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By Guido Stein and Kandarp Mehta

Whether you’re negotiating solo or with a team, it is crucial to have a smart approach to get the best deal in every situation. In this article, the authors focus on the significance of team negotiation toward value creation as well as the imperatives to making collaborative effort yield desired outcomes.

 

A participant in a negotiation course once confessed that he hated to negotiate in front of his wife. When asked why, he said he found it difficult to close the negotiation. For example, once he was negotiating to buy a used car. Both he and his wife had agreed that €15,000 was a fair price for the car. However, the seller did not want to go below €16,500. “If I were negotiating alone, I would have agreed on 16,500. But I generally find it difficult to concede in the presence of a family member. I couldn’t concede in that negotiation and we ended up abandoning it. Whenever I am with my father, my brother or my wife I become a bit adamant. Maybe I don’t want to look weak in front of them,” the participant said. Negotiating in a team involves more complexities due to the special interpersonal nature of teamwork. Some of us are more comfortable negotiating as part of a team while some of us are more comfortable negotiating solo.

 

Impact of Team Negotiations on Outcomes

In a collaborative negotiation situation, teams actually help increase the joint gain. In a nutshell, teams should achieve better results overall in negotiations.

Let us try to understand a team as a negotiating unit by answering two questions: 1)What happens when an individual negotiates as part of a team? 2) What happens when an individual negotiates opposite a team? In a study led by Leigh Thompson from Northwestern University in Illinois, it was found that teams negotiate better in almost all situations. Not only that but teams were also a better counterpart than a solo negotiator. When teams negotiate with individuals in competitive or distributive scenarios, teams generally create greater value. However, individuals are still better off negotiating opposite a team than negotiating opposite another individual. In other words, in a competitive scenario, teams help not only to get a better result than their counterpart but they also help their counterpart get a better result. On the other hand, in a collaborative negotiation situation, teams actually help increase the joint gain. In a nutshell, teams should achieve better results overall in negotiations.

There are two main reasons why teams could create greater joint profits: better information and better control. When teams negotiate, they have the advantage of a better network, better information and better analysis. With more members on the team, teams can come up with better ideas because they have a greater perspective. Another reason why teams create greater joint profits is their control over the negotiation process. Teams can theoretically have better control over the process because teams have more tactics available to them. Teams can use tactics such as good cop / bad cop, which is generally difficult in a solo negotiation.

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Challenges in a Team Negotiation

However, team negotiations do have several challenges. Below are some challenges and strategies to overcome them.

Lack of Coordination

One of the biggest problems with negotiating in a team is a lack of coordination. Teams may lack coordination for various reasons but the major reason is generally internal conflict. That is why it is extremely important to avoid internal conflict in a team by carefully studying sources of potential conflict even before the team is formed. There are mainly two types of conflicts that affect teamwork: 1) interpersonal and 2) task-related. It is very important to make sure that a negotiating team is a cohesive unit. Interpersonal conflicts are difficult to foresee and hence difficult to avoid. Most interpersonal conflicts are the result of strong emotions. The best way to avoid emotional hiccups in a team is to choose the team members well. It is also important for negotiating teams to spend some time together before the members start negotiating as a team. Some organisations overlook the impact of teams on negotiation performance and so fail to give the team members sufficient warm-up time together to develop a sense of camaraderie.

If team members negotiate with conflicting goals in mind, this will not only harm the unity of the team but also result in poor team performance.

Task-related conflict can be avoided in two ways. First, by having a high degree of functional homogeneity on the team. If the team is homogeneous in terms of the functions and expertise of its members then the members understand each other’s perspectives much better. However, this may work only if the negotiation is limited in terms of functions. In many complex negotiation situations, a team needs experts from different fields. On a negotiating team, it is very common to see representatives of finance, marketing, operations and human resources negotiating together, representing the organisation. To avoid task-related conflict on a multifunctional team, it is important to give the team some grooming time. This is essential for team members to understand each other’s objectives as well as priorities. It is also important to use this mutual understanding to create common ground for negotiation. If team members negotiate with conflicting goals in mind, this will not only harm the unity of the team but also result in poor team performance.

 

 

Poor Control of the Process

Another problem with team negotiations is that they tend to get a bit off-track and eventually teams end up spending too much time at the negotiating table. The two graphs on the right show how information sharing is spread across the period of negotiation between team negotiations and individual negotiations.

As shown in the graphs, it is difficult to share information in team negotiations. There are phases with sudden increases in information shared. As a result, it is very important to keep track of the information shared. In information sharing during a team negotiation, we observe kinks such as the ones we have seen above because, when teams negotiate, a lot of time is spent simply warming up. Later on, almost all the team members start chipping in with information and a lot of information is shared. Quite often it is difficult to keep track of all the information that is shared. The best way to avoid such an information overload is to manage the process through role assignment.

