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Effective Business Negotiations

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Comprehensive presentation on business negotiations, improving negotiating skills, international negotiations, controlling course of negotiation

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Effective Business Negotiations

  1. 1. Make it an Effective Tool for Everyday Business Osvaladas Čiukšys 23 March, 2016 BMI 1
  2. 2. Osvaldas Čiukšys More than 20 years of negotiating experience: 1991 – 1993 Head of Trade division in Ministries of International Economic Relations and Foreign Affairs: negotiations on Free trade, Investment protection, Economic cooperation agreements 1993 – 2000 Head of Foreign trade division of Ogmios group and General Director of Ogmios Laikas Ltd.: negotiations on distributorship and long term commercial contracts with leading world companies (electronics, household appliances, luxury goods: Swiss watches, jewelry ) 2000 – 2001 Vice-minister of Economy: negotiations on LT accession to EU, 3 negotiation chapters: Free movement of goods, SME and Industrial policy 2002 – 2009 Deputy head of LT diplomatic mission in Poland, Ambassador of Lithuania to Latvia and the Czech Republic: member of various state negotiations teams 2009 – 2011 Expert of Ignalina NPP decommissioning, General Director and Corporate Affairs Director of Ignalina Nuclear Power Plant: negotiations with main projects contractors, EBRD and EU Commission on NFP 2014-2020 From 2013 Deputy Director General and Director General of Lithuanian Confederation of Industrialists, Chairman of Lithuania – China Business Council, Consultancy on international business negotiations 2
  3. 3. Main stages of negotiation Preparation Exchange of Information Bargaining Closure and Commitment Business Negotiations, Osvaldas Čiukšys© 3 80% 20%
  4. 4. Preparation • Identify the main goal of negotiation: yours and opponents • Make necessary economic and financial calculations • Prepare technical and other documentation • Design your negotiating team and get the mandate to negotiate • Prepare your position and best alternative (BATNA) • Set the agenda for negotiations • Gather and analyze information about your opponents Business Negotiations, Osvaldas Čiukšys© 4
  5. 5. Preparation: practical aspects • Inform your team about your goals, strategy and agenda. Discuss their roles in negotiation process • Offer opponents to negotiate at your territory • Propose to write down minutes of negotiations • Propose and be the first to send draft agenda • Meet former employees, business partners or clients of your opponents • Invite your opponents to meet informally: dinner or lunch, beer or coffee prior to negotiations • Be the first to send them drafts of documents: contract, technical specification, samples etc. • Offer your help to the other side: interpreter, driver, office, hotel reservation etc. • Take time to relax and be ready to make decisions Business Negotiations, Osvaldas Čiukšys© 5
  6. 6. 6 Ask yourself : are we ready? Do we really have enough information or just see what we want to see and make wrong perceptions? Business Negotiations, Osvaldas Čiukšys©
  7. 7. Exchange of information Business Negotiations, Osvaldas Čiukšys© 7 Main rule: only the required minimum of valuable information provided to the other side
  8. 8. How to control negotiations 1. Controlling the environment arrangements, drafts, seating 2. Setting the agenda and the course imposing agenda that you prefer, taking the initiative and making the first proposal 3. Controlling the course of negotiation using questions and expressing emotions , making concessions in the right way Business Negotiations, Osvaldas Čiukšys© 8
  9. 9. 9 Negotiation team Chief negotiator Good guy Bad guy Hard liner Sweeper ©Business Negotiations, Osvaldas Čiukšys
