Characteristics Of Negotiation Skills

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Have you heard about Richard Branson? Richard Branson, a British entrepreneur and head of Virgin Group Ltd., displayed commendable negotiation skills during his Virgin Island deal in the 1970s. Branson had just launched his company, Virgin Records, when he heard about “Virgin Island” and thought it would be an efficient marketing technique.

When he saw the advertisement, the island was listed for $6 million, but Branson did not have sufficient money to make an offer. He made an offer for $100,000 and was laughed off. He researched and found that the island was isolated, causing losses, and the seller had no offers from anywhere. He decided to walk away and let the seller wait and become more desperate. After exactly one year, he checked again, found the island was still unsold as he had expected, and purchased the same for $180,000.

Now, why this story? This was to show you the power of negotiation if you properly understand its skills and characteristics. Before we understand the characteristics of negotiation, let’s see what is negotiation.

What Is Negotiation?

A process where two or more parties enter into a series of discussions to resolve a conflict or to reach a final agreement is negotiation. It can involve discussions, compromises, and strategic communication to resolve such conflicts or make deals.

Such as, you and your friend want to start a business together, so you have to negotiate the terms of this partnership, the profit sharing and all other details. Now, the partnership firm is ready, and you want to hire your first employee. This will include negotiations for work hours, responsibilities, and salary with the other side.

Understanding how to negotiate effectively becomes crucial in these scenarios.

Irrespective of your occupation, negotiation is a soft skill that everyone requires. It can help you close business deals, escape bad situations, and advance your career. Fidelity’s 2022 study shows that around 58% of working professionals cannot negotiate their salary and accept their first offer. The same study also shows that of the professionals who negotiate their salary, more than 80% of them get at least some of what they asked for.

Now, there are certain features or characteristics of negotiation skills and of the negotiation process. Let’s discuss these characteristics in detail in the next section.

What Are The Characteristics Of Negotiation?

Negotiation is characterised by certain core features that are an integral part of the negotiation process.

Be it a negotiation for a business deal, a salary negotiation, or even dividing responsibilities at home, you will find these features in negotiation.

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1. Two Or More Parties

The negotiation process is not a one-sided affair; rather, it involves two or more parties engaged in a discussion or dialogue with the intention of reaching an agreement. It is a reciprocal interaction where the parties’ input influences the direction and outcome of the discussions. Each party typically has its interests, objectives, and perspectives that it seeks to address through your negotiation process. The interaction between the parties forms the core dynamic of negotiations.

When a negotiation takes place between two people, we call it a bilateral negotiation. When a negotiation takes place between more than two people, we call it a multilateral negotiation. For example, the negotiation between Microsoft and LinkedIn during LinkedIn’s acquisition is a bilateral negotiation between the parties. On the other hand, the North American Free Trade Agreement (NAFTA), signed in 1994 by the United States, Canada, and Mexico, is a well-known example of a multilateral business negotiation. You can observe various negotiation dynamics in both bilateral and multilateral settings.

2. Informal Process

Unlike legal or arbitration proceedings, the process of negotiation is more informal and simpler. A legal proceeding is bound by the rules and provisions of the law that are in place for that specific area of conflict. For example, if the dispute is regarding the terms of a partnership, you have to follow Partnership laws and Contract laws to resolve the same. In negotiation, parties have more flexibility to determine the course of action that best suits their interests and preferences.

Further, even arbitration proceedings have formal rules under arbitration laws that need to be followed while conducting arbitration. There shall also be an arbitrator to moderate and resolve the dispute. Considering this, negotiation is the only process which is party-centric. There are no pre-established rules or formalities that the parties are supposed to follow. They can mutually decide the process they want to adhere to and set guidelines they want to follow. They can mutually decide the other party’s involvement in the process and set guidelines they want to follow.

For example, when Steve Jobs negotiated with John Sculley to invite him to lead Apple and leave PepsiCo, rather than following a process with legal teams and structured discussions, Jobs used informal negotiations to close the conversation.

3. Voluntary Participation

Participation in a negotiation is voluntary, meaning that each party chooses to engage in the process willingly. Unlike legal proceedings where participation may be mandatory, negotiation is characterised by the parties’ mutual decision to enter into discussions to find common ground. The voluntary nature of negotiations emphasises that you and the other side willingly and autonomously choose to engage in the negotiation process. This aspect underscores that parties can also be aware of the negotiation process and willing to contribute to its progress.

Whether prompted by a business deal, a conflict resolution need, or any other circumstance, the parties can initiate discussions when they believe it is in their best interest. Similarly, parties are free to exit negotiations if they feel it is no longer productive. Parties engaged in negotiation have a shared interest in finding common ground, and the voluntary nature of the process allows for more amicable resolutions. This can be particularly crucial in situations where maintaining a positive ongoing relationship is essential.

The unsuccessful Pfizer-AstraZeneca merger is an example of the voluntary nature of negotiation. Pfizer pursued the acquisition of AstraZeneca in 2014 in what would have been a significant pharmaceutical merger. However, AstraZeneca rejected several offers, and both sides voluntarily ended the negotiations since they were unable to come to a common ground.

4. Non-Adjudicative Process

What is an adjudicative process? The adjudicative process means a dispute resolution proceeding between two or more parties where a third neutral person moderates the discussion and announces the final decision. Decision-making powers need to be with the third person for a process to be called adjudicative. For example, a judge decides a courtroom proceeding, and an arbitrator decides an arbitration proceeding.

Negotiation is non-adjudicative, meaning that it does not involve a formal judge or arbitrator who makes binding decisions. Instead, the parties are responsible for reaching an agreement through dialogue, compromise, and mutual understanding. The parties may involve a third party to ensure a smooth conversation, but the third party can only moderate the discussions and not compel a decision.

For example, in the Boeing-IAM negotiations 2013, representatives from the State of Washington were neutral mediators to help the negotiation end successfully. They assisted in minimising tension between the parties and encouraged them to keep their emotions in check and understand the opposite party. They never suggested a proposal nor gave a decision.

5. Dynamic And Flexible

Flexibility is a key characteristic of negotiation. Negotiation is inherently dynamic, and circumstances can change rapidly during the process. Flexibility allows negotiators to adapt to these changes efficiently. Negotiators can modify their strategies and positions to navigate evolving situations, whether due to new information, shifting priorities, or unexpected developments. If a particular approach doesn’t yield the desired results or new insights emerge, negotiators can immediately adjust their tactics.

The flexibility of negotiation allows for customisation to the individual preferences and needs of the parties involved. Each negotiation is unique, and negotiators can tailor their approach to suit the specific context, personalities, and priorities of the individuals engaged in the process.

6. Mutually Satisfactory Agreement

The ultimate goal of negotiation is to arrive at a mutually satisfactory agreement. This means that the parties involved have reached a consensus that meets their respective needs and objectives. While compromises are inherent in the negotiation process, the aim is to find a solution that satisfies the interests of all parties to a reasonable extent. A mutually satisfactory agreement takes into account the core needs, concerns, and aspirations of yourself and the other party.

Achieving an agreement may not be possible with just one proposal, and thus, negotiators prepare their BATNA (Best Alternative to a Negotiated Agreement) beforehand. The best alternative to a negotiated agreement is one of the best solutions you and the other party have if the negotiation fails. However, not all negotiations need to end in a mutually satisfactory agreement. For instance, distributive negotiations are a specific category of negotiation where both parties aim to maximise their personal benefits instead of focusing on a common ground of agreement.

What Are The Advantages Of Negotiation?

Negotiation is a valuable and versatile skill that offers numerous advantages in various aspects of life, personal and professional.

Here are some key advantages of negotiation:

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1. Empowerment

Negotiation empowers parties to participate in decision-making actively. Since it is a voluntary and non-adjudicative process, parties retain control over the outcome, fostering a sense of ownership and empowerment. Both you and the other party have to use their own strengths and weaknesses to deduce the outcome that they desire. For example, try to remember the first time you negotiated your salary for a job compared to how you would negotiate it now. The more you participate in negotiations, the easier it becomes and the more confident you feel.

However, to be a successful negotiator, you will need to communicate effectively, prepare proposals and counter-proposals, bargain with the other party and try to persuade them to agree with your views. These activities empower the parties for all forms of communication.

2. Cost-Effectiveness

Negotiation is often more cost-effective than legal or other formal dispute resolution processes because of the lack of any specific formal process. It reduces the need for extensive legal proceedings, court fees, and associated expenses. Moreover, there is no need for a third party to adjudicate and give a decision; you also save on professional fees.

A good example is the Samsung-Apple patent dispute initiated as a lawsuit filed by Apple against Samsung. The jury in the lower court held Samsung liable for copying the design and announced a compensation of $1 billion, which was reduced to $539 million by the appellate court in Samsung’s appeal. In the end, the parties decided not to litigate further and resolved the dispute through negotiations for an amount of around $120 million. Although negotiation is not exactly cheap, it is one of the most cost-effective compared to any other dispute resolution process.

3. Time-Efficiency

Negotiation is generally quicker and gets resolved much faster than any other process. Since the process is flexible, parties can decide the days to meet, the number of hours to spend on discussion and the frequency of meetings. In the litigation process, the court decides the dates of the meeting and the duration for which the dispute will be heard. Moreover, two meetings can happen over a period of 2-3 months. Thus, negotiation offers more time efficiency.

The average duration of arbitration is 16 to 20 months to resolve a dispute completely, while litigation takes 2 to 3 years to resolve the same. Compared to these processes, negotiation takes 3 to 6 months on average to resolve a dispute.

4. Confidentiality

Negotiation is a private and confidential process between two sides. Since the discussions are not public, it allows parties to discuss sensitive issues without exposing them to public scrutiny. This privacy can be particularly crucial in certain personal or business matters. Negotiation is an effective method in situations like mergers and acquisitions, which are supposed to be kept confidential from the public.

If there are certain positives for something, there will definitely be something negative about it, too. For dispute resolution, a highly effective, less costly and time-saving process is negotiation. However, there are certain disadvantages to this process as well. Let’s look at some disadvantages.

What Are The Disadvantages Of Negotiation?

The negotiation process is essential for resolving conflicts and reaching agreements, but it is still comprised of challenges and disadvantages.

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1. Power Imbalances

Power imbalances can significantly affect certain negotiations, placing the weaker party at a disadvantage. When a party with a stake in the disputed matter is either excluded or inadequately represented during the negotiation process, it diminishes the value of the agreement, making it subject to future challenges.

2. Miscommunication

A successful negotiation requires each party to have a clear understanding of its negotiating mandate. Poor communication can lead to misunderstandings and misinterpretations during negotiations. Clarity in conveying ideas, needs, and expectations is essential to prevent breakdowns in the negotiation process.

3. No Third Party

Negotiation mostly involves the parties to the conflict and does not involve a third party to moderate the negotiation. Without a neutral third party, parties may struggle to reach an agreement, as they may find it challenging to define the issues at stake and make progress toward a solution. The lack of a neutral third party might also lead one party to exploit the situation, attempting to take advantage of the other.

4. Non Binding

Negotiation as a process is completely voluntary, and parties are not bound to enter into an agreement. Parties are free to leave the negotiation in between if they feel it is not fruitful, and they can switch to another dispute resolution mechanism as well. Moreover, even if the parties come to a common ground and form an agreement, it is not binding against them and can be challenged in a legal proceeding.

Conclusion

In a nutshell, negotiation is characterised by its voluntary and flexible nature and the ability to come to a mutual conclusion between two sides in a dispute. Whether in the boardroom, at home, or in everyday interactions, understanding the key characteristics of negotiation can enhance your ability to negotiate effectively.

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By Ashish Agarwal

Ashish is a content writer at Kapable. A dynamic lawyer, experienced educator and content writer, he blends his legal expertise with a flair for storytelling. He has a passion for writing compelling articles and strives to simplify complex concepts, making them accessible to diverse audiences. He is dedicated to writing on contemporary topics and topics related to soft skills development. His articles showcase a deep understanding of the topic and reflect his commitment to fostering intellectual curiosity.

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