The Silver Bullets of Commercial Negotiation

Strategies and Tactics

Christopher Lennon

• Publisher: Routledge
• Year: 2022
• ISBN:
  9781000588378
• Edition: 1
• Topic: Desarrollo personal
• Subtopic: Negociación

This book empowers you to immediately grasp the opportunities that present themselves in international commercial negotiation, and to be able to create and maintain positive, mutually beneficial relationships with other parties that are long lasting and productive.

International commercial negotiations are a vital element of today's business world. But how do you conduct them successfully? And how well trained, prepared and knowledgeable are those conducting the negotiation? What makes this book different is that it encapsulates the core 'need to know' elements of negotiation that can make or break a deal. It is written to be user-friendly and an easy read – it offers simple advice that will be immediately useful to the commercial negotiator and makes many complicated issues easily understandable. 'Silver Bullets' are provided, distilling the critical factors that have significant implications for the negotiated outcome.

This book has been written with the experienced business professional who is engaged within commercial negotiations in mind. It provides new insight into how to add value in terms of negotiation skills and operational efficiency. The book has been deliberately written in a non-technical, easy-to-read style that will have broad appeal.

1 Introduction

DOI: 10.4324/9781003263722-1

Traditionally, negotiation was viewed as an adversarial process – it was you against them and winner take all. In some circumstances, this may well still be the case. However, this is an outdated and outmoded approach or methodology. In the author’s opinion, the fundamental crux of business should be the creation of sustainable, mutually beneficial relationships that endure over long periods of time – bringing an ‘added value’ to all parties concerned. I wrote this book based on my experience; having come to the conclusion that although there are a great many books out there on the subject, none of them seemed (to me) to be quite what I was looking for. I was searching for a deeper understanding of human interactions and diversity and how the ‘negotiation interface’ and the people involved behaved. I wanted to be able to then harness this understanding across nearly any situation that I might find myself in and know what to do and how to act. In short, I wanted to be prepared.

The very essence of the negotiation problem is of course that of uncertainty. No two negotiations, even if negotiating the same subject matter or deal, can or ever will be the same as there are a legion of factors and implications, environmental aspects and of course human foibles. What has to be added to this rather (sometimes) explosive and dynamic mix is the fact that human decision-making (or indeed a human being) is not always rational. This therefore makes it unpredictable in the extreme.

The author recalls a time when he was asked by the MD of a company to evaluate two tender documents for a contract. They were both pretty similar, except that one of the offers was about $500,000 more than the other. We met for lunch. I gave my opinion; although the more expensive bid provided for a slightly higher quality of materials, it was only a marginal difference and certainly did not justify the price differential. I recommended the cheaper bid was the better one – in my opinion. The MD thought for a moment, nodded and then said that he was going to accept the higher bid. Unperturbed – as I had been hired to provide an opinion, I had done so and knew that my invoice would be settled – I sat back and regarded him for a moment. I asked him why he was going to choose the more expensive bid. He told me that many years previously, the other vendor had stolen his girlfriend and there was no way that he was ever going to give this company any work – period. I’m not normally surprised by much, but that display of irrationality surprised me. It is factors such as these that you cannot know or will never anticipate that create both the complexity and mysticism of negotiation – and, as described above, are (or can be) factors of significant impact.

Another problem that we all face in interacting with others is that we are evolutionarily hardwired to make opinions very quickly about the person or people sitting across the table from us. This is fine and although the old maxim ‘you only get one chance to make a first impression’ carries a lot of weight, unfortunately this first impression more often than not proves to be wrong. This therefore has the potential to place you at an immediate disadvantage relevant to the other parties, regardless of whatever opinions onerous or otherwise that they may have formed about you. So, we can see that before anything at all has started, and as we are all engaged within the opening pleasantries and sizing each other up, we are all beginning from a skewed viewpoint.

This is further compounded by the fact that all of us (either consciously or subconsciously) begin from a position of self-interest (albeit from the organisational as opposed to the individual perspective or a combination of both). It is an instinctive thought process that attempts to make an assessment as to how a particular situation can be of benefit to the individual in question, that is, ‘what’s in it for me?’ This is discussed later on in more depth.

