Five things every project manager should

know about negotiation

Conference Paper Leadership, Communications Management, Decision Making 12 October
2010

Craddock, William T.

How to cite this article:

Craddock, W. T. (2010). Five things every project manager should know about negotiation.
Paper presented at PMI® Global Congress 2010—North America, Washington, DC.
Newtown Square, PA: Project Management Institute.

President, Craddock & Associates, Inc.

Introduction

How prevalent is negotiation? “All of us negotiate many times a day.” (Shell, 1999, p 6).
Indeed, Shell noted that most people begin negotiating at a very early age. This raises several
questions, starting with: “What is negotiation?” Although there are multiple opinions, many
formal definitions of negotiation have similarities; consider the following definitions:

• “the process of communicating back and forth for the purpose of reaching a joint
agreement about differing needs or ideas” (Acuff, 2008, p 6)
• “a process by which we attempt to persuade people to give us something we want in
exchange for something else” (Kublin, 1995, p 18)
• “a process of potentially opportunistic interaction by which two or more parties, with
some apparent conflict, seek to do better through jointly decided action than they
could do otherwise” (Lax and Sebenius, 1986, p 11)

These definitions have some common elements. For example, negotiation is a process that
involves two or more people using persuasive communications to satisfy their needs. Also,
the people involved enter the negotiations because they believe they can satisfy their needs
with a better solution than they could have obtained if they had acted alone.

Cellich and Jain (2004, p 25) offered two definitions, one similar and one different: (a) “a
mechanical exercise of offers and counteroffers that leads to a deal” and (b) “sharing
information and developing a relationship that may lead to a deal.” One explanation for the
difference lies in the cultural lenses used to view the overall negotiation process. Another
possible explanation is that the first definition reflects a tactical paradigm, whereas the
second definition reflects a strategic viewpoint.

The underlying assumption for this paper is that soft skills, in general, and negotiation skills,
in particular, are important for project managers. Skulmoski and Hartman (2010) summarized
the research regarding the relative importance of soft skills for project managers compared
with hard skills, such as scheduling. They subsequently investigated the soft skills needed for
information technology (IT) project success; negotiation skills comprised one of the seven
categories of the soft competencies they analyzed. In their study, the subset of negotiation
skills included persuasiveness, marketing, and selling; consensus building;
negotiation/facilitation skills; conflict and dispute resolution skills, and mediation/ “umpire”
skills.

Project managers should know many aspects of negotiation; this paper briefly discusses five
of them, starting with an obvious observation and ending with a perhaps not so obvious
opinion.

The Five Things

Number 1

First, project negotiations are usually ongoing. The Shell quote at the beginning of this paper
emphasizes the extent to which each of us is involved in various negotiations daily, which
certainly applies to project managers.

The nature of a project manager's negotiations ranges from routine to unique. They are
similar in that the basic purpose of negotiation is to resolve some conflict (frequently some
form of resource allocation question); they are different in that a project manager's days are
seldom routine at the micro level. The nature of the conflict or resources to be allocated can
vary significantly. The project manager may also help to resolve other conflicts, including
disagreements on how to resolve a problem.

A Guide to the Project Management Body of Knowledge (PMBOK® Guide)—Fourth Edition

(Project Management Institute, 2008, p 450) defines a stakeholder as the “Person or
organization (e.g., customer, sponsor, performing organization, or the public) that is actively
involved in the project, or whose interests may be positively or negatively affected by
execution or completion of the project.” In essence, stakeholders are the people with whom
project managers negotiate, often multiple times a day.

However, not every communication exchange is a negotiation. Clampitt (2001) described

three overall types of communication models. The Arrow model is used to send a message to
someone without any need for feedback. One problem with the Arrow model is that the
sender of the message doesn't know if the receiver actually received and understood the
message. “Noise,” as a general term, is often the culprit in the incomplete receipt of
messages. The Circuit model takes care of this incomplete reception problem by adding a
feedback loop to the sender. “The fundamental assumption of Circuit managers is that
Understanding = Effective Communication” (Clampitt, 2001, p 12). From a negotiation
perspective, the assumption that understanding is the same as agreeing is a fundamental flaw.

Clampitt described the third communication model as a Dance, in which the communication
between parties flows back and forth. Each party listens and responds in an attempt to
persuade the other. The result can be different than the starting point of either party. In this
context, negotiations follow the Dance model. While a project manager's communication can
inform and even verify, negotiation involves the Dance.

Number 2
There are two basic types of negotiation. Many negotiators may be more familiar with a
distributive negotiation, in which the typical task is to allocate something (usually a scarce
resource like money or time). Distributive negotiations are also known as “win-lose”
negotiations. This is because each party's objective is to maximize its share of the resource
being allocated. If the amount of resources is fixed, the only way one party can win is if the
other party loses. It is not possible for both to “win” the distributive negotiation. “Zero-sum”
and “fixed pie” are other names for distributive negotiations.

