Conducting a Successful Negotiation Keri Kozlowski J.D., M.P.H. A - - PowerPoint PPT Presentation

THE POWER OF PERFORMANCE

51TH ANNUAL CONFERENCE MAY 22-25, 2018 ORLANDO, FLORIDA

Conducting a Successful Negotiation

Keri Kozlowski J.D., M.P.H.

ABOUT ME

 Attorney  Chief Performance Officer  UCF College of Business Faculty  Executive Coach, Leadership Development

Speaker, & Mediator

NEGOTIATION

A discussion between two or more parties (each with its own aims, needs, and viewpoints) seeking to discover common ground and reach an agreement on a matter of mutual concern or to resolve a conflict.

NEGOTIATION

 We begin negotiating when we are very young  People negotiate every day  Every time you ask for something you are

actually negotiating

WHY DO PEOPLE NEGOTIATE?

 To resolve a problem / dispute between

parties

 To agree on how to share / divide a limited

resource

 To create something new that neither party

could attain on his or her own

 When we believe we can achieve more

cooperating with others then without

NEGOTIATION MYTHS AND FACTS

Myths

• 1. Good negotiators

are born

• 2. Good negotiators

take risks

• 3. Good negotiators

rely on intuition

Facts

• 1. They are self-made
• 2. They carefully consider

risks & potential benefits

• 3. They rely on preparation

NEGOTIATION MYTHS AND FACTS

• 4. Negotiations are

always win-lose

• 5. The only negotiations

are formal or explicit negotiations

• 4. A vast majority can

be win-win

• 5. Far more negotiations

take place informally every day

NEGOTIATOR SHORTAGE

• Many Master Contract Negotiators in both the

public and private sectors have retired or became retirement eligible in 2012

• During the past 10 years, there has been an

increase in the complexity of contracts, making it harder to negotiate a good deal at a fair price

• U.S. Government Procurement Policies are placing

more financial risk on government prime contracts and subcontractors

• In the next 3-5 years, “Negotiation Skills” will grow

as a key personnel performance indicator

SUCCESSFUL CONTRACT NEGOTIATORS:

• Master the art and science, or soft and hard skills,

required to become a master negotiator

• Are able to and adapt strategies, tactics, and counter

tactics in a dynamic environment

• Communicate ideas clearly and effectively
• Understand their own negotiation style (and others)
• Know their products and services, desired terms and

conditions, and pricing strategy

• Can successfully lead a diverse multi-functional team
• Calmly and deal with high stress situations

 46% of contract managers enter negotiations not

knowing what they really want.

 No clear objectives set  Don’t understand strengths and

weaknesses of own and other position (can’t develop persuasive arguments)

 Don’t explore opportunities for value

creation

 Depend on being “quick and clever”

PLANNING FAILURES

THE ESSENCE OF PREPARATION

 The foundation for negotiating  Adequate preparation leads to beneficial

• utcomes

 Preparation & the 80-20 rule:  80% of your efforts should be devoted to

preparation

 20% should be devoted to the actual negotiation

THE PREPARATION PROCESS

1

• What do you want or need?

2

• How do you intend to get it?

3

• What are your alternatives if no acceptable agreement

is reached? 4

• What does the other party want or need?

5

• What alternatives do the other side(s) have if no

acceptable agreement is reached?

THE PREPARATION PROCESS

Bargaining Mix BATNA Reservation Prices Bargaining Power Analyzing the Other Party

THE BARGAINING MIX

 The bargaining mix is the package of issues up

for negotiation. Each item in the bargaining mix, can have its own starting, target and resistance point.

Prioritize Issues !!

DEFINING THE SITUATION

 What will you be negotiating?  All of the issues that must be addressed to

produce the desired outcome

 Your goals/objectives

DEFINING THE SITUATION

 Kickoff meetings help make sure all players have

complete information

ESTABLISHING GOALS

 What do you want?  What the other party wants?  Goals can be:  Substantive

 Price, terms,  contract language, …

 Relationship

 Short vs. long term !!

RELATIONSHIP

TARGET POINTS

 What you realistically hope to achieve for each

issue

 Determining target points

 What is required to satisfy your interests

and set that as your target

 Setting targets should be based on research

 Justify and quantify

BEST ALTERNATIVE TO A NEGOTIATED AGREEMENT (BATNA)

 The basic test of any proposed agreement

 Whether it offers greater value than your

best course of action without the other party

 When preparing to negotiate

 Identify and analyze your best no-agreement

alternatives “What would be my best course of action if I can’t reach an agreement?”

WHY BATNA IS IMPORTANT?

