Creating win/win solutions to small business problems
“I know that you believe you understand what you think I said, but I’m not sure you realize that what you heard is not what I meant.”
– Robert McCloskey
When you are an entrepreneur, you need to deal effectively with conflicts. Small business people need the excellent communication skills that will help to defuse a conflict situation and negotiate a solution that both parties are happy with. In a large business, several people may excel in conflict management, but in a small business, the entrepreneur or small business owner often has to resolve all conflicts by themselves.
This is not always easy, and the quote above highlights the typical problems with communication and in particular with conflict resolution.
Conflicts start when two people disagree and need to come to a resolution. There are several ways you can resolve conflict so that one party “wins” or is happy and the other is not, that both parties “lose” or that both parties “win”. Obviously, the best solution is a win-win situation.
Read the scenario below and think about how you would respond. We’ll work through each of the five possible outcomes for the scenario to give you an idea of how the communication and negotiation dialogue can play out.
Belinda walks into the office and slumps into her chair. Her main supplier has just put up the price of his product and it will make it almost impossible to keep her business afloat. She needs to negotiate a deal with the supplier to reduce the costs of the essential material she uses in her product, or face the fact that the business could go under.
Belinda Loses – Supplier Wins (Lose/Win)
Belinda could approach the supplier and request a discount, without offering any reason for the supplier to do so. Belinda just begs for a discount because otherwise her business will go under. The supplier decides he has the right to put whatever price on the product and he keeps the price at the higher rate.
Belinda Wins – Supplier Loses (Win/Lose)
Belinda cuts down on her order from the supplier and then threatens to find another supplier. In the face of the threats from his best customer, the supplier backs down and puts the price back down. However, he is unhappy about the situation and feels that Belinda is taking advantage of him. He will spend more energy in the future getting other customers to buy the product instead of working on the business relationship he had with Belinda.
Belinda Loses – Supplier Loses (Lose/Lose)
Belinda finds that negotiating with the supplier is too difficult. She gives up on the negotiation dialogue and simply cuts all ties with the supplier. Belinda goes out of business and the supplier loses his customer.
Belinda Wins – Supplier Wins (Win/Win)
Belinda sits down with the supplier and starts a negotiation dialogue with the supplier. First of all, she listens to supplier who explains why the product price has increased. He has passed on the costs of implementing a new law to all of his customers, otherwise he will go out of business.
Belinda recognizes the problem and explains her situation. She needs his product, but can’t afford the higher costs. At this point, it seems like an insolvable conflict. However, Belinda and the supplier discuss several options for Belinda to recoup the higher costs of the product or for the supplier to reduce the costs.
Finally, Belinda offers to pay half the higher price and the supplier offers a discount for bulk orders and fast payment options that will alleviate his own cash flow problems. Belinda passes on some of the higher cost to her own customers.
Belinda is happy with the outcome of the negotiation – she has reduced the supplier’s price. Meanwhile, the supplier recoups some of the additional costs from complying with the new law and reduces his cash flow problems, so he is happy with the outcome of the negotiation.
The final possible outcome of the negotiation is to create a workable compromise where both parties lose something and both parties win something. The compromise is equal and a solution evolves that both parties are reasonably happy with, even if neither party calls it a true win-win situation.
The supplier decides that he cannot afford to reduce the price, as such, but suggests that Belinda may be able to provide services in kind instead of paying cash.
Since Belinda’s entrepreneurial business involves designing websites, the supplier suggests that she pay half the additional price in cash (thereby resolving some of his cash flow problems), and pays the other half in kind by designing and maintaining his website. They discuss how the compromise will work for both parties, including hourly rates, invoicing, and payment options.
The situation above is a workable compromise – Belinda still pays some of the higher price and the supplier agrees to receive goods in kind instead of cash for the product.
To work towards a win-win solution or at least a workable compromise in any conflict management scenario, you need to be able to communicate effectively. Listen carefully to what the other party is actually saying and offer something that gives the other party what they need while you still get what you need from the solution.
Clear communication techniques and getting a good negotiation dialogue happening are the keys to creating win-win solutions in conflict management.