Module 3

MODULE 3

PRE-CONTRACT NEGOTIATIONS

“Negotiating in the classic diplomatic sense assumes parties more
anxious to agree than to disagree”

-Dean Acheson

3.1 DEFINITION

The biggest reason behind this is in today’s fast-paced world nobody has time to sit back
and fight, in the case of a disagreement everyone looks for the best possible solution
in less time. Today everybody is focusing on the principles of fairness, seeking mutual
benefit and maintaining a relationship. This is what negotiation gives. Negotiation is one of
the most important aspects in an individual’s life. Being able to negotiate well plays a key role
in the overall career of a person. But what is negotiation?

Negotiation can be understood as a discussion between individuals to determine a
disagreement and collectively reach an understanding on the point of discussion that satisfies
the interests of the parties in dispute. It is a process where people rather than fighting among
themselves sit together, evaluate the pros and cons and then come out with an alternative
which would be a win-win situation for all.1

Negotiation is one form of dispute resolution mechanism which has a wide scope of
happening in a formal setting like in business, government branches, legal proceedings, NGOs
etc. or in an informal setting like a dispute among friends, marriage, divorce, parenting and
everyday life.

3.2 SKILLS, STYLES AND TACTICS

Negotiation is all about dealing with Negotiation means a series of ability that a
people tactfully or diplomatically to make negotiator uses while doing the negotiation to
them reach a solution that is beneficial to reach the goal that is intended for the

both of them

1 http://www.managementstudyguide.com/models-of-negotiation.htm

negotiation. Negotiation is all about persuading and influencing parties.

E3.2.1 STYLES
very person has there one negotiation styles. There are no particular
parameters according to which negotiation styles can be defined. However,
broadly speaking there are three major negotiation style that can be identified:
This is more on individualistic line. The party tries to persuade a

Win-Lose style party in a manner that the other party does what they want
ignoring their own interest. This at times can be threatening.

According to studies of businesspeople and students, about half

of U.S. negotiators have an individualist style. Individualists tend to claim value rather

than create it, argue their positions forcefully, and, at times, make threats.2 This style

can be beneficial in the short run, but ruins the chances of future as no one would

ever want to deal with such people again.

This is what major corporations try to do. They

try to search for a middle way to the problem Win-Win style
where the interest of both is protected. The

parties mutually agree to solution best for

both of their interest. Both the parties compromise equally, without burdening

anyone of them. This is which is best for the long run as well as in short run.

Mixed style In this the negotiation is done in a manner where the needs
of all the parties are tried to be met to the best of the possible
options. And finally, after all, the available options are put
forward one of the party claims the best share.

T3.2.2 TACTICS
here are many tactics available for a person to choose from but it should highly
depend on the fact that who is the other party and the relationship that the
parties have. These are:
¯ SALAMI TACTIC: This tactic is named after salami sausage. Whenever a person
eats sausage it is eaten piece by piece and not whole at a time. Similarly, using
the same approach the negotiator tries to convince the parties step by step
rather than giving a full solution at once. Because there are chances that if the
solution to the problem is given in one go it is rejected. Therefore, the
negotiator divides the disagreement into several different contentions and
then deal with them step by step. For eg: When a person buys a second-hand

2 http://www.pon.harvard.edu/daily/negotiation-skills-daily/identify-your-negotiating-style/

car from a well-known dealer. Is it just the car the person negotiates for? It’s
actually the car, getting the damaged parts replaced, getting a free service for
one year, getting the petrol tank filled for the first time for free, etc. all of this
the person negotiates the price of the. It’s a fact that no dealer will want to
loose out on the deal just because of not getting the tank filled. Thus, the
technique works here.