 The goal of a negotiation is NOT to make any

deal

 The goal of a negotiation is to make a “good”

deal: One that is better than each party’s respective BATNA

Assessment requires three steps:

 Identify all the plausible alternative options you

might pursue if you are unable to reach an agreement with the other party

 Estimate the value associated with each alternative  Select the BEST alternative—this is your BATNA

BATNA

 Your reservation price is your walk-away point; the

point at which you pursue other options (i.e. your breakeven point)

 Define your reservation price before negotiating  Learn your opponents’ reservation price, if possible

CALCULATE RESERVATION PRICE (RP)

ZONE OF POSSIBLE AGREEMENT

Seller Settlement Range Buyer Settlement Range

Seller’s Resistance Price Buyer’s Resistance Price

ZOPA ZOPA is Positive Positive Bargaining Zone Exists

Seller’s Target Price Buyer’s Target Price

ZONE OF POSSIBLE AGREEMENT

Seller Settlement Range Buyer Settlement Range

Seller’s Resistance Price Buyer’s Resistance Price

ZOPA

Seller’s Target Price Buyer’s Target Price

ZOPA is Negative No Possible Agreement

LEARN ABOUT OPPONENTS’ RP

 Estimate the other party’s:  Definition of the situation  Goals, issues, interests  BATNA, reservation prices

Exhaust pre-negotiation sources of

information

 Consulting company reports (e.g. Hoovers)  News Article, Press Releases, Job Boards  Contact your sources within that industry  Determine their strategic goals  See what you can learn from any member of

the negotiating team though informal discussions or slips of the tongue at the table

Examine your assumptions  Ask direct questions; watch for non-responses

LEARN ABOUT OPPONENTS’ RP

 Often people have a singular goal of convincing

• ther side to accept a certain kind of deal or

demand

 Prepare by: Determining what I want and

identifying a host of reasons why the other side should agree to give it to me.

 What we learn is limited by what we allow

• urselves to learn. We often erect barriers to

learning simply by the way we negotiate.

LEARN ABOUT OPPONENTS’ RP

RAPPORT BUILDING

 Negotiators who chat for 5-10 min, even about

unrelated issues:

 Share more information  Make fewer threats  Develop more trust and respect than pairs

who do not

 Efforts to analyze the other party involve making

estimates, assumptions, educated guesses or even hunches

ANALYZING THE OTHER PARTY

 The dilemma of trust  The other party may take advantage if you believe

too much of what he or she tells you

 But you may not be able to reach an agreement if you

believe too little

 The dilemma of honesty  The other party may take advantage if you share too

much information

 But you may not be able to reach an agreement if you

share too little

 You need to prepare in advance for tough

questions.

 Helps you avoid lying  Helps you avoid giving up too much information  Helps you reclaim control of the conversation (and

framing)

WHAT IF THEY ASK TOUGH QUESTIONS?

RUG EXERCISE

VALUE CLAIMING AND VALUE CREATION

 Value differences that exist between negotiators

include:

 Differences in interest  Differences in judgments about the future  Differences in risk tolerance  Differences in time preferences

NEGOTIATION STRATEGIES

Characteristics Distributive Integrative Available resources Fixed amount of resources to be divided Variable amount of resources to be divided Primary MINDSET I win, you lose I win, you win Primary interests Opposed to each other Convergent with each other View of relationships Short term Long term

DISTRIBUTIVE BARGAINING

 Positions (not issues) are the primary focus  Reservation prices / resistance points set limits  Target points are what you realistically hope to

achieve

 Offers & counteroffers define the process  Alternatives (BATNAs) define your resistance points

and your power

TACTICS OF DISTRIBUTIVE BARGAINING

Tactic 1: Planning: Assess your BATNA and improve it Tactic 2: Planning: Determine your resistance point, DO NOT reveal it Tactic 3: Estimate the other party’s BATNA and their resistance point Tactic 4: Set your targets high Tactic 5: Make the first offer (if you are prepared) Tactic 6: Immediately re-anchor if the other party opens first Tactic 7: Plan your concessions & counter offers Tactic 8: Provide objective support and explanations for your

• ffers

Tactic 9: Appeal to norms of fairness Tactic 10: Do not fall for the “even split” ploy / Dirty Tactics

TACTIC 1: ASSESS YOUR BATNA AND IMPROVE IT

 Define your BATNA  If you BATNA is week  Improve it

IMPROVE YOUR BATNA

 If the parties believe your BATNA is inferior to

the other party’s BATNA:

 Keep your BATNA concealed, increase its

perceived strength

 Weaken the other party’s BATNA – thus

balance the seesaw

 Team up with other parties to increase your

BATNA

 Seek a third party opinion

TACTIC 2: DETERMINE YOUR RESERVATION PRICES

 Reservation prices or resistance points set

limits & define ZOPA

 Should you reveal your reservation prices?

