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Negotiation as a tool for Project Management Practice

Introduction

Negotiation is the process through which the parties seek a mutually acceptable solution for

items they own or control. Negotiation is not only used for business purposes, sales or for inparticular for Project management we do use this all the time in our regular activities. For

example, we use it in our social lives perhaps for deciding a time to meet, or where to go on

a rainy day. Negotiating project scope with project sponsors or daily negotiation on project

commitment from the team members, all have become the part of our day-to-day activity.

Negotiation is usually considered as a compromise to settle an argument or issue to benefit

both the party as much as possible.

Starting with Basics.

Why Negotiate?

In general terminology if your reason for negotiation is seen as 'beating' the opposition, itis known as 'Distributive negotiation'. This way, you must be prepared to use persuasive

tactics and you may not end up with maximum benefit. This is because your agreement isnot being directed to a certain compromise and both parties are looking for a different

outcome.

Should you feel your negotiation is much more 'friendly' with both parties aiming to reach

agreement, it is known as 'Integrative negotiation'. This way usually brings an outcomewhere you will both benefit highly.

Negotiation, in a business context, can be used for selling, purchasing, staff (e.g. contracts),

borrowing (e.g. loans) and transactions, along with anything else that you feel are applicable

for your business.

Pre-Negotiation

Before you decide to negotiate, it is a good idea to prepare. What is it exactly that youwant to negotiate? Set out your objectives (e.g. I want more time to pay off the loan). Youhave to take into account how it will benefit the other party by offering some sort of

reward or incentive (explained later).

What is involved (money, sales, time, conditions, discounts, terms, etc)? Know yourextremes: how much extra can you afford to give to settle an agreement? Although you are

not aiming to give out the maximum, it is worth knowing so that you will not go out of your

limits.

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Know what your opposition is trying to achieve by their negotiation. This is useful

information that could be used to your benefit and may well be used to reach a final

agreement.

Consider what is valuable to your business, not the costs. You may end up losing something in

the negotiation that is more valuable to your business than money. It could be a reliableclient or your company reputation or your project teams confidence. So balance it!

Negotiation and agreement

It is important that you approach the other party directly to make an appointment tonegotiate should it be in person, writing or by phone (not through a phone operator,

receptionist, assistant etc) as this will allow you to set the agenda in advance, and improve

the prospects of the other party preparing sufficiently enough to make a decision on theday. Try to be fairly open about your reason for contact or they may lose interest instantly

and not follow up on the appointment. Save all your comments for the actual appointment-

don't give away anything that will give them a chance to prepare too thoroughly: it's not

war, but it is business!

So, it's time to negotiate and you've prepared well. What else must you have? Two things:

confidence and power. Your power will come from your ability to influence. For example, you

may be the buyer (but not always a strong position), or have something that the other party

wants, or you may be able to give an intention to penalize if the other party fails to meet

the agreement (as is the way with construction). As briefly mentioned above, you may be

able to give a reward or an incentive. For example, you may be selling kitchen knives and aspart of the package you are giving a knife sharpener and a storage unit away free as an

incentive.It is always important that you keep the negotiation in your control: this can mean within

your price range, your delivery time or your profit margin. If you fail to do so, you will end

up on the wrong side of the agreement, and with nothing more out of the deal other thanmaintaining trading relationships.

When negotiating, aim as high as you feel necessary in order to gain the best deal for

yourself. The other party may bring this down but it is a good tactic, as it is always easier

to play down than to gain.

Make sure that you remain flexible throughout the negotiation in case the opposition

decides to change the direction of the agreement (they may want different incentives or

even change their objectives). This is where your preparation comes to good use: knowing

your limits and the other party's needs. If you're a quick thinker then you've got an

advantage. You'll need to turn it around quickly if things start to go against you without

putting your objectives at risk.

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Confidence comes from knowing your business, your product, what its worth, and being able

to communicate this well to the other party: these people are almost impossible to get the

better of, as some of you will know only too well.

What so special in negotiation in Project Management?

