Negotiations encompass more than just two parties meeting to bargain for an agreement. They involve multiple parties and multiple issues that may be global in nature. Complex negotiations are most evident in the business field with numerous mergers. Mergers require negotiations concerning the actual purchase, regulatory agency approval and vendor services contracts. Utilizing project management concepts can prevent these disputes and make for an organized, goal oriented negotiation process. The tools used in the field of project management to plan, execute, control and close a project can be applied effectively to prepare for complex negotiations.
The Project Management Institute (PMI) defines project management as, “the application of knowledge, skills, tools, and techniques to a broad range of activities in order to meet the requirements of a particular project.” The military developed the main principles of project management in the 1950’s. Today project management is used in the high-tech, manufacturing and healthcare industries. It is especially used in the construction industry by builders, owners, architects and engineers to bring a project in on time and within budget.
The planning process brings the negotiating team together, and helps them prepare the transaction. The major step in this process is writing the scope statement. The scope is the work of the project. In order to create the scope statement, the negotiators would utilize a work breakdown structure (“WBS”).
A “WBS” groups the deliverables of the project and organizes them to form the total project scope. Creating a “WBS” requires brainstorming a list of activities to complete the task. From this, a multi-tiered chart, like an organizational chart, is created, taking the larger functions and reducing them to sub-elements and deliverables.
The next part of the planning process is a mapping of time allocation. From the “WBS,” a Gantt chart is formed. Gantt charts were developed by Henry Gantt, a pioneer in scientific management in 1917. The Gantt chart shows the length of each activity and its dependency on other activities. Therefore, for negotiations, it must be decided what part of the negotiation needed to be discussed first or if negotiations could happen concurrently (if they are not dependant on another issue being resolved first). The activity sequence is then used to form a Critical Path.
The Critical Path Method (“CPM”) is an analysis used to predict project duration. The longest path is the completion date. The Critical Path is flexible because it is based on time estimates. These estimates include slack, or what project managers call “float.” The float can be adjusted by applying additional resources. If negotiations need to be completed by a certain date, then perhaps more people would be added to the team. Another suggestion would be deciding to hire a mediator if a certain part of the negotiation would take too long. This can all be determined ahead of time and will result in the project being completed earlier.
The last parameter is cost to understand funding. To formulate the cost parameter the “WBS” and Gantt charts are used. The tool used by project managers is called “Activity-Based Costing.” The activities from the “WBS,” plus the time indicated in the Gantt chart, formulate the cost. The cost should be given in ranges—there is the optimistic, pessimistic and most likely.
Negotiators, having formulated the Gantt Chart and calculated the Critical Path, will know if there is need for the earliest completion date for a negotiation, which would require additional resources. These resources may include hiring additional lawyers or consultants to work the deal, such as consultants who specialize in lobbying or working with regulatory agencies, or a financial expert in the case of a merger or an accountant for the purchase of a company. These additional resources will have a direct effect on cost. This can be seen in the “Activity Based Costing”; as more tasks are needed, there will be a higher the cost.
An example of a complex negotiation is one company purchasing another company. A “WBS” for this situation may be as follows: on the top of the chart would be “Negotiation,” “Gather Financial Statements”, “Review The Company’s Contracts”, and “Meet with Regulatory Agency.” Then these elements are narrowed into sub-elements. For example some elements of “Review Company Contracts” might be “Past Contracts,” “Present Contracts,” and “Employment Contracts.” Each task delineated in the “WBS” would have an amount of time assigned to it. “Meet with Regulatory Agency,” may be assigned fourteen days, which may be dependent upon gathering certain financial statements. Using the project management tools, the company’s negotiation teams could be alerted if the time adjustment is possible and also have an estimate of the additional cost involved.
Lastly, the planning process ends with the scope, which requires incorporating all of the above elements—the “WBS,” the Gantt chart, the “CPM,” and an estimated cost range—all of which must be agreed to in writing. If not, there may be what is termed creep. Creep is the adding on of other projects to the scope. This may be problematic since the negotiation’s original objectives may not be met. Again, this project management tool is ideal for preparing for difficult negotiations to make sure they run in an organized manner. At the completion of the scope statement, the next phase is the executing process.
Executing the project plan involves organizing people, identifying specific resources for carrying out the work defined in the plan, scheduling workers to activities and scheduling start and end dates. Agendas for meetings are kept. The agendas document minutes and performance review, providing direction to each team meeting. A project manager is also chosen. A strong project manager is needed in order to maintain communications and manage conflicts within each negotiating group.
The controlling process compares actual performance with what was originally planned. This is where there is an actual negotiation between the competing parties. The party using project management would monitor the performance to discover the status of each activity. The reporting system should include timely and accurate information to correct the performance.
In order to take corrective action, risk management is required. Risk management identifies, assesses and responds to what could go wrong during the life of a project. Risks are listed; their impact and probability are ranked in the Risk Register. The Risk Register documents all identified risks, their cause and probability of occurring. Then there is a list of proposed responses.
In a complex negotiation, using a Risk Register will lead to a prepared team of negotiators. Risks for a negotiation can range from insolvency of one of the entities, to possible strike of the employees in the case of a merger, to the loss of creditors. The impact of these can be lessened by using a Risk Register, which would provide a list of alternatives if the actual risk comes into fruition. Corrective action in the form of additional resources may be needed. A negotiator may need to be shifted from another activity that may be running ahead of schedule. Therefore the timetable can remain.
The function of formally closing a project is to review the project’s successes and failures in order to improve future projects and to evaluate the project. It is for this reason that documentation of the project is needed. Documentation provides historical data, a training resource and performance evaluation. The closing process also includes an audit to gauge satisfaction as to whether the project work has been done on time, within budget and according to specifications.
Many fields have used project management to successfully complete their objectives. In negotiations, however, the concept is foreign. Many negotiations dealing with complex issues or multiple parties would benefit from utilizing the processes in the field of project management. The four processes of planning, executing, controlling and closing each have tools that can be utilized. In the end, a team of negotiators would be better prepared to meet the challenges presented and produce effective results.