Negotiating with Strategy

In order to conduct negotiations strategically, it is important to consider some essential aspects. For this purpose, a needs analysis is presented first, since needs are the basis for motives (conscious and unconscious), as well as for consciously formulated goals. Then, different power bases are systematically presented. Subsequently, the formulation of goals and demands and how to deal with them are addressed. After that, essential aspects of a character analysis are described. Another point, which is only touched on in its basic outlines, is verbal and non-verbal communication. Finally, power tactics and techniques of influence are described.

Before addressing the information base, power bases should be discussed. For this purpose, the power base typology by Yukl (2013), which is based on the work of French and Raven (1959) and is also excellently described by Weibler (2016), is introduced. Specifically, a distinction is made between positional power (legitimate power, reward power, coercive power, information power, and ecological power) and personal power (referent power and expert power).

Legitimate power is authority that is conferred on one from outside, such as the office of a judge or a police officer.

Reward and coercive power can be obtained legitimately or illegitimately. For example, teachers have the power to reward or punish their students.

Information power involves control over information, i.e., access to and dissemination of it.

Ecological power describes the possibilities to shape physical, organizational, and technological circumstances according to one's own wishes and indirectly influences other persons.

Referent power refers to the way a person affects others and whether others have a positive basic attitude towards the person.

Expert power refers to the power that someone has because of their expertise and on which others depend. This can also be due to credentials such as being a licensed lawyer or tax advisor.

When preparing negotiations, each of these individual points needs to be thought through. However, not every power base can be used equally. In corporate transactions, the last four points are in the foreground.

Control of information involves what data is made available to the other party, when, and in what way.

Ecological power can be used, for example, by specifying the location and time frame of negotiations.

If a person appears friendly (referent power), one is more likely to do a favor and subconsciously seeks affirmation from them. This power base is closely linked to extraversion, a character trait, which is described further below.

information base for the negotiations. In M&A negotiations, this may be, for example, good environmental and company analyses and business valuations according to various methods.>Expert power can be exercised in particular by creating a good

A digression on negotiations with superiors follows (Weibler, 2016):

Influence can be achieved through

• rational argumentation,
• reference to applicable values and norms,
• stimulating presentation,
• persistence,
• advice/consultation,
• influence through coalition building, and
• special kindness in pursuing goals

These influence strategies have different degrees of effectiveness and will not be explained in detail. Perhaps this digression will help some in, for example, salary negotiations.

For a character analysis in negotiations, the Big Five model of personality can be used to analyze each participant (Costa & McCrae, 1992). The Big Five model distinguishes:

• neuroticism
• extraversion
• openness to experience
• agreeableness
• conscientiousness

Neuroticism means that someone tends to emotional reactions (joy, surprise, fear, anger, disgust, sadness, and contempt). In negotiations, unwanted impulsive decisions can be made, which harms the negotiating party.

Extraversion, more commonly known as an adjective under extroverted, means that someone is confident and dominant, but also friendly and sociable. In negotiations, this character trait is very helpful in asserting one's own demands.

Openness to experience encompasses much more than interest in the external and internal world, namely a strong imagination and thus the ability to find unconventional solutions. In negotiations, it can have positive effects, but a tendency to unrealistic (possibly also spontaneous) proposals harms one's own position.

Agreeableness can be described as helpfulness, good-naturedness, and benevolence. However, if the person tends towards selflessness, unselfishness, and submission, inappropriate concessions may be made during negotiations.

Conscientiousness means that a person works in a goal-oriented and very thorough manner out of their own motivation. This is very helpful for the preparation of the negotiations, but also during the negotiations.

The character analysis should be prepared in writing for each person involved in the negotiations. Often even an overview is helpful.

For your own side, an extroverted personality who is not neurotic but acts conscientiously represents the optimal negotiator. If necessary, an external person should lead the negotiations.

In the case of the other party, an attempt can be made to specifically address and involve agreeable people who tend to have spontaneous ideas (openness to experience). If the negotiator is neurotic, this should be dealt with with professional distance, and the person should not be exposed to a high stress level.

