Four Ways To Work Out Business Disputes

Writen by Giuseppe Leone

Business owners have four options to resolve disputes with partners, vendors or customers. Each option is based on different assumptions, and entails a different cost. Therefore, it pays to understand them better.

Option #1 – Direct negotiation

Direct negotiation is certainly the cheapest - but not necessarily the easiest – way to resolve a conflict. A good place to start, is to get clear about what one wants, why, and how much one cares for the future relationship with the other person. The next step, is finding out how the situation looks from the other person's perspective. This task requires effective questioning, listening, and observing. The final negotiation step, is crafting an agreement that both parties believe to be better than all other alternatives.

To negotiate successfully one needs some planning, communication and negotiation skills. Without them, it is easy to end up with no deal, or a bad deal, or even a personal war.

Option #2 - Mediation

The goal of mediation is not to find who is right or wrong, but how the problem at hand can best be resolved. Mediation is a process in which parties who disagree meet with a neutral third-party, who facilitates their negotiations. The mediator doesn't have any decision-making authority. The parties decide how to resolve their problem, in a way that is mutually acceptable.

Since mediation is confidential, mediation discussions and materials are not admissible in court. In a sense, when people mediate they have everything to gain and nothing to lose. If they are able to reach a mutually acceptable agreement with the mediator's assistance, that's great. Otherwise, they can still use the remaining two options. And in that case, whatever they have said or heard, offered or counter-offered during mediation, doesn't matter.

Option #3 – Arbitration

The business dispute is submitted to a neutral arbitrator, who examines the evidence, listens to the parties and renders a binding decision. The conflicting parties must accept the arbitrator's decision, no matter whether they like it or not. Arbitration is past-oriented, and requires a certain amount of fact-finding. Therefore, generally it takes more time (and money) than mediation, but less than litigation.

Option #4 – Litigation

The fourth option is to let the judge decide which party is right or wrong, based on the facts and the law. In actuality, though, the vast majority of civil cases never get that far (some statistics say up to 90%). They settle out of court. A few days – or even hours – before the trial, the two conflicting parties, assisted by their respective attorneys, prefer to negotiate their own agreement, rather than running the risk of losing in court.

For business owners – as well as for anyone else - litigation has two major drawbacks. First, it inevitably has a detrimental effect on the future relationship between the parties. Second, it can be quite expensive in terms of time, money and stress. Nonetheless, when a business dispute cannot be resolved any other way, litigation is a valid option.

About The Author

Giuseppe Leone is a Business and Workplace Mediator. Past President of SPIDR (Society of Professionals in Dispute Resolution) Hawaii Chapter. Mediator for Hawaii District Courts. Email: mediationplus@yahoo.com

To Win In Negotiations Learn How To Taper Concessions

Writen by Roger Dawson

In extended negotiations over price, be careful that you don't set up a pattern in the way that you make concessions. Let's say that you're selling a used car and you've gone into the negotiation with a price of $15,000, but you would go as low as $14,000. So, you have a negotiating range of $1,000.

The way in which you give away that $1,000 is very critical. There are several mistakes that you should avoid:

Equal-sized concessions. This means giving away your $1,000 negotiating range in four increments of $250. Imagine what the other person's thinking if you do that. She doesn't know how far she can push you, all she knows is that every time she pushes she gets another $250. So, she's going to keep on pushing. In fact, it's a mistake to make any two concessions of equal size. If you were buying the car, the owner made a $250 concession, and when pushed made another $250 concession, wouldn't you bet that the next concession would be $250 also?

Making the final concession a big one. Let's say that you made a $600 concession followed by a $400 concession. Then you tell the other person, "That's absolutely our bottom line. I can't give you a penny more." The problem is that $400 is too big a concession to be your final concession. The other person is probably thinking that you made a $600 concession, followed by a $400 concession, so he's sure that he can get at least another $100 out of you. He says, "We're getting close. If you can come down another $100, we can talk." You refuse, telling him that you can't even come down another $10, because you've given him your bottom line already. By now the other person is really upset, because he's thinking, "You just made a $400 concession and now you won't give me another lousy $10. Why are you being so difficult?" So, avoid making the last concession a big one, because it creates hostility.

Never give it all away up front. Another variation of the pattern is to give the entire $1,000 negotiating range away in one concession. When I set this up as a workshop at my seminars, it's amazing to me how many participants will turn to the person with whom they're to negotiate and say, "Well, I'll tell you what he told me." Such naivete' is a disastrous way to negotiate. I call it "Unilateral Disarmament."

So you're thinking, "How on Earth would a person be able to get me to do a stupid thing like that?" It's easy. Someone who looked at your car yesterday calls you up and says, "We've located three cars that we like equally well, so now we're just down to price. We thought the fairest thing to do would be to let all three of you give us your very lowest price, so that we can decide." Unless you're a skilled negotiator, you'll panic and cut your price to the bone, although they haven't given you any assurance that there won't be another round of bidding later.

