Project Management Institute

Five things every project manager should know about negotiation

President, Craddock & Associates, Inc.

Introduction

How prevalent is negotiation? “All of us negotiate many times a day.” (Shell, 1999, p 6). Indeed, Shell noted that most people begin negotiating at a very early age. This raises several questions, starting with: “What is negotiation?” Although there are multiple opinions, many formal definitions of negotiation have similarities; consider the following definitions:

  • “the process of communicating back and forth for the purpose of reaching a joint agreement about differing needs or ideas” (Acuff, 2008, p 6)
  • “a process by which we attempt to persuade people to give us something we want in exchange for something else” (Kublin, 1995, p 18)
  • “a process of potentially opportunistic interaction by which two or more parties, with some apparent conflict, seek to do better through jointly decided action than they could do otherwise” (Lax and Sebenius, 1986, p 11)

These definitions have some common elements. For example, negotiation is a process that involves two or more people using persuasive communications to satisfy their needs. Also, the people involved enter the negotiations because they believe they can satisfy their needs with a better solution than they could have obtained if they had acted alone.

Cellich and Jain (2004, p 25) offered two definitions, one similar and one different: (a) “a mechanical exercise of offers and counteroffers that leads to a deal” and (b) “sharing information and developing a relationship that may lead to a deal.” One explanation for the difference lies in the cultural lenses used to view the overall negotiation process. Another possible explanation is that the first definition reflects a tactical paradigm, whereas the second definition reflects a strategic viewpoint.

The underlying assumption for this paper is that soft skills, in general, and negotiation skills, in particular, are important for project managers. Skulmoski and Hartman (2010) summarized the research regarding the relative importance of soft skills for project managers compared with hard skills, such as scheduling. They subsequently investigated the soft skills needed for information technology (IT) project success; negotiation skills comprised one of the seven categories of the soft competencies they analyzed. In their study, the subset of negotiation skills included persuasiveness, marketing, and selling; consensus building; negotiation/facilitation skills; conflict and dispute resolution skills, and mediation/ “umpire” skills.

Project managers should know many aspects of negotiation; this paper briefly discusses five of them, starting with an obvious observation and ending with a perhaps not so obvious opinion.

The Five Things

Number 1

First, project negotiations are usually ongoing. The Shell quote at the beginning of this paper emphasizes the extent to which each of us is involved in various negotiations daily, which certainly applies to project managers.

The nature of a project manager's negotiations ranges from routine to unique. They are similar in that the basic purpose of negotiation is to resolve some conflict (frequently some form of resource allocation question); they are different in that a project manager's days are seldom routine at the micro level. The nature of the conflict or resources to be allocated can vary significantly. The project manager may also help to resolve other conflicts, including disagreements on how to resolve a problem.

A Guide to the Project Management Body of Knowledge (PMBOK® Guide)—Fourth Edition (Project Management Institute, 2008, p 450) defines a stakeholder as the “Person or organization (e.g., customer, sponsor, performing organization, or the public) that is actively involved in the project, or whose interests may be positively or negatively affected by execution or completion of the project.” In essence, stakeholders are the people with whom project managers negotiate, often multiple times a day.

However, not every communication exchange is a negotiation. Clampitt (2001) described three overall types of communication models. The Arrow model is used to send a message to someone without any need for feedback. One problem with the Arrow model is that the sender of the message doesn't know if the receiver actually received and understood the message. “Noise,” as a general term, is often the culprit in the incomplete receipt of messages. The Circuit model takes care of this incomplete reception problem by adding a feedback loop to the sender. “The fundamental assumption of Circuit managers is that Understanding = Effective Communication” (Clampitt, 2001, p 12). From a negotiation perspective, the assumption that understanding is the same as agreeing is a fundamental flaw.

Clampitt described the third communication model as a Dance, in which the communication between parties flows back and forth. Each party listens and responds in an attempt to persuade the other. The result can be different than the starting point of either party. In this context, negotiations follow the Dance model. While a project manager's communication can inform and even verify, negotiation involves the Dance.

Number 2

There are two basic types of negotiation. Many negotiators may be more familiar with a distributive negotiation, in which the typical task is to allocate something (usually a scarce resource like money or time). Distributive negotiations are also known as “win-lose” negotiations. This is because each party's objective is to maximize its share of the resource being allocated. If the amount of resources is fixed, the only way one party can win is if the other party loses. It is not possible for both to “win” the distributive negotiation. “Zero-sum” and “fixed pie” are other names for distributive negotiations.

The second type of negotiation is integrative and has two steps. First, the people involved in the negotiation attempt to identify additional items that could be added to the overall mix of items being negotiated. Think of this as a collaborative problem-solving or brainstorming activity. The objective of this first step is to expand the total potential value of the negotiation. It is possible that some of the additional items identified may have little cost or value to one party, but be prized by the other.

The second step of integrative negotiation is an allocation process, similar to the distributive resource allocation process in distributive negotiation. Ultimately, the allocation decisions in this second step are required to complete the negotiation. If the integrative negotiation was successful in expanding the total value during its first step, both parties will feel like winners in the second step.

Therefore, integrative negotiations are also known as “win-win” negotiations. This is because the expanded list of items being negotiated makes it possible for each side to claim items that have value This is because the expanded list of items being negotiated makes it possible for each side to claim items of value from that side's perspective.

“Collaborative,” “non-zero sum,” and “expandable pie” are other names for integrative negotiations.

Lewicki, Barry, and Saunders (2010) also defined a third kind of negotiation—accommodative negotiation. They characterized this as “lose-win” negotiation (p 113). Why would anyone deliberately plan to “lose” a negotiation so that the other party could “win?” The answer lies with the second of the two definitions provide by Cellich and Jain (2004), which were discussed in the introduction. It is both feasible and reasonable to enable the other party in a relationship to “win” in order to strengthen the long-term relationship and set the stage for future integrative negotiations.

Number 3

Project managers actually fulfill three negotiation roles. The obvious one is negotiator, in which the project manager is one of the parties or sides actively involved in the dispute resolution or resource allocation discussions. Each party should have identified its contingency or fallback position in case the negotiation fails and this should be done before the negotiation begins.

However, occasionally a negotiation stalls or breaks down. This is often referred to as an impasse. One option the negotiating parties have at an impasse is to just walk away from the negotiation and implement the contingency plan. A second option is to involve a third party in helping to resolve the impasse. There are two specific types of third-party interventions—mediation and arbitration.

A mediator seeks to facilitate the communication between the two negotiating parties so that they can resume productive discussion and arrive at a mutually acceptable solution. Communication is a key component of negotiation. Indeed, Fisher, Ury, and Patton (1991) declared that “Without communication there is no negotiation” (p 32). The mediator is likely to ask questions to generate dialogue. If the negotiation remains stalled, the negotiating parties each fall back to the contingency plans identified prior to the negotiation. The mediator is just a facilitator, not a decision maker who can impose his or her will on the negotiating parties.

An arbitrator, on the other hand, is a decision maker. The arbitrator listens to both sides and asks questions similar to those asked by the mediator. The difference here is that the arbitrator serves as a judge who, after receiving input from both parties, makes a decision regarding the issues being negotiated. Depending on the initial ground rules set by the negotiation parties, the arbitrator's decision may be mandatory or optional. If the arbitrator's decision is optional, the parties may choose to accept the decision or return to their contingency plans for a failed negotiation.

A project manager becomes a mediator whenever he or she intervenes in the negotiation between two stakeholders. The parties may ask the project manager for input. Perhaps a more likely scenario is that the project manager chooses, unilaterally, to become involved in an attempt to resolve the conflict. In this role, the project manager seeks to facilitate the communication between the two parties with the conflict to help them find common ground and a mutually acceptable solution. The project manager's involvement as a mediator stops there. It is still possible to be at an impasse even though a mediator has been involved.

The project manager may also transition to an arbitrator role, either as a result of being asked, or because the project manager feels the conflict will not be resolved otherwise. The project manager may also use the threat of arbitration as a mediation tool. For example, the project manager may say: “You resolve this conflict between yourselves, or I will make the decision that perhaps no one will like.”

Number 4

Project management provides a framework or approach for negotiation. The PMBOK® Guide describes five project process groups: Initiating, Planning, Executing, Monitoring and Controlling, and Closing. Similarly, negotiation has three overall process groups:

  • Planning
  • Engagement
  • Closing

As expected, planning involves the preparation for the negotiation with the other party. It encompasses both the initiating and planning process groups of project management. Engagement is the actual negotiation and it ends with either a mutually acceptable agreement or an impasse. Engagement aligns with the executing and monitoring and controlling process groups of project management. Closing is the work required to enact the mutually acceptable agreement.

Skulmoski and Hartman (2010) identified the negotiation sub-skills most needed by project process groups. Persuasiveness is the top sub-skill needed during project initiation. Consensus building is the top sub-skill for the remaining three project process groups, as defined by Skulmoski and Hartman: planning, implementation, and closeout. In addition, they identified conflict/dispute resolution as another top sub-skill for implementation (or execution).

Number 5

The last item involves project success and is perhaps more controversial than the preceding four. The proposition is that project success can be influenced by negotiation. How? The key is how project success is framed or defined. Dictionary.com defines success as “the favorable or prosperous termination of attempts or endeavors.” That sounds like a successful project.

Actually, the same project can be both a success and failure. Nelson (2005), Bourne (2007), and Shenhar and Dvir (2007) discussed project successes that were later considered failures and failed projects that were considered successes in retrospect. Nelson's focus was on IT projects, whereas Bourne and Shenhar and Dvir looked at a variety of projects.

Several authors have expanded the project success criteria using various approaches. Bourne (2007, p 3) identified three “pillars of project success.” The first of these pillars was labeled “delivering value.” The criteria in this pillar were cost, time, scope, and benefits realization (in essence, the triple constraint plus benefits realization).

Nelson (2005) proposed two broad categories —process-related and outcome-related —with three criteria in each. Nelson's process-related category was composed of time, cost, and product (in essence, the triple constraint). The outcome-related category included use, learning, and value. In a way, these outcome-related metrics represent stakeholder satisfaction.

Nelson's model was based on the results of 72 IT project retrospective analyses. Nelson also performed more detailed analyses on 15 of the 72 retrospective analyses. Specifically, Nelson asked five stakeholder groups (project manager, project team, users, sponsor, and top management) to assess the importance of the six success criteria. Stakeholders internal to the project team reported process-related criteria as the most important, whereas stakeholders external to the project team assigned the top importance to outcome-related criteria.

Project success results from the attainment of predetermined criteria; however, not all these criteria are quantifiable. This raises the possibility that stakeholder expectations can be shaped, and negotiation skills provide the platform for these discussions.

Conclusion

The acronym OKRAS provides a convenient method to remembering the five things every project manager should know about negotiation. First, a project manager's negotiations are Ongoing. That is, a project manager is involved in various negotiations throughout each day. Second, there are two basic Kinds of negotiation —distributive and integrative. Even if the negotiation begins with an integrative approach, ultimately the resources have to be allocated in a distributive manner. Third, there are three distinct negotiation Roles that a project manager fulfills: negotiator, mediator, and arbitrator. Fourth, project management provides an excellent framework or Approach for negotiation. The three phases of negotiation are planning, engagement, and closing. Finally, a project manager's negotiation skills can have an impact on the perception of project Success. To recap, OKRAS summarizes the five things about negotiation:

      Ongoing

      Kinds

      Roles

      Approach

      Success

Almost three decades ago, Peters and Waterman (1982, p 11) noted in their best-selling book, In Search of Excellence, that “soft is hard”; in other words, soft skills, including negotiation, are more difficult to master than hard skills like technical knowledge. This is as true today as when this book was initially published. Because a project manager's negotiations are ongoing, there are opportunities for learning and improvement. Again, project management provides a useful tool: lessons learned. Project managers should periodically assess themselves on how well their ongoing negotiations are being conducted and use lessons learned as a method for continual improvement.

“Negotiation is a basic, special form of human communication, but we are not always aware that we are doing it” (Shell, 1999, p 6). Therefore, negotiation is deceiving. Early and frequent negotiations do not automatically result in effective negotiators. Soft skills, like hard skills, require continual practice, assessment, and feedback to improve. Effective negotiation skills are critical for a project manager to be successful. Your project was a success” are sweet words to hear at the end of a project.

References

Acuff, F.L. (2008.). How to negotiate anything with anyone anywhere around the world. New York: AMACOM

Bourne, L. (2007, January). Avoiding the successful failure. PMI Global Congress 2007, Asia-Pacific, Hong Kong, China.

Cellich, C., &. Jain, S.C. (2004). Global business negotiations; A practical guide. Mason, OH: Thomson South Western.

Clampitt, P.C. (2001). Communicating for managerial effectiveness (2nd ed.). Thousand Oaks, CA: Sage Publications, Inc.

Fisher, R., Ury, W., & Patton, B. (1991). Getting to yes; Negotiating agreement without giving in (2nd ed.). New York: Penguin Books.

Kublin, M. (1995). International negotiating; A primer for American business professionals. New York: International Business Press.

Lax, D.A., & Sebenius, J.K. (1986). The manager as negotiator; Bargaining for cooperation and competitive gain. New York: The Free Press.

Lewicki, R.J., Barry, B., & Saunders, D.M. (2010). Negotiation (6th ed.). New York: McGraw-Hill/Irwin.

Nelson, R.R. (2005). Project retrospectives: Evaluating project success, failure, and everything in between. MIS Quarterly Executive, 4(3), 361-372.

Peters, T.J., & Waterman, R.H, Jr. (1982). In search of excellence; Lessons from America's best-run companies. New York: Harper & Row Publishers.

Project Management Institute. (2008). A guide to the project management body of knowledge (PMBOK® Guide— Fourth Edition. Newtown Square, PA: Author.

Shell, G. R. (1999). Bargaining for advantage: Negotiation strategies for reasonable people. New York: Penguin Books.

Shenhar, A.J., & Dvir, D. (2007). Reinventing project management: The diamond approach to successful growth and innovation. Boston: Harvard Business School Press

Skulmoski, G.J., & Hartman, F.T. (2010, March). Information systems project manager soft competencies: A project-phase investigation. Project Management Journal, 41(1), 61-80.

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI or any listed author.

© 2010, William T. Craddock
Originally published as part of 2010 PMI Global Congress Proceedings – Washington, DC

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