"When there are different opinions in the organisation the customer always detects them and goes for whatever point is under discussion; if there are different opinions in the company, the customer feels that there is some room for the company to move in the direction he wants. It is therefore key to be aligned BEFORE sitting with the customer” (Survey respondent from this study)
This observation, made by an experienced business negotiator, reflects a common concern negotiators have – they feel that if they don’t prepare well then their negotiations will not yield the best outcome. This is in accordance with my own experience of conducting complex buyer-seller negotiations for over a decade; I consistently felt that I and other negotiators could have avoided mistakes at-the-table and instead claimed more value if we had prepared more effectively. Less intuitively, my experience also indicated a correlation between joint value creation, for the benefit of both parties, and our own preparation activities. This practitioner experience was the impetus for this research. This thesis is concerned with understanding the preparation and planning activities that are involved in complex business negotiation; more specifically, what activities are conducted, by whom, and when in the process do the preparation and planning activities take place.
Widely-regarded writers on negotiation, such as Fisher, Ury and Patton (1991), Mannix and Innami (1993), Roloff and Jordan (1991), and Watkins (1999) recommend investing time in the effective preparation and planning for the upcoming negotiation. Many practitioners’ texts (e.g. Lax
& Sebenius, 2006; Lempereur & Colson, 2010; Movius & Susskind, 2009; Shell, 2006) devote a chapter or more to the topic and offer checklists and descriptive advice. Many negotiation texts books do likewise (Brett, 2007; Hames, 2012; Lewicki, Barry, and Saunders, 2010; Thompson, 2009).
Jordan and Roloff (1997), Lewicki et al. (2010), Peterson and Shepherd (2010), and other sources have made the observation that despite the extensive research into negotiation, few have focused on what is actually prepared in anticipation of negotiations, and there is scant empirical evidence on the impact careful preparation has upon the negotiation process (Lewicki et al., 2010).
Planning ahead, which is what preparation involves, is the process that links cognition with action (Sacerodoti, 1977; Wilensky, 1983) and has been found to help translate an abstract goal into a specific set of actions which pave the way to the goal (Townsend & Liu, 2012). We should expect, then, that a lack of preparation and planning is going to lead to mistakes and poor outcomes, particularly in a complex and dynamic process such as negotiation. It is imperative to better understand what drives the behaviours performed at the negotiation table.
Consequently, this thesis examines the preparation practices of a group of experienced commercial negotiators with a view to understanding how they prepare for their negotiations. The practitioners were all employed by a multi-national wind turbine manufacturing company and they negotiated contracts with a customer, typically a private or public utility, independent power producer or a project developer. These supply and servicing contracts could be worth a hundred million Euro or more. The core of the negotiating team would be an expert in sales and a lawyer, though they may be joined by four or five others as the need arises during their preparation and in the negotiations themselves. The initial prospecting to the completion of an agreement may take up to five years with the negotiation phase lasting several months. Clearly, preparation for these major negotiations is crucial; it is in the interests of both parties that the negotiations go well.
A distinction is often made between the academic and the practical. By investigating the degree to which experienced practitioners follow the prescriptions of the negotiation literature we
can assess the strength of the link between the two. A key area of interest that will be explored in this thesis is whether negotiators follow the advice of the researchers and other writers when preparing for a complex negotiation. Are there aspects of practice that the negotiation literature seems not to have covered? The extent of the link between the academic and the practical will be significant for both researchers and practitioners alike.
The evidence presented in this thesis suggests that the practitioners’ preparation activities are broadly consistent with the recommendations offered in the negotiation literature but that some of the activities recommended do not seem to occur, a finding that suggests that there is still room to improve the link between the researcher and practitioner.
If negotiation scholars and practitioners consistently consider preparation to be a critical element of negotiation then why did my colleagues and I not follow this advice? Possibly because we did not know all of the possible activities, readily available in the literature, or we did not know how to conduct these activities. Like so many other managers, and others in the world of business, we were time poor (Peterson & Lucas, 2001; Watkins, 1999), which may have led to our not being sufficiently thorough or strategic in our preparation. With little time available for preparation, resource prioritization becomes paramount. Hence, understanding which of the possible preparation activities are the most effective in achieving the desired outcome is essential. This thesis, therefore, in addition to understanding the principles of good preparation and which of those are followed by negotiators, investigates who conducts the activities and when in the process these different activities are conducted.