A project manager must juggle four variables, must meet financial budgets, timelines, lists

of tasks to be completed and quality standards. Most people can keep track of two of those

variables, and some can keep track of three. Great project managers have to keep track of

all four.

Any project manager needs an outgoing personality, because whenever there is conflict, the

project manager needs to be able to defuse the situation and get the parties to move

forward toward the goal.

Somewhere along the line, every project runs into a wrinkle that's not planned for, that's

where the project manager can look into the tool kit for skills such as negotiation and

motivation.

A case study

While the world is expecting the project manager to be the almighty behind every activities

of the project, they are sanding in front of the sponsors and hearing the awful question How much you and your team really committed to the committed delivery date? The real

answer remains unuttered.

The team is working in three or four simultaneous projects, each of which is of prime

importance. Over and above there are few of support activities of earlier completed

projects and which are already on fire. How far can the team stretch their working hours?

But instead of saying all these truth project manager says things like, yeah, you all cancount on us, we are exactly on track.

This could have been done with some sort of creativity, for sure!

Now let us identify what goes wrong.

First, the assignment could have made clear, a detailed project plan and WBS can be madeand communicated to the team. This will ensure what end-result is expected from the team.

Second, we are asking for commitment from team but do they have any control on their

availability? Their boss has to agree to that.

Third, the project managers trust on his team carries a lot on the commitment.

Fourth, the project manager has no authority to assign work to directly or to reward the

outstanding performance. Thus the consequences for the assignment are all negative.

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Recognizing the flaws we may get the commitment in a different way. May be we

Making assignment clear to the stakeholders with all its constraints make the projectmanager buying time from the sponsors and at the same time it strengthens the base for

getting the understanding of the team and thereby winning the commitment from themWhile we cannot expect everyone to be that creative, at least we can make the foundation

for negotiation by:

Clarifying as much as possible the end-result what is expected and how is that measured?

Ask for employees judgment about the feasibility

Trusted the judgment

Provide the credit and reward for the good job done.

Making assignments this way gives much better opportunity to win the confidence of theteam and thereby build the framework of effective negotiation.

Common Project Negotiations:

o Use of sub-contractor: Contract negotiation, relationship, potential litigationo Use of 2 or more functional units for design:

different perspectives from different units, occurs frequentlyo Management of change order: occurs frequentlyo Project charter -Written agreement between PM, senior management and functional

managers, committing resource/schedule/cost to the project, Written agreement

between partnering companies, committing resource/schedule/cost to the project.o Fundamental issues of conflicts during projects like

1.Technical objectives2.Commitment of resources

3.Priority4.Organizational structure

Conclusion and summary

We use negotiation in everything we do but we have to be sure that it is done in the best

way possible to achieve maximum benefit. The most important part is planning: preparing

well will give you an advantage when negotiating.

Only use the knowledge and experience you need to achieve your objective: having the

business owner negotiating the supply of pencils is over-kill, and leaves you little room to

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power-bargain with the same supply company when you want them to supply you with, say,

color photo -copiers.

Have confidence and be sure that you can keep control at all times. Aim highly, but don't

underestimate the opposition. They too may have ju st read the same advice. If you're

selling something, be persuasive and offer some incentive to keep the customer interested.

Don't close an agreement until you are happy. This could be difficult if you have been put in

a 'corner' but this would perhaps be an effect of poor preparation.

Negotiations on project s is to seek solutions to the conflict that not only satisfy an

individuals own needs, but also satisfy the needs of other parties-at-interest and the

parent organization. Hence

1.Separate people from problem

2.Focus on interests, not positions

3.Invent options for mutual gain: consider all choices and choose best.

4.Use objective criteria: best for the project, general standard wins (precedence,

market value, industry practice)

Thus entering into the negotiation process at any stages of a project, keeping the four

steps in mind:

1.Parties-at-conflict enter negotiations knowing what they want

2.The negotiator spells out the substantive problem3.As the negotiator presents a variety of possible solutions that advance their

mutual interests, their positions converge.

4. A win/win situation emerges as an outcome of the negotiation.

Ultimately the objective of this is Win-win situation, not Win-Lose.