¯ WALK AWAY: This is a tactic where the party tries to pressurize the other party
by walking away from the table. This generally happens in a situation where
the party is not happy with the compromise which the other party tries to do.
While opting for this, the party is well aware of the fact that the other party is
in a need of a deal and the party walking out is at a position to renegotiate
slightly above of what they were doing originally. It is not what you want to
pay or receive; it is what you need to receive or can afford to pay.3 For eg: A
has a house in the middle of the plot where B wants to construct a five-star
hotel. Only the house of A is stopping the construction. In this situation, it’s A
who is at the higher platform then B and can use this technique to negotiate
the terms of the deal.

¯ USING SILENCE AND TIME4: Never respond too quickly to an offer. Pausing or
even suspending negotiations can convey that you’re not desperate to close
the deal and that you have other options. Silence can force a surprising amount
of pressure on the other party as well.

¯ ACCEPT DEFEAT: This tactic is used generally in a situation where the ties
between the parties are more important than the deal being negotiated. In this
situation one of the parties accepts the terms which at times are against his
interest. For eg: Negotiation to save marriage ties.

¯ TAKE IT OR LEAVE IT: This is when the deal that the person gives is so attractive
which is hard to say no to. And this is when the party giving the deal offers to
either accept the deal or to deny it, no other option is offered. Such types of
deals are so appealing that success is ensured in most of the cases. For eg:
Apple CEO Steve Jobs’ main closer strategy was to offer an insane amount of
money compared to other contenders. Jobs perfected the take-it-or-leave-it
approach and effectively rendered his subjects blind to any other offer.5

3 http://www.how-to-negotiate.com/tactics/
4 http://www.moneycrashers.com/negotiation-techniques-to-score-a-great-deal/
5 http://www.ceo.com/strategy/9-negotiation-tactics-from-famous-ceos/

¯ POKER FACE ATTITUDE: This tactic is generally used by buyers. In this rather
than making the other party aware of the fact that the buyer has got the exact
product he is looking for, the buyer keeps a straight face. He pretends that
though the product is good but it’s lacking son something maybe something
like a great bargain. He shows that he is keeping his option open, but at the
same time maintains an attitude that he is interested in the product but if an
amazing deal is given. For eg: a person going to buy a television. As a buyer,
you should never fixate on a single product; always shop around and keep your
options open. As a seller, you should always be prepared to seek more potential
buyers.6

¯ PROLONG NEGOTIATION7: This is an Iranian style of negotiation. Several of the
speakers say that Iranians have an amazing capacity to prolong negotiations.
In this regard, they are good at exploiting the willingness of people to accept
process instead of substance. For example, Iranians may create a virtual issue,
begin negotiating, and then create a scenario in which everyone is talking
about something that was not on the original agenda, thereby stalling the
negotiations. Like, Iranians will negotiate the terms of a contract and then will
insist on negotiating the implementation of those terms. That way, they can
expect a concession at each step in the negotiations while at the same time
wearing down their opponents.

These are just several of the tactics used by negotiators. When faced with tricks and
tactics, it is vital to remember some key points:8

o If you prepare and plan your negotiations, you will be more equipped to deal
with tactics. You will always know where you are going, where you are in the
process, and will know what you can do if negotiations are unsuccessful.

o The objective of the negotiator is to obtain, efficiently, an agreement that is
fair to both sides. We want to keep the relationship intact.

o Remember you can only correct and control the situation, not the other
person. Our focus has to be on the problem and the process.

o A negotiator may not only require negotiating the issue, but also the ground
rules of the negotiation process.

o Recognize when a tactic is being employed. Address the tactic with the other
party. Do not personalize it ("You are lying to me!").

o Always have sufficient confidence to stop proceedings if they are not going
well. This can be via a caucus, or even rescheduling for another day or venue.

6 http://www.moneycrashers.com/negotiation-techniques-to-score-a-great-deal/
7 https://www.cna.org/news/events/2006-04-19
8 http://www.negotiations.com/articles/negotiation-tactics/

o Always know what you will do if an agreement cannot be realized. Having that
knowledge can and will prevent you from proceeding in a negotiation where
tactics are muddying the issue. Know where you are in relation to what you
will do if negotiations are unsuccessful, throughout the negotiation process.
Do not allow the use of tactics cause an agreement to be worse that what could
have been done on your own.