  10. 10. Team formation (1) Members Roles Functions Chief negotiator Leader of the team, experienced , not necessarily the oldest Makes decisions, gives instructions Good guy Everybody likes him Agrees with opponents, makes a good impression, creates comfort in negotiations Bad guy Opposite to Good Guy, it’s much easier to reach an agreement without him Stops negotiations when necessary, reduces value of opponents’ proposals, points out weaknesses of the other side Hard liner Serious, knowledgeable, makes the life of opponents difficult, his opinion is respected by everybody Writes down the minutes, delays negotiations when needed, helps to take proposals back, strictly follows the agenda, observes Sweeper Accumulates all proposals, suggests overarching solutions Does not allow the others to lose the track and forget the main goals, suggests the ways out Business Negotiations, Osvaldas Čiukšys© 10
  11. 11. Team formation (2) • Small and flexible • Knowledgeable and well informed • United: team spirit • Resourceful and creative • All necessary areas well represented • Team members know their roles and functions Business Negotiations, Osvaldas Čiukšys© 11
  12. 12. Seating (1) window You Opponents window BG GG Ch N HL Sw Sw HL Ch N GG BG Business Negotiations, Osvaldas Čiukšys© 12
  13. 13. window You Opponents window You BG + HL GG Ch N Sw Ch N Sw ?GG? 13 Business Negotiations, Osvaldas Čiukšys© Seating (2)
  14. 14. window You Opponents window GG + Sw + Ch N Ch N BG +HL ? 14 Business Negotiations, Osvaldas Čiukšys© Seating (3)
  15. 15. Seating (4) window You Opponents window HL+BG Ch N+GG+Swnp Sw HL Ch N GG BG 15 Business Negotiations, Osvaldas Čiukšys©
  16. 16. window You Opponents window You You Opponents Separate room for negotiating team Ch N Ch N BG + HL GG Sw + GGBG 16 Business Negotiations, Osvaldas Čiukšys© Seating (5)
  17. 17. Informal meeting You Opponents Ch NCh N Sw GG Sw HL BG HL GG BG 17 Business Negotiations, Osvaldas Čiukšys© Seating (6)
  18. 18. 1. Propose and agree the goal of the meeting 2. Announce (correct) the agenda and issues to be discussed 3. Shortly summarize (make comments and corrections) the situation and already agreed issues 4. Invite your opponents for comments, correct them Business Negotiations, Osvaldas Čiukšys© Negotiations: opening Take the initiative: 18
  19. 19. Possible agendas (1) 1. Push: start with important issues 2. Procrastinate: you begin with less important issues 3. Assemble: put together groups of issues both parties are likely to agree, forming packages for agreement 4. Classify: classify issues like financial on one side, and all other issues on the other 5. Sort: review all issues to be negotiated and decide if there are any that can be settled quickly Business Negotiations, Osvaldas Čiukšys© 119
  20. 20. Possible agendas (2) 6. Select: you suggest the order of issues to be discusses. Never agree to this formula: who picks up an issue to be discussed gets strategic advantage 7. Consult: you agree agenda prior to it and then revise the schedule and announce it 8. Concede: put some issues on the table for discussion you willing to concede. Because of your concessions you can require and anticipate concessions in return 9. Soften: make concessions not important for you on the first stage . When the opponents are comforted negotiated the real deal 10. Appetizers: start with easy issues to agree on.” If we did it so easy, lets do this one as well “ Business Negotiations, Osvaldas Čiukšys© 20
  21. 21. Negotiations: a good start 1. Pay attention to trivial information “I hope things go well this time”, “We reserved the hotel for two days”, “We’ve been having a good year, but stock has increased since…” 2. Create a diversion Make some jokes. Build self confidence, test the atmosphere. If they feel nervous or want to start immediately, expect hard negotiation… 3. Be diplomatic Introduce the issues in relaxed manner, even if you intent to attack and play tough later on. Do not provoke immediate back fire Business Negotiations, Osvaldas Čiukšys© 21
  22. 22. Making the First Offer • Making the offer first you do the anchoring • Setting the rules – taking the initiative • Your figures and arguments are first to be discussed • It puts the opponent into “must react” position Explain: why you making this offer but not what you are offering or proposing Business Negotiations, Osvaldas Čiukšys©
  23. 23. Shaping up a proposal Separate THE EXPLANATION phase and THE JUSTIFICATION phase If you can meet the following conditions 1…, 2…, 3…, n…, we will be prepared to consider offering the following: 1…, 2…, 3…, n….. Our reason for doing so are a…, b…, c…, …z... Business Negotiations, Osvaldas Čiukšys© 23
