CONTRACT NEGOTIATION

Contract Negotiations Impact on management

Labor Relation: Contract Negotiations Impact on management Jeff D. Bell Webster University San Antonio

Bibliography Most goods and services can be obtained faster and at a lower cost by purchasing them from companies that specialize in producing and delivering them. Organizations obtain these goods and services by entering into contracts, which insure a steady, controlled and un-interrupted flow of indemand goods and services. Because contract are legal documents, just writing up and signing a contract is dangerous for all parties involved. So, organizations us a process called contract negotiation, which if not executed properly can be just as dangerous. This literary review will address the impact negotiation has on Staffing, Controlling, Directing, and Labor Relations.

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Introduction Contract negotiation affects the whole organization in one way or anther. Whether in staffing, Controlling, Directing, or Labor Relation, The question, How do you get what you want from a Negotiator from a potential joint venture who is vastly more experienced than you are at negotiating, and who very likely has more leverage than you? "It all depends on how it is approached," says Lynne Jebens. The approach is established by the organizations negotiator, he or she must have the ability to direct the negotiations in corporative manner to benefit their organization. "If you come out aggressively and with an attitude, you're going to get nowhere." Donald Farber comments that, when negotiating a contract, "I say 'please'--sometimes 'pretty please.' Yelling and hollering I don't do. Rather than take a hard-edged approach to negotiations, be sure to be cordial and respectful, even (perhaps especially) if your counterpart is being obnoxious, crude, or rude. It's also important never to show fear during negotiations. Being afraid is the worst possible thing. Keep a steady head, think carefully, ask questions without seeming high maintenance." The effective negotiator must also know what's important to give up. Labor relation is about the working relationships (trust) between coworkers, management, and contractors (supplies and vendors) and the law that affect them. Many contracts are written in language that is turgid or cryptic or just plain incomprehensible. Ask questions if the contract is written in "legalese," and insist on a rewrite if the language is given to two or three interpretations. Donald Farber says, "If you don't totally and completely--without doubt, without any question--understand exactly what you're saying, ask someone who does." Jack Menashe adds, "If it doesn't make sense, you absolutely shouldn't sign it. If you are not sure, whether you are gaining benefits or over committing assets, you should clarify every little thing, and put in everything that you need. Be 100% comfortable." Whatever you do, remember to have everything promised to you in writing, preferably word processed, and signed by both sides. And always remember to be very careful to read every single draft through to the end--including riders that are attached to the contract. Michael Lazan Back Stage, 05/11/2001, Vol. 42 Issue 19, p28. Controlling organizational assets is vital to the success and survival of the organization. Remember this little fact, no matter what you do in business, all areas of management will be affected. Staffing Staffing is the management function of insuring adiquit number of qualified human capita is available, selected and hired, assigned in the appropriate duties, tracked for possible action (promotion or termination), and training development. Hiring the right person with the right skills, knowledge, and abilities is critical when organizations plans to rely on contracts for personnel, supplies, and/or expert skills support. The first thing that must be done is to conduct a job analysis to identify the tasks, duries, and responsabilities that make up the negotiators job, and the knowledge, skills and abilities needed to perform his or her duties. looking for an experienced negotiator could lead the organization to a training issure, a trial and erorr effort by promoting someone within the organization, or a expensive venture by contracting a professional negotiator to negotiate for the organization. "Listening is as important in negotiating as stating what you want," Podziba says. "Negotiating any long-term relationship requires trust. Building that trust doesn't exclude pursuing your interests. It means being forthright and listening carefully to the other side. If no one in the organization has negotiation skills, management may have to train a supervisor or a mid-level manager. Remember, you have no one with these skills in your organization, so management will be the first to negotiate a contract. Whether you negotiate the price for a state of the art negotiation training package, a brief and simple negotiation training program, or just negotiate with a colleage to accompany him or her on their next negotiation session. As a manager, you could just promote or assigned a supervisor (s) or a mid-level manager (s) to the position or status of negotiator. Now the organization must go through the screening process which includes, who is the best candidate ( who has the knowledge, skills, abilities, and personality) for the position, what experiences have they had that relate to the position, what education level do they hold, and what interpersonal skills would they need to posess. Now that you have selected two or three good candidates, next will be the interivew and slection process. Once a candidate has been selected, the organization will have to come to the realization that some form of training (initial and continued educational) must take place. The organization must insure that the selectee understands the organizations position on contracts and plans for the contract he or she will be negotiating. How will the organization compensate the new companys negotiator or will this be one of those additional duties as required? If the negotiation duties are to be additional duties as required, how will this increase in the number of different tasks in supervisors and mid-level managers affect their current responsibilities. The organization will have to deside on the value it should places on the negotiators duties. If the organization desides to compensate the newly selected negotiator, the next question is how much and when will the compensation start. The next step is to examin the organizational structure to determind where in the organization will the responsibility of contract negotiations will be managed. Changes in the organizational structure will demand a close