 

 

 

Role Assignment to Manage Information

To have better control over the negotiation process, it is important to assign roles for negotiation. Assigning roles will help the negotiating team achieve two objectives:

1) managing the information and 2) managing the process. In a way, managing the information and managing the process are interrelated. Poor management of the sharing and receiving of information leads to poor management of the negotiation process, which eventually results in a bad deal. Ideally, roles should be assigned in two ways: 1) functional assignment and 2) process assignment.

Functional assignment is very important in a multifunctional negotiating team. In a joint-venture negotiation where issues related to human capital, the valuation of the company and the product portfolio need to be decided, it is advisable to have an expert on each area at the negotiating table. This will ensure that every important aspect that needs to be shared or explored is taken care of.

Process assignment means assigning each and every team member his or her role at each step of the negotiating process. For example, assigning someone to establish the contact, somebody to frame the negotiation or somebody to manage offers and concessions. Process assignment has two important advantages. First, no single member of the negotiating team has the pressure of taking the initiative at each and every step of the negotiation. Second, it makes everyone better synchronised with the negotiation process. It is very important for each member of the negotiating team to know his or her role in the negotiation. Clarification of each person’s role in the negotiation process involves clarity on two aspects: 1) What information do I need to explore or collect? 2) What is my role at each step of the negotiation process?

 

Collective Preparation

From the previous paragraph it should be clear that a negotiating team needs a great deal of synchronisation. To address the issues related to the assignment of roles, it is absolutely essential that teams prepare together. Preparation for a team negotiation should ideally be managed over two phases: 1) individual preparation and 2) team preparation. During the individual preparation phase, an individual must understand his or her particular objective and needs in the negotiation. It is important to understand how the negotiation is likely to affect the individual’s personal objectives. Once individual preparation is done, every individual should get together and prepare for the negotiation together as a team. Prior work on individual preparation will help the team focus on issues that need greater clarification.

 

Caucus

In a complex negotiation, quite often the team members confront a situation where, all of a sudden, they need to deal with information or issues they had not foreseen.

Another important part of a team negotiation is the caucus. The caucus is when a team takes a private break from a negotiation in order to assess the negotiation’s progress and check its effectiveness. Caucuses are important. Many teams, however, do not request caucuses because they assume that this would be seen as a sign of weakness. That is why it is important to convey in advance that the team will use caucuses to assess information and the negotiation’s progress. Caucuses are also used to deal with unforeseen situations. In a complex negotiation, quite often the team members confront a situation where, all of a sudden, they need to deal with information or issues they had not foreseen. During a caucus, it is absolutely important to maintain strict discipline and not get distracted. It is also important to summarise all the important issues discussed before returning to the negotiating table. It is not just important to manage your own caucuses – it is equally important to manage your counterpart’s caucus. Imagine you have been doing very well in the negotiation and you have a great feeling about it. Suddenly your counterpart asks for a caucus. The biggest risk in this situation is to lose all the hard work done so far. That is why, before the counterpart’s caucus request is granted, it is important to reach a consensus over what has already been agreed upon. It is equally important to decide the time limit for the caucus. If the time limit is not set properly, there is a big risk of losing focus.

 

 

 

 

 

Conflict During the Negotiation

Caucuses also help deal with any conflict that arises during the process of negotiation. At times negotiators disagree on a certain issue during the process and this may lead to conflict. To resolve a conflict that arises, the following steps should be taken.

1) Caucus: if possible, it is always better to avoid continuing the negotiation if members of the same team are in conflict with each other. The first measure to resolve the conflict should be to take a caucus and resolve the internal conflict. An internal conflict in the team not only affects the team’s focus on the negotiation but may also have a disastrous effect on an employee’s commitment to the negotiation.

2) Conflict resolution system: to avoid conflict, it is important to prepare as a team and also set up a system to resolve conflicts that may arise in a negotiating team.

 

Leader

Last but not least, every negotiating team should have a leader. As we have established in previous chapters, negotiation is a skill and, in a team negotiation, it is important to make sure that each member’s skill is put to the best possible use. However, it is possible that, in a team negotiation, each member might get overwhelmed by a few particular issues and so it is important to have someone in charge of keeping the overall picture in focus all the time. It is also important to make sure that there is an approving authority whenever crucial decisions are to be made. That is why each negotiating team should appoint a leader – a leader who can keep the team intact, who can take control whenever needed and who can make decisions about the negotiation.

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About the Authors

Guido Stein is Academic Director of the Executive MBA of Madrid, Professor at IESE Business School in the Department of Managing People in Organisations and Director of Negotiation Unit. He is partner of Inicia Corporate (M&A and Corporate Finance).

Kandarp Mehta is a PhD from IESE Business School, Barcelona. He has been with the Entrepre-neurship Department at IESE since October 2009. His research has focussed on creativity in organisations and negotiations. He frequently works as consultant with startups on issues related to Innovation and Creativity.

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