Beyond Time, Cost and Scope: Negotiation Skills for Project Managers

Beyond Time, Cost and Scope: Negotiation Skills for Project Managers Presented by Susan Dodia 4 May, 2010 Memphis PMI Chapter Meeting

Agenda • Negotiation Defined • Interests versus Positions • Expanding the Pie • Preparing for Negotiation • Successful Negotiation Styles • Tips and Tricks • One Text Procedure www.theproject-coach.com

What IS Negotiation? Negotiate: to deal or bargain with another or others Compromise: a settlement of differences by mutual concessions Negotiation is the process of back and forth communication aimed at reaching agreement with others when some of your interests are shared and some are opposed. www.theproject-coach.com

What PMBOK 4 says “Negotiation is a strategy of conferring with parties of shared or opposed interests with a view to compromise or reach an agreement. Negotiation is an integral part of project management and done well, increases the probability of project success.” Project Management Body of Knowledge, Fourth Edition, Appendix G, page 421 www.theproject-coach.com

Goals of Negotiation • Negotiate to produce a better agreement than what you can get without negotiating • Produce a wise agreement, efficiently and amicably – seek to improve or at least not damage the relationship. • Expand “the pie”, don’t just divide it. www.theproject-coach.com

Expanding the Pie means… By seeking common ground with the other parties to come up with creative solutions Approaching negotiation as joint problem solving to create outcomes that benefit both sides The Pie www.theproject-coach.com

The Story of the Orange Two children are fighting over an orange. There is one orange, and both of the children want it. One option is to compromise and cut the orange in half, but each child wants more than half the orange. Through creative problem solving, they invent an option that benefits each side more than compromising would. www.theproject-coach.com

Interests instead of Positions • Positions are WHAT we want • Interests are WHY we want what we want • Interests are based on needs, desires, fears and concerns • We are more comfortable focusing on positions www.theproject-coach.com

Thanksgiving My POSITION: I want to stay at home and have a “traditional” Norman Rockwell Thanksgiving in our home with our children. www.theproject-coach.com

Thanksgiving My INTERESTS: I FEAR the holiday traffic I DON’T WANT dinner at the in-laws’ house www.theproject-coach.com

Thanksgiving I have CONCERNS about dinner at my family’s house My INTERESTS: www.theproject-coach.com

Thanksgiving My INTERESTS: I DESIRE to go shopping on Black Friday www.theproject-coach.com

Interests instead of Positions • Aim for integrative (mutual gains) bargaining instead of positional (win/lose) bargaining • Don’t focus on stated positions, focus on satisfying their underlying interests • For every interest, there are several possible solutions to satisfy it www.theproject-coach.com

Identifying Interests • Ask “Why”? • Successful Negotiators ask three times as many questions as unsuccessful negotiators • Ask “Why Not”? • Figure out what is keeping them from accepting what you offer • Realize that each side has multiple interests • Invest the time to dig into their interests. (See handout for sample discussion.) www.theproject-coach.com

Creating Value: Expanding the Pie • You create value by trading what is of little value to you for what has great value to them • The more issues are on the table, the easier it is to create value • Avoid leaving value on the table by not recognizing opportunities to create value www.theproject-coach.com

Obstacles to Expanding the Pie • Premature judgment • Searching for a single answer • Thinking that solving their problem is “their problem” • Assumption of a “fixed” pie www.theproject-coach.com

Techniques for Expanding the Pie • Build Trust and Share Information • Identify Shared Interests • Dovetail Differing Interests www.theproject-coach.com

Techniques for Expanding the Pie • Look Through the Eyes of Different Experts Sales Introduction to customer, supplier or board member Marketing Participate in Advisory Council, White Paper, Case Study Legal Experience with HIPPA or SOX audit, brainstorm on new laws or regulations Operations Visit sites or plants, exchange best practices Accounting/Finance Payment terms, timing of agreement www.theproject-coach.com

Techniques for Expanding the Pie • Unbundle the Issues • Resource - Team lead on maternity leave • Stability – code freeze constrains timeline • Employee Satisfaction – respect time off on holidays • Invent Agreements of Different Strengths • If you can’t agree on substance, try to agree on procedure • If you can’t make permanent agreement, try to make provisional agreement • Separate Inventing from Deciding www.theproject-coach.com