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investigation of departmental budgets, authority lines, and responsabilities. Any changes in an organizational structure or departmental budgets must pass the organizations strategic plan test. That is , does the change support the organizations strategic plan, also will the cost stay within the overall planned budget, how will this change affect any strategic alliances the organization have, and is there a alternative method buildt in the organizations strategic plan? If the organization chooses to contract a professional negotiating frim or consulting negotiator, the price of their services compared to what they deliver may cause the organization more than a few concerns. Many of their services are not tailored to every organization and the more specific the organization gets, the higher the cost will be. Benchmarking or researching like organizations, the professional negotiating frim or consulting negotiator they used, and the results they received from contracting negotiation services is the best method of finding the right professional negotiating frim or consulting negotiator. The venture of contracting has other implications in staffing. For instance, the services or supplies the organization intend to obtain through contracts may eliminate jobs in the organization. Any job elimination will cause a change in the personnel structure, a decrease in payrole, un-employment benefit payment, reassignment of certain job duties, or the elimination of a whole department (personnel and equipment). In a small organization these concerns may be mutt, but in a large organization these seemingly minor changes can have far reaching implications.

Controlling Controlling is the process whereby managers monitor and regulate how efficiently an organization and it members are performing the activities necessary to achieve organizational goals. So, controlling a contract negotiation is to monitor and evaluate whether the negotiations strategy and structure are working as intended, how they could be improved, and how they might be changed if they are not working. Control does not mean just reacting to events after they have occurred. I also mean keeping the negotiation on track and anticipating events that might occur. Controlling a contract negotiation will keep both parties focused on the issues at hand and working together to take advantage of opportunities that will help both parties achieve the goals of the negotiation. "Heed the following advice from Podziba on mind-set, preparation, and trust, and put it to work negotiating deadlines, collections, and bids for your next job. 1. Something More Than Zero-Sum. In some negotiations, a gain for one party means an equal loss for the other. Think of buying a car: Podziba says. "For example, in a salary negotiation, an employer wants to pay as little as possible and a would-be employee wants the opposite. But maybe the candidate values stock options more than salary because her financial needs are not immediate. Likewise, the employer may be cash poor and stock rich. Add in flextime, telecommuting, vacation, and other benefits, and what looked like a zero-sum negotiation at first has become a situation in which both sides can find room for agreement." 2. Divide, Unify, and Conquer Anatomize challenging issues -- they're oftentimes comprised of multiple layers. "The more layers you peel off," Podziba says, "the more nuanced your negotiation becomes. Once you've dissected the problematical point into its different parts, pan back and look at the negotiation as a whole. Avoid treating each individual part as its own separate zero-sum negotiation. Build packages of agreement with give and take on the various issues." 3. Be Confident and Courteous, Stay Calm and Curious"Negotiating requires the confidence to ask for what you want, and the focus to get it. Negotiating also provokes strong emotions, and emotions can cloud a person's focus. Staying calm and nonconfrontational keeps aggression at bay and the negotiation on track. Asking questions sets a positive tone -- for the other party, and for you. Cultivating curiosity allows you to unpack the situation, focus on the important issues, and rein in your emotions. It's hard to be upset and curious at the same time."

