In the business world, negotiation is a constant. Therefore, it is easy to recognize the advantages of creating a collaborative atmosphere that favors value creation while negotiating. However, negotiation processes characterized by high tension and confrontation are still recurrent. And it is in the course of these same processes that we find negotiators angry, frustrated and offended, that egos are challenged and objectivity disappears. This combination thus results in incalculable losses for the parties involved.
As an illustration, consider the following negotiation between a Supplier and a Retailer that took place a few years ago. The process started when the Supplier asked the Retailer to guarantee shelf space for all its new products and to accept its entire range without dispute. However, this request was unacceptable for the Retailer, as it restricted his ability to adapt the portfolio according to consumer preferences, which indicated an increase in demand for his own brand. As space is limited and several producers asked for exactly the same, it would be impossible to satisfy the request of this specific supplier. In addition, it would also be unfair to make an exception and discriminate against other important producers.
Given this situation, the parties took extreme positions. The Supplier argued that thanks to its market margin and the strength of its brands, any new product would be a success. In response, the Retailer recalled the long-term relationship that united them and the fantastic results that were only possible with mutual cooperation!
Given the Retailer's refusal, the Supplier decided to move on to another matter: the retailer should accept a price increase of at least 2.5% to adjust for inflation. As the remaining retailers had already accepted this increase, it should not be an exception. Defying the expectations, the Retailer rejected the proposal, arguing that in the context of falling purchasing power in which they lived, it would be unrealistic to raise prices.
By this time, the Supplier's representatives were already very upset, as they considered this last refusal to be unacceptable. As one of the largest consumer goods companies in the world, with a growth of almost 8% in that market in the previous year, they should be treated with respect! Irritated by the Retailer's lack of flexibility, the Supplier decided not to offer discounts on its products. In retaliation, the Retailer withdrew 70 products from this supplier.
There followed a threat by the Supplier to raise the price of all products by 30% if the retailer did not reconsider its position. The Retailer responded by discontinuing 300 Supplier products.
The conflict continued to escalate: the Supplier launched a large advertising campaign that claimed that its products were available elsewhere, in an attempt to divert traffic from the Retailer's stores to the competition. And the Retailer responded by launching a campaign to promote other brands, in particular, its own brand. As a result of this negative conflict spiral, both parties lost immensely, in a situation in which the escalation of the conflict was extreme.
Oddly enough, even experienced negotiators are often frustrated with problematic relationships and situations of stalemate and valued destruction. Therefore, understanding the circumstances that hinder negotiation processes is extremely important in conflict management.
In reality, negative conflict spirals can result from psychological factors that lead the parties to persist with an action plan that differs from what would rationally make sense. In these cases, the inability to accept defeat can lead to the battle of "wills" and, as a result, a situation of loss for both sides.
The conflicts aggravation can also start with errors in the negotiation structure and process management.
Negotiations are often structured around a single topic, "the problem" that affects both parties, which in this example was shelf space. When the negotiation takes place around a single topic, the negotiation is merely distributive: one party wins at the expense of the other. This negotiation logic contributes to a higher level of tension, sometimes even confrontation, in the negotiation.
In contrast, negotiations that involve more than one topic have an integrating dimension, as the parties identify opportunities to create joint value. With the growth of the agenda, it is possible to identify non-controversial issues, where the preferences of both parties point in the same direction. In addition, because the parties value controversial matters differently, it is possible to identify profitable trade-offs: a party may give up something that it values less, in exchange for something more valuable to itself. In this sense, the identification of win-win situations contributes to creating a constructive and collaborative negotiation environment.
When parties are too focused on solving a single problem, they are unable to put things in perspective and identify other issues that could significantly change the direction of the negotiation. And even when other variables are introduced in the negotiation, as is the case of the price in the example above, the different subjects are discussed in isolation and the approach to negotiation is subject to subject, rather than combined.
Difficult negotiation processes often arise because executives and decision-makers underestimate the importance of building constructive relationships. Many negotiators still believe that the best way to achieve their goals is to exert maximum pressure, insist on their position, use aggressive and disrespectful language, and deceive the other side. They seem to ignore that a negotiator's level of satisfaction is determined not only by the end result but also by the negotiation process. Therefore:
Use smooth and appropriate language;
Be courteous;
Show appreciation for the other;
Listen actively;
Recognize the other's point of view;
Do everything to avoid misunderstandings.
When credibility is lost, trust disappears and working constructively to identify value creation opportunities for both parties is virtually impossible. A relationship based on trust, respect and mutual understanding results in easier and more effective negotiations. For such:
Don't make commitments that you are unable to honor;
Don't be caught in a lie;
Don't open the deal with an outrageous offer;
Don't withdraw an offer without having a strong reason to do so.
This publication was inspired by the article "Escalation of Conflict in Negotiations" by Professor Luís Almeida Costa.