A Case Study in Negotiation

A Case Study in Negotiation

A Case Study in Negotiation

Negotiations provide a means for possible win-win conclusions whereby two or more parties agree with a situation despite their different opinions. A successful negotiation requires the parties to practice empathy and consider the problem from different perspectives. A couple of months ago, I witnessed the talks between the CEO of a startup with his office’s Landlord. The Landlord had given an eviction notice and was evoking his right to auction the company’s property in the office to cover unpaid rent. The CEO, on the other hand, was requesting a deadline extension. The Landlord’s eviction notice was within the contract terms signed by the CEO and himself. Therefore, the CEO’s request for an extension was to the Landlords humanity. His reason for not paying the rent on time was out of his control. The company’s main contract had not been paid because of restructuring within the client’s finance department after the unfortunate passing of the department chair. Up to that point, the CEO had always made the payments on time and sometimes even paid months in advance. He believed that his previous track record should at least guarantee that he could be trusted. He also argued that closing the office would completely impossibly cripple his business to recover. The Landlord was reluctant about giving the extension because he felt that doing that would show his other tenants that it was possible to negotiate outside the terms of the contract. As a business owner, he believed the terms of the agreement were meant to protect the interest of both parties, and since they both agreed from the start, nothing should change. The two men had several meetings where documents were provided to prove that the startup was expecting money. The CEO had also gotten a signed apology from the client for delayed payments and an agreement for the new date when payments would be made. I saw how the two men negotiated terms for a new deal that protected them from financial loss.

 

A Case Study in Negotiation

 

The disagreement between the Landlord and the CEO was because of unforeseen circumstances. The CEO up to that point,t had upheld the terms of the rental contract. Although unfortunate for the CEO, the Landlord’s decision to serve an eviction notice was him acting within the terms of the agreement. The Landlord’s reluctance was from the fear that other tenants would see his flexibility as an opportunity to not adhere to their contracts. The contract, however, had not considered such a circumstance for delayed payment. The CEO’s delayed payment was not caused by his lack of preparation but by an unforeseen incident outside his control. He had also provided proof of scheduled cost and that the cause of the delay was legitimate. A suitable negotiation method should be efficient and improve or not damage the relationship between the parties (Fisher, Ur,y and Patton, 2011, p23). In this case,e a reasonable conclusion would be one where both parties’ perspectives are considered. The application of the four critical steps for principled negotiation, according to Fisher and Patton (2011,) is vital in developing a win-win conclusion for both parties. The steps guide helps to ensure the findings meet the interests of both parties and are based on criteria unaffected by their wills.

Conflicts often occur between two or more individuals with differing opinions. Negotiation usually involves high emotions as everyone fights for their need to be met. The first key separating the people from the problem is based on the fact that negotiators are humans and are therefore prone to biases and blind spots based on their emotions, backgrounds, and values (Fisher, Ury, and Patton, 2011, p35). Treating the negotiators as human beings prone to emotional reactions requires both parties to consider their personal biases as well as put themselves in the shoes of others. Ensuring the facts and emotions that will be discussed in a negotiation help to see the other part as a person and not the villain is important in accountability discussions (Patterson, Grenny, MaxField, & Switzler, 2013, p29). It is therefore important that the CEO see the Landlord beyond the person serving an eviction notice and the Landlord see the CEO as more that a tenant that breached contract terms. The Landlord and CEO have emotions about the situation. The Landlord is fearful of what his flexibility could cost him in the future. The CEO feels that his situation should make sense to the Landlord and his previous cooperation earns him an extension. Negotiations involve two major interests, the substance and the relationship, according to Fisher, Ury and Patton, the substance and relationship do not have to be conflicting interests in negotiation as long as parties agree treat them separately on their own merits (2011, p37). In this case the substance is the money owed to the Landlord and the potential for loss by the CEO. The relationship is maintaining the CEO as a tenant and earning their commitment because of the mutual understanding. A good conclusion will therefore be one that protects the Landlord and CEO from financial losses and maintains or improves their relationship. According to Fisher, Ury and Patton, one of the ways to separate the people from the problem is considering their perception by making proposals consistent with the other party’s values (2011, p35). In the Case of the CEO, the Landlord values a fixed contract dictating terms whereas the CEO values trust based on past experiences. Terms that satisfy both these values such as a new contract clause dictating the terms for rent extension will be mutually beneficial.