One of the commonest human follies is the failure to not ‘see’ what is actually in front of you. Negotiation as a subject is as broad as the sky and as deep as the ocean; the interactive processes across nearly infinite combinations of interface make it a subject that is difficult at best to grasp in all of its possible complexities. The sheer quantum nature of these possibilities can be daunting, at best. This is mitigated, however, to a certain extent by the fact that commercial negotiations tend to have a purpose; there is a reason that these particular parties are facing one another across the negotiation table – they want something from one another. The author would suggest that having a clear understanding of what is pertinent and relevant to the negotiation at hand would serve very well in keeping the process on track and in focus. All too often, time and energy become devoted to peripheral issues. Every negotiation has a core issue or issues; this is where the focus must be directed and concentrated, otherwise valuable time is lost. I am very fond of saying that time is the most precious resource and when you lose it, it is gone forever and you can never have it back.

The author believes that negotiators have to possess a certain set of traits in order to be successful and that the successful negotiator is quite different from a lot of other people as a result of these character traits. Paramount among these has to be the ability to effectively make decisions. If we consider the discussion thus far, it is obvious that decision-making within a negotiation setting is going to be significant. It could drive the process towards either success or failure. There is a need to make decisions objectively – emotions must be removed; there is no place for the subjective on the analysis of established hard facts and cold data. It is inevitable that some of these decisions will be ‘tough’ or difficult to make. I think that if the situation arises where such decisions must be made, then the negotiator cannot and indeed must not flinch from his or her duty in order to achieve the required result. We will take a more in-depth look at psychological and personality traits as to how they shape both behaviour and decision-making processes in a later chapter.

People aside, the environment of the negotiation contains a plethora of influencing aspects that will interact on those involved. Often the place where a negotiation is set to happen can have many subtle and sublime purposes – designed to distract or influence mood and opinion. Vision is the primary sense of humans; therefore, colour, lighting, location and set-up (lay out) are all factors that will have an immediate (more often than not) subconscious impact upon someone walking into the room. Take it from me; a lot of thought goes into these details, especially if the negotiation in question is high stakes. As mentioned, where the negotiation is going to occur has great significance: Is it on home territory? Neutral ground? Or on the home ground of the other party? This is very important. All of these issues will be discussed in detail in a later chapter.

In the author’s opinion, when it comes to complex, commercial agreements and the negotiation of them, there is never a truer adage than that of ‘The Devil is in the details.’ What do I mean? Well, obviously the bigger the deal, the more intricate and complex it’s going to be. But that’s obvious. What I am referring to here is the question of preparation and readiness. The author knows many a negotiator who found themselves the recipient of a nasty surprise and it wasn’t from something unexpected like the kind of factors discussed thus far. It was from overlooking or not ‘seeing’ or recognising something for what it was and having a strategy in place, that is, being caught with one’s figurative pants down. In this book, there is quite a lot of focus on the idea of planning and preparing for a negotiation. I have included a few templates and other processes to help the reader get better ready for what lies ahead. I would suggest that there is no excuse for being caught unawares by something that you should have been fully cognisant of, if it happens – simply, you haven’t done your homework in getting prepared.

I believe that any negotiator should view the negotiation from two perspectives, and if I may, I’d like to borrow two military adages here. First, the ‘general’s view’ from the top of the high ground (sometimes in contemporary parlance referred to as the ‘helicopter view’). As it would suggest, those commanding the action need to be able to see the entire picture in order to act and react as required. Second, knowing how to ‘fight in the trenches.’ This is where it’s up close, dirty and personal. This is the sharp end where all the action is. So, we could paraphrase these two perspectives into the strategic and tactical elements and aspects of the negotiation at hand. Another useful way of considering this is to think macro-level and micro-level. The strategy informs and guides the action and the tactical performs the execution. The key to success here lies within the providence of common sense. After you’ve gone to all the trouble to formulate your strategy and how you are going to execute and implement it (tactics), you need to have some form of monitoring and control mechanism in place. This will allow you (and the team if applicable) to review and measure the actual against the expected and ideal during break times or at end of the day (should the negotiation be a protracted endeavour), thus providing the opportunity to bring something back on track that might be a deviation from where you want to be or simply to regain control over something that might be becoming a little errant (perhaps before the other side realises). It must be remembered that all plans are of a limited use for a limited time. You must monitor, control and review what’s happening as often as is realistically possible and I would definitely suggest a team review meeting back at the hotel every night if involved in a complex, drawn out process. This is discussed fully in several places later in the book. To reinforce the above discussion to quantify and qualify what’s being said, the author suggests that discipline is of paramount importance – discipline in conduct (i.e. not giving anything away emotively when events take a dramatic turn), discipline in following the strategy and executing it, discipline in recognising the vitality of flexibility and being able to adapt and discipline towards achieving what you came for.

