Negotiation Strategy: Planning Is Critical

By Cathy Cronin-Harris

E-mail Story
Print Story
In the past quarter century, a great deal of effort and scholarship has been devoted to developing negotiation theory and practice to move beyond competitive negotiation and toward real problem solving. With problem solving, or interest-based bargaining, parties look at their underlying interests rather than merely asserting positions and demands. Together they search for solutions to meet those underlying interests while making concessions consistent with their own needs and concerns.

To do this, negotiators must recognize that needs and interests frequently differ, and reflect different values, concerns, and motives. These differences allow the negotiation to become an inquiry to find differing needs and the solutions that will satisfy them. While problem-solving negotiation often deals with money, as most negotiations do, it can become one element of a solution that has many other aspects. Negotiation is a side-by-side dialogue where parties can trade on their differences, rather than a battle over a limited resource.

It’s usually a mistake to approach negotiation as a casual encounter without much forethought. Such sessions are likely to become reactive and meandering meetings rather than being proactive with specific goals in mind. Lack of planning often appears at the negotiating table as too much reliance on demands and ineffective attempts to persuade the opponent. Good planning, based on the five strategies below, can provide a negotiator with the direction needed to do effective problem solving at the negotiation table.

Decide on Priority Interests and Rank Them

To make the most of the negotiating sessions, each party should initially decide upon its goals for the session. What interests underlie the current demands that have been made? Is it only money? Is it a continuing relationship or an enhanced business relationship with the other side? Is it a resolution of this matter, which may be disrupting other business? Is it recognition of the validity of one’s claims or status? Or is it the harm caused by the other side? After identifying its goals, each party should determine the priorities of these items. Negotiation is, after all, a matter of both parties conceding and reaching a solution. The key to interest-based concessions is to trade items of less importance in order to secure items of more importance.

Assess the Other Side’s Priorities

Each party to a negotiation should spend some time in the other party’s shoes, imagining what the other side might really want to achieve. The more one can understand the values, needs, and issues from the other side’s perspective, the better the chance of guessing at what they might want as their priority needs.

It is beneficial to make such guesses, because human imagination, when considering the reality of the other side’s position, can lead to creative thinking about possible solutions outside of purely monetary exchanges. Educated guessing can lead to ways to meet both parties’ most important needs in a way that both sides win. For example, consider a client who is upset with an actual mistake made by a firm’s junior accountant that cost the client $5,000. What does this client really want? Most likely it wants to be made whole, and that typically assumes a present outlay of $5,000. But what might be equally important to this client is an explanation and an apology. One solution option might be an explanation of how the mistake occurred, coupled with a promise that only a senior associate will treat the client’s affairs in the future, as well as a year of free service worth $2,500, plus a present payment of $2,500. This solution can salvage the business relationship, shows good faith in acknowledging the mistake of a junior associate, and limits monetary outlays in the long run.

Guessing may not always lead to the right answers. Even so, this analysis can identify potential nonmonetary solutions and get the ball rolling during the negotiations. Offering creative solutions can also set a tone of exploration, and avoid the tough dynamics associated with more rigid positional bargaining.

Money Represents Other Needs

It’s often forgotten that money is a substitute for many other genuine human needs. Lawsuits offer a limited solution set of either money or preliminary injunctions or declarations, such as ordering a person to perform a certain obligation. When negotiating, there is the potential to explore exactly what the money means to the other side and then look for ways to satisfy those needs more productively. Does the money represent psychological or psychic satisfaction for mistreatment or being wronged? Would a public pronouncement, or changes that would help avoid the problem in the future, be useful? Does the money represent peace of mind? Does the money represent revenge or proof that the claimant was in the right? Would a public clearing of its reputation help?

Thinking outside the box about why a person is claiming specific monetary recovery can offer options that meet both sides’ needs more productively. If that option doesn’t work, an invitation to the other side for suggestions might reveal what they really want and establish a problem-solving focus.

Plan Factual Inquiries Carefully

A superior plan for a specific and fruitful information inquiry during the early stages of the negotiation usually arises after analyzing the other side’s possible underlying interests and priorities, and options that might satisfy them. The best negotiators spend time asking questions, staying curious, and uncovering the other side’s views of the situation, facts, interests, and priorities. The information-acquisition phase can confirm some of the planning analysis or reveal new data. Of course, having two skilled negotiators will help ensure that each side is securing this type of data. They use and respect the norm of reciprocity: If information is shared by one side, that side should receive the information it requests. Naturally, negotiators will always be wary about revealing detrimental information, to avoid being taken advantage of by the opposing side. But as reciprocity is respected, two negotiators can develop a trust that allows for better information flow.

The best deals can arise from solid information sharing. It paves the way for creating viable solution options. It also creates a tone between negotiators that focuses on problem solving rather than positional bargaining.

Plan Money Moves Based on Objective Principles

Money will almost always arise as a component of the negotiated solution. Consequently, the better the monetary issues are handled, the better the outcome.

The first move of any negotiation sets the tone for the entire process. Studies have shown that, among negotiators resolving the same problem, the first negotiator to make the more ambitious offer or demand for money that does not undersell its claims and leaves room for concessions will get a superior result. Nonetheless, a reasonably balanced offer or demand will help avoid the possibility of a conflict spiral that may result when a negotiator makes outlandish demands. A reasonable offer is more likely to be appealing to the other side, and will induce more reasonable counteroffers in return. This first move, and all others, should be supported by the most objective rationale that can be found. It’s hard to fight reason, and the better a demand is supported, the more difficult it is to counter. Then again, principled reasoning facilitates the cordial tone of the negotiation and advances the search for a viable, fair solution.

Another technique for the money phase of the negotiation is to establish a formula, rationale, or framework whose principles will enlighten monetary issues. Once the formula is agreed upon, its application is far easier than engaging in the give-and-take of even an objectively justified negotiation dance. Nonetheless, the debate about the appropriate formula usually rests on differing values, and that alone often becomes a negotiation. For example, a business valuation conducted according to acceptable accounting principles may be the goal, but the specific valuation formula might become an area for discussion and negotiation. But once an agreement is reached, the money issue often falls into place quickly. While planned money moves might be changed during the negotiation based on information discovered therein, forethought will provide a better guide to making those adjustments than will an off-the-cuff decision.

Good planning for negotiation can lead to better confidence at the table and a plan of action for uncovering factual data, interests, and priorities that can be used to craft the best solution possible.

Cathy Cronin-Harris is an attorney and alternative dispute resolution specialist. She is senior consultant to the CPR Institute for Dispute Resolution and a lecturer at Columbia Law School.




















The CPA Journal is broadly recognized as an outstanding, technical-refereed publication aimed at public practitioners, management, educators, and other accounting professionals. It is edited by CPAs for CPAs. Our goal is to provide CPAs and other accounting professionals with the information and news to enable them to be successful accountants, managers, and executives in today's practice environments.

©2009 The New York State Society of CPAs. Legal Notices