Negotiating is a powerful tool in organizational life, helping solidify relationships, create benefits; and speed up agreements for parties involved. However negotiations can diminish relationships, suspend agreements or cause parties to seek out other opportunities where their positions and interests are fully understood and appreciated by the counter party (See Diagram 1.1). Negotiation has been coined as ‘a process of maximising ones value through interpersonal decision making in situations where outcomes for each party are interdependent’ (Martin & Fellenz, 2010).
Is negotiations part and parcel of everyday organizational life? Instead of taking a generalized approach to this question, this article will touch on three key situations where negotiations occur at different levels of an organization (Individual, Group & Organization Levels adapted from Cummings & Worley p.93 (2009)) that are embedded in organizational life.
Situation: Interviewer & Candidate at the Individual Level
A candidate seeking employment/advancement in organizations occurs on a daily basis. With the labour market intensifying coupled with people becoming more specialized, negotiations take place between employers and potential candidates regarding the terms and conditions of employment (Salary/BIK). Malhotra (2014) discusses tactics that candidates can use when faced with job offers:
Likability should not be underestimated: The potential employer must like you to consider you. Being likeable allows you to probe at the value of the offer without seeming petty and so on. DeMarr & Janasz (2013) also note such tactics for increasing your own power in a negotiation.
Justify Demands: An increase in proposed salary merits detail as to why you deserve it. Young & Rhoderick (2014) note that stating your position is the most explicit form in negotiations; often quantified and specific i.e. I want ‘W’ amount extra for moving to your organization because of my skills in ‘X’, my experience in ‘Y’ and my sacrifice in leaving ‘Z’.
Seriousness: A candidate should emphasize that they want to work with the employer in question. Using tactics that show how another six employers want you will only decrease the employer perception that you unquestionably want this job thus decreasing chances of your demands being taken seriously. DeMarr & Janasz (2013) also state that such intimidating tactics or trying to improve your BATNA to increase your power in a negotiation can cripple your position.
Considering the whole deal: Take into account the job satisfaction, responsibilities, opportunities for personal development and personal circumstances.
In places where trade unions have power and influence, integrative approaches or mixed motive bargaining is necessary to reach agreements. However, not all negotiating situations create outcomes beneficial for both parties. Martin & Fellenz (2010) note there are five different conflict handling styles shown below.
Accommodating: In the case of Aer Lingus, the employer ‘reluctantly agreed to pay €191 million into its employee pension fund’ which was a final recommendation made by an expert panel (also known as a mutual third party) (The Journal, 2014).
This aptly applies to the accommodating approach by allowing the other party to achieve what they desire at the end of the negotiation to ensure unity and harmony emphasizing the importance of the relationship (Martin & Fellenz, 2010). Demarr & Janasz (2013) point out WATNA (worst alternative to a negotiating agreement) and it is abundantly clear Aer Lingus management considered their WATNA prior to negotiations over the pension fund dilemma i.e. Employee strike causing disruption to services costing the airline everyday it continues.
Situation: B2B Sales at the Organization Level
In today’s globalized and interconnected world where competition is dynamic and complex, negotiation places a vital role in businesses acquiring the best quality inputs at the most favourable quantities and at the lowest prices possible or in terms of the supplier, acquiring the best possible price for their products at their most favourable quantities (DeMarr & Janasz, 2013).
Literature Review: Coined by Lenarčič & Brcar (2014), conflicts can arise between business partners as they have different interests and goals and there is a paramount need to understand the counter party, find long term solutions acceptable to both sides. DeMarr & Janasz et al (2013), state there is a specific need to use an integrative approach in negotiations as the ongoing relationship merits better outcomes for both parties as ‘preferred customers often have better access to product support, and obtain more favourable delivery schedules and payment terms’. ‘Common goals will be compromised, if one party insists on its interests alone and very often, the other partner ends the relation in such situations’ (Lenarčič & Brcar 2014) thus it is necessary to align goals, avoid being perceived as manipulative or using hardball tactics; and be honourable in all dealings when relationships are important (DeMarr & Janasz, 2013).
The Ryan Air Story: Just after the 9/11 tragedy in the U.S, Ryan Air entered negotiations with Boeing and because of the downturn in Boeing sales caused by terrorist attack fears, Ryan Air availed of large discounts on a bulk purchase (Independent, 2008).
Abandonment: In 2009, Ryan Air came back to the negotiation table where the outcome differed due to a change in power positions. Ryan Air ended negotiations to purchase two hundred aircraft with Boeing following the supplier not agreeing to some terms and conditions (savings) that Michael O Leary’s company had ‘enjoyed in existing contracts with the supplier’. Mr. O Leary commented on the situation highlighting that it was disappointing that the negotiations did not result in a ‘mutually acceptable conclusion’ (BBC, 2009). It is important to note that all of Ryan Air planes are Boeing 737s’ as part of a cost minimization strategy.
Thinking Strategically: Despite the above case, it is of utmost importance for suppliers to transform business collaborations into business partnerships through sharing common goals; understanding the importance of the relationships (Lenarčič & Brcar 2014).
The three situations discussed above show how negotiations are part and parcel of everyday organizational life, albeit, further discussion of all stakeholders must be analysed in negotiations to fully understand the interdependent web in which an organization resides. Negotiations happen on a daily basis (between line managers and subordinates) and some happen less frequently (mergers, acquisitions, make/buy decisions) but all impact on the short and long term effectiveness of a business. Finally, negotiations skills and training are crucial to every organization thus positions should be made or managers should be trained in the art of successfully negotiating with stakeholders like those aforementioned in the three situations to in order to maximize value through outcomes.