Offshore Negotiations: a Macro View

Negotiations are an integral part of business life, that’s pretty much a truism. More so negotiations for business are very much like breathing for human beings. Sometimes it seems that you can not make a single step without getting involved in some kind of negotiations – project scope / resources / time / quality; multiple aspects of employment relationships; vendor relationships; customer relationships; and so on. So it’s no surprise that an ability to negotiate is one of those mandatory job requirements that somehow never make it to job description.

While negotiation skills are important for any professional they are particular important and are put to real test when working with third parties and in particular with offshore. That’s why I decided to put a few posts to cover some of the most important elements of the subject.

Offshore negotiations like many other ones often come down to drawing a line in sand demarcating what’s mine and what’s yours – reaching an agreement on resource allocation, responsibilities, financial aspects and so on. Negotiating in its isolated “pure” form is an ongoing and often major portion of communications through the lifecycle of the offshore partnership. It typically comes up first during the initial contract negotiations, possibly as early as signing an NDA and later comes up at every change in direction ort pace.

What institutes a good negotiation? In a classic form a negotiated agreement is considered good if it is fair, wise, was reached efficiently, and is stable. I would a few more bytes to it – A negotiation went well if your interests are addressed, relationships are intact, you did not lose more than you gained in the process, you did not get more than you bargained for, and you feel good about it.

So, how do we get there?

First and the most important – before entering any negotiation you should understand the situation, the subject of negotiations, and what is at stake. It is amazing how often people jump into negotiation when there is nothing to negotiate (both parties are in violent agreement), too early or too late, or when negotiation is not the way to move forward. Identify the situation by ask yourself:

  • What are the problems / issues?
  • What are the affected parties?
  • What are the timeframes?

Just a few days ago one of my providers called me with rather unexpected message “Nick, we need to increase the rate for some of our developers!” My initial reaction could have been “Rodrigo, are you completely out of your mind?” Tell you the truth that it actually was, internally. I did manage not to say it and instead asked the questions similar to those above. A few minutes late I realized that the problem was far less urgent and severe and that I had a plenty of negotiation space with potentially very promising outcomes…

Second step is gathering the information. In some negotiations that could be a rather involved process and it deserves a stand alone post, maybe a few; for now I will just mention the high points:

  • Identify high-level information pertaining to the negotiation for the all parties involved.
  • Identify position of your opponents – their stated goals and objectives in terms of what they “want”.
  • Discover true interests behind the positions of your opponents – their true goals and objectives or what they actually “need”.
  • Identify the situation as it pertains to your negotiation power, timing and skills.
  • Discover the same about the situation of your opponents, pressures they are under.

Third step (time wise it could be preceding second step or done in parallel with it) involves defining your own position, your own “wants” and “needs”. As Seneca put it: “If a man knows not what harbor he seeks, any wind is the right wind.” Interestingly enough negotiating for the sake of negotiating is not such an uncommon event. Maybe an emotional rollercoaster of high pressure negotiations, blood taste in the mouth, or twisted pleasure of seeing your negotiation partner crumble to pieces is enough of a motivation, but what will it do for you in a long term?

Start with setting the desired outcomes – Best and Realistic:

  • What exactly are we trying to achieve by the negotiations?
  • What / Where / When / How do we want it?
  • What / Where / When / How do we NOT want it?
  • What is gained / lost by resolution?
  • What are the achievement criteria?

Next go through some brainstorming and identify your alternatives:

  • What are the alternatives that are available away from the table?
  • What is your Best Alternative To Negotiated Agreement (BATNA)?
  • What is gained / lost in case of no resolution?
  • Exactly What / Where / When / How is BATNA manifested?
  • Exit criteria. At what point do you stop negotiating and revert to BATNA?

The fourth step, involves tactical and organizational actions for preparing to the “official negotiations” or the process of reaching the agreement. It involves obtaining negotiating authority, setting up negotiation team and addressing all logistic components. There is much to be said about setting up environment for negotiation, in particular in cross-cultural negotiations.

And finally the last step – reaching the agreement. This step is by far the most complex and comprehensive. It requires plenty of skills, knowledge and patience. This step might vary in its complexity, length and structure depending on the complexity of the topic, positions of the parties involved, negotiation space, techniques, and many other dimensions. It definitely deserves a stand-alone post. For now let me just mention a few elements common for many comprehensive business negotiations:

  • Initial Discussion(s) – at this stage the parties typically outline negotiations landscape and share their “wants”.
  • Regrouping / Final Preparation – at this stage the negotiating teams define / adjust their strategy and tactical approach.
  • Reaching an agreement – the “face to face combat”, the heart of the negotiations.
  • Paperwork – preparing and finalizing documentation pertaining to the subject negations.
  • Closure – signatures, handshakes, and communications.

OK, that’s enough for now; it also looks like I will need at least half a dozen of follow on posts; that will keep me busy. Hopefully there will be seats on BART at least on one leg of my commute, otherwise that might take awhile…

One thought on “Offshore Negotiations: a Macro View

  1. Good tips you got there, very important guidelines when negotiating an outsource partner. I’m saving the link and will review your tips before any offshore negotiation.

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