Online Tutoring on Complexity of Negotiations

Introduction

Today’s business environment is highly challenging for any business as there are multiple players in any industry. In pursuit of growth, businesses usually focus on competing with one another, however depending on several internal as well as external factors, they collaborate as well. An example of the internal factor that promotes collaboration is that a company in the industry may lack a particular technology (but is good in application) and another company has the technology. So, it is a possibility that the two companies may want to collaborate. An example of the external factor that promotes collaboration is that the customers are price sensitive and companies fighting using a ‘price war’ strategy may not prove beneficial for any business, thus some business may collaborate to offer a common price.  Thus, across any industry, competition and collaboration between different companies are on a rise, and these activities play a significant role in shaping up the industrial dynamics (Polzer et al. 1995)

The above-mentioned activities of competition and collaboration can be achieved by the negotiation process. Due to changing business environments, the scope and importance of negotiations are on a rise. Another emerging trend is that more and more negotiations involve multiple parties and as a result, it is becoming increasingly difficult to reach a satisfactory agreement among all the stakeholders (Polzer et al. 1995).

Thus, there is a need to examine the multi-party negotiation process to understand how the interest of all the involved parties can be upheld. This is done by developing a theoretical framework as done below.

Characteristics of Multi-Party Negotiations

Sondak et al. (2013) described multi-party negotiations as interactions where three or more parties represent their interest. These interactions aim to resolve the perceived difference of interest even though each party aims to pursue their own interest. There are three main forms of multi-party negotiation: The first form of negotiation is the negotiation process that occurs within a team. This form of negotiation can be related to various aspects including remuneration discussion and responsibility distribution. The second form of negotiation is the negotiation process that occurs between different entities. This form of negotiation is characterised by each entity trying to serve their own interest. The third form of negotiation is the negotiation process in the market place where there are multiple buyers and sellers. In this form of negotiation, several factors are beyond the control of negotiating parties due to the direct influence of the external factors. There is a need to understand that while all the three models discussed above are multi-party negotiation models, however, these models are different from one another as there are several variables that impact the negotiation process differently in different models. For example in case of a within-team negotiation, one of the parties may have authority over the others, usually, the party with authority is the senior in the team. In the case of different entities negotiating with one another, each will try to win the negotiation and might have a level-playing field.  In case of a market-place negotiation, the dynamics of the negotiation are heavily influenced by the fact that some multiple buyers and sellers have a strong influence on the negotiation process (Sondak et al. 2013).

Swaab et al. (2008) argued that in a multi-party negotiation, the optimal objective for any party is to ensure that their interest is represented, however at the same time they must be open to the viewpoint of others.

Scope of Multi-Party Negotiations

Crump (2006) argued that understanding the scope of a multi-party negotiation is complicated as there is a lack of a theoretical framework that can adequately explain the multi-party negotiation process due to the numerous interactions that characterize such negotiation. While there can be numerous factors that can impact the negotiation process, there are five key interactions that shape any negotiation process: First is primary party relations that refer to relations between the core parties to any transaction. Second is cooperative relations that refer to the fact that when there are three or more parties involved in a negotiation, it is usually observed that some of the parties form a cooperative relation. As part of the coalition, they agree to the allies’ viewpoint and offer counter to opposing views, thereby shifting the negotiation power in their control. Third is non-cooperative relations that are related to the behaviour by two parties to cooperate on some issues while disputing on some other issues. This can actually complicate the negotiation process as the allies will not be aware of the perspective of others on a particular issue. Fourth is the third party relations that concern the relationship between a core party and third party, even though the third party might not have a direct role in the negotiation, however, they are involved in the negotiation due to their relations with a primary party. These actors usually include arbitrators or mediators. Fifth is the supporting party relations that include advisors and agents that assist the core party.

In addition to the above five relations, there is one more aspect that impacts the negotiation process: the uncertainty associated with the negotiation. Raffia (1982) highlighted the importance of distinction of uncertainty in a two-party and a multi-party negotiation process.  In a two-party negotiation, the two parties have to arrive at a mutual solution. However, in a multi-party negotiation, it is a possibility that not all parties will agree to the proposed solution. Also, there is a need to understand the uncertainty difference between two-party and multiparty negotiations reflects the challenge of acquiring and managing relevant information in the multiparty context. For example, a negotiator in a multiparty context must consider not just the interests of own (or the party he is representing), but those of all other parties as well. Thus, it is necessary that a negotiator must consider the wide range of possible agreements across a negotiation process. However, it is difficult for a negotiator to be as inclusive as suggested above. This could be attributed to the possibility that a negotiator might not know who all the other parties are, or even know how many other parties are involved. Thus, uncertainty is an important concern in negotiation (Bazerman et al. 2000).

According to Raffia (1982), the uncertainty in any multiparty negotiation can be classified into three dimensions: first is the uncertainty regarding the identity of the parties. This uncertainty can be described as a party being unsure of its role in the negotiation process. Second is the uncertainty regarding the interest of the parties. This uncertainty can be described as a party lacking knowledge about the interest of others. Third is the uncertainty regarding the inclusion in the negotiation process. This uncertainty is concerned with the inclusion of all the parties in the negotiation process.

Traditionally, the impact of uncertainty on the negotiation is usually considered to be negative, however, Sondak et al. (2013) argued that there is a need to look at the impact of uncertainty on the negotiation using both positive and negative perspectives. While the negative perspective is easily understandable and has been discussed above, however, there is a positive impact as well, that is rarely discussed. There is a need to understand that inherent uncertainty in the negotiation process is necessary to achieve optimal negotiation outcomes. This uncertainty results in the concerned parties processing information diligently as well as also relying on developing associations with other parties involved in the negotiation. Weingart et al.  (1993) argued that by processing information systematically and diligently, the parties can ask the right questions, can listen to the answers by others, thereby there can identify opportunities for achieving mutually beneficial trade-offs, that results in enhanced value creation (for themselves and others) through negotiation.

In addition to the uncertainty surrounding any negotiation process, there are several aspects of multi-party negotiations that impact the scope of the negotiation. The first aspect is that a multiparty negotiation is difficult to monitor. The second aspect is that multi-party negotiations are vulnerable to breakdowns if they are not properly managed. The underlying reason why the above two aspects complicate a multi-party negotiation is that there are numerous parties at the discussion table that have their own preferences and perspectives, thereby increasing the complexity of negotiation process (Sondak et al. 2013).