The second type of negotiation is integrative and has two steps. First, the people involved in
the negotiation attempt to identify additional items that could be added to the overall mix of
items being negotiated. Think of this as a collaborative problem-solving or brainstorming
activity. The objective of this first step is to expand the total potential value of the
negotiation. It is possible that some of the additional items identified may have little cost or
value to one party, but be prized by the other.

The second step of integrative negotiation is an allocation process, similar to the distributive
resource allocation process in distributive negotiation. Ultimately, the allocation decisions in
this second step are required to complete the negotiation. If the integrative negotiation was
successful in expanding the total value during its first step, both parties will feel like winners
in the second step.

Therefore, integrative negotiations are also known as “win-win” negotiations. This is because
the expanded list of items being negotiated makes it possible for each side to claim items that
have value This is because the expanded list of items being negotiated makes it possible for
each side to claim items of value from that side's perspective.

“Collaborative,” “non-zero sum,” and “expandable pie” are other names for integrative
negotiations.

Lewicki, Barry, and Saunders (2010) also defined a third kind of negotiation—
accommodative negotiation. They characterized this as “lose-win” negotiation (p 113). Why
would anyone deliberately plan to “lose” a negotiation so that the other party could “win?”
The answer lies with the second of the two definitions provide by Cellich and Jain (2004),
which were discussed in the introduction. It is both feasible and reasonable to enable the
other party in a relationship to “win” in order to strengthen the long-term relationship and set
the stage for future integrative negotiations.

Number 3

Project managers actually fulfill three negotiation roles. The obvious one is negotiator, in
which the project manager is one of the parties or sides actively involved in the dispute
resolution or resource allocation discussions. Each party should have identified its
contingency or fallback position in case the negotiation fails and this should be done before
the negotiation begins.

However, occasionally a negotiation stalls or breaks down. This is often referred to as an

impasse. One option the negotiating parties have at an impasse is to just walk away from the
negotiation and implement the contingency plan. A second option is to involve a third party
in helping to resolve the impasse. There are two specific types of third-party interventions—
mediation and arbitration.
A mediator seeks to facilitate the communication between the two negotiating parties so that
they can resume productive discussion and arrive at a mutually acceptable solution.
Communication is a key component of negotiation. Indeed, Fisher, Ury, and Patton (1991)
declared that “Without communication there is no negotiation” (p 32). The mediator is likely
to ask questions to generate dialogue. If the negotiation remains stalled, the negotiating
parties each fall back to the contingency plans identified prior to the negotiation. The
mediator is just a facilitator, not a decision maker who can impose his or her will on the
negotiating parties.

An arbitrator, on the other hand, is a decision maker. The arbitrator listens to both sides and
asks questions similar to those asked by the mediator. The difference here is that the
arbitrator serves as a judge who, after receiving input from both parties, makes a decision
regarding the issues being negotiated. Depending on the initial ground rules set by the
negotiation parties, the arbitrator's decision may be mandatory or optional. If the arbitrator's
decision is optional, the parties may choose to accept the decision or return to their
contingency plans for a failed negotiation.

A project manager becomes a mediator whenever he or she intervenes in the negotiation

between two stakeholders. The parties may ask the project manager for input. Perhaps a more
likely scenario is that the project manager chooses, unilaterally, to become involved in an
attempt to resolve the conflict. In this role, the project manager seeks to facilitate the
communication between the two parties with the conflict to help them find common ground
and a mutually acceptable solution. The project manager's involvement as a mediator stops
there. It is still possible to be at an impasse even though a mediator has been involved.

The project manager may also transition to an arbitrator role, either as a result of being asked,
or because the project manager feels the conflict will not be resolved otherwise. The project
manager may also use the threat of arbitration as a mediation tool. For example, the project
manager may say: “You resolve this conflict between yourselves, or I will make the decision
that perhaps no one will like.”

Number 4

Project management provides a framework or approach for negotiation. The PMBOK® Guide
describes five project process groups: Initiating, Planning, Executing, Monitoring and
Controlling, and Closing. Similarly, negotiation has three overall process groups:

• Planning
• Engagement
• Closing

As expected, planning involves the preparation for the negotiation with the other party. It
encompasses both the initiating and planning process groups of project management.
Engagement is the actual negotiation and it ends with either a mutually acceptable agreement
or an impasse. Engagement aligns with the executing and monitoring and controlling process
groups of project management. Closing is the work required to enact the mutually acceptable
agreement.

Skulmoski and Hartman (2010) identified the negotiation sub-skills most needed by project
process groups. Persuasiveness is the top sub-skill needed during project initiation.
Consensus building is the top sub-skill for the remaining three project process groups, as
defined by Skulmoski and Hartman: planning, implementation, and closeout. In addition,
they identified conflict/dispute resolution as another top sub-skill for implementation (or
execution).