Another way that the other side can get you to give away your entire negotiating range up front is with the "we don't like to negotiate" ploy. Let say you're a salesperson trying to get a new account with a company. With a look of pained sincerity on his face, their buyer says, "Let me tell you about the way we do business here. Back in 1926, when he first started the company, our founder said, 'Let's treat our vendors well. Let's not negotiate prices with them. Have them quote their lowest price, and then tell them whether we'll accept it or not.' So that's the way we've always done it. So just give me your lowest price and I'll give you a yes or a no. Because we don't like to negotiate here." The buyer is lying to you. He loves to negotiate. That is negotiating-seeing if you can get the other side to make all of their concessions to you before the negotiating even starts.

Giving a small concession to test the waters. Giving a small concession first to see what happens tempts us all. You initially tell the other person, "Well, I might be able to squeeze another $100 off the price, but that's about our limit." If they reject that, you might think, "This isn't going to be as easy as I thought." So you offer another $200. That still doesn't get them to buy the car so in the next round you give away another $300 and then you have $400 left in your negotiating range, so you give them the whole thing.

You see what you've done there? You started with a small concession and you built up to a larger concession. You'll never reach agreement doing that, because every time they ask you for a concession, it just gets better and better for them.

So all of these are wrong because they create a pattern of expectations in the other person's mind. The best way to make concessions is first to offer a reasonable concession that might just cinch the deal. Maybe a $400 concession wouldn't be out of line. Then be sure that if you have to make any future concessions, they're smaller and smaller. Your next concession might be $300, then $200, and then $100. By reducing the size of the concessions that you're making you convince the other person that he has pushed you about as far as you will go.

If you want to test how effective this can be, try it on your children. Wait until the next time they come to you for money for a school outing. They ask you for $100. You say, "No way. Do you realize that when I was your age my weekly allowance was 50 cents. Out of that, I had to buy my own shoes and walk ten miles to school in the snow, uphill both ways. So I would take my shoes off and walk barefoot to save money (and other stories that parents the world over tell their children.). No way am I going to give you $100. I'll give you $50 and that's it."

"I can't do it on $50," your children protest in horror.

Now you have established the negotiating range. They are asking for $100. You're offering $50. The negotiations progress at a frenzied pace and you move up to $60. Then $65 and finally $67.50.." By the time you've reached $67.50, you don't have to tell them that they're not going to do any better. By tapering your concessions, you have subliminally communicated that they're not going to do any better.

Key points to remember:

1. The way that you make concessions can create a pattern of expectations in the other person's mind.

2. Don't make equal size concessions because the other side will keep on pushing.

3. Don't make your last concession a big one because it creates hostility.

4. Never concede your entire negotiating range just because the other person calls for your "last and final" proposal or claims that he or she "doesn't like to negotiate."

5. Taper the concessions to communicate that the other side is getting the best possible deal.

Roger Dawson
Founder of the Power Negotiating Institute
800-932-9766
RogDawson@aol.com
http://www.rdawson.com

Roger Dawson is the author of two of Nightingale-Conant's best selling audiocassette programs, Secrets of Power Negotiating and Secrets of Power Negotiating for Salespeople. This article is excerpted in part from Roger Dawson's new book - "Secrets of Power Negotiating", published by Career Press and on sale in bookstores everywhere for $24.99.

Negotiating The Impact Of Time On Negotiations

Writen by Bill Scarpino

Time is a precious commodity in your personal life, in your professional life, and in general. Value the time you are investing in resolving a dispute or negotiating an issue. Wasted time is not recoverable. Consider the importance of the matter at hand before over-investing in the resolution process. Time is important to everyone. By better understanding the dynamics of time consumption, one can use it tactically to advance a negotiation.

There are ways to manage time relating to settlement conferences. Suggest having the meeting at your office to eliminate travel time. Prepare a written agenda for the meeting to keep the parties focused and minimize extraneous dialogue that you do not want to have. Consider who should draft the settlement documents. You control the timing of getting documents out if you do the work to draft the agreement. But you save time by letting the other person draft the agreements for your review.

Add negotiating team members to assist in the research and preparation for the meeting. You may need to focus on other, more pressing matters. But the preparation still needs to be done. Adding teammates to spread the work is often effective. Make sure, however, that you don't also add more time in managing the team then it would have taken to do the preparation yourself.

Time is important to others as well. It can and should be used as a negotiating tactic. If the issue is a minor irritant for the other person, by being openly willing to prolong the time it will take to settle the issue you may indirectly encourage the other party to settle rather than waste additional time at the table. Look for ways that the other person handles time in a negotiation as an indicator of his readiness to settle or willingness to invest in the process.

If the person looks to be pressured by time you have two options, push for a quick settlement or reschedule the meeting. What you do depends on where you are in the negotiation; not what the other person would like to do. Make decisions designed to advance your cause and not to accommodate the other person's needs. This is a conflict being settled, not a tea party.

If you are given a time-sensitive deadline by the other person, don't accept it on face value. He may be trying to force a decision out of you prematurely. Question the need for the deadline and what other options there might be. Use a break to gather intelligence of your own about the validity of the deadline. Recognize that time is used as a tactic regularly. Don't fall prey to its being used on you.

Bill Scarpino is a professional negotiator and restructuring consultant. He writes about developing time management skills in both business and personal negotiations.