 

A Case Study in Negotiation

 

The CEO and the Landlord have individual positions in the negotiation. The conflict is because they are facing the situation from a fixed position that they believe is the best option. The second key is focusing on the interests, not the position (Fisher, Ury and Patton, 2011, p52).The position is something an individual has decided on and the interest is what causes the decision (Fisher, Ury and Patton, 2011, p53). By understanding the reason behind someone’s position it becomes possible to meet their needs. To figure out the parties’ interest in a negotiation, one needs to ask why and why not the parties are taking their positions (Fisher, Ury, and Patton, 2011, p55). The why helps to understand the reason behind the positions, and the why not helps to understand why the opposing party’s position is unacceptable. In a nice conflict by Scudder, Patterson, and Mitchell, John is asked a question by an older client that had come to be a mentor (2011, p20). Walter asked John why he thought he was losing employees, and he outlined the reason why they shouldn’t have quit; Walter was, however, of the opinion that those were John’s definition of a good job, not the employees (Scudder, Patterson and Mitchell, 2011, p20). The employee’s interests are different from John’s so although he thought they were happy; their needs were probably not being met. In the case of the CEO and the Landlord, the CEO needs an extension because he believes he will be able to cover the rent within a given period. The request for an extension is their position, whereas the desire to continue their business and avoid losses is the CEO’s interest. The Landlord, on the other hand, issued the eviction notice because he wanted to stick to the terms of their contract to avoid future problems with other tenants. Acting in accordance with the contract is the Landlord’s position while their interest is to prevent future breaches of contract by other tenants

Principled negotiation is whereby the needs of both parties are met. According to Fisher, Ury, and Patton, the third key to principle negotiating is inventing options for mutual gain (2011, p65). Mutual gain means that the decision benefits both parties. When seeking options in a negotiation, one of the ways to invent mutual options is to identify shared interests (Fisher, Ury, and Patton, 2011, p77). In most cases, the problem in a negotiation is based on several interests for both, taking time to consider several possible options can help to discover mutual interests. Once the interests are clear, it is possible to invent options for mutual gain. In the case of the Landlord and the CEO, one mutual interest is to minimize financial loss. The CEO doesn’t want to lose their assets and office space, and the Landlord does not want to risk not recovering the unpaid rent. Financial loss by both parties can also be seen if the Landlord will need to invest in marketing the space once the tenant is evicted and the CEO needs to procure new assets and new office space. A possible mutual option is an agreement for new deadlines and increased security from the CEO to be auctioned if payments are not made. The security could be assets outside of the office. Another option could be an agreement that the next payment would include interest for delayed payment. An accruing interest motivates the CEO to settle the rent on time and increases the Landlord’s profit when the tenant breaches the contract terms.

From the third key, several options of mutual gain may have been discovered based on similar interests. Selecting the best fit requires criteria outside the will of both parties. The fourth key of principled negotiation is insisting on using objective criteria (Fisher, Ury, and Patton, 2011, p85). To resolve conflict of interest, an outcome independent of will can be produced using fair procedures (Fisher, Ury, and Patton, 2011, p89). In the negotiation between the Landlord and the CEO, possible objective criteria include actual financial loss that both parties could incur. If the Landlord offers the extension, their loss could be the current balance plus the rent they could have earned if they had evicted the startup and rented the space out to a new tenant. The loss that the startup could incur is the difference between the prices their assets are sold at compared to their initial cost. Another objective criterion is court judgments on such matters from other cases, even if the Landlord and CEO do not end up in court.

A win-win solution for the Landlord and the CEO would be adding terms for rent extension in the contract. This clause would state the conditions for which rent extensions are acceptable. In this case, a fixed period of consistent and timely payments before the extension request, a fixed extension period, and documents to prove eligibility of circumstance. Such an agreement, if presented to all tenants, would protect the Landlord’s interests and provide a clear guideline for dealing with such situations if they over recur.

 

The case study highlights how the keys to a principled negotiation can be utilized in the case of the Landlord and the CEO. The CEO requests a deadline extension to clear the late rent, whereas the Landlord enforces the agreed-on contract terms of late payments. The keys involve treating the people and the problem separately, basing decisions on interest and not positions, creating options for mutual benefit, and using objective criteria to conclude. The steps ensure that the needs of both parties in a negotiation are met reasonably. In future talks, I would recommend practicing patience during negotiations. In most cases, negotiations are necessary at points of conflict, and people rush to select the first solution that comes to mind. The key steps for principled negotiation require patience to understand perspectives, communicate interests, brainstorms mutual benefits, and use objective criteria to select the best option.

 

 

References

Fisher, R., Ury, W.L. & Patton, B. (2011). Getting to yes: Negotiating agreement without giving in. Penguin Group USA, Inc.

Patterson, K., Grenny, J., MaxField, D., McMillon, R., & Switzler, A. (2013). Crucial accountability. McGraw Hill Education.

Scudder, T., Patterson, M. & Mitchell, K. (2011). Have a nice conflict: How to find success and
satisfaction in the most unlikely places. Jossey-Bass.