Number 5

The last item involves project success and is perhaps more controversial than the preceding
four. The proposition is that project success can be influenced by negotiation. How? The key
is how project success is framed or defined. Dictionary.com

defines success as “the favorable or prosperous termination of attempts or endeavors.” That

sounds like a successful project.

Actually, the same project can be both a success and failure. Nelson (2005), Bourne (2007),
and Shenhar and Dvir (2007) discussed project successes that were later considered failures
and failed projects that were considered successes in retrospect. Nelson's focus was on IT
projects, whereas Bourne and Shenhar and Dvir looked at a variety of projects.

Several authors have expanded the project success criteria using various approaches. Bourne
(2007, p 3) identified three “pillars of project success.” The first of these pillars was labeled
“delivering value.” The criteria in this pillar were cost, time, scope, and benefits realization
(in essence, the triple constraint plus benefits realization).

Nelson (2005) proposed two broad categories —process-related and outcome-related —with
three criteria in each. Nelson's process-related category was composed of time, cost, and
product (in essence, the triple constraint). The outcome-related category included use,
learning, and value. In a way, these outcome-related metrics represent stakeholder
satisfaction.

Nelson's model was based on the results of 72 IT project retrospective analyses. Nelson also
performed more detailed analyses on 15 of the 72 retrospective analyses. Specifically, Nelson
asked five stakeholder groups (project manager, project team, users, sponsor, and top
management) to assess the importance of the six success criteria. Stakeholders internal to the
project team reported process-related criteria as the most important, whereas stakeholders
external to the project team assigned the top importance to outcome-related criteria.

Project success results from the attainment of predetermined criteria; however, not all these
criteria are quantifiable. This raises the possibility that stakeholder expectations can be
shaped, and negotiation skills provide the platform for these discussions.

Conclusion

The acronym OKRAS provides a convenient method to remembering the five things every
project manager should know about negotiation. First, a project manager's negotiations are
Ongoing. That is, a project manager is involved in various negotiations throughout each day.
Second, there are two basic Kinds of negotiation —distributive and integrative. Even if the
negotiation begins with an integrative approach, ultimately the resources have to be allocated
in a distributive manner. Third, there are three distinct negotiation Roles that a project
manager fulfills: negotiator, mediator, and arbitrator. Fourth, project management provides an
excellent framework or Approach for negotiation. The three phases of negotiation are
planning, engagement, and closing. Finally, a project manager's negotiation skills can have an
impact on the perception of project Success. To recap, OKRAS summarizes the five things
about negotiation:

Ongoing

Kinds

Roles

Approach

Success

Almost three decades ago, Peters and Waterman (1982, p 11) noted in their best-selling book,
In Search of Excellence, that “soft is hard”; in other words, soft skills, including negotiation,
are more difficult to master than hard skills like technical knowledge. This is as true today as
when this book was initially published. Because a project manager's negotiations are
ongoing, there are opportunities for learning and improvement. Again, project management
provides a useful tool: lessons learned. Project managers should periodically assess
themselves on how well their ongoing negotiations are being conducted and use lessons
learned as a method for continual improvement.

“Negotiation is a basic, special form of human communication, but we are not always aware
that we are doing it” (Shell, 1999, p 6). Therefore, negotiation is deceiving. Early and
frequent negotiations do not automatically result in effective negotiators. Soft skills, like hard
skills, require continual practice, assessment, and feedback to improve. Effective negotiation
skills are critical for a project manager to be successful. Your project was a success” are
sweet words to hear at the end of a project.

References

Acuff, F.L. (2008.). How to negotiate anything with anyone anywhere around the world. New
York: AMACOM

Bourne, L. (2007, January). Avoiding the successful failure. PMI Global Congress 2007,
Asia-Pacific, Hong Kong, China.

Cellich, C., &. Jain, S.C. (2004). Global business negotiations; A practical guide. Mason,
OH: Thomson South Western.

Clampitt, P.C. (2001). Communicating for managerial effectiveness (2nd ed.). Thousand
Oaks, CA: Sage Publications, Inc.

Fisher, R., Ury, W., & Patton, B. (1991). Getting to yes; Negotiating agreement without
giving in (2nd ed.). New York: Penguin Books.

Kublin, M. (1995). International negotiating; A primer for American business professionals.

New York: International Business Press.
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Shenhar, A.J., & Dvir, D. (2007). Reinventing project management: The diamond approach
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Skulmoski, G.J., & Hartman, F.T. (2010, March). Information systems project manager soft
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© 2010, William T. Craddock

Originally published as part of 2010 PMI Global Congress Proceedings – Washington, DC