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Analyzing a Negotiation

Most people think negotiation is a one step process, which entails going into a discussion and getting the other side to agree (partly or wholly) to what you want. This could not be further from the truth. In fact, negotiation is a 4-step process, which involves planning your negotiation strategy, actual negotiation using appropriate tactics, closing the deal through a contract and lastly performing and evaluating the net result i.e. the outcome of the contract.

Planning the negotiating strategy is perhaps the most important and involves answering the below questions:

  • What questions should I ask to complete my analysis?
  • What are my BATNA (Best Alternative to Negotiated Agreement) and ZOPA (Zone for potential agreement)?
  • How can I use a decision tree to complete my BATNA analysis?

It is important to establish the overall goal of reaching an agreement before actually sitting into a negotiation discussion. We need to identify the issues that are important and its importance with reference to identified objectives

Understanding the best alternative to a negotiated solution and reservation price, which is acceptable, are two vital points to note. Thereafter, we need to know the stretch goal, and the most likely price.

So how does this work? Lets take an example -assume that I want to sell off my existing car and buy a new one.

The car dealer is offering an exchange discount of INR 150,000. I feel that a well maintained car like mine couldget a price of INR 250,000 if I am able to connect with a genuine buyer directly (without involving a broker). The same is validated by prices quoted if I try to buy a similar car. Let’s say that broker charges 10% of the sales value as commission, and if I were to advertise online it would take some of my time and money that I estimate to be worth INR 10,000.

My overall goal is to sell the car, and issue important to me is the price since I would need to make a down payment for the new car.

My BATNA (Best Alternative to Negotiated Agreement) is INR 150,000 i.e. the price the car dealer is willing to offer.

My minimum reservation price is INR 161,000 in case of direct sale or INR 168,000 if a dealer is involved. My stretch price is INR 250,000 – anything more would impact my credibility as a genuine seller, and my most likely price would be around INR 200,000.

With this information at hand, I am ready to negotiate with any buyer, and my aim would be to discover his BATNA and reservation price i.e. the price mentioned above which he would walk away from the discussion. The price range between my reservation price and that of the other party would be the zone for potential agreement (ZOPA).

A decision tree eliminates bias by adopting a mathematical approach using probability of the likely outcomes and the net impact on the value attached to each outcome.

Tag: Strategic negotiation; negotiation tactics; BATNA, ZOPA

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Change Management

This blog is in continuation to my earlier blog on the PMI Virtual Symposium https://www.linkedin.com/pulse/article/20140914193923-61179563-pmi-virtual-symposium?trk=object-title

Let me share what I learnt from presenter Mr. Angelo Baratta, ‘A Framework for Change Management’, which talks about

  1. Definition of change
  2. Dimensions of change – what are we changing?
  3. Laws of change – why change is rarely easy?
  4. Force factors for change – what drives or opposes a change?

‘Change management’ is the most widely discussed concept that one comes across. This concept requires a paradigm shift to which one is sub-conscientiously opposed.

Leonardo Da Vincisaid “he who loves practice without theory is like the sailor who boards ship without a rudder and compass and never knows where he may cast.”

“It’s easier for [people] to come up with new ideas than to let go of old ones.” — Peter Drucker

“Change initiatives are time consuming and costly, significantly impacting an organization’s drive toward success. And nearly half of them fail.” — PMI’s The Pulse of the Profession (Executive Summary) 2014

What is Change?

“To make the form, nature, content, future course, etc., of (something) different from what it is or from what it would be if left alone”.

Change is a complex concept comprising 3 distinct dimensions:

  1. Target object(s) changed within some context: the thing that is changed
  2. Resulting performance factor changed (speed, cost, risk, etc.)
  3. Change in value to some stakeholder

Most projects list down the features/functionalities that need to be achieved in their scope document. This is the Target object mentioned above.

Performance factor also captured in the scope document is the ancillary goal of achieving reduction in the time taken for the process under examination, reduced cost, reduced risk or improved quality. This is independent of the feature discussed in the target object above.

Finally change in value to the stakeholder identifies the parties who would benefit from the exercise (project), and validate if the benefit is actually perceived to be occurring by the stakeholders.Failure can happen in any dimension

  • Target Object: Result failed to achieve the stated objective
  • Performance factor: Result failed to impact time/speed, cost, risk etc.
  • Value to stakeholder: Result did not convince the stakeholder.

Success must be in all dimensions for the project to succeed.

Target object is normally at the project level, performance factor on the program level, and value to stakeholder at the portfolio level. So it’s important to understand the larger picture when undertaking the project, who are the stakeholders, and how would the project create value for the clients/end users.

For example, let’s say the project aims at adding new features and making the output more reliable, but it fails to reduce the time taken by the end users, which is one of the objectives. Here the project has failed at the performance factor. If on the other hand, the project meets the target object as well as the performance factor, but the stakeholders/clients/end users do not perceive any value addition, then the project is a failure at the portfolio level, since the goals are not aligned.

Universal Laws of Change/Motion (Newton)

1st: Persistence (inert, moment): tend to keep going

Status quo =Lowest energy option

Change has cost always

2nd: Energy/Power: figure out how much it will take

F= ma (how much force do you need – objective)

3rd: Reciprocity: change elicits response

From stakeholders, these laws cannot be broken.

Let’s decode the above laws to somethingeasier to understand.

An organization/individual continues to function like it/he/she has been doing in the past, unless there is conscious effort to change the behavior or process. So the continuance of the behaviors actually is the lowest energy option, and hence the processes remain unchanged unless force is imposed for change.

The veiled benefit is that processes once established remain constant and do not change frequently on their own, which if they did, would create a new challenge that would be difficult to address.

The amount of force depends upon the extent of change desired.

All changes elicit a response (implicit or explicit) from the stakeholders, based on their own assessment of the change and its perceived impact on their own state of affairs. If the change is thought to further their own ends, they would support it, even if it is expected to adversely impact them, they would oppose it. If they are yet not impacted, then they would be neutral to it.

The people supporting the change would provide the positive thrust, while those opposing it would increase the resistance. The task of the project manager is to increase the positive thrust, decrease the resistance, and convert the neutral to favorable if possible.

Factors of Change (energy required/available)

Technical (1st & 2nd), the objective will be what is needed and the target is object

Social & Economic (3rd) – human

–subjective: who is engaged -value to stakeholder

Technical factors deal with the viability of the project, and covers the target object/scope of the project.

Social and economic factors look at the impact assessment of the change on the stakeholders and are entirely the human component. They determine whether a particular stakeholder will support the change, oppose it or be neutral to it based on the perceived impact on his social or economic condition.

Interaction of dimensions, laws, factors object

Total Cost Required = Object change cost + Resistance costs

Forget clichés: change is difficult; people resist change

Only constant is change.

Develop practice grounded in theoretical framework:

  1. Dimensions: Object, Performance, Value
  2. Laws: Persistence, Power, Reciprocity
  3. Factors: Technical, Social, Economic

For each business process in scope:

  1. Identify each change object
  2. Connect each object to one or more performance factors
  3. Connect each factor to one or more stakeholder
  4. Develop Stakeholder Value Impact G&L (Gain & Loss: +, 0, -)
  5. Impact assessment
  6. Reduce energy required for the target change (uncouple)
  7. Increase positive stakeholder impacts
  8. Reduce negative stakeholder impact
  9. Convert neutral stakeholders

I will be sharing the thoughts of the other speakers so do remember to look it up.

Tags: Change management; Object change cost; Resistance costs