3.3 THE PREPARATION

Preparation is the most important aspect of negotiation. To win it, one needs to get
ready just like a tiger. One needs to plan strategically to be on the winning side. There
is no particular mantra for a successful negotiation, but going unprepared will surely
lead to failure. Being prepared will increase the chances of winning. One should make sure
that before sitting for actual negotiation one takes out time to prepare. Even if it’s just for
few minutes sitting in the car.

Some steps that can be helpful in preparing for negotiations can be:

Ø UNDERSTAND YOURSELF9: Before we even begin to understand and apply best- and
leading practice negotiation, it is imperative that we first invest in understanding
ourselves. The idea is to optimize your strengths and find ways to minimize the impact
of weaknesses. In negotiation, it is important that we make use of personal profiling
tools to highlight our areas of preference within the context of negotiations. It enables
us to have a reference point from which to plot our skills development.

Ø Know the context of the deal: It is important to have an idea about the circumstances
and environment in which the negotiation is taking place. The context differs in every
negotiation.

Ø NEGOTIATION POINT CHECK: As Sun Tzu, the author of "The Art of War", said hundreds
of years ago, "Engage only when it is in the interests of the state; cease when it is to
its detriment. Do not move unless there are advantages to be won."10 Try to figure out
beforehand that will the negotiation be advantageous to you or not? If the answer to
this is NO, then there is no point negotiating.

Ø SET A TARGET: Clarify in your mind what is the solution you intend to reach at. Make a
detailed picture of what you are exactly looking for? Having an aim will help one

9 http://biznegotiation.typepad.com/jan-potgieter-blog/2010/04/the-top-5-components-of-preparing-for-a-
negotiation.html
10 http://www.businessknowhow.com/growth/negotiations.htm

negotiate accordingly. Being specific with one’s negotiation goal will make one more
confident, giving an edge over the other party. Consequently, will help to achieve the
objective one wants.

Ø CORRECT INFORMATION: After setting an aim, the next and the most important is to
do deep research on the point, to collect the information needed. The information
collected should be about the interest of both the parties, necessary resources and
possible alternatives and solutions. It’s good to know the other side’s situation and
modify it to favor you. Throughout a negotiation, you should do tons of listening,
clarifying and checking. And when your turn comes to put over your case, you should
use every skill you can muster to make sure they understand.11

Ø Get a BATNA: A BATNA is your “Best Alternative to a Negotiated Agreement” and is
the only certain way to be successful in negotiations. By preparing for negotiations
with one party by sounding out an alternative deal with another party gives you walk
away power. It means that, even if the alternative isn't quite what you want, you are
still prepared to go there, if need be.12

Ø BE READY WITH QUESTIONS: How? Where? When? Why? Who? What? Always be
ready with answers to these questions beforehand. These are the most common
question that arises in most negotiations. Also, many times solution to the problem
comes out from these questions itself.

Ø MENTALLY PREPARED: Getting into the right frame of mind is very important for a
successful negotiation. Some preparation steps could be:
ü Being in awe of something is OK, but don’t show it.
ü Be calm, composed and easygoing.
ü Be in a business mood: attentive, sturdy and firm.
ü Never wear your heart on your sleeve.
ü Never underestimate or overestimate yourself.
ü Go with an open and clear mind.
ü Be a good listener first, and then a speaker.

Ø HAVE NEGOTIATION POINTS: One should always plan the possible negotiation points.
The best way is by preparing a list. After doing that write down the contentions to deal
with each issue. Also, with that try and think from the other side and see how they will
deal with the issue. This will help counter the other party’s points during the
negotiation in a better way. Since, one will already have an idea of the other side.

11 http://www.businessknowhow.com/growth/negotiations.htm
12 http://www.managetrainlearn.com/page/preparing-for-negotiations

3.4 NEGOTIATION MODELS

There are various models of negotiation:
Win-Win Model In this model, each and every individual involved in negotiation wins.
Nobody is at loss in this model and everyone is benefited out of the
negotiation. This is the most accepted model of negotiation.