Seller’s Resistance Price Buyer’s Resistance Price

ZOPA

= B = S

ZOPA = B - S > 0 Positive Bargaining Zone Exists

 Push for settlement near other’s resistance

point

 Convince other party to change their

resistance point

 Create a positive settlement range (ZOPA>0)  Convince the other side it is the best deal

Tactic 3: Estimate Other Party’s RPs

ESTIMATE OTHER PARTY’S RP

 Factors affecting the other party’s resistance points:

Other’s party’s lower value of a particular issue Other’s party’s perception of how much you value an issue Other’s vs. your cost to delay/stop negotiations

Other party’s resistance point + +/- +/-

TACTIC 4: SET HIGH ASPIRATIONS / TARGETS

 Be realistic but optimistic (not outrageous)  Negotiators who set high aspirations end up

with more of the pie than those who set lower aspirations

PLAN YOUR SIDE & GUESS OTHER PARTY’S SIDE

Target Prices / Aspiration Points Reservation Prices / Resistance Points BATNA Opening Offer Your side Other Party’s Side

TACTIC 5: FIRST OFFERS & ANCHORS

 The most critical step in negotiations

WHO SHOULD MAKE THE FIRST OFFER?

If your understanding is Inferior  Will have trouble anchoring effectively If your understanding is Superior  You have a better understanding of ZOPA  Take advantage and make an optimistic offer If both parties understand the ZOPA well  Making the first offer is of little consequence  Parties are concerned about fairness If neither parties understand the ZOPA  Can run the risk of being too concessionary or too

demanding

ANCHORING

 Anchoring = the first offer on the table may

“anchor” the entire negotiation

HIGH OPENING OFFERS

Advantages

 Gives you room to

maneuver as more information becomes available

 Sends a strong

message that:

 There is a long way

to go to a settlement

 More concessions

than the opponent had planned may be necessary

Risks

 You may alienate the

• pponent to the point

they say "Get lost!"

 It may damage future

negotiations between the parties

 If you choose to open

high, be certain to have a contingency plan to deal with rejection

RESPONSES TO AN “EXTREME” OPENING OFFER

 How do you respond to an “Extreme” Opening

Offer?

 Ignore  Ask them to justify—but be careful!  Make an anchored counter, then propose

moderation.

 Give the other side an opportunity to moderate—

without losing face.

 Avoid making unilateral concessions  Label your concessions  Be explicit about expectations of reciprocity  Make contingent concessions  Diminishing pattern in concessions  Be comfortable with silence  Don’t lose track of the number of size

concessions made by both parties

TACTIC 7: CONCESSIONS

EXAMPLE: PATTERN OF CONCESSIONS

100 500 300 200 400 5 4 3 2 1 Concession Number Size of Concessions (in dollars) =Texas Couple concessions = Chris’s concessions

BRACKETING

 The logical process of moving toward a middle

point between the opening offers

BRACKETING

Buyer’s Opening Offer Seller’s Opening Offer X = Negotiated price S = seller’s reservation price (min. price) B = buyer’s reservation price (max. price) $19,500 $20K $21K $52K $52,500 $500 $500 $51K

X

$1,000 $1,000 $41K $10,000 $31K $10,000

TACTIC 8: PROVIDE OBJECTIVE SUPPORT AND EXPLANATIONS

 Skilled negotiators utilize information / objective

criteria to support their offers or diffuse other offers

TACTIC 9: APPEAL TO NORMS OF FAIRNESS

Norm Negotiator Utilizing the Norm Equality

• Outcomes are distributed without regard to inputs, and

everyone benefits (or suffers) equally

• Evenly splits the difference between offers; 50-50

Equity Splits the difference between offers based on proportional inputs of the parties Need Splits the difference between offers based on proportional needs of the parties

THE EVEN SPLIT

 Earlier concessions may have been different in

terms of magnitude or pattern, making the bases to split potentially unfair

 Often the person who suggests the even split is in

an advantageous position

 Ok when dealing with smaller amounts

OTHER TACTICS

 Use Silence  Use time to your advantage  Flinch

HARDBALL TACTICS AND DIRTY TRICKS

Hardball Tactic Brief Description How to Counter

Bogey Pretend unimportant issue is important Good preparation Good Guy/Bad guy Use two negotiators Openly describe tactic Intimidation and Other Aggressive Behavior Fear, anger, guilt, appearing legitimate Ignore, halt the negotiation to discuss process Lowball/Highball Extreme opening offers Good preparation Nibble Include a small issue late in negotiation What else do you what? Snow Job Overwhelm other with info Ask questions, listen carefully, use tech. experts Selective, Deceiving,

• r Distorted Info.