  24. 24. Prepare the order of your arguments Finally, come with your “sledgehammer” arguments which will have the strongest impact on the solidity of their position Secondly, present the weaker arguments. They are weaker but it doesn’t mean that they are not justifiable. Make as much of them as you can. Let them be tired to work on it First come strong arguments. These put the others side on the defensive. You show your seriousness Business Negotiations, Osvaldas Čiukšys© 24
  25. 25. Make your arguments stronger • Use comparisons • Refer to best practices • Use expert opinion • Use presentations, statistics , reports, studies etc. • Visualize your argumentation: presentations, charts, samples etc. People believe what they see… Business Negotiations, Osvaldas Čiukšys© 25
  26. 26. Making concessions (1) Concessions 10 2 2 2 2 2 10 1 2 3 4 10 4 3 2 1 • Start from small, not important concession and finish with bigger one • Trade your concession for a bigger one from your opponents • Package: “ we are ready to give up on issue A if you agree to give us B and C” Negotiation rounds 26 Business Negotiations, Osvaldas Čiukšys©
  27. 27. Making concessions (2) 1. Make your possible concessions list (invent and create as more as possible) 2. Group them to minor, less and really valuable to you and your opponents 3. Make the list of possible concessions you want to receive from your opponents and group them 4. Shape up your proposals in packages and make a trade-offs: exchange the package made of lower value concessions to one of real importance Business Negotiations, Osvaldas Čiukšys© 27
  28. 28. Types of questions in negotiations 1. Open questions: designed to get more information and require explicit answers 2. Probing questions: more specific sort of open questions which require detailed explanation 3. Closed questions: requires short answers of “yes” or “no” type Business Negotiations, Osvaldas Čiukšys© 28
  29. 29. Open questions and phrases (1) Most important and effective tool to control negotiation (their subject and time frame) are open questions (or phrases): “What do you think about the possibility to change your delivery terms ?” “Can you change your delivery terms?” Business Negotiations, Osvaldas Čiukšys© 29
  30. 30. Open questions and phrases (2) Examples: • What do you think about our proposal? • Please tell us more about the strong sides of your proposed payment terms • Could you elaborate a bit more on the delivery terms? • Would you be so kind to explain your idea about the solution to this problem? • Correct me if I’m wrong • The most important thing for me that everything is done correctly and fairly • We would like to settle it in accordance with best common practice and experience • Can I ask a few questions to see if my understanding and information are correct? Business Negotiations, Osvaldas Čiukšys© 30
  31. 31. Open questions and phrases (3) “Let the doors stay open” examples: • Let us say that we agree with that proposal, what would be your suggested way to proceed? • Is there any other information you feel I should have at this time? • Whys is that so important to you? • Let me get back to you on this later • Please help me understand the purpose of your request/offer Business Negotiations, Osvaldas Čiukšys© 31
  32. 32. • When you say “approximately”, what do you mean by that? • What else would that entail? • How specifically would that work? • If we meet your requirements what exactly would be your offer to us? • If speaking more specifically, what do you mean by saying…? • You said that your offer is… It seems that your current positions is… Probing questions Business Negotiations, Osvaldas Čiukšys© 32
  33. 33. • Do you agree? • Are you saying we could by-pass that? • Is that always the case? • Am I correct? • Do you want me to close the issue? • Are you happy with this? • Should we proceed further? Closed questions Business Negotiations, Osvaldas Čiukšys© 33
  34. 34. Expressing and sharing emotions (1) Speak about your emotions during negotiation process. Use it to create constructive and controllable environment Examples: • We had a good start. That makes me optimistic! • We are doing not very well this time. Are your of the same opinion? What are the reasons your think? • I feel exhausted by this issue. Should we change for something better? • I am so happy we agreed on this. It makes me think we will move easier now. Don’t you think so? • Should we break for a coffee? I think we deserved it both! Lets discuss it informally… Business Negotiations, Osvaldas Čiukšys© 34
