Menu

What are the Needs for Negotiation in Business Organizations?

January 4, 2019 0 Comment

1. Purchase order

2. Labour contracts

3. Export deal

4. Land acquisition

5. Job offer

6. Salary increase

7. Foreign assignment

8. Bank loan

9. Capital budget

10. Merger and acquisition

Such negotiations may range from very simple ones to the very complicated. It may be at the level of the department, a business organization, between organizations or at the industry level.

It could be between the employees and the management, the apex organizations and the trade unions or government and various federations. In the global context, such negotiations could be between business entities in different countries or even between the trade and economic delegations of various countries.

Periodical wage settlements of central government employees, PSU workers, insurance employees, bank officers, settlement of railway strike, truckers strike and such other agitations often call for protracted negotiations.

Depending upon the range of issues and the parties involved, negotiations may stretch over hours or days or months or even longer. At the global level, we know that negotiations relating to General Agreement on Tariffs and Trade (GATT), the Doha round of negotiations among countries within the European Economic Community and regional economic zones are often ongoing and stretch over a long period.

When negotiations stretch over a long period of time, although the basic issues remain the same, the members of the negotiating team may change with old members dropping out and new members joining up.

Under such circumstances, the negotiations become more issue based and less person based. What is relevant is the collective stance of the groups and the reasoning put forth and not mere individualistic approach.

As we have noted in the beginning of this chapter, the need for communication arises in the world of business because of the need to perform, be efficient and productive, achieve goals and deliver expected results.

Businesses deal with several stakeholders and input providers and all of them have their own expectations. Business is all about delivering results by reconciling expectations. Let us look at some common instances of negotiation listed earlier.

A purchase order has to be negotiated because the purchaser wants to pay the most reasonable price, ensure appropriate quality and take delivery as per the time and schedule he prefers.

On the other hand, the other party that is the supplier looks for maximum returns, not very stringent quality specifications and delivery schedules which are flexible.

It is through negotiations that the parties sit together, discuss each item of the deal, see each other’s capabilities and constraints and finally work out a mutually acceptable deal.

Let us look at the industry-level negotiations that take place between the All-India Trade Union Organizations and the representatives of the bank managements through the forum of Indian Banks Association (IB A).

The trade union organization on its part endeavours to achieve the best possible deal covering salary hikes, pension payments, and promotion opportunities, fringe benefits, working conditions, recruitments, leave and medical benefits.

The managements, on their part, have to consider affordability, present and future profits, establishment costs, relativity among different groups, employee motivation and other such relevant factors. In the process, both the parties have to do their elaborate homework.

They have to come to the negotiating table duly prepared with all the relevant facts, figures, calculations, logic and well-prepared arguments and studies.

They should also be aware of the previous agreements and other influencing factors. They should try to see how the other party is likely to approach the issue on hand and what benefits and concessions can be extracted.

Through the process of long-drawn negotiation, both the parties make sincere efforts to delve into each other’s perspectives and problems, viewpoints and expectations, authority and limitations and develop a framework of common understanding in a spirit of cooperative goodwill and mutual benefit.

Generally speaking, in the world of business, negotiation is not a one-off event. It is, by and large, a repetitive exercise. If the experience is satisfactory, you would like to deal with the same set of parties again and again.

You may like to have the same supplier, same customer and the same set of employees. In such an event, there is a long-term relationship between the negotiating parties.

While the individuals may not remain the same, the relationships—supplier-purchaser, employee-management, exporter-client and banker-borrower—continue to be the same.

Given this nature of relationship, parties concerned in the negotiation process should look beyond the specific transaction or particular deal and keep in view the long-term merits and demerits and make sure that the present deal is not done by hurting the long-term relationship.