Negotiation Phases Three – Closing
Negotiation Phases Three – Closing
Negotiating in the classic sense assumes that parties are more anxious to agree than to disagree.
– Dean Acheson
Introduction
The closing phase of a negotiation represents the opportunity to capitalize on all of the work done in the earlier phases. The research that has been done in the preparation phase, combined with all of the information that has been gained is useful in the closing phase.
It is during the final phase of a negotiation that a compromise can be reached and an agreement can be formed. Putting in a little extra effort during this phase can help to ensure that the negotiation achieves the desired outcome. The term “closing a negotiation” can refer to two distinct things: First and foremost, it may be a question of how to bring disparate ideas together into a mutually acceptable conclusion. According to a second possible interpretation of ‘closing,’ the means by which negotiating parties can acknowledge or formalize the idea that an agreement has been reached is discussed.
Recognizing that the parties have reached an agreement can be a straightforward process. “Then, have we come to an agreement?” one can inquire of the other(s). Each party has the option of shaking hands, making a public announcement, or signing a document. However, the real issue is that each negotiator must communicate clearly to the other negotiators that a mutually agreed-upon conclusion has been reached.
Obtaining a Consensus
Closing a negotiation can mean two different things: First it may be a question of how to bring different ideas to a mutually agreed conclusion. A second possibility view of ‘closing’ is what means negotiating parties can use to acknowledge or formalize the idea that agreement has been reached.
Recognizing that parties have reached agreement can be quite simple. One can ask the other(s), “Then, have we reached agreement?” The parties can shake hands, make a public announcement, or sign a document. The real issue is that each has to make it clear to other negotiators that a mutually agreed conclusion has indeed been reached.
Bringing about a closing of an agreement is often the focus of the selling or purchasing process. However, getting parties to buy-in to a solution can be important in all kinds of negotiations. A negotiator who feels the best approach to reach agreement is by bullying may gain in the short-term. However, getting negotiating parties to agree using collaborative approaches is far more likely to yield long-term success.
Closing does not necessarily depend on scoring more debating points. Rather it reflects a diplomatic process of asking questions and using other respectful processes to find out what other parties think — and then characterizing one’s own suggestions in ways that demonstrate an understanding of what will bring about agreement from others. To close a deal (reach agreement) one has to ask questions like “What makes this or that solution especially attractive to you?” “Do you think this approach will work?” “Would you agree we should do it this way?”
Brief check
Closing is a process of gaining validation and acceptance rather than forcing agreement. Each negotiation may require different ways to accomplish this; the critical factor is that the philosophy that underlies the approach must be built on respect, understanding, and mutuality.
Different people have different ideas about what constitutes a unified front in a discussion. When it comes to negotiations, reaching a consensus usually entails reaching a substantive agreement on important issues. To reach consensus, it is not necessary for everyone to be completely satisfied; however, everyone must believe that the outcome of the negotiation is something with which they can live. Building consensus is one of the most difficult aspects of negotiation because the negotiating parties will likely have radically different attitudes toward what they believe the outcome should be in the first place. For different people, the term “consensus” can mean different things. According to some, it is an unsatisfactory compromise, with both parties ultimately agreeing on a solution that does not provide them with everything they desired. It is, however, a simple fact of life that you will never be able to please everyone all of the time. It is important to reach a consensus in order to please as many people as possible. In reality, the best solutions are those that do not cause too much dissatisfaction among the participants. In an ideal world, you would be able to please everyone in an equal and complete manner. However, this is not an ideal world, and the realities of life dictate that in order to please one person, you will almost always have to displease someone else. In order to avoid ending up with 0%, you have to make concessions. Otherwise, you would have to push for 100% of the time. As a result, it is far preferable to have two political parties that each have a significant portion of what they want to achieve. For some parties, reaching a consensus may be a bittersweet experience, but it is preferable to have 50% of something than 100% of nothing.
Putting Together an Agreement Building
An agreement necessitates the development of a unique skill: the ability to convert generalities into specifics. Negotiators should be aware that they have reached the end of the bargaining process at this point in the process. They should make every effort to reach an agreement that is based on a fair and accurate interpretation of the consensus that has been reached by the parties.
While doing so, they want to ensure that they do not inadvertently waive any rights by failing to pay close enough attention to the written agreement. The tendency to reach certain principle agreements and conclude that the job has been completed during negotiations can occur at times. There is more to negotiation than just making a concession here and putting a time limit on something there. A nasty surprise awaits you when it comes time to formalize a deal if you make the mistake of believing that the negotiation process has resolved all of the issues in the transaction. Think of the negotiation process as if it were a news broadcast, and this may be helpful. It is wonderful to have headlines that cause people to sit up and take notice, but in order for these headlines to have any real meaning, the stories that accompany them must also be written. The basic principle agreement reached in the negotiation room will be the headline and will be what people remember, but it must be backed up by specifics. Having at least one person on a negotiation team is essential for getting the fine print in place after the negotiators have laid out the broad strokes of the agreement in front of them.
Brief check
When two or more parties need to reach a joint decision but have different preferences, they attempt to work out a negotiated agreement.
Initiating negotiations and establishing the terms of an agreement
We are all familiar with what can happen when the terms of a contract are not clearly stated in the contract’s language. As an illustration: When two employees discuss their individual responsibilities for updating their company’s website, they reach an agreement. A week has passed with no sign of anything happening. Each of them was waiting for the other to take the first step before proceeding.
They had defined their responsibilities, but they had not yet devised a strategy for carrying out those responsibilities. In order for a contract to be successful, all of the essential terms must be stated explicitly and in writing. It is one thing to reach an agreement in theory, but it will be essentially meaningless if the practicalities are not taken into consideration. The agreement that is reached at the end of negotiations must be supported by a plan for how it will be implemented. What emerges from the initial negotiation is where you intend to go and, in some cases, when you intend to go. Even more important than any of the other factors, however, is the “how,” because without clear plans for how you intend to put everything in place, you can agree on anything you want and it will be of no consequence.
Brief check
In dealmaking, identify what stands between you and the agreement you want.
You may be able to overcome barriers to concluding a business transaction with the assistance of the following seven methods of negotiation.
- Engage in process negotiation.
According to Robert C. Bordone, a professor at Harvard Law School, one of the primary reasons why we struggle so frequently to reach an agreement during negotiations is that we do not negotiate an explicit process at the outset of the conversation. Discuss the appropriate course of action for the negotiation first, before moving on to the specific issues that are at stake or the parameters of your discussions. Which ground rules are required to be followed? Who will act as the meeting facilitator? When will you discuss these issues, and what topics will they be? According to Bordone, outlining the steps involved in the negotiation process can help you avoid making erroneous assumptions during the course of your discussions. Additionally, this can make for negotiations that are more productive and streamlined.
- Set benchmarks and deadlines.
Bordone recommends setting short-term benchmarks in addition to a final deadline that is both realistic and aggressive when designing the process for conducting negotiations. What are the repercussions if you are unable to meet a certain standard or deadline? Clarify whether you need to establish a new routine and talk about ways in which you can improve moving forward in the conversation.
When time is running out, negotiators frequently worry that they will give up too much ground. However, keep in mind that the other side is just as impacted by the deadline as you are. According to the findings of research conducted by Don A. Moore, a professor at the University of California at Berkeley, time constraints can result in both parties making concessions and engaging in more creative thought.
- Attempt to put a stop to the situation.
Guhan Subramanian, a professor at both the Harvard Business School and the Harvard Law School, suggests that businesses should consider attempting a shut-down move if they believe that the prospect of a more alluring offer from a competitor may impede their ability to close a deal. For instance, you could ask the other side to participate in limited, exclusive negotiations for a set period of time (such as one week), during which they would commit to not considering any offers made by your other business rivals. In order to persuade the other party to agree to this type of shut-down move (described as such because it eliminates competition on your side of the table), you should elaborate on the one-of-a-kind advantages, other than financial ones, that you can bring them, such as access to valuable networks or an outstanding public relations team.
- Take a break.
It might not make sense at first, but delaying the conclusion of a negotiation until the following day, week, or even longer might actually help you reach an agreement more quickly. When you take a break from the typically tense and stressful environment of business negotiations, you give yourself the opportunity to relax and the space to do so. It also gives you the opportunity to review with your team (and possibly your superiors) what you’ve achieved so far and how much further you still need to go. A review of this nature can assist you in determining whether or not it is prudent to continue working toward the completion of a business transaction.
- Include an impartial and reliable third party.
When one or both parties in the negotiation are unwilling to put their best offer on the table, the negotiation can sometimes become stuck. In that case, you could suggest involving a reliable neutral third party in the discussion. Each party could reveal its bottom line in confidential meetings with the third party, and the third party could then tell you whether or not there is a zone of possible agreement, also known as a ZOPA. If this is not the case, it is most likely time for you to move on. If this is the case, you ought to be able to quickly locate a deal, with or without the assistance of the adviser.
- Swap out the order of the players.
If you or your team are having trouble concluding a business transaction, you might want to think about bringing in replacements. A new team on one or both sides of the negotiation may be able to look at it with fresh eyes, free of any emotional baggage or personality clashes that may be holding you back from reaching an agreement.
- Establish a contract that is subject to conditions.
At the very end of the negotiation process, you might consider looking into the possibility of a contingent contract, which is, in essence, a wager on which party’s vision of the future will become a reality. For instance, if you believe a re-modeller will do a great job on your house but that his timeline is too ambitious, you could suggest putting in place a penalty for late completion or, as an alternative, a bonus for early or on-time completion. In this scenario, the re-modeller would have an incentive to finish the job on time and early completion would result in a bonus. If he is confident that he will be able to meet his deadline, he ought to have no problem agreeing to the contingency. The terms of this deal allow the parties to “agree to disagree” on a number of important issues.
Concluding a business transaction is a difficult process, and it is important to note that doing so is not always the best option. If you follow our guidelines, you will be better equipped to determine when a deal is within reach and when you should look into other opportunities. This is because you will know when to follow our guidelines.
Practical Application
Janet was working for a large toy manufacturer company as a sales manager overlooking the bulk orders. She was given the responsibility for sales negotiation with the buyers for a large order.
The company was largely depending on her to close the negotiation deal with this buyer. The negotiation was going to be a bit tough because the buyers were asking for a huge discount on bulk buying. The order was big so Janet’s company could not afford to loose the customer.
When Janet started the meeting the first thing she did was to try and establish the trust of the buyers in her company by highlighting the quality of their products. Then during the sales negotiations, she tried to be as honest and forthcoming as possible.
She also tried to be as social as possible to get to know the buyer in a more personal level. Knowing more about the other people aids in finding commonalities and in building personal trust and goodwill.
The buyers were quite impressed with Janet because in their own business practice they emphasized on building trust through building personal relationships with their associates; which had proved to be their main success point. The buyer’s personal experience taught them that if the seller is emphasizing on building a personal relationship, putting the interest of the other party before themselves and being honest during a negotiation, there is already a real possibility for the deal. The reason is, that an honest sales person would be willing to work around any problems that might arise, would be straightforward in their thoughts as well as be reasonable with the price.
Based on the observations during the negotiation meeting, all the buyers unanimously agreed to place the order for bulk products. They assumed that an honest seller like Janet would be honest in all the phases of the sales process. Without much of haggling, Janet came out of the meeting with a win-win sales agreement.