Based on the data from 68 practitioners, this study has found evidence to suggest which activities are usually conducted individually (alone or with colleagues) and which activities are
usually conducted by the negotiation team. Using participant observation data over a 13 month period from a multinational and multilingual negotiation over the sale of a triple digit million Euro power generation plant, findings have been discovered to suggest in which phases of the negotiation process the different preparation and planning activities were conducted primarily.
Another implication, related to the temporal aspects of preparation and planning, is that negotiators should regard preparation and planning as being a continuous cyclical process, rather than a single event before the negotiation. The findings revealed that preparation and planning occurs individually and with the negotiation team before a meeting with the other negotiating party, but also after it. Furthermore, the case study data shows that the negotiators used communication technology to prepare while still at the negotiation table. This at-the-table preparation, together with the pre- and post-preparation meetings and preparation conducted away-from-the-table by individual members of the negotiating team, completes the iterative negotiation preparation and planning cycle. These new insights can inform further research and also strengthen the advice offered to negotiators and improve their effectiveness.
1.1 The research opportunity
This thesis was made possible thanks to a large industrial company who committed to sponsor the project together with the Danish Ministry of Science, Innovation, and Higher Education as part of the Industrial PhD programme1. Prior to starting the PhD project I had never worked in the company and had only a superficial knowledge of it. The multiparty agreement between company, university, the ministry, and myself made it possible to do a naturalistic inquiry (Lincoln
& Guba, 1985) within the setting of the company and, thereby, complement the negotiation research conducted within the university laboratories (Buelens, Van De Woestyne, Mestdagh, &
Bouckenooghe, 2008; Pruitt, 2011).
On January 1st 2011, I transferred from Denmark to Spain, where the company has one of its global sales business units. This unit spans multiple countries and handles many ongoing, parallel customer negotiations. My initial informal interviews with negotiators consistently revealed that customer negotiations are a sensitive subject due to the financial importance of the outcome both to the negotiators themselves and for the company. As a result, this was a closed setting (Bell, 1969) which made access a challenge for the researcher. To cope with this important obstacle I engaged in offering negotiation advice and training, which turned out to be highly sought after by the negotiators of the company. The negotiators soon started to invite me, as an observer, to both internal preparation meetings and external customer negotiations, possibly as an act of reciprocity.
Other negotiators told me that they had invited me because my own experience as a negotiator made me “like one of them”. No matter the reasons for the access granted, the insider approach adopted presented both advantages and challenges (Bryman & Bell, 2007; Dwyer & Buckle, 2009), an aspect of the research that will be discussed in Chapter 4.
My initial observations of preparation and customer negotiations revealed a similar pattern, with blunders occurring at-the-table that could have been avoided by efficient preparation and suboptimal agreements being reached that could possibly have been improved by better preparation;
this suggests that even in the high Euro amount negotiation, preparation is not always optimal.
These preliminary observations in the context of the company under study mirrored my own experience and reinforced my motivation to conduct the study that now comprises this thesis.
1.2 Outline of the dissertation
Following this Introduction, chapter 2 presents a review of the literature on negotiation.
Under the overall theme, concerning which preparation activities are undertaken to conduct a complex business negotiation, the primary purpose of the literature review is to develop the specific research questions and propositions, and to create a comprehensive list of the recommended negotiation preparation and planning activities. The review also served to develop the questionnaire used for the open-ended survey.
Chapter 3 explains the methodology employed and the overall interpretive research design.
This involved multiple methods of inquiry to capture the widest possible range of insights from the practitioners. The chapter also describes the selection criteria, data collection, and thematic coding and analysis. The two main sources of data were a survey and a case study. The case is described in chapter 4 – Company Context and Sales Process - the purpose of this chapter being to provide background information and to understand the context of the company from which all of the data for this study originates. The chapter also describes one multinational, multilingual complex negotiation over the sale of a large power generation plant.
The findings from the case study and the survey are presented in chapters 5, 6, 7, in which each chapter offers an answer to the research questions developed during the literature review;
namely: (1) Which preparation activities are undertaken to conduct a complex business negotiation, (2) Who undertakes the preparation and planning activities, and (3) When do preparation and planning activities occur in teams. These findings are brought together in chapter 8 which considers the implications for further research and for practice.