Directing Directing or leading is articulating a clear vision and energizing and enabling organizational members so that they understand the part they play in achieving organizational goals. Directing contract negotiation is articulating a clear vision or process for the negotiation, and using power, influence, persuasion, and communication skills to coordinate the behavior of the negotiation members so that their activities and efforts are in harmony. Set Inclusive Goals, every negotiation requires careful thought and planning. It also requires common sense. Given that many disputes cannot be fully resolved, it is best to work on the most urgent conflict and to address the most crucial interest of each side. "We are never going to be able to sit at a table with the goal of creating peace and harmony between fishermen and conservationists," Podziba says. "But we can establish goals big enough to include the key interests of each party and resolve the specific impasse we are currently facing. Setting reasonable goals at the outset that address each party's concerns will decrease the tension in

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the room, and will improve the chances of reaching an agreement. Set Reasonable Deadlines. "Negotiations will balloon to fill the time allotted." Podziba says. She advises setting reasonable deadlines rather than assigning arbitrary time slots. Mediators should attach consequences to deadlines to give the dates real value and to motivate parties to move more quickly toward an agreement they may otherwise evade. Keep Emotions at Bay, most negotiations, by their very nature, are emotional. But a properly executed negotiation can be very humane and relatively painless. Podziba believes that people can be good negotiators, provided they maintain the confidence to pursue what they want. "It is not a matter of tactics, or scheming," she says. "The key to a successful negotiation is building trust with the other party, being clear about what you want, and legitimizing what the other party wants in order to create a joint problem-solving discussion as opposed to a hard bargaining situation. " What else must a good negotiator remember? Patience. "Impatience, or any other surge of emotion, can ruin a negotiation," Podziba says. The best way to deal with an emotional tidal wave is to channel that adrenaline into productive energy. Take deep breaths and keep yourself on target by referring back to your written range of possible agreement to keep yourself on target. Irrationality can ruin a carefully crafted relationship, or can cause you to concede to something you will later regret. Don't Show Your Cards, "Once you put that number out, you've locked yourself into a range that will reach away from your ideal number. Being able to set the first anchor away from the first number mentioned will get you closer to your desired goal." This alternative gives you security and confidence in the face of faltering agreements, and serves as its own anchor.

Labor Relation Labor relation is the activities that negotiator engage in with other members of the negotiation party to insure they have effective working relationships with each other. Experienced negotiators are generally comfortable working out the terms of an economic contract: They bargain for the best price, haggle over equity splits, and iron out detailed exit clauses. But these same seasoned professionals often spend so much time hammering out the letter of the deal that they pay little attention to the social contract, or the spirit of the deal. So while the parties agree to the same terms on paper, they may actually have very different expectations about how the agreement will work in practice. Without their arriving at a true meeting of the minds, the deal they've signed may sour. In a negotiation context, we define the social contract in terms of the parties' expectations. This contract has two levels: The underlying social contract answers the question, What? (For instance, are we working out a series of discrete transactions or a real partnership? What is the real nature, extent, and duration of our agreement?) The ongoing social contract answers the queerly, How? (In practice, holy will we make decisions, handle unforeseen events, communicate, and resolve disputes?). We'll look at the underlying social contract first. Too many negotiators leave the underlying social contract implicit, which can cause misunderstandings and ultimately poison a relationship. Rather than discuss their expectations during negotiations. The parties project their own reasonable, but sometimes incompatible, assumptions about the fundamental nature of the deal. Some people, for instance, view a contract as a starting point for a problem-solving relationship. In reality organization enter into contract to solve problems in overhead cost, the need for a rapid un-interrupted supply chain, on time deliveries of produced products, auditing services, and many other problems organizations may have. Just as important as the underlying social contract is the ongoing social contract. It answers the question, How will we work together? Properly negotiated, it outlines the broad process expectations for how the parties will interact: norms for communication, consultation, and decision making; how unforeseen events will be handled; dispute resolution; conditions and means for renegotiation; and the like. A positive ongoing social contract can foster efficient sharing of information; lower the costs of complex adaptation; permit rapid exploitation of unexpected opportunities without the parties having to write, monitor, and enforce complete contracts; and reduce transaction costs and even fears of exploitation. In fact, in a 1997 study of North American and Asian automakers and suppliers, then Wharton professor Jeffrey Dyer found that "General Motors procurement (transaction) costs were more than twice those of Chrysler's and six times higher than Toyota's. GM's transaction costs are persistently higherbecause suppliers view GM as a much less trustworthy organization." Clearly, a well-functioning ongoing social contract is beneficial, but too often, partners hold conflicting expectations. Imagine, for example, that a global manufacturer has a joint venture with a major local distributor. The relationship runs smoothly until the manufacturer approaches another distributor about selling a different product line. Since the economic contract governing their joint venture said nothing about the new line, the manufacturer may think it perfectly reasonable to use another distributor. But the first distributor may have expected to have been given the opportunity and may think that the manufacturer has acted in bad faith. Because their assumptions were never made clear, their relationship suffers, even though no actual breach of contract has occurred.

