Key aspects to effective negotiations are:
- Finding interests − why they/we want what they/we want
- Taking positions − how we would address our own interests (defining our negotiating envelope)
- Creating options − to address both parties' interests
Now we need a way to objectively and fairly assess those options.
Negotiators open with their subjective, self-satisfying competing positions on an issue. They Probe to learn more about the interests that underlie the other party's positions. They employ creativity to address those interests. But still their proposed solutions are not satisfactory to both sides.
Usually this happens when
- One side is relying on an imaginary measurement of success; or
- One side is relying on a standard on which the outcome will be measured; or
- Multiple parties are relying on different standards to measure outcomes.
Often, your counterpart will not offer any legitimate or objective criteria. During the Exchange Stage or here in the Bargain Stage, share your legitimate or objective criteria to establish the measuring point for your issue. If there are conflicts, follow best practices below to determine a measuring point both parties can agree to.
Three Primary Approaches
- Legitimacy – a catch-all category for approaches that are reasonable, but not necessarily data-based, and are from an unbiased source
- Objective Criteria – data computations that are reality-based
- Independent Standards – index or guideposts provided by an unbiased source provided without reflection on this specific situation
1. What is legitimacy?
Legitimacy is used to describe that which is deemed acceptable because it makes good sense.
It is often the perception of legitimacy that carries weight, not the actual finality of it. Legitimacy sources are:
- Widely accepted because they are market tested, time tested, or user tested.
- Reasonable, genuine, justifiable or logical.
- Not always written – can be tradition, community practice, cultural norms, RFP specifications, schedules, etc.
- And, sound official. They are inherently subjective, and have a perception of carrying weight (but may not actually do so).
Examples of perceived legitimacy:
- Industry standard terms and conditions
- Past agreements
- Company policy
- Or statements that sound legitimate: "We have never done that before"; "Everyone has always agreed to this"
- Written documents, such as price/rate schedules and specifications
- Industry practices
- Tradition and community practice
Using legitimacy can sound official and quickly make the other side comfortable that
- The issue is not negotiable, or
- At least that you have provided a fair assessment, or
- Uncomfortable with their more subjective position.
The power of the written word : Standard terms and conditions, company policies, and price schedules are often perceived as more legitimate when they are written than if you shared the spoken word. They have a tendency to make things non-negotiable without you having to say "No."
2. What are objective criteria?
Objective criteria describes that which is based on data – that which is computed as a result of surveys, research, testing, mathematics, analysis, sight and other senses. Unlike legitimacy sources that are inherently subjective, these are objective support for a position. They are:
- Based on data
- Reality/fact-based, not position-based
- Results of surveys, research, mathematics
- Subject to challenge of the underlying analysis, but have a legitimate data basis
Examples of objective criteria:
- Market value
- Replacement cost
- Should-cost analysis
- Customer Preferences
Objective criteria are always fact-based. Arguing about the facts does not change the facts. Using objective criteria is critical when interests are in conflict because it grounds the discussion in reality.
3. What are independent standards?
Independent standards are measures against which options can be assessed by looking at rules, data points, guidelines, specifications, laws and other determinations decided by neutral authorities. Independent Standards are typically:
- Determined by impartial, unbiased person or bodies, most often without any relation to the issue under negotiation.
- Well recognized as a reliable source that has withstood the test of time – like a court ruling/precedent, industry, media, government
- Published, providing the perception that they are more reliable
- Measurable, such as is it allowed by law, does it exceed the rate, will it meet the safety specifications, it can't exceed the environmental impact level, etc.
Examples of independent standards:
- CDI (Chemical Data Incorporated; plastics/resins), IHS
- ICIS (chemicals, energy), other commodity prices
- World Trade Organization (WTO) rulings
- CPI (Consumer Price Index)
- Nielsen, IRi, SPINS
- Government economic forecasts and other financial indexes
- Brent, WTI, WCS (crude idecies)
- Expert opinion such as Subject Matter Experts (SME)