In a rapidly changing, highly competitive, and sometimes hostile world of business, governments, organisational leaders, and policymakers are continuously seeking ways to improve competitiveness, industrialise, ensure business sustainability, national growth, and development.
While various strategies and tactics are needed to achieve these goals, transaction lead and deal-making negotiators in most developing economies continue to be politicians, lawyers, engineers, and accountants. Various research from leading institutions including Harvard, Oxford, Stanford, Cranfield, INSEAD LBS, WITS, and WBS amongst others, indicate that using such professionals to lead deal-making will most likely not yield the desired win-win outcomes.
Drawing on a sample of international organisations, including Fortune 1000, FTSE 250, and JSE 100 companies, as well as state-owned enterprises and government departments, a PanAvest International and Partners-funded study, investigated opinions relating to bargaining and negotiations.
Whilst the findings of the purposive research indicated a significant appreciation of the role of negotiations in long-term value creation, the study also highlighted the following:
- The need for negotiation skills to be a core strength of deal makers be they in the public or private sectors,
- There were major misunderstandings vis-a-vis the difference between negotiations and bargaining.
- The urgent need for negotiations training for both public and private sector decision-makers.
The purposive study which involved director-level executives in both public and private sectors also revealed the following:
- 66percent of c-suite executives conflated bargaining with negotiations.
- 84percent of public sector chief executives conflated bargaining with negotiations.
- 90percent of public sector project negotiations were led either by a politician, a lawyer, or accountant.
- 78percent of private-sector business negotiations were led either by a lawyer or an engineer or an accountant
- 92percent of developmental project negotiations were led either by a politician, a lawyer, or accountant.
It is an accepted fact globally that politicians, engineers, lawyers, and accountants in most cases are not necessarily equipped with the right negotiation skills to help with the deal-making associated with industrialisation and developmental-related projects.
Unlike the developed world and selected countries in Asia (e.g. China), which use expert and trained negotiators to lead negotiation discussions, deal-making in Africa continues to be mainly championed by politicians, engineers, lawyers, and accountants. In most cases, their goal is to help maximise price and short-term gains plus protect a party from a potential contractual dispute.
Are these the reasons why:
- So many deals relatively go wrong in Africa?
- Africans are not benefiting from her vast resources?
- There are major project cost overruns?
Today, unconscious bargaining is unfortunately a popular activity among African governments, policymakers, and business executives. This is essentially a result of:-
- A non-experienced negotiator leading the deal-making process.
- Product or service value underestimation by policymakers and business executives.
- Pressure to satisfy shareholders, political agenda and a
- Focus on short-term price gains.
Consequently, issues relating to long-term sustainability, competitiveness, and socio-economic development continue to be short-changed.
To negotiate for mutually beneficial change and create recognisable differences in current local and regional wide value creation, organisational leaders and government officials need to appreciate the differences between negotiating for long-term benefit and bargaining for short-term gains.
So, what is the difference?
Bargaining involves discussions where each party push viewpoints to help minimize acquisition costs and not necessarily to maximise the total acquisition cost of ownership. Put simply, bargaining tends to focus on short-term price-chiseling and looks at who is right in a specific situation. Since bargaining is generally about ‘winning,’ it leads to win-lose relationships between competing individuals or organizations. In most cases, it does not necessarily take the long-term business and societal consequences of such relationships into account.
Bargainers tend to focus on attaining goods or services for the cheapest possible price. Adopting bargaining practices in the place of negotiation usually happens for one of two reasons.
- On the one hand, bargainers may enter engagements with a psychological belief that their organisation cannot afford the proposed price of the required product or service, and therefore need to cut the price down.
- On the other hand, they may enter engagements in a state of financial desperation, and bargain out of fear of losing a deal.
According to Prashant Deedhai (2016), when it comes to win-lose or hard-bargaining “each side often adopts an extreme position, knowing that it will not be accepted, and then employs a combination of guile, bluffing, and brinkmanship to cede as little as possible before reaching a deal.”
Negotiation on the other hand is a strategic discussion that resolves an issue in a way that both parties find acceptable. Negotiations’ focus is on the total cost of ownership and involve engaging on equal terms for mutual benefit plus on what is right in a specific situation. Tony Robbins rightly describe negotiation as “a discussion between two or more parties who must cooperate to achieve their respective goals…………. requiring a give and take by both parties to attain a mutually beneficial result…………..”
Writing in the Harvard Business Review (2019), Sebenius J.K rightly pointed out that every negotiation involves: customers and suppliers, shareholders and creditors, prospective joint venture and alliance partners, with people within companies, and across industry and national borders. For all these interactions, there is the need for the right and trained professional to take responsibility to help reach a mutually beneficial end goal.
Unlike bargaining, negotiation is not about ‘winning’ or ‘losing’. Nor is it about attaining cheaper prices. Rather, it is a catalyst for building mutually beneficial relationships.
Forbes’ Nimala Reddy (2018) insists that “it is important that any negotiation is fair and well-balanced, in a way that benefits all parties involved in the deal in the long term. A negotiation is thus not about one party winning and the other party losing, making it a total zero-sum. Instead, two or more parties come to the table for a conversation. They discuss their interests and create an exchange to build win-win benefits for each other.”
Negotiators enter discussions from a position of knowing the intrinsic value of what they have and what value they want for it. In addition, they engage in negotiations with the potential value to be created for each party in mind and are driven by the long-term possibilities of future business relationships.
Wolfgang S. and Fieke H(2020) succinctly summarize bargaining from an economic perspective as focusing on the dilemma between immediate self-interest and benefit to a larger collective whilst negotiations focused on the effect on, and behavior and cognition of people…….
To sum up although used interchangeably, bargaining and negotiating are two inherently very different concepts for striking a deal. Today, one of the most important, but often misunderstood aspects of deal-making is negotiation. Governments and organizations thus need to promote knowledge and understanding of the purpose of negotiations to ensure long-term value creation, business and industrial competitiveness, broader economic growth and development.
In conclusion, appreciating and understanding the differences between negotiating and bargaining plus having the right and experienced professional to lead the deal-making process will help governments, businesses, and organisational leaders to make informed and impactful decisions that will not only influence the outcomes of specific negotiations but also pave the way for greater and life-changing opportunities relating to the UNSDGs.
>>>is an international chartered director and Africa’s first-ever appointed Professor Extraordinaire for Industrialisation and Supply Chain Governance. He is the CEO of PanAvest International and the founding non-executive chairman of MY-future YOUR-Future and OUR-Future (“MYO”) and the highly popular daily Nyansa Kasa series. He is currently the non-executive chairman of the Minerals Income and Investment Fund (MIIF). Professor Boateng was previously the non-executive chairman of the Public Procurement Authority (PPA). For more information on Nyansakasa visit www.myoglobal.org.