Relentlessly push for concessions Document

FINAL OFFER

 At some point in your negotiations, you will reach

a point beyond which you are unwilling or unable to go

 When you get there, make your final offer

HIPAA COMPLIANCE EXAMPLE

Tactic 1: Planning: Assess your BATNA and improve it Tactic 2: Planning: Determine your resistance point, DO NOT reveal it Tactic 3: Estimate the other party’s BATNA and their resistance point Tactic 4: Set your targets high Tactic 5: Make the first offer (if you are prepared) Tactic 6: Immediately re-anchor if the other party opens first Tactic 7: Plan your concessions & counter offers Tactic 8: Provide objective support and explanations for your offers Tactic 9: Appeal to norms of fairness Tactic 10: Do not fall for the “even split” ploy / Dirty Tactics

PRACTICE

Landlord Tenant

INTEGRATIVE NEGOTIATION

 Focus on commonalities not differences  Address needs and interests, not positions  Commit to meeting the needs of all parties  Exchange information and ideas  Invent options for mutual gain  Use objective criteria to set standards

CREATING VALUE

 Expanding the resources from which the

parties are drawing

 Goal is to have both parties do well

 Its is not compromising  Positions may be incompatible, but interests

may be compatible

CREATING VALUE EXPAND THE PIE

Changing the number of considerations & the amount of each (adding resources)

EXPANDING THE PIE: JOB OFFER NEGOTIATION

 The employee requests a $75,000 salary  Employer offers $52,500

Employer’s OO Employee’s OO $52,500 $75,000 $60,000 $65,000 $62,500 Employee’s RS Employee’s TS Employer’s TS Employer’s RS $57,500

EXPANDING THE PIE: JOB OFFER NEGOTIATION

 A sign-on bonus  Performance bonuses  Relocation expenses  Stock options  Increased vacation time  Working conditions or

location

 Working at home or

flexible hours

 Title  Timed salary increases  A car lease or purchase  Parking Space  Additional unpaid leave  Health insurance:

dental, medical, optical

 Long-Term Care /

Disability Insurance

 Retirement Funds  Tuition reimbursement

INTEGRATIVE BARGAINING TACTICS

Identify and Define the Problem (Issues) Separate the Person from the Problem Focus on Interests Not Positions Invent Options for Mutual Gain Use Objective Criteria to Evaluate Options

• I. IDENTIFY AND DEFINE THE PROBLEM

 Identify all issues  Classify issues

• III. SEPARATE THE PERSON FROM THE PROBLEM

Being soft on people but hard on the problem

 Challenges:  Managing emotions  Managing perceptions  Effective communications

THE ROLE OF EMOTION

 Conflict is expressed through our emotions:  Anger  Fear  Disappointment  Frustration  Hostility  Depression

THE ROLE OF EMOTION

 Negative emotions cause negotiators to:  Pay less attention to the other party’s interests  Diminish the accuracy of judgments about

interests

 Use of less cooperative strategies  Less interested in having future interactions  Can bring a negotiation to an impasse or an end

“WHENEVER YOU'RE IN

CONFLICT WITH SOMEONE, THERE IS ONE FACTOR THAT CAN MAKE THE DIFFERENCE BETWEEN DAMAGING YOUR RELATIONSHIP AND DEEPENING IT. THAT FACTOR IS ATTITUDE.” –WILLIAM JAMES

STRATEGIES FOR TREATING PERCEPTION

1.

See the situation from your opponent's perspective

2.

Avoid blaming your

• pponent for the

problem

3.

Discuss each other's perceptions

4.

Try to disappoint your

• pponent's worst

beliefs and expectations about you (be kind!)

5.

Give your opponent a stake in the

• utcome by making

sure they participate in the negotiation process

6.

Make your proposals consistent with the principles and self- image of your

• pponent

FREE FLOWING INFORMATION

 Ask open-ended and probing questions  Engage in active listening  Reframing

WARM BUT LEADING QUESTIONS

“Hey, I know what you best looks like and I don’t think this is it, is the best that you can do?”

ACTIVE LISTENING

• Focus on what

the other person is saying, understanding both the content and emotion

• IV. FOCUS ON INTERESTS NOