Management of Industrial Relations

Importance of Negotiation and Process of Negotiation

Importance of Negotiation

(1) Helps in Conflict Resolution – Conflict occurs when people have separate and conflicting interests at the time or the needs and interests of their constituents. Negotiating parties may be subjected to different forms of conflict, depending on their needs and interests of their constituents. When managers and employees know how to negotiate workplace conflicts, general morale and productivity will improve. People deal with problems ear!y on, before they can escalate to unmanageable proportions. The organisation thus gains a precious commodity time to do higher-potential things such as attract new business, create innovative products, and anticipate and satisfy customers’ needs. Moreover, retention improves, as employees find the workplace a more positive place to be.

(2) Helps in Cost Reduction – When companies develop competence in negotiation, they can reduce the costs associates with flawed contracts and the use of legal counsel to resolve conflicts that have escalated needlessly. Negotiation is a useful method of maintaining value for money in a single source situation i.e. where there is no real competition.

(3) Strengthens and Maintains Better Relationships – When people negotiate effectively, they exchange something of value to achieve mutually agreeable purposes. Successful negotiations thus strengthens relationships and builds a sense of trust that each party has the other’s interests (as well as its own) at heart. Mutual benefits and trust in turn create a feeling of quality and satisfaction in workplace.

(4) Find Solution to Problem – The purpose of negotiation in organisation is to persuade an opponent and at the same time find a solution to the problem that is satisfactory to both parties. Negotiation also helps to develop new procedures for handling problems.

(5) Helps in Finding Alternative – Conflict must be avoided at the work place as it only leads to negativity all around. Negotiations help to reduce conflicts at the work place. Conflicts arise when individuals are too rigid and are just not willing to compromise with each other. Negotiations help in finding an alternative which benefits all.

Process of Negotiation

(1) Preparation and Planning – Before the negotiation process is started, one has to find the following things –

  • Nature of the conflict,
  • History leading to negotiation,
  • Person involved and their perceptions about the conflict,
  • Expectations from negotiation, and
  • Goals.

This stage helps to put the goals in writing and develop a range of outcomes – from “most hopeful” to “minimally acceptable” – to keep the attention focused.

(2) Definition of Ground Rules – Once the planning is done and strategy is developed, one should be ready to begin defining the ground rules and procedures with the other party over the negotiation itself. Then following things should be considered –

  • Person doing negotiation,
  • Place of negotiation process,
  • Applicable time constraints,
  • Issues to which negotiation will be limited, and
  • Specific procedure to follow if impasse is reached.

During this phase, the parties will also exchange their initial proposals or demands.

(3) Clarification and Justification – When initial positions have been exchanged, both the parties will explain, amplify, clarify support, and justify their original demands. This need not be confrontational. Rather, it is an opportunity for educating and informing each other on the issues, why they are important, and how each arrived at their initial demands. This is the point at which one party might want to provide the other party with any documentation that helps to support its position.

(4) Bargaining and Problem-Solving – The essence of the negotiation process is the actual give-and-take in trying to hash out an agreement. This is where both parties will undoubtedly need to make concessions.

(5) Closure and Implementation – The final step in the negotiation process is formalising the agreement that has been worked-out and developing any procedures that are necessary for implementation and monitoring. For major negotiations – which would include everything from labour-management negotiations to bargaining over lease terms to buying a piece of property to negotiating a job offer for a senior management position-this requires hammering out the specifics in a formal contract. For, most cases, however, closure of the negotiation process is nothing more formal than a hand-shake.

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