Thursday, October 07, 2004
The art of negotiation
The art of negotiation
By Scott Withrow, Builder.com | Wednesday, September 29 2004 7:17 PM
Negotiating agreements is a common headache for most application development managers. The final outcome of most negotiations is that one party gains an advantage over the other.
I was recently reminded of how difficult the negotiations balancing act can be when a project manager and I were discussing issues surrounding a software contract renewal.
The software vendor was making numerous demands and was seeking a significant increase in support costs. The project manager was stunned because it was a 180-degree switch from prior negotiations in which the vendor practically gave away its services. Although experienced managers are very familiar with this tactic, my peer was unprepared and felt as though he had few options.
Handling the vendor
There are numerous reasons why the vendor may be taking a hard line, several of which include:
* In earlier negotiations, the vendor might have made the sale in order to shore up quarterly earnings.
* The vendor may have gone easy in the past to get its foot in the door with the buyer.
* The vendor may be trying to absorb unexpected support costs from the prior dealings.
Regardless of the vendor's reason, you need to understand that negotiation is about recognizing power, leverage, or position, and then using this information to your benefit. Preparation is the name of the game. Prior to entering into discussions with the vendor (or, conversely, with the buyer), you should assess your goals by asking yourself the following questions:
* Do you need to reduce costs?
* Do you desire to maximize profit?
* Do you require changes to commitments?
* What are your collective interests in this negotiation?
The art of BATNA
Once you answer these questions, you can develop your BATNA, or Best Alternative to a Negotiated Agreement, a concept that was coined by Roger Fisher and William Ury in their bestseller Getting to Yes: Negotiating Without Giving In.
Understanding your BATNA is an important element in any negotiation because it's your best outcome if a negotiation fails. As such, it provides your starting point for the negotiation. It gives a baseline that you must exceed for a negotiated agreement to provide value to your side. If you cannot reach an agreement that improves your BATNA, then it's a loss to you.
You can develop your BATNA by formally listing actions you would take if you fail to reach an agreement. Now, reduce the list to what's most feasible and what provides the highest benefit for the lowest cost. Then, select the best items from this list to create your BATNA.
A primary goal during the negotiation process is to improve your BATNA. In this sense, the BATNA becomes a dynamic, ever-changing option. As negotiations progress, you'll receive concessions from the other side, which will add to the value of the agreement, improving your BATNA. In turn, you can measure this directly against your starting BATNA.
Another important concept associated with BATNAs is the idea of power or leverage in the negotiation. As a rule, the stronger your BATNA, the greater your position. In other words, the stronger your alternatives to the agreement, you'll be more willing (and capable) to demand concessions.
The other BATNA
It's also important to understand your counterpart's BATNA. In many negotiations, the vendor (or buyer) may believe that it has little to gain by conceding to demands; this makes for a strong BATNA position.
Other times, the vendor/buyer desires the sale, thus weakening its relative BATNA position. Other factors that alternatively improve or reduce a party's BATNA often include:
* Desire to close the deal in short order
* Fixed requirements
* Fixed or capped costs
* Business competition
Finally, it's important to keep your BATNA to yourself. The less your opponent knows about your alternatives, the less likely it is that it will be able to work to reduce them.
Scott Withrow has more than 20 years of IT experience, including IT management, Web development management, and internal consulting application analysis.
By Scott Withrow, Builder.com | Wednesday, September 29 2004 7:17 PM
Negotiating agreements is a common headache for most application development managers. The final outcome of most negotiations is that one party gains an advantage over the other.
I was recently reminded of how difficult the negotiations balancing act can be when a project manager and I were discussing issues surrounding a software contract renewal.
The software vendor was making numerous demands and was seeking a significant increase in support costs. The project manager was stunned because it was a 180-degree switch from prior negotiations in which the vendor practically gave away its services. Although experienced managers are very familiar with this tactic, my peer was unprepared and felt as though he had few options.
Handling the vendor
There are numerous reasons why the vendor may be taking a hard line, several of which include:
* In earlier negotiations, the vendor might have made the sale in order to shore up quarterly earnings.
* The vendor may have gone easy in the past to get its foot in the door with the buyer.
* The vendor may be trying to absorb unexpected support costs from the prior dealings.
Regardless of the vendor's reason, you need to understand that negotiation is about recognizing power, leverage, or position, and then using this information to your benefit. Preparation is the name of the game. Prior to entering into discussions with the vendor (or, conversely, with the buyer), you should assess your goals by asking yourself the following questions:
* Do you need to reduce costs?
* Do you desire to maximize profit?
* Do you require changes to commitments?
* What are your collective interests in this negotiation?
The art of BATNA
Once you answer these questions, you can develop your BATNA, or Best Alternative to a Negotiated Agreement, a concept that was coined by Roger Fisher and William Ury in their bestseller Getting to Yes: Negotiating Without Giving In.
Understanding your BATNA is an important element in any negotiation because it's your best outcome if a negotiation fails. As such, it provides your starting point for the negotiation. It gives a baseline that you must exceed for a negotiated agreement to provide value to your side. If you cannot reach an agreement that improves your BATNA, then it's a loss to you.
You can develop your BATNA by formally listing actions you would take if you fail to reach an agreement. Now, reduce the list to what's most feasible and what provides the highest benefit for the lowest cost. Then, select the best items from this list to create your BATNA.
A primary goal during the negotiation process is to improve your BATNA. In this sense, the BATNA becomes a dynamic, ever-changing option. As negotiations progress, you'll receive concessions from the other side, which will add to the value of the agreement, improving your BATNA. In turn, you can measure this directly against your starting BATNA.
Another important concept associated with BATNAs is the idea of power or leverage in the negotiation. As a rule, the stronger your BATNA, the greater your position. In other words, the stronger your alternatives to the agreement, you'll be more willing (and capable) to demand concessions.
The other BATNA
It's also important to understand your counterpart's BATNA. In many negotiations, the vendor (or buyer) may believe that it has little to gain by conceding to demands; this makes for a strong BATNA position.
Other times, the vendor/buyer desires the sale, thus weakening its relative BATNA position. Other factors that alternatively improve or reduce a party's BATNA often include:
* Desire to close the deal in short order
* Fixed requirements
* Fixed or capped costs
* Business competition
Finally, it's important to keep your BATNA to yourself. The less your opponent knows about your alternatives, the less likely it is that it will be able to work to reduce them.
Scott Withrow has more than 20 years of IT experience, including IT management, Web development management, and internal consulting application analysis.
# posted by MiDBA @ 10/07/2004 09:27:00 AM 
