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Archive for Juli 2010

This is the second part of Blog

The Sunloungers at the Beach of Rimini – 1020

Negotiation is the fundamental form of dispute resolution directly between parties. In simplest terms, it involves an interest driven discussion between two or more disputants who are trying to work out a solution to their dispute. Often negotiations may be done in advance, to avoid later disputes. We are negotiating when family members discuss their responsibilities for the preparation of a barbeque party; when we discuss with our husband or wife where to go to have a nice dinner or when a couple discusses which TV-channel should be watched. When we bargain over the price of a product or service, we are negotiating. In order to live or work effectively with others, good negotiation skills are critical.

On the beach of Rimini the rental guy with the red hat is still talking to the pale and the dark guy on the subject of sunlounger. There are different resolutions of this dispute. If the new guy stays for a couple of days while the tanned is in Rimini on his day of departure, it makes sense to give sunlounger to the white guy. He will be good paying customer for the coming days. If the tanned guy is a regular customer every year and the pale new then maintaining the existing customer relationship might be the right choice. However in either decision by the red hat the lounger will be rented to only one of the customers. The red had needs to make decisions how to distribute the right to use the lounger to either of the two interested customers.

But the red hat is a smart listener. He finds out, tanned and white guy want to have this particular sun lounger. It is an observation lounger with an excellent view to the bar. Red hat is clever. He suggests to move the five loungers closer to each other and put a sixth sunlounger with exact the same observation qualities next to the row. The additional lounger is a clever idea, making everybody very happy: the tanned and the white guy are able to spot the girls on the bar and red hat does not lose any customer and makes his money.

We can name the dimension of any negotiation. It is first the interest of the parties involved. It is second the substance the real issues on stake. In the Rimini examples it is the sunlounger. It is then relationship of the parties. Since it always takes more than parties to negotiate. The fourth dimension is the process of the negotiation. The process may be planned or may evolve as the dynamics of communication.

In simplest terms, negotiation is a discussion between two or more disputants who are trying to work out a solution to their problem. This interpersonal or inter-group process can occur at a personal level, as well as at a corporate or international (diplomatic) level. Negotiations typically take place because the parties wish to create something new that neither could do on his or her own, or to resolve a problem or dispute between them. The parties acknowledge that there is some conflict of interest between them and think they can use some form of influence to get a better deal, rather than simply taking what the other side will voluntarily give them. They prefer to search for agreement rather than fight openly, give in, or break off contact.

When parties negotiate, they usually expect give and take. While they have interlocking goals that they cannot carry out independently, they usually do not want or need exactly the same thing. This interdependence can be either win-lose or win-win in nature, and the type of negotiation that is appropriate will vary accordingly. The disputants will either attempt to force the other side to comply with their demands, to modify the opposing position and move toward compromise, or to invent a solution that meets the objectives of all sides. The nature of their interdependence will have a major impact on the nature of their relationship, the way negotiations are conducted, and the outcomes of these negotiations.

The dispute between the tanned and the white guy on the beach was a form to find out, who would get the sunlounger. In this approach there is one winner and one looser. The tanned and the white guy had exactly the same position. Each of them claimed the he was entitled to be on the sunlounger. This approach we will call the distributive approach or bargaining.

The solution of the red hat was clever and served both disputants interest. They entered in to an agreement both being a winner. This approach we shall call integrative approach or just negotiation. Settling disputes can take two principal forms: bargaining or negotiating alternatively called the distributive and integrative approach.

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Talking about the nature of negotiations many people think in terms of rhetoric’s in direct exchange of reasoning. This direct face to face negotiation is an extreme form of communication. The dividing line between the communication and negotiation is very thin and hard to draw.

I became a witness of a discussion of two tourists on a bar on the beach of Rimini. The topic was rather casual and a kind of small talk. They exchanged their views and ideas of the best sun loungers to occupy on the beach. One of them said he prefers to have them at rather remote place with some trees nearby. Especially after a hard night partying so he could recharge during the day. The other was also concerned about is nights, but wanted to meet some lady friends during the day, he would then propose to have dinner and enjoy the night with. He preferred the sunloungers near the bar, so he could have an eye on the female guests of the bar and move towards them if he thought he could connect with one of them. He called a row of five sunloungers the best “observation lounger”.

This is a form of a casual conversation just to exchange opinions and not really a negotiation.

The next day I observed from the very same spot two men having a rather loud exchange of words on the side of the row observation loungers. One of them was pale and his white body showing he had not been exposed to the sun. The other was well tanned and dark. It seemed to be an argument between a new comer and a habitué of the beach. Obviously they were disputing over occupying the last left lounger. This was not a casual talk but communication directed to pursue an interest. Each of them claimed to have the right to occupy the lounger. Since words alone did not help they started to posture their physical capabilities to impress each other. As the voices became louder the guy renting the sun loungers moved quickly towards them. He was not to be missed with a red hat and dressed all white with a big black purse hanging in front his six-pack. He immediately took command of the communication and spoke to each of the disputants separately. First he interrogated the dark guy and listened carefully, insisting that he was not interrupted by the white guy standing on the side and intervening vividly. He then turned to the new guy on the beach and elaborated his version and view of the situation.