  35. 35. Expressing and sharing emotions (2) React immediately to what is unacceptable or undesirable for you: take the control back Examples: • Sorry to interrupt you, but I can’t understand the reasoning behind it • I feel uncomfortable: I can’t see enough logic behind these arguments • I am an open person and I should tell you my opinion about what I just heard • This made us a bit nervous. Could we go back and look to the situation from a different perspective • It makes me feel bad if we can’t agree on it. Let us try to focus on it later and finish our agenda Business Negotiations, Osvaldas Čiukšys© 35
  36. 36. Controlling the course of negotiation  Right questions help you control the overall situation of negotiation  Quick reaction and responsiveness enables you to take over the control of situation Business Negotiations, Osvaldas Čiukšys 36
  37. 37. Specifics of International Negotiations In international negotiations your skills to identify and understand cultural differences are essential for choosing the right strategy There are more then 200 different national cultures in the world Richard D.Lewis separated them into 3 main cultural types: - Multi active - Linear active - Reactive 37 Business Negotiations, Osvaldas Čiukšys©
  38. 38. Cultural types (1) 38 Business Negotiations, Osvaldas Čiukšys©
  39. 39. Cultural types (2) 39 Business Negotiations, Osvaldas Čiukšys©
  40. 40. Multi active Linear Reactive Family Speaks all the time Facts Speaks to the point Intuition Polite Hierarchy Many jobs at once Planning Focused to one task Honor Avoids straight contact Human relations Not planning Results Consistent and planning Relations Listens all the time Emotions Permanently shows emotions Punctuality Straight but polite Duty and responsibility Hides emotions Rhetoric Has many excuses Keeping a word Sometimes emotional Harmony Not confronting Loyalty Frequently interrupts or stops discussion Trust in institutions Does not like to loose a face Reputation Diplomacy dominates the truth Emotions dominate facts Trust in Law Tries not to interrupt when listening Can not loose the face Flexible truth Main thing is truth Never interrupts Brazil, Chile, Argentina , Mexico Germany, Switzerland, Luxembourg, Great Britain Japan, China Vietnam, South Korea Cultural types (3) 40 Business Negotiations, Osvaldas Čiukšys©
  41. 41. Language Behaviour Values Mentality Decision making process In International Negotiations very important to understand the other side: 41 Business Negotiations, Osvaldas Čiukšys©
  42. 42. Barry Tomalin, Mike Nicks “The World’s Business Cultures. How to Unlock Them” CULTURAL PROFILE 1. COMMUNICATION STYLE Direct In direct 2. WORK STYLE Formal Informal 3. DISCUSSION STYLE Quick Slow 4. BUSINESS ATTITUDE Progressive Traditional 5. MANAGEMENT STYLE Horizontal Vertical 6. BUSINESS RELATIONS Human relations Work 7. DECISSION MAKING Individual Collective 8. BASIS FOR DECISSION MAKING Facts Instincts 9. TIME ATTITUDE Planned Flexible 10. WORK/LIFE BALANCE Living to work Working to live Business Negotiations, Osvaldas Čiukšys©
  43. 43. UNITED STATES - CULTURAL PROFILE 1. COMMUNICATION STYLE Direct In direct 2. WORK STYLE Formal Informal 3. DISCUSSION STYLE Quick Slow 4. BUSINESS ATTITUDE Progressive Tradicional 5. MANAGEMENT STYLE Horizontal Vertical 6. BUSINESS RELATIONS Human relations Work 7. DECISSION MAKING Individual Collective 8. BASIS FOR DECISSION MAKING Facts Instincts 9. TIME ATTITUDE Planned Flexible 10. WORK/LIFE BALANCE Living to work Working to live Business Negotiations, Osvaldas Čiukšys©
  44. 44. BUSINESS IN USA Ways to success Ways to failure Positively and clearly explain who you are and what you do Speak in calm British manner and be sarcastic Communicate and be visible Make statements about gender, race or religion Implement any project in time and in line with its budget Tell that Americans lack a sense of humor Use free and friendly way of communication Do not tell if there is a threat of the project being late Be interested, correct the proposals but do not refuse them Get out for a beer during lunch break Icebreakers Icebergs The glory of their country Start discussion on US foreign policy Good willingness of Americans Criticise Vietnam war The best American movies and television Jokes about sex Business Negotiations, Osvaldas Čiukšys©
  45. 45. GERMANY - CULTURAL PROFILE 1. COMMUNICATION STYLE Direct In direct 2. WORK STYLE Formal Informal 3. DISCUSSION STYLE Quick Slow 4. BUSINESS ATTITUDE Progressive Traditional 5. MANAGEMENT STYLE Horizontal Vertical 6. BUSINESS RELATIONS Human relations Work 7. DECISSION MAKING Individual Collective 8. BASIS FOR DECISSION MAKING Facts Instincts 9. TIME ATTITUDE Planned Flexible 10. WORK/LIFE BALANCE Living to work Working to live Business Negotiations, Osvaldas Čiukšys©
  46. 46. BUSINESS IN GERMANY Ways to success Ways to failure Show productivity and punctuality Be disorganized and ignore existing rules Be open and straight Promise and do not deliver Do what you say Do everything without consulting Learn the rules and follow them By pass your direct manager Respect hierarchy Be too familiar in communication with your colleagues Icebreakers Icebergs Be interested in German and European issues Too early talk about personal life Spent your holidays abroad, preferably with Germans Germany’s role in World War II Sport, especially football Remember that England outscored Germany 5:1 in qualification of World Cup 2001 Business Negotiations, Osvaldas Čiukšys©
  47. 47. GREAT BRITAIN - CULTURAL PROFILE 1. COMMUNICATION STYLE Direct In direct 2. WORK STYLE Formal Informal 3. DISCUSSION STYLE Quick Slow 4. BUSINESS ATTITUDE Progressive Traditional 5. MANAGEMENT STYLE Horizontal Vertical 6. BUSINESS RELATIONS Human relations Work 7. DECISSION MAKING Individual Collective 8. BASIS FOR DECISSION MAKING Facts Instincts 9. TIME ATTITUDE Planned Flexible 10. WORK/LIFE BALANCE Living to work Working to live Business Negotiations, Osvaldas Čiukšys©
  48. 48. BUSINESS IN UK Ways to success Ways to failure Be with your work on time, do not dramatize your achievements Be proud on your achievements Be on time to any meeting Speak an hour on your presentation If problem arises – ask for advice, do not risk to miss the deadline Phone to people on business matters at evenings or weekends At the end of the meeting ask what are the exact expectations from your work Let somebody down when it is said that you are a trustful person Go for some bear or sports after office hours Behave patronisingly with women Icebreakers Icebergs British weather Religion, politics and migration Real estate prices – but never ask how much is worth a property of your opponent Salary and personal wealth Complaints about traffic, parking and public transportation “Why Brits send their parents to nursing houses?”
  49. 49. RUSSIA - CULTURAL PROFILE 1. COMMUNICATION STYLE Direct In direct 2. WORK STYLE Formal Informal 3. DISCUSSION STYLE Quick Slow 4. BUSINESS ATTITUDE Progressive Traditional 5. MANAGEMENT STYLE Horizontal Vertical 6. BUSINESS RELATIONS Human relations Work 7. DECISSION MAKING Individual Collective 8. BASIS FOR DECISSION MAKING Facts Instincts 9. TIME ATTITUDE Planned Flexible 10. WORK/LIFE BALANCE Living to work Working to live Business Negotiations, Osvaldas Čiukšys©
  50. 50. BUSINESS IN RUSSIA Ways to success Ways to failure Be patient Criticize Russia Be open and hard during negotiations – Russians respect power Agree to proposed compromise very easy Respect Russian calendar: your proposed meeting time can differ from theirs Show that your team is not united Pay attention to hierarchy – it is important to please higher authority Refuse to analyse what is behind a nice facade Build relations: Russians build their business on personal relations Use permanent pressure tactics Icebreakers Icebergs Russian culture, literature and art Chechnya Russian achievements Russian critics (even Russians are criticizing their country) Russian great role in World War II Communist period in their recent history Business Negotiations, Osvaldas Čiukšys©
  51. 51. Respect to the culture of the opponent is the key to success 51 Business Negotiations, Osvaldas Čiukšys©
  52. 52. 52 QUESTIONS ?
  53. 53. 53 THANK YOU!

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