While the level of importance of the relationship will dictate the amount of time and energy spent on negotiations, all negotiations can benefit from sound negotiating principles. This is especially the case when working to transform an organization from traditional adversarial relationships with suppliers to more constructive partnerships.
Traditional negotiating tactics include the following forms, which are called position-based tactics:
• Hard negotiators view other parties as adversaries to be beaten, so they take a position, demand concessions, and give none in return. They threaten, mislead, or pressure the other party. This can endanger long-term success.
• Soft negotiators value agreement to the point that they disclose their bottom line, alter their position, or accept one-sided agreements that involve only concessions. Contracts might be won, but this party is left feeling exploited and might be financially at risk.
These positions can be described as win/lose or lose/win. Fisher and Ury of the Harvard Negotiation Project developed a third option: a win/win negotiation technique called principled negotiations. Rather than negotiations in which each party sequentially takes and gives up actual or deceitful positions, principled negotiations start by insisting on several criteria for long-term gain (none of which are typically present in win/lose or lose/win tactics):
• Negotiations should efficiently solve the underlying issues.
• Negotiations should preserve or increase positive relationships.
• Agreements, if reached, should endure, meet both parties’ actual needs to the extent possible, resolve conflicts of interest fairly, and be in the community’s interests.
Principled negotiation is a four-step interest-based bargaining style:
Step 1: Separate the people from the problem. Rather than trying to be adversaries or friends, principled negotiators insist on the criteria listed above for long-term gain. They attack the problem rather than the other party.
Step 2: Focus on interests, not positions. Position taking leads to defensiveness. Principled negotiation avoids taking positions or a bottom line at all. Instead, negotiators relate what they are interested in achieving and seek to understand what the other party is interested in achieving.
Step 3: Invent options for mutual gain. Principled negotiators first seek a time frame in which to study the problem rather than bowing to time-based pressure. During this time, they devise alternatives that could satisfy the interests of both parties.
Step 4: Insist on the use of objective criteria. Rather than engaging in haggling, principled negotiators guide any disagreement toward deciding upon a fair standard that both parties can agree will be the basis for the decision (e.g., market value, expert opinion, analysis results, the law, ethical standards).
Principled negotiations or similar negotiation tactics can result in relationships that are perceived as profitable and indispensable by both parties, which, in turn, means that the buyer is not constantly looking for a new supplier or vice versa.
Both parties in a negotiation are advised to predetermine their best alternative to a negotiated agreement. This is what the organization would do if the negotiation fails. It might be to manufacture the product in house, partner with an existing supplier to expand their operations, and so on. When the costs and benefits of this alternative are known in advance, the negotiator will know when it is better to walk away (or to take an offer that still beats this best alternative).