In the international context, a cultural analysis of both negotiating parties can be carried out. Hofstede (2001) and Hofstede and Minkov (2010) specifically distinguish:

• power distance
• uncertainty avoidance
• collectivism vs. individualism
• masculinity vs. femininity
• short-term vs. long-term orientation
• indulgence vs. restraint

Power distance stands for the expected and (unconsciously accepted) inequality within a society. In relation to negotiations, attention should be paid to a corresponding authoritarian or sociable demeanor.

Uncertainty avoidance describes the degree of accepted uncertainty or norm deviation. In particular, the degree of risk aversion (risk-averse, risk-neutral, and risk-loving) or deviation from predefined plans (in terms of content or time) can be an expression of uncertainty avoidance.

Collectivism stands for a strong group orientation, even if one has to step back oneself, while individualism is strongly oriented towards a benefit/cost ratio. During negotiations, inappropriate behavior can cause an affront.

Masculinity stands for competition, decisiveness, and seeking success, while femininity stands for caring, equality, and sympathy. In negotiations, it is important to accurately assess the customs of the other side.

Short-term vs. long-term orientation refers in particular to the target horizon. In negotiations, it is significant to assess the target horizon of both your own and the other party, especially regarding potential conflicts.

Indulgence vs. restraint can be understood as a kind of self-control in satisfying one's own needs. With high indulgence, a business lunch and a joint outing in the context of negotiations will have a completely different effect than with a restrained culture.

The goal of cultural analysis in the context of negotiations is to understand one's own culture, the foreign culture, and the differences, and to react appropriately to them. There are general studies that analyze nations accordingly and provide a good starting point. Here, too, the results should be recorded in writing and expanded during the negotiations.

Various power tactics (Wunderer, 2011) can be used during negotiations:

• Information control
• Control of procedures, rules, and norms
• Relationship management
• Impression management
• Situational control
• Pressure to act
• Timing

You determine which information you will pass on, when, and in which form. Regarding the other party, you should watch out for distorted or false information (information control).

By controlling procedures, rules, and norms, you take a dominant position in negotiations. If you do not have the upper hand yourself, you can at least insist on an even distribution of the framework conditions.

Relationship management means that you consciously use existing relationships. In a company demerger, for example, essential information can be gained through good relationships with employees. Also, contact with external experts and referring to them increases your own power position.

Impression management has an impact especially on reputation. Are you perceived as serious and professional? Do not let yourself be deceived by the other side. Especially with people who tend towards agreeableness (helpfulness), impression management can be effective.

Situational control can be seen in connection with negotiations through the selection of the venue, but it encompasses more. Basically, it's about the question: "Who sets what for whom?" This can include organizing water bottles or a taxi.

Pressure to act can be triggered by, for example, artificial scarcity. You can arbitrarily time-limit an offer in negotiations or refer to other possible contracting parties.

Timing means that you or the other party try to use points in time to your respective advantage.

Another partly overlapping typology of influence strategies in the sense of "principles" has been written by Cialdini (2006):

• Principle of reciprocity
• Principle of scarcity
• Principle of authority
• Principle of liking
• Principle of social proof
• Principle of consistency

The principle of reciprocity states that when gifts and favors are given, even involuntary ones, an inner need arises to reciprocate them. Your negotiating partner gives in on an insignificant point for you but pressures you to give in on a much more important aspect.

The principle of scarcity states that we attribute high value to (apparently) scarce goods. Scarcity can also be artificially created, such as with time-limited offers. Referring to other potential negotiating partners also creates this psychological effect.

People tend to hold people with an authoritarian appearance, such as a person in uniform, in higher esteem and are more likely to accept instructions from them. Referring to valuation reports and reputable institutions such as the World Bank, national statistical offices, etc., is therefore important.

Liking unconsciously creates the desire to please the person and act accordingly. Be aware that not every friendly demeanor from the other side comes from the heart and do not give in unnecessarily in negotiations.

Social proof is a psychological effect. Especially in times of uncertainty, we tend to orient ourselves to others. Referring to well-known but theoretically unfounded business valuation methods, such as EBITA multiples, as a basis for company valuation is an example.

The principle of consistency states that we do not like to revise preliminary decisions. Often, insignificant and uncritical aspects are discussed during negotiations. The more time and effort we have invested, the harder it is for us to break off unfavorable negotiations.