Furthermore, when having these sorts of progress meetings, the author thinks that a time for honest self-assessment in reviewing the performance of the day is very important. If you are operating solo, then you should consider your conduct throughout the events of the day and ask yourself what went well, what could’ve been better and what didn’t go well. This is equally applicable to a team-based scenario. Remember though that this is not as easy as it sounds. In the team setting, it is important to understand that this is not a negative process. This is not about assigning blame and pointing fingers. Rather (especially if you are back at the table the following day), this is about tightening up weaknesses in performance regardless of what and who might be responsible. It is about refreshing and resetting the way forward. It might be about damage mitigation or it might be that you (or the team) can amend your strategy to deal with an emergent opportunity. This will be discussed at length in a later chapter.

2 The Critical Choice Compete or Co-operate?

DOI: 10.4324/9781003263722-2

Forget all of the myriad of articles that espouse ‘touching feely,’ ‘warm’ and ‘fuzzy’ approaches to negotiation. It is a serious business and, as stated earlier, one that both or all parties are wanting something from that personally benefits them for whatever reason. In essence, there are only three possible ways that a negotiation can be approached. It can be from a competitive perspective, it can be from a co-operative perspective or it may be that there is a combination of both of these elements relative to different parts or stages of the process. This latter point is mentioned at the end of the introduction when talking about emergent opportunities. It may be that some form of change or turn of events dictates a revision of the strategy and execution of your plan.

First, let’s examine the co-operative dimension of negotiation. There are several factors that might underpin this approach and all of them are both valid and worthwhile, where there is a power inequality between the parties. In this instance, it is almost certain that the weaker party will be dictated to and acquiesces to the terms and conditions as laid out by the stronger party. The weaker party in these circumstances has little choice but to be co-operative if they wish to do business. There is an interesting dynamic involved with market power distribution. The stronger party might be a big international venture, whilst the weaker party is a smaller organisation; so in the course of normal business, the relationship is likely to be as described above. The author recalls giving a negotiation seminar to a group of senior commercial negotiators and asking the question right at the start: ‘So tell me, how do you negotiate?’ There were a few rueful smiles around the room, and then one of the most senior people present said:

It’s very easy actually – we give them our terms and conditions, they take them, thank us and then give us their terms and conditions. Then they tell us that if we wish to do business with them – it is on the basis of their T&C’s – non-negotiable – take it or leave it, so we have no choice but to take it.

It is not always the case that the bigger company (in the example above, the smaller company was actually quite a big international entity; it was just small compared to the other party) holds all the cards though. I can recall a company that was the owner of a specific proprietary technology that was very much in demand as it saved the other organisations a lot of money operationally (we’re talking oil and gas industry here). The scenario above was reversed completely. If the larger organisations wished to utilise the technology of the smaller company, then they paid what was asked; there was no debate.

Whilst this might seem fairly intractable to the reader, it is a scenario that commonly plays out in meeting and board rooms on a daily basis around the world. There is one aspect that is perhaps overlooked with this attitude – that of longer-term relationships. Decision makers and organisational negotiators are aware of this dimension to corporate dealings, evidenced, for example, by the increasing advent of vendor partnering and supply chain finance initiatives.

What might become apparent to the reader is that co-operation may well be better termed as ‘forced co-operation,’ in light of the examples given above. There will be times when there is no magical solution, no silver bullet to save the day where you have little choice or any real room to manoeuvre. When you find yourself in this position, it is of extreme importance that you have a termination or ‘walk away’ point. This is where you will leave the table – the negotiation process is concluded without a result. It is fair to say that sometimes having a ‘point of no return’ where you are prepared to walk away can in itself be a lever that will prompt the other party to perhaps offer some form of concession, to break their rigidity and stance. In poker parlance, you have called their bluff, whether intentionally or not.

