Step 1 in the Negotiation Framework: Preparation


If I could give budding negotiators just one tip to dramatically increase their negotiation success rate it would be to prepare, prepare, prepare…

To borrow heavily from Gary Player (golfing great) in amending his famous quote on practice I would say:

“The more I prepare the luckier I get”.

My experience however has been the contrary, especially in my field of engineering and construction law.

Contractors spend large amounts of time and money in preparation of their claims by way of extensive contract management, calculating costs, conducting delay analysis on programs and compiling substantial claim documentation. However little to no time is spent on preparing for the actual negotiation itself.

What the parties to the negotiation fail to realise is that most of your work is done in the preparation phase.

Getting Ready to Negotiate

Getting Ready to Negotiate (Penguin Business)

Fisher, R and Ertel, D in their book “Getting Ready to Negotiate, Penguin Books, 1995” detail the three main reasons why parties fail to adequately prepare for a negotiation.

  1. People assume that talking is low risk – this is the classic “Let’s hear what the other side has to say” approach.
  2. Preparation simply takes too much time.
  3. A lack of understanding as to how to properly prepare.

Against this backdrop it is necessary to consider what exactly the key aims of preparation are.

The key aims of the preparation phase can be summarised as:

  1. Perform the correct type of preparation.
  2. A consideration of: “the who”, “the what”, and “the how” of the negotiation process.
  3. Conduct an examination of the current situation from the other party’s perspective;
  4. Consider the negotiation style you and the other party may use;
  5. Begin brainstorming possible solutions;
  6. Initiate preliminary contracts.

Essentially there are there are three key considerations that must be canvassed during the preparation phase, these are:

  1. The Substance of the negotiation i.e. what is being negotiated?
  2. The Process of the negotiation i.e. how to negotiate?
  3. Relationship considerations i.e. who is negotiating?

Whilst preparing for your negotiation it is necessary to fully canvass what and Fisher and Ertel consider to the bet 7 elements of negotiation:

1) Interests – a detailed consideration of both parties interest (as opposed to their positions). Interests are those issues which a party cares about which fuel the parties’ position. The discussion of interests vs. positions deserves a post all on its own;

2) Options – possible agreements, generally the more options on the table the more likely there will be one capable of reconciling the parties interests;

3) Alternatives – a consideration of your best alternative to a negotiated agreement, commonly referred to as one’s BATNA;

4) Legitimacy – external standards to “reality test” your options and alternatives;

5) Communication – the manner in which an outcome is reached is almost as important as reaching the actual outcome itself. Proper two way communication is essential for preserving relationships and managing emotions throughout the negotiation.

6) Relationship – a good negotiation where both parties’ interests are met will serve to strengthen the relationship between the parties. Considerations of cultural differences in negotiation must be dealt with appropriately.

7) Commitment – assessing the realistic promises that can be made and that you expect the other party to commit to.

I would highly recommend following a structured approach to dealing with the preparation phase – Appendix B of Getting Ready to Negotiate provides a useful preparation toolkit in this regard.

A Practical Example

I am currently preparing for a negotiation on behalf of a client. The dispute surrounds a claim by the Employer for delay damages and a counter claim by the Contractor for an extension of time.

While delay damage and extension of time claims are easily the most common form of claim encountered in the field of construction and engineering disputes, what is interesting to note here is that the Contractor has not claimed additional cost, only time, it is therefore clear that his primary goal is escape the penalties claimed by the Employer as opposed to recovering any time related costs.

With a view to providing some practical application of the above if I was briefly to remark on my thoughts regarding the preparation in respect of my next negotiation my high level comments would be:

1) Interests:

a. Both parties clearly share the common interest of avoiding a lengthy and costly arbitration.
b. The Contractor’s primary interest is to avoid paying delay damages for the late completion as opposed to recovering any costs for the alleged delay.
c. The Contractor has an interest in securing future work and providing on-going maintenance and spares in respect of the work already provided.
d. The Employer has an interest in recovering the maximum amount it can from contractors to mitigate against potential losses due to the late completion of the works.
e. The Employer has other works which require to be competed.

2) Options:

a. The options that are generated flow naturally from the analysis into the parties interests.
b. There are various options available to the parties.
c. The Contractor may agree to pay the full penalty, without notifying a formal dispute, if the he is able to secure future or further work from the Employer.
d. The Employer may agree to reduce the penalty if the Contractor can provide spares at a reduced cost.
e. The Contractor may have other companies in its group which could expand on the value offered to the Employer.
f. I have even see the Contractor providing equipment which is redundant to the Contractor but useful to the Employer (often as spares) to “widen the negotiation pie”.
g. From the above it becomes apparent that there is substantial value to be had in generating these options during the preparation phase.

3) Alternatives:

a. The Employer’s BATNA (best alternative to a negotiated agreement) in this instance may very well be to set-off the monies owed against any monies retained and pursue the balance in arbitration or even write the balance off.
b. The Contractor’s BATNA may be to apply to have the penalty reduced or pursue its extension of time claim with associated costs.

4) Legitimacy:

a. The Employer may wish to test the Contractor’s claim with reference to standard methods of delay analysis or run the costs past an external claims consultant.
b. The Contractor may wish to get advice and/or investigate the Employer’s actual prejudice suffered against the penalty claimed with a view to reducing the penalties (this remedy is available under South Africa law per the Conventional Penalties Act).

5) Communication:

a. At present the dialogue between the parties is very amicable and they are both invested in achieving a settlement in the matter.
b. Despite this one needs to constantly monitor the status of the communication as when the parties meet their relevant emotions are heightened and communication can deteriorate rapidly.

6) Relationship

a. While the current relationship is good one of the core concerns for the Contractor must be the large imbalance in power between him and the Employer.
b. This is a common feature in negotiations between the smaller Contractor’s and the larger Employer’s.
c. Dealing with power is beyond the scope of this article but I will deal with it in later posts.

7) Commitment

a. I am confident that any agreement that is reached will have a high level of commitment from the parties as the quantum of the claim against the interest to avoid a lengthy arbitration is a strong motivator to both reach and commit to any agreement.
The above constitutes some high level thoughts and notes on the current negotiation for the purpose of this article. It is by no means representative of what is necessary to fully explore the 7 key issues in order to meet the requirements of a successful preparation.

Summary and Take-Away

  1. Prepare, prepare, prepare;
  2. Make sure you are doing the right preparation;
  3. Follow a structured approach to your preparation;
  4. Be sure to consider not only your own interests by try and view the negotiation
    from the other parties’ side.
  5. Reality test the options you have created.
  6. Don’t forget about the relationship.

I am confident that if you follow the above approach and prepare effectively you will see a marked improvement in your negotiation results.

Adapted from the “CEDER Certificate in Advanced Negotiation” and “D. Malhotra and M. Bazerman, Negotiation Genius: How to Overcome Obstacles and Achieve Brilliant Results at the Bargaining Table and Beyond, Bantam Dell, New York, 2007”