There are many ways of approaching a negotiation, but achieving success requires a well thought out plan and a clear understand- ing of the various parts of the negotiating process. Simply put, it requires good management. The four steps in a successful negoti- ation can be summarised as:
• preparation • discussion • proposing • bargaining.
Preparation
Assess your objectives
What do you really want to achieve" For most builders the pri- mary aim is to receive the payments that are due for the work completed. The builder will also probably want a satisfied client. After all a satisfied client may use them on the next proj- ect or recommend them to other prospective clients for another project. Hopefully the builder will also want the opportunity to complete the work and to rectify any perceived defects noted by the client.
The owner will probably want to pay the builder what is really due. They may believe that some of the variations are too expen- sive, or not justified. They will also want the work finished (if not by this builder, certainly by someone) if possible within the orig- inal budget and to have any defects corrected at no expense to themselves.
At the beginning of any negotiation it is important to plan your approach and sequence the issues you wish to raise. Prior to the first negotiation session always decide what are the fixed terms of agreement and what are variable. For the builder, the main fixed item is of course to be paid for his actual expenses. As to the variable, the builder will want what they believe is a reasonable profit for the work undertaken. The actual figure that is paid may be negotiable. The same will apply to variations that have been completed. As to whether the builder completes the work or not, that again is a desire, rather than a fixed requirement. It may be a very strong desire, (as it may affect the cash flow) but so long as the builder is not out-of-pocket this item is negotiable. For the owner, the only fixed position is that they will not be prepared to pay for work that has not been completed and to only pay for work completed to the specified standard.
Discussion
It is necessary that the parties who are going to enter into the negotiation begin the process as early as possible. Exchange mes- sages with the other side. In particular keep the messages in a friendly climate and avoid making demands. The wording should be ‘we would like/we suggest/would you consider …’ and so forth. By doing this you set the climate of openness.
The Department of Veterans Affairs in the United States published ‘The Dirty Dozen of Communication’ (<http://www. va.gov/adr/dirtydzn.htm>, viewed June 2001), a collection of words and phrases to be avoided in good communication. Try to stay clear of:
• using phrases such as ‘you must/you have to/you will’. These may produce fear or active resistance and often promote rebellious behaviour and retaliation. • warning or threatening phrases such as ‘if you don’t then…’ which can cause
resentment, anger and rebellion.
• moralising, for instance saying ‘you should/you ought to’. These types of phrases can cause a person to become defensive of his or her position. • advising or giving solutions by telling the person how to solve the problem.
These can imply that the other party is not able to solve the problem and that you know best.
• teaching or lecturing. This provokes defensive positions and counter arguments and may cause the other party to stop listening altogether.
• judgmental phrases like ‘you are not thinking maturely’. This implies incompe- tence, stupidity or poor judgment and it may cut off communication from the other party for fear of negative judgment.
• praising or agreeing. Remarking that ‘I think you did a great job’ implies high expectations which can appear patronising or as a manipulative effort to encourage desired behaviour.
• shaming, ridiculing or chastising by making the other party feel foolish. Referring to someone as ‘Mr Smarty’ can cause a person to feel unworthy which can have a devastating effect on self-image and which often provokes verbal retaliation.
I have to admit to having heard most of these at some time dur- ing both mediations and arbitration hearings.
Socialisation
When the negotiations start, it is important to be sociable. Small talk is often important — ask about their health, their families and things that make both sides feel at ease. The aim is to estab- lish an atmosphere that is tension-free and trusting. Personally I am a great believer in the ‘coffee and chocolate biscuit’ approach, which I find successful with unions and clients alike, for setting a more relaxed and less hostile atmosphere.
Asians are renown for this approach to most business discus- sions. The Japanese have made the tea ceremony a fine art, where socialisation may go on for many hours while the actual business takes only a few minutes. The secret is to establish trust first, with the firm belief that each party can ‘do business’ with the other. It also ensures that the parties are aware of what they are going to negotiate about.
Once the atmosphere is set, the next item on the program is to confirm the broad objectives of both parties. It is necessary for the first party to listen carefully to what the other side desires. In particular, the second party must listen and be aware of any sur- prises (often points either not known or not appreciated by them) and how they affect the second party’s plan for the negotiations. One suggestion at this stage is not to take notes, as this will dis- tract the listening process. Use a recording device or have some- one else take notes so that all present can concentrate on what is being said. Jotting down a few key words may substitute if no other means is available. Concentrating on the message being given by the other side is essential — almost more so at this point than later in the negotiations. Receiving the wrong message at
this initial stage means it is that much harder to correct later. It is vital for both parties to review the background to the dis- agreement and to review the proceedings leading up to the meet- ing. This is so differences of fact are clarified and the possibility of negotiating on the basis of a false premise is reduced.
Proposing
Once the trust has been established it is time to clearly define the issues that the parties wish to resolve. It is a time for each party to provide detailed description of the matters that they wish to resolve, but in a way which doesn’t intimidate the other party. At the same time the parties must not appear weak. It is best to link these issues where appropriate to the other party’s objectives.
Consider the following situation. Person A, the builder, desires to get paid for the work completed to date, while Person B, the owner, wants the work finished, but believes that A has not car- ried out the amount of work for which he is making the claim for payment. The builder disagrees.
One solution that could be proposed would be for both the builder and the owner to jointly obtain the services of an inde- pendent surveyor. They would then agree to abide by the assess- ment of the surveyor. The owner may feel that this is possible, but who will pay for the surveyor" The owner believes it is not their responsibility.
The builder now needs to consider his options. By agreeing to pay for the surveyor, he at least should get paid for the outstand- ing claim. But supposing he refuses" It may then go to court, caus- ing not only time delays but further financial outlays with no guarantee of a satisfactory outcome. However it would be wrong to suggest this first. The builder is after all negotiating. One sug- gestion could be to split the cost 50/50 between the two parties. The second proposal could be to suggest that the losing party pay. That is, if the surveyor says the builder is entitled to the full monies claimed, then the owner would pay the surveyor. If less — if the builder has over claimed for the work completed — then he would have to pay. From his point of view, the worst position would be that he pays for the surveyor, but receives his money reasonably quickly, and at best the same applies and he pays nothing. The middle ground will probably result in the builder receiving less from the owner, but at least getting some money and the work can proceed.
There are several other options. Each side could employ their own surveyor and these would meet and agree on the sum to be
paid. But another problem may be that the builder believes the owner does not have the money and so there is a question of security of the money for the payment once the sum is agreed. Perhaps it could be paid into a joint account and so on. Whatever the possible solutions, remember always to keep the problem to the fore and not put the other party in a position where they can- not move. Be flexible.
Bargaining
Negotiate the issue. A party should start by asking for what they actually want, but accept that goals may have to be modified. Link compromises to other objectives, rather than make conces- sions.
A good phrase to remember is:
If … then
In light of the above point regarding payment, perhaps the builder could say: ‘If you pay me the money I have claimed, I will have two gangs of men on site tomorrow and finish the work quicker than the contract stipulates so you can use the room ahead of time’. Or propose that if the owner pays now, the builder will have the surveyor on site tomorrow, and the builder will pay the costs, so that work can recommence as quickly as possible. Any adjustments could be taken care of in the next progress claim.
The secret of good negotiation is to:
Be creative
Summarise
It is vital to confirm the understanding of the points that have been mutually agreed, by summarising points during the discus- sion, particularly where complex issues are involved. Use feed- back such as, ‘Now I understand that we have agreed to…’ but do not leave it until the end of the discussion. Memories can be short, and subsequent discussion can alter the perception of what has already been agreed.
Settlement
Finally, agree on what has been agreed. Unless the resolution is fully understood by both parties, the settlement may not last. Where appropriate, provide at least a hand written summary of the agreement at the end of the session. The full agreement can by typed and exchanged later if deemed necessary. In some
circumstances a handshake may establish the bond better than the written word, so long as both sides clearly understand to what they have agreed.