In this model one party wins and the other party loses. In such a Win-Lose Model
model, after several rounds of discussions and negotiations, one
party benefits while the party remains dissatisfied.

Lose-Lose Model As the name suggests, in this model, the outcome of the negotiation
is zero. No party is benefited out of this model. In this model,
generally, the two parties are not willing to accept each other’s views
and are reluctant to compromise. No discussions help.

For Eg: Mike got selected with a multinational firm of repute. He was called to negotiate his
salary with Sara- the HR Head of the organization.

Case 1 - Sara quoted a salary to Mike, but Mike was not too pleased with the figure. He insisted
Sara to raise his salary to the best extent possible. After discussions, Sara came out with a
figure acceptable to Mike and she immediately released his offer letter. Mike got his dream
job and Sara could manage to offer Mike a salary well within the company’s budgets - A win-
win Situation (Both the parties gained)

Case 2 - Sara with her excellent negotiation skills managed to convince Mike at a little lower
salary than he quoted. Mike also wanted to grab the opportunity as it was his dream job and
he was eyeing it for quite some time now. He had to accept the offer at a little lower salary
than expected. Thus in this negotiation, Mike was not completely satisfied but Sara was - A
win-lose negotiation

Case 3 - Mike declined the offer as the salary quoted by Sara did not meet his expectations.
Sara tried her level best to negotiate with Mike, but of no use.-A lose-lose model of
negotiation. Nobody neither Mike nor Sara gained anything out of this negotiation.

RADPAC Model of Negotiation is a widely used model of RADPAC Model
negotiation within corporates. Let us understand it in detail. Every
alphabet in this model signifies something:

R – Rapport: As the name suggests, it signifies the relation between parties involved in
negotiation. The parties involved in the negotiation ideally should be comfortable with each
other and share a good rapport with each other.

A – Analysis: One party must understand the second party well. It is important that the
individual understand each other’s needs and interest. The shopkeeper must understand the
customer’s needs and pocket, in the same way, the customer mustn’t ignore the shopkeeper’s
profits as well. People must listen to each other attentively.

D – Debate: Nothing can be achieved without discussions. This round includes discussing
issues among the parties involved in the negotiation. The pros and cons of an idea are
evaluated in this round. People debate with each other and each one tries to convince the
other. One must not lose his temper in this round but remain calm and composed.

P – Propose: Each individual proposes his best idea in this round. Each one tries his level best
to come up with the best possible idea and reach a conclusion acceptable by all.

A – Agreement: Individuals come to a conclusion at this stage and agree to the best possible
alternative.

C – Close: The negotiation is complete and individuals return back satisfied

3.5 THE PROCESS

Process is the procedure that should be followed for a peaceful and fruitful negotiation.
During the negotiation, there are a lot of twists and turns involved. One needs to make
certain choices, compromise at few places, to achieve the desired outcome. To make
the correct choices, it’s very important to be aware of the negotiation process. Negotiation
process involves three phases:

Ø Planning
Ø Doing

ü Discussion
ü Clarifying goal
ü Negotiate
Ø Ending
ü Agreement
ü Implementation of plan of action

CONTRACT PHASE 1: PLANNING: Planning talks about the
PROCESS preparation steps talked about in the above section.
One needs to plan communication style and the tone
PHASE 1: Planning they will use. To know what to plan exactly, here’s a
PHASE 2: Doing recap of the points one needs to be ready with:
PHASE 3: Ending
v Know yourself and the other party
v Have a clear agenda to negotiate
v Look into the interest of both the parties
v List out the negotiation points
v Be ready with a proper in-depth research
v What to do if negotiation fails

PHASE 2: DOING: This phase starts as soon as the
parties enter the room to negotiate. The person should
keep in mind following tips to ride through the
negotiation process easily and walk out with a content
feeling after finishing the negotiation successfully. This
phase can be further divided into:

¯ Discussion: It is during this stage that the parties

open up with their version of the dispute. In a

way, they put forward their understanding of the

situation.