This dispute on a particular lounger on the beach by the dark and the white guy is not a small talk. In this situation the interest to occupy this particular observation lounger is the driving force of communication which in fact is a negotiation. Interests do not need to be rational. Very often it happens to be the case that people do start disputes not because of the item under discussion, but rather out of personal emotional reasons. They are subconsciously driven to give another person of random choice a hard time. There are many reasons for this. May be in the case of an incidence in the morning on the hotel table or even the night before. But the two guys verbally contesting the rights seemed to have rather clear reasons.

Now the rental guy with the purse is not actually negotiating just for himself but brokering a settlement between the two men. This is the work of a mediator.

Negotiation is adding the dimension of orientation towards some kind of interest to the mere form of communication. Negotiation is therefore always interest based, even though the interest may be conscious or subconscious reaction of person.

Pareto is a great Italian and why YOU could do better in negotiations!

The Pareto principle (also known as the 80-20 rule, the law of the vital few, and the principle of factor scarcity) states that roughly 80% of the effects come from 20% of the causes. Business management thinker Joseph M. Juran suggested the principle and named it after Italian economist Vilfredo Pareto, who observed in 1906 that 80% of the land in Italy was owned by 20% of the population; he developed the principle by observing that 20% of the pea pods in his garden contained 80% of the peas. It is a common rule of thumb in business; e.g., „80% of your sales come from 20% of your clients.

Kurt Rohner, a master negotiator for almost two decades, transfers and applies the Pareto principle to negotiations. The first question is: “How much time do you need to invest to the gain know-how of negotiations, to multiply your own capability of negotiating by at least four times?”

The fundamental knowledge is to understand the nature of negotiations with the 4D-Model. Any negotiation, in business, in private life, in conflicts of any kind or even in court proceedings is tied to four dimensions. The first and root dimension is the interest of the involved parties. Parties may be single people, companies or organizations such as unions, political parties or states. Only the overlap of interest between parties defines a common ground as a prerequisite for any negotiation. The common interests define the substance, the content of negotiations as the second dimension in negotiation. Since there are always two or more parties involved the relationship between the parties define the third dimension of any negotiation. The fourth dimension is the process of the negotiation to obtain an agreement.

Understanding the 4D-Model of interest, substance, relationship and the process will give any negotiator a simple map to navigate any kind of negotiation.

In his speech Kurt Rohner will present the 4D model as a base for understanding how to achieve better results in negotiations.

In the substance dimension there are two fundamentally different approaches to reach agreement. The most common and widely ingrained style is the bargaining. Some people call it the bazaar-method to divide one point in discussion. In the orient this method is cultivated to reach agreement on prices on goods traded. This distributive approach in negotiations is a good and efficient method if one single item is under discussion. However in the complex world of today many negotiations embrace several points to negotiate. Having multiple issues to negotiate this method does not produce satisfactory results to any party.

A complete different approach any business person to be familiar with, is the integrative method. Often this method is referred to as the Harvard-Principle. Kurt Rohner will demonstrate and explain the integrative method in an easy to understand and fast to apply method. It is the story of four women haggling for two eggs.

If you are ready to invest two hours to the presentation of Kurt Rohner in the event of Performance Strategies in Bologna you will have return equal to the Pareto principle. Immediately you will achieve better results in your negotiations.

Get in touch with me and you shall receive the details.

 

Negotiations do not happen by chance. To negotiate or not to negotiate is a rational decision. There are some conditions in which you should not enter into bargaining or negotiations.

You have no interest

If you have no interest to negotiate, then do not negotiate. Since there are no incentives to negotiate a better condition as you are currently experiencing. Typical situations in businesses are, your goods are on high demand or you operate on the full capacity for your services. In such situation there is no reason to discuss price reduction and you might think of increasing your prices.

You have no interest but are pushed to negotiation by force

Hostile takeovers in the corporate world are a typical example for such a situation. In hostile bid a hostile party tries to buy the shares of a company to become the new owner and to influence the destiny of the company. Often member of the boards are taken by surprise. Before you start with a hostile party you should build up an alternative. The solution in the corporate world is called  a white knight. Only if you have found a per-arrangement with an alternative buyer, you should start negotiating with the hostile party. Time is of essence in such situations.

If you are not prepared

Do not jump in to negotiation without good preparation. The most common mistake I observe in the business world is insufficient preparation before entering the negotiations process. If you have not prepared yourself then delay the meeting to prepare sufficiently in advance.

If you have no alternative

Negotiating without an alternative is putting you in a weak situation. This is a general rule. To negotiate strategically is to create and pursue alternatives. Beside a good preparation for the negotiation creating alternatives is most important task to satisfy your interest. I have this observed very often: The limitation is not the other party or the circumstances, but our own horizon. Many times I have asked whet alternatives are at hand and always got the same reply: “There is no alternative!” I almost all the cases it proofed to be wrong. The simplest most powerful move in any negotiation is to have equally attractive alternatives to satisfy an interest.

If the clock is running against you

Not having sufficient time to prepare is one reason not to jump into negotiations. Having time pressure from the other party is never a reason to bow to the command of time.

If time is running for you

Negotiate to sell with falling prices in to the future; you should delay negotiations just before the point of reversal is reached. You will try to close the deal before the prices start to go up again. These cycles are known in almost all markets. An example is the market for properties.

If you lose out big

If the only possible outcome may be you losing everything, it is not very wise to negotiate. Seek an other alternative to solve the problem or circumstances you are in.