  • Relationships are built by how we behave and feel towards one another, not by the substance we exchange.

  • Substance (material value):

  • Short-term transaction – the value of the present transaction.

  • Long-term transaction – the present value of all past, present, and future transactions with the same person or organisation.

  • Relationship (the ability of parties to work together):

  • Short-term relationship – how people act during a specific interaction.

  • Long-term relationship – how people act during a series of interactions.

  • Relationships are never the substance of negotiations.

  • It is possible to build a positive long-term transaction with a negative long-term relationship (think Walmart or Amazon suppliers).

  • There’s nothing wrong about giving a discount today (negative short-term transaction) to close a longer-term contract (positive long-term transaction) and not rely on a relationship value. Thus, a discount is paired with a guarantee (commitment on substance), not a promise of a future relationship that may or (more likely) not materialise.

  • It may feel like if the negotiation is ONLY about the substance, so why even bother with relationships, which take time to build and can’t be relied on for deal making?

  • People want their social status to be recognised, want to be trusted and respected.

  • Source of potential future negotiations – a positive network of relationships expands the resources (knowledge, access to expertise) available. More people with think of us should a new opportunity arise.

  • Facilitates material value creation – a good relationship generates interdependence leading to a safer negotiation environment and more short-term and long-term substance value.

  • In a nutshell, relationships improve collaboration, information exchange and value creation opportunities.

Promoting Interdependency

  • Interdependency is when the negotiators are better off dealing with each other to get what they want. It’s different from independence (the parties don’t need each other) or dependency (one party has power over another). Interdependency leads to reciprocation, which is a strong motivator for collaboration.

  • The temptation to use power is lower because of the value that can be pursued together.

  • Interdependency is faster and easier to build than trust, so it makes sense to start with it as an early relationship strategy and reinforce it during the entire negotiation to put things on track if needed.

  • An early step should be erasing power distances between the parties. The negotiation gets framed from a perspective of “we” leading to collaborative behaviour, not a battle.

  • The Joint Value Pursuit (JVP) frame recognises the interests of both parties and makes conversations sound like: “we will maximise our value”, “we intend to build a fair deal for all”, “we will explore options to satisfy as many of our interests as possible”, etc.

  • JVP has its risks: disbelief for the truthfulness of another party’s intentions can be tackled by consistent behaviour; the perception of weakness should be addressed by focus on value, not power. Reducing this risk requires communicating this frame up front to encourage the other party’s buy-in can be done with phrases like: “do it together”, “overcome the issue in front of us”, “collectively come with creative ideas”.

  • [MK: I won’t lie, I’ve heard people say these things lots and lots of times and ignored such arguments as either cliches, or manipulation attempts. Being on the other side of the table, I feel bad for these people now.]

Focus on a Common Challenge or Opportunity

  • It’s hard to avoid bad feelings towards a person bringing bad news. [MK: it’s in line with the manipulation attempt of people to look better by associating with good news.] But the old saying still holds true: “attack the problem, not the people”.

  • The word “problem” is perceived by many people emotionally, not mathematically, and they prefer to use alternatives: challenge and opportunity. [MK: no wonder many people have drinking opportunities instead of problems.]

  • Having a common challenge (resist the temptation to use the word “enemy”) helps focus the parties on collective efforts to address it. Some challenges can be successfully tackled by a single party, so the focus should be on the ones that require collaboration because of the prohibitively high cost of solving them alone.

  • Another way to look at the collaborative negotiation is identifying the value-creation obstacles (i.e., when parties are pitched against each other):

  • Resource constraint – the negotiation can’t create enough value due to a real or perceived scarce resource (money?). In positional bargaining it’s a source of competition. The path to the solution lies in the joint search for more or alternative resources.

  • Artificial limit – sometimes value can’t be created due to human-created limitations: policies, laws, rules, habits, etc. It makes sense to challenge the limitations themselves or to search for extra value within the current constraints.

  • Narrow scope – one of the parties doesn’t have a mandate or view of the negotiation due to the lack of authority or understanding or preparation. This limits the party’s ability to negotiate beyond their goals. Such parties should be offered to explore the possible opportunities without them committing to anything immediately or containing safety nets in case of risky topics.

  • The usual bargaining “us vs them” position is transformed into “us” being both parties and “them” being the challenges and opportunities.

  • The “us vs them” mentality is dangerous because in its extreme form the opposite party that may look very different will be dehumanised and deprived of the same standards of respect a more “similar” opponent would command. This justifies unfair treatment and ridiculous offers. Hence, the “we” mentality is also helpful for us to remain human.

  • “We” should be quite specific: it’s the collective of all people involved in the negotiation. [MK: it has a “levelling” quality – everyone is equal and everyone’s contribution to the common goal counts.]

  • It even matters how people sit at the table: sitting across each other reinforces the competitive process, while sitting next to each other signals the willingness for collaboration. Verbal affirmations of sitting side-by-side can sound like: “we’re on the same side / on the same team”, “we’re saying the same thing differently”, “I’m not against what you’ve said, just trying to …”.

  • The risks of making statements to sit “side-by-side” are:

  • The other party may perceive this to be a unilateral commitment to help. Thus, the language must be very clear: your interests are also important to us, and we want to help you maximize your value, because we believe this way you will be more likely to help us do the same. (Here we state our intentions and the desire to reciprocate.)

  • We can be perceived as insincere. Then we need to explain that helping the opposite party is the easiest way to help ourselves and that this is a selfish and efficient move, not a selfless and naïve move.

  • When choosing roles, negotiators try to get the ones with the most power (and distance) and are tempted to adopt a “win-lose” negotiation style. A “client” role is a very powerful one [MK: unless there’s a single seller and the goods in question are sought after].

  • Collaborative approach requires choosing roles that don’t dominate the conversation and rather create opportunities for joint activities. As a bare minimum, the chosen roles should allow contributing ideas and asking for feedback and suggestions.

… to be continued …

Part 7.