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Conclusion: Contract negotiations are stressful. The negotiation is an effort to forge a partnership between all parties concerned. It is a tedious process with peaks and valleys with the potential to realize expectations or face the agony of total failure in obtaining needed services or supplies. Can two walk together except they be agreed? Amos 3:3 the King James Bible. This partnership is needed to further an organizations dream (Strategic Plan). The realizations of the dreams for all parties involved are largely dependant upon the events that take place before, during and after the negotiation process. In all stages of contract negotiations people are involved and they bring their personalities and beliefs. Getting past the tendency to be selfish or focus on ones own agenda is difficult, because looking out for self is human nature. Organizations do not send their negotiators to contract negotiations to insure the other parties get what they need, they send them to secure the services, supplies and business it need or want. The secret is to bring together the right combination of people with a common purpose. Staffing is the first step in the process. Organization must send the best prepared person to negotiate on their behalf. Unless the owner or manager is a capable negotiator or there is an experienced negotiator in the organization, a negotiator will need to be hired, assigned, and/or be trained. The purpose of the negotiations must be clear and understood. The limitations, extent or concessions to which the organization is willing accept or the rock bottom must also be clear. Limitations or boundaries are set as a safety point and going past them in contract negotiations will cause damage to the organizations ability survive. So, The optimal knowledge, skills, and abilities must be presented to the negotiations process in the form of a person. Even the best laid plans can go astray. And having limitations or boundaries are not a guaranty that the negotiation process will proceed according to plans. Someone must be the guardian of the process and that guardian has to be part of the negotiation party. A negotiator in the negotiation process will be that guardian of the process to keep it on track. Controlling the negotiation process to keep it within the establish parameter is the responsibility of all involved. A set of checks or balances and someone to conduct the negotiation process is great. But if the organizations negotiator want to obtain his/her organizations goals, they better lead or direct the right portion of the process. Fear is false evidence appearing real; negotiator will not operate effectively in fear. To direct or lead one must be in front leading the way. Negotiators must take the leaders acid test, by looking behind themselves to see if anyone is following. A leader with no one following them is just a man or woman taking walk. If you want friends, you must first yourself friendly. Humans like to be around others who think and believe like them. They also like a little variety or spice every now and then. When two people with different beliefs and mind sets get together there is bound to be fireworks. Human relations (connections, association or similarity) is at this point is being tested. But when two human get together to work, then labor (working) relations (connections, association or similarity) is in effect. In contract negotiation relations must be the dominant word in effect. The negotiators must find the connections, association or similarity with each other and in their organizations purpose for the negotiations to be effective in obtaining the desired services, supplies or business.

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References

Ertel, D. Kliman, S. and Fisher, R members of the Harvard Negotiation Project 1980s. Harvard Business Review, Feb2003, Vol. 81 Issue 2, p66, 10p Hoult, J. Fast company Negotiation 101 October 2000 . Kaplan, J. Go Technologies' founder Lax, D. A and Sebenius, J.K coauthors of The Manager as Negotiator: Bargaining for Cooperation and Competitive Gain (Free Press, 1986). Lazan, M. What They Dont Teach in School, Back Stage, 05/11/2001, Vol. 42 Issue 19, p28, 4p Ming-Jer, C. the former director of Wharton's Global Chinese Business Initiative Orum, D. the president of Online Operations at Oxygen Media Podziba. S. teaches the fine art of negotiation at Harvard and MIT Rothenberger, C. Fastcompany Negotiation 201: Refine Your Skills November 2000. SUPPLIER SELECTION & MANAGEMENT REPORT MARCH 2003. The King James Bible Tischler, L. Fastcompany Seven Strategies for Successful Alliances December 2001. Torch That Sent a Deal Down in Flames," Financial Times, April 12, 2000 Woods, L. H C.P.M., A.P.P., CFPIM, global purchasing manager, CommScope Incorporated. Yildiz, Muhamet Econometrica, May2003, Vol. 71 Issue 3, p793