Whether or not the co-operative scenarios above are played out in this way (as opposed to true co-operation, things like joint venture [JV] negotiations), one element that has to be evaluated is what you see the outcome scenario to look like. To the author, scenario generation on the back of the due diligence process is of vital importance as it allows a modicum of a ‘view of what might be.’ We’ll discuss this in a later chapter.

Ultimately, there is an individual somewhere who will have the final say. Often, the path chosen will be strongly influenced by the organisations’ (or decision makers’) attitude to risk and what their overarching risk strategy might be that is required to be implemented. The author would suggest that from this overarching perspective, there are five broad generic strategies that are utilised either in isolation to one another or perhaps selected on the basis of the issue or negotiation at hand.

First, there is the strategy of ‘remove.’ What this tells us is that a risk of some sort exists and has been identified by the organisation/individual. There does not appear to be any effective risk mitigation option other than to remove it. From the business perspective, this might well be represented by a decision to outsource something (i.e. no longer attempt to maintain or control it internally); it may be more cost-effective for it to be managed by specialists who operate exclusively within this particular domain. From the negotiation perspective, it might be a disclosure best not made to the other parties. This might be achieved simply by removing a particular item from the negotiation agenda – taking it ‘off the table’ discreetly and quietly.

Second (and the author would suggest, very commonly), there is the strategy of reduce or mitigate a risk. Again, the risk has been identified and evaluated and there is action that can be taken to reduce the impact should it manifest. From a corporate perspective, this might be to invest in more specialist training for personnel who are directly involved or, if we consider high value items, investment in security provisions. From the negotiation table perspective, mitigation might well be attempting to diminish the impact of new information, or a significant deviation from the planned agenda or a mistake made (i.e. disclosing something that could now give the counterparty an advantage, a ‘slip of the tongue’).

Third, the risk strategy might be to retain the risk; the organisation might decide that they are best placed to manage a particular risk through their knowledge and expertise. From the negotiation perspective, this might be reflected as a deliberate tactic – telling the counterparty that you will continue to do ‘X’ and not to worry, but to attempt to utilise this strategy as a grand gesture that you can capitalise on, perhaps to get those sitting on the opposite side of the table to feel an emotional debt towards you, to perhaps be either compelled or guided into some kind of trade off that is of particular value to you when you had already decided that you would keep this risk (unbeknownst to them).

Fourth, the approach might be to share a particular risk. This strategy is common as it is the basis for much co-operative business deals that are negotiated. In the international oil and gas industry, for instance, JVs are fairly commonplace and standard practice. This is often due to a number of factors such as amount of investment required and the length of time until payback. What has always been of particular interest to the author though is the dark side of JVs, when a seemingly sensible plan such as sharing the risk between parties (and thereby limiting your risk exposure to your particular contribution) actually is the vehicle for other agendas. The most common ones that I can think of almost instantly are gaining access to a new market or territory, having access to infrastructure such as ports and warehousing, or getting your hands on proprietary technology or process. The former two tend to contain less skulduggery but might still be representative of a deliberate or devious manipulation, whilst the latter can often result in disputes, based on the idea that the JV partner who doesn’t have the technology or know how in question has entered into the arrangement with the intention of utilising said technology or process far and wide as opposed to being limited to the venture at hand. This is why Contract Law is the most difficult area of law (in the authors view); as if it is not illegal and the parties to the contract agree to be bound by the rights, duties and obligations contained therein, then the possibilities are almost infinite, and if you’ve signed within the c...

Table of contents

• Cover
• Half Title Page
• Title Page
• Copyright Page
• Table of Contents
• 1 Introduction
• 2 The Critical Choice: Compete or Co-operate?
• 3 The Effective Communicator: Managing and Understanding the Verbal/Non-verbal Interface
• 4 Managing Stress and Controlling Conflict
• 5 Styles of Negotiators
• 6 Planning to Negotiate
• 7 Preparing to Negotiate
• 8 Decision-Making within Negotiation Scenarios
• 9 Negotiation as a Tool for Dispute Resolution
• 10 Power and Negotiation
• 11 Establishing and Maintaining Control
• 12 Deception, Misdirection, Lying and Half-Truths
• 13 Strategies and Tactics of Negotiation
• 14 Team Negotiations
• Index