Techniques for Expanding the Pie • Make Package Deals, not Single-Issue Offers • Think of The Triple Constraint • Make Multiple Offers Simultaneously Door #3: Phase 1+2+3 15 weeks $75K Door #1: Phase 1 4 weeks $25K Door #2: Phase 1+2 6 weeks $60K www.theproject-coach.com

Preparation: Know Your BATNA • Best Alternative To a Negotiated Agreement • Your BATNA is the standard by which you evaluate any offers • Your BATNA is not your walk-a-way point • Continuously work to improve your BATNA www.theproject-coach.com

Preparation Worksheet • Interests • Leverage – what do you have that they want? • Goal – should be justifiably optimistic • BATNA • Walk-a-way point – the most you will give • Opening offer – the highest offer you could reasonably explain to an independent 3rd party www.theproject-coach.com

Preparation Worksheet • Possible concessions • Legitimizing sources • Market value • Tradition • Professional Standards • Moral Standards • Equal Treatment • Reciprocity • What a court would decide • Scientific Judgment www.theproject-coach.com

Preparation Worksheet www.theproject-coach.com

During the Negotiation Meetings • Be Optimistic • People treat you better when they like you • A good mood can be infectious • A good mood promotes creative thinking which leads to creative problem solving • Be Patient www.theproject-coach.com

Successful Negotiation Styles • Adversarial behavior is regarded by peers to be distinctly ineffective • Three styles: • Start low and be flexible • Start high and be inflexible • Most appreciated is start high and be flexible • Ask three people to assess you www.theproject-coach.com

For the Overly Cooperative • Know your BATNA – focus on your goals, not your walk-a-way point • Delegate the negotiation task • Bargain on behalf of someone else • Create an audience for accountability • Rehearse saying “I need you to do better than that because…” not “Yes” • Insist on commitment, not just agreements www.theproject-coach.com

For the Overly Competitive • Focus on expanding the pie, not just slicing it • Ask more questions than you think you should • Rely on standards and legitimizing sources • Don’t haggle when you can negotiate • Always protect the other party’s self esteem www.theproject-coach.com

Further Tips and Tricks • Preparation is your greatest advantage • The more interests you identify for yourself, the greater your chances for reaching an agreement that pleases you • Your goal should be specific, justifiable and reasonably optimistic • Promptly reduce the agreement in writing yourself www.theproject-coach.com

Stuck in the Middle Again… • The One Text Procedure is useful when you are stuck between shareholders who can’t reach an agreement. • The Project Manager acts as a neutral 3rd party facilitator or mediator. • The facilitator retains control of the document throughout the process. • The facilitator will draw out each party’s interests, lead the group through expanding the pie and deciding on one course of action. www.theproject-coach.com

One Text Procedure, cont… • All the parties get a copy of the facilitator's draft, but they are not allowed to revise it or add to it. • All parties review draft of text and give feedback to the facilitator. • The facilitator drafts and seeks approval until they feel they can do no more to reconcile the interests of all parties. • At this point, the facilitator offers all parties the opportunity to say “Yes” or “No” to accept the draft. www.theproject-coach.com

One Text Procedure, cont… • If any party says “No”, the process will start over again. • Advantages to the one text procedure are: • Simplifies decision making as each party only has one decision to make: “Yes” or “No” • Pressures parties to be reasonable • Shifts the focus away from positional bargaining • Very effective when there are many parties and mutual concessions are impossible www.theproject-coach.com

If You Only Remember 7 Things • Build Trust and Share Information • Be Prepared • Focus on Interests not on Positions • Be Positive • Look Through the Eyes of Different Experts • Don’t think that Their Problem is “Their Problem” • Protect the Self-Esteem of the Other Parties www.theproject-coach.com

Sources • Getting to Yes: Negotiating Agreement Without Giving In, Roger Fisher, William Ury and Bruce Patton • Getting Ready to Negotiate: The Getting To Yes Workbook, Roger Fisher and Danny Ertel • The Mind and Heart of the Negotiator, Leigh L. Thompson • Getting Past No: Negotiating in Difficult Situations, William Ury • Project Management Body of Knowledge, 4th Edition www.theproject-coach.com

Questions? or contact Susan@theproject-coach.com Follow our blog at http://theproject-coach.com/wordpress/ Follow me on Twitter at http://twitter.com/susanprojcoach Link In with me on LinkedIn at http://www.linkedin.com/in/susandodia www.theproject-coach.com

Beyond Time, Cost and Scope: Negotiation Skills for Project Managers