I recently gave a lecture on negotiating with South Korean companies to a group of business students. I realized that not only most employees are never trained in negotiations but that many business students are not exposed to the art of negotiating as well. It is true that when thinking about risk management, especially in an international context, negotiations do not usually come to mind. However, negotiations can be used to resolve disputes, internal and external to a corporation, prior to such disputes turning into litigation. In essence, negotiations can help reduce the risk of litigation or other disputes ( arbitration,etc) and should be viewed as an effective risk management tool that can reduce legal costs as well as business costs associated with litigation. It can be used to prevent internal discord in an organization and can also be used to resolve differences between governments and political entities besides corporations and companies. In fact, we all use some form of negotiations on a regular basis and our career or life may be determined on how successful we are at negotiating. We negotiate for a raise, for a promotion, for a career, for almost everything in life- sometimes without realizing it. Therefore, it is important that not only companies train employees on how to effectively negotiate, but that business schools educate in negotiations too.
Negotiations can be simple or complex, depending on the subject matter and number of parties involved. International negotiations are perhaps the most complex as they involve different cultures, languages, legal systems, and viewpoints. Numerous variables exist in international negotiations that do not exist in domestic negotiations. Nonetheless, if handled properly , international negotiations can be very effective and successful.
The stages of negotiation can be defined primarily as a decision-making process whereby two or more parties resolve their disputes or differences by advancing their interests vis-à-vis each other. Negotiations may be broken down into several distinct stages:
•The beginning or pre-negotiation stage
•The middle or negotiation stage
•The final or post- negotiation stage
All three stages are crucial to successful resolution of a dispute or potential dispute that could lead to the risk of litigation and onerous or excessive legal fees and costs.
1.1 The Pre-Negotiation Stage Prior to negotiating with the other party or disputant, a party must understand the facts, identify the issues involved, and map out a strategy to deal with negotiations. Though it may seem easy, this stage actually involves numerous steps. Each step may involve several processes or sub-processes as well. The basic steps are as follows: •Determining the problem at hand •Determining the interests of all parties involved •Identifying possible solutions •Deciding upon negotiation strategies •Understanding your best alternative to a negotiated agreement—sometimes called the BATNA. Knowing your BATNA sets the bottom floor of any deal, as it will set the range of a possible settlement. No party will agree to a negotiation that offers less than the party's BATNA. Once a party understands the facts, has defined the dispute to be resolved, and knows its BATNA, it needs to develop its negotiation strategy. There are two basic strategies negotiators use in negotiating dispute:
• Position ( Competitive) based
•Interest ( Cooperative) based
1.1.1 Competitive-Style ( Position-Based) Negotiations Negotiations maybe conducted in a competitive manner whereby parties state their positions and negotiate from those positions. It is considered a win/lose strategy or position based strategy. It is the most common form of negotiation strategy that everyone is familiar with, though not the most effective, as it focuses only on the negotiating a party’s wants and needs and does not address the needs and wants or desires of the other party. Many people not familiar with negotiating will tend to follow the competitive style approach, which in some situations will not succeed.
1.1.2 Cooperative-Style ( Interest-Based) Negotiation Negotiations may also be conducted as a cooperative process or interest based process whereby the parties focus on solving each other’s problems and addressing both parties needs and desires. It is, in other words, a win/win strategy or interest based negotiation strategy. Parties may use one or the other negotiation strategy of win/lose, or both, or hybrids of both if needed. It is common to use both strategies in one negotiation. Using the strategies depends on how parties perceive negotiations and often whether they want a short-term relationship or long-term relationship with the other party. In many situations, it is imperative to know the BATNA of the other side. This may facilitate negotiations, as the parties may try to solve each other’s problems. Failure to solve your counterpart’s main concerns and issues may lead to failed negotiations. Of course, your counterpart has his or her own BATNA.
1.2 Negotiation Stage The negotiation stage or middle stage of the negotiation process involves numerous decisions too. Once parties have finalized the pre-negotiation stage, decisions still have to be made involving such issues as when, where, and how negotiations will take place. For instance, parties may start negotiations via e-mail to negotiate minor items before concluding negotiations over the phone. Or they may start negotiations over the phone and wrap up with face-to-face negotiations. Or they may start with using email to negotiate minor items, phone conferences to settle some other items and then meet face to face to conclude the most important items and issues. Therefore, decisions have to be made on how to negotiate to one’s own advantage. During the negotiation stage, internal and/or external parties and stakeholders may play a part in the outcome. Decisions must be made whether to include them or not. If third parties are involved in negotiations, one or both of the main parties may try to develop coalitions. Third parties may, in fact, add more problems and issues to negotiations or at least bring an added dimension to the discussions. Parties must also decide upon a venue for negotiations. Many parties prefer a neutral site. However, those negotiators in a strong position may prefer negotiations to be held in their own office. It is all about tactics and to a certain degree perception of the other party’s position.
1.3 Post-Negotiation Stage- An equally important stage is the last stage of negotiations or the post-negotiation stage. This stage results in an agreement or resolution. Hopefully an enforceable one at that. Parties must also decide whether to reduce an agreement to writing or leave it verbal—or a little bit of both. There are several sub- processes in this stage, such as concluding an agreement, drafting it in writing, and having the parties review it and approve it. Of course, each party may need its home office or upper management to approve the agreement as well. Parties may want their respective Law Departments or outside lawyers to review the negotiated agreements. Agreements need to be reviewed to determine if they indeed resolve the dispute, and if the agreements are enforceable.
It is obvious that negotiation is an important LRM tool. However, to be adequately used as a method to decrease the risk of litigation, the parties on both sides must be adequately trained in negotiation techniques and must have a proper negotiation mind-set. If the parties come to the table properly prepared, ready to negotiate and seek an amicable outcome, negotiation can be a powerful resolution process and risk mitigation tool. If not, it may lead to a lost opportunity and an unfavorable outcome.