Michael Heberling, Lieutenant Colonel, USAF, Ph.D.
Michael Heberling, Lieutenant Colonel, USAF, Ph.D., Department of Graduate Acquisition Management Air Force Institute of Technology, Wright-Patterson AFB, OH 45433 513/255-7777 ext. 3368 or 3374.
Carl Templin, Lieutenant Colonel, USAF, Ph.D.
Carl Templin, Lieutenant Colonel, USAF, Ph.D., Department of Graduate Acquisition Management Air Force Institute of Technology, Wright-Patterson AFB, OH 45433 513/255-7777 ext. 3368 or 3374.
Negotiations are an important activity for the purchasing professional. They have the potential to either strengthen or strain buyer-supplier relationships. In industry, negotiations are beginning to move away from the traditional adversarial style known as "positional." The current trend in negotiations is to be more cooperative or "win-win" in nature. This latter approach is known as "principled."
This negotiation shift is a logical response to the changing relationships of buyers and suppliers. Firms have begun to reduce the number of suppliers that they deal with. For those suppliers that remain, the relationships becomes not only closer, but of longer duration as well. Positional negotiations do not foster close long-term relationships between buyers and suppliers.
With the positional style of negotiation, each party starts with an extreme (usually unjustified) position. The basis for this approach stems from the belief that the ultimate solution will be favorable only if the initial offer is extreme. It is seen as a zero-sum game. One party will win and one will lose. An extreme position increases the chances of a "win." The more extreme the opening positions and the smaller the concessions, the more time and effort it will take to come to an agreement.
A typical positional negotiation is likely to conclude after a lengthy exchange of small offers and counteroffers. These small concessions are made to avoid a negotiation impasse. The process frequently includes theatrics from both parties. Common tactics include foot-dragging, threatening to walk out, and stonewalling.
This time consuming process continues until some constraint compels one or both sides to seek resolution. The differences that were keeping the two parties apart are usually reconciled with major movements. There is then a final series of "split the difference offers with an eventual settlement.
Settlements in positional negotiations come with a steep non- monetary price. Trust falls by the wayside. In addition, the process creates (or perpetuates) an adversarial relationship between the two parties. This arrangement does not bode well for close buyer-supplier relationships, which are crucial for both parties.
Successful companies are placing greater reliance on their suppliers for a technical edge in the market place. This close relationship frequently includes joint strategic planning, simultaneous engineering on new products and processes, continuous quality improvements and better communication. Positional negotiations threaten the success of all these buyer-supplier initiatives. The narrow focus on tradeoffs and split-the- difference compromises frequently leads to suboptimal "Win-Lose" or even "Lose-Lose" solutions.
PRINCIPLED NEGOTIATION AS AN ALTERNATIVE
Principled negotiation seeks to establish a climate where parties can be creative in searching for mutually beneficial solutions to a shared problem. This approach preserves, and may even enhance, ongoing relationships. Principled negotiation seeks a winning outcome for parties by bargaining over the interests of both parties, not on the positions. It is based on complete and early sharing of information in the belief that "the pie" of options being divided is made larger by understanding what is most important to the other party. Ideally, the negotiation will reveal that both parties can have what they want most, or at least more than they initially thought they'd get (Thompson, 1991).
Table I summarizes the four basic elements of principled negotiation put forth by Fisher and Ury (1991) in their book Getting to Yes (1991).
FOUR ELEMENTS OF PRINCIPLED NEGOTIATION
SEPARATE THE PEOPLE FROM THE PROBLEM
The first step in reaching a mutually agreeable solution is to realize that there are two elements in negotiation: the human side and the non-human problem. The trick is to separate these two parts. The two negotiators must see themselves as working on the same side. In principled negotiation, the parties jointly attack the problem. In positional negotiation, they frequently attack each other.
FOCUS ON INTERESTS, NOT POSITIONS
Positional negotiation tends to cloud the real issues of what the parties actually want or need. Their true interests may actually be at odds with the stated positions. A better approach would be to focus on the underlying human needs and interests. This may provide a better insight into why they adopted the positions in the first place.
INVENT OPTIONS FOR MUTUAL GAIN
The adversarial environment of positional negotiation tends to inhibit creativity. most problems have multiple solutions. One or more of these may be mutually acceptable. The best way to find these alternatives is to have both parties stand back and view the issues in a larger context. This "brainstorming" session helps to invent options for mutual gain.
INSIST ON USING OBJECTIVE CRITERIA
Insist on using objective criteria. Negotiations will be less contentious if the issues can be evaluated using an agreed upon standard. This could include outside expert opinion, established market values or some quantifiable method. Subjective criteria in the form of opinions from negotiating parties tends to degenerate into the same personal attacks found in positional negotiations.
KNOW WHEN TO QUIT
Know when to quit. Sometimes it is just not possible to reach a solution. A good negotiator should anticipate this potential outcome. If this occurs, what alternatives exist? The term BATNA, which is short for the "Best alternative to a negotiated agreement" addresses this situation. Effective negotiators prepare for the possibility of no agreement. They seek to make their alternative to a negotiated agreement as attractive and acceptable as possible. It is worth noting that negotiation power is a function of the attractiveness of the alternative. The greater the ability to walk away from a negotiation, the stronger the bargaining position. Negotiators should always work to develop feasible and satisfactory alternatives to a negotiated agreement.