¯ Clarifying goal: This stage as the name suggests

is to explain the interest, agendas and

perspectives of the parties to each other.

Clarification is an essential part of the

negotiation process, without it

misunderstandings are likely to occur which may

cause problems and barriers to reaching a

beneficial outcome.13

¯ Negotiate: This stage marks the end of the

phase. After the discussions and clarification, the

parties together try to reach to an outcome

which would be fruitful to both of them.

Alternatives, compromise situations etc. all are

given at this stage.

To sum it up:

13 http://www.skillsyouneed.com/ips/negotiation.html

CONTRACT Ø Start by introducing and putting forward the
PROCESS agendas you plan to negotiate on.

PHASE 1: Planning Ø Make the first offer, if not then never accept the
PHASE 2: Doing first offer of the other party. It is proven that
PHASE 3: Ending people who take the first proposal are less
satisfied and regret their haste.14

Ø Be calm, composed and confident throughout
the process.

Ø Develop an understanding of the other party’s
frame of mind, how they are negotiating and
what they are aiming at, during the process.

Ø Discuss thoroughly each point, whether it’s their
or yours.

Ø Keep on giving alternatives and listening to their
options.

Ø Give and take.

PHASE 3: CLOSING: This phase starts at the end. It is all
about wrapping up the process. As they say, all’s well that
ends well. Thus, after a successful negotiation it vital to
close the deal correctly. This phase can be further divided
into:

Ø Agreement: This is when a possible outcome is reached
and agreed by both the parties. It should be clear so that
both the parties have a clear picture of whatever has been
decided and there is no confusion.
Ø Implementation of the plan of action: This is the last
stage of the process. Whatever is decided is implemented.

To sum it up:

Ø After everything is done look back and go through the
agenda and the contentions once again.
Ø Get the agreement in writing signed by both the parties.
Ø Follow up.

14 https://www.business.qld.gov.au/business/running/managing-business-relationships/negotiating-
successfully/negotiation-process

3.6 TIPS FOR SUCCESSFUL NEGOTIATION

It's time to negotiate! Here are a few golden rules to successful negotiations:

¯ Always try to negotiate for at least 15 minutes. Any less than that and it is unlikely that
either party has had enough time to fairly consider the other side. Generally, the size
or seriousness of the negotiation determines the amount of time needed to negotiate
it. Setting a time limit is a good idea. Approximately 90% of negotiations get settled in
the last 10% of the discussion.

¯ Always offer to let the other party speak first. This is especially important if you are
the one making a request for something such as a raise. The other party may have
overestimated what you are going to ask for and may actually offer more than what
you were going to request.

¯ Always respect and listen to what your opponent has to say. This is important even if
he or she does not extend the same courtesy to you. Do your best to remain calm and
pleasant even if the other party is displaying frustration or anger. Remember some
people will do anything to intimidate you.

¯ Acknowledge what the other party says. Everyone likes to know that what they say is
important. If the other party opens first, use it to your advantage, by paraphrasing
what you have heard. Repeat their important ideas before you introduce your own
stronger ones.

¯ Pay attention to your own and your counter partner’s body language. Review the chart
below to learn how to interpret body language during the negotiations. Make sure
that you aren't conveying any negative body language.

Language to use to Language to use for
show understanding/ objection on a point
agreement on a or offer:
point:
ü Understand where
ü I agree with you on you're coming from;
that point. however,...

ü That's a fair ü I'm prepared to
suggestion. compromise, but...

ü So what you're saying ü The way I look at it...
is that you...
ü The way I see things...
ü In other words, you
feel that... ü If you look at it from
my point of view...
ü You have a strong
point there. ü I'm afraid I had
something different
ü I think we can both in mind.
agree that...
ü That's not exactly
ü I don't see any how I look at it.
problem with/harm
in that. ü From my
perspective...

ü I'd have to disagree
with you there.

ü I'm afraid that
doesn't work for me.

ü Is that your best
offer?

Body Language Possible meaning

Avoiding Eye Contact • Lying
• Not interested
Serious Eye Contact • Not telling the whole truth
Touching the face/fidgeting • Trying to intimidate
• Showing anger
Nodding • Nervousness
Shaking the head/turning away • Lack of confidence

• Submission
• Agreeing
• Willing to compromise
• Frustrated
• In disbelief
• Disagreeing with a point

3.7 TROUBLESHOOTING

The negotiation process is all about solving the dispute by sitting across the table and
discussing. It is obvious that the road will not be easy as the parties coming will already have
opposite opinions on the same points. Therefore, there are certain hitches that can be faced
during the process. These can be:

ü COMMUNICATION: one of the most common issues during the negotiation process.
Communication means putting across your point of view exactly the way you think. If
communication is not done properly it can create misunderstandings, thereby giving
rise to an unproductive negotiation.

ü BEHAVIOR: Negotiation becomes a tough job if the parties, or even any one of them,
have antagonistic behavior. This makes the whole process very negative and
unproductive. Bullying, sarcasm, guilty feeling, bribe, showing superiority, insulting
words etc are some of the signs of an aggressive behavior.

ü TIME BOUNDATION: This is one of the strategies that a lot of people try to use in
negotiation to bring the ball in their court. They may try to pressurize the party by
putting unnecessary and unexpected time pressures. They try to push the other party
a step behind and compel them to take the decision in their favor.

ü LAST-MINUTE WAVERING15: Just when you think that negotiations are over and you
have reached the agreement, the other party begins wavering over some seemingly
trivial point. The other party knows that your defenses are down as the negotiation
nears completion and they ask for another concession. Actually, the other party can
waver several times, squeezing several additional concessions from you each time.

ü UNDERSTANDING OF THE ISSUE: there are times when negotiations are not successful;
the reason behind this can be not understanding the real and correct agenda. If the
root cause is not figured, negotiation process will be completely off beat and
consequently an unproductive negotiation.

ü HINDERING PROGRESS16: Negotiations must move forward in order to reach a
decision. If one side is being obstinate with no room to concede, you may need to take
a more drastic approach. Ask him if he wants to continue with the discussions. Perhaps
he would like to speak with someone else. Ask him if he is uncomfortable and if there
is anything he needs to make him feel at ease with the negotiation. By reaching out to
let him know that you are putting his needs first, you may find progress with the
negotiation

ü NO PLANNING: Going to negotiation unprepared is the worst thing that a person can
do. Planning is the first and most crucial step of negotiation, without this the
negotiation will only be a failure. One should never underestimate the other party.

ü WRONG ATTITUDE: one should never be too rigid, or too flexible or overconfident, or
under confident. It is very important to have a balanced attitude. One should be clear-
cut and definite in communicating while negotiation process.

This is not an exhaustive list but some of the most common issues that arise in almost all the
negotiations. To get a fruitful negotiation, with other steps, it’s also very important to figure
out these troubleshooting issues and handle them effectively with patience.

15 http://www.tero.com/negotiationchallenges.html
16 http://www.ehow.com/info_7978779_problems-faced-during-negotiations.html

3.8 GLOBAL NEGOTIATION MODELS17

17 http://www.businessinsider.sg/communication-charts-around-the-world-2014-3/#.VPV4j3zoRYo









3.9 CONCLUSION

As Jim Hopkinson says, “There is an opportunity to make thousands of dollars within few
minutes, you have to take advantage”. Negotiation in almost all the businesses and spheres
of life is a norm and not an exception. Doesn’t matter that a person is signing a deal in the
fast paced city of New York or in a backward area of Amazon Jungle or in a traditional city or
Jerusalem or in a developing city like New Delhi, a common step is negotiation. Therefore,
knowing negotiation and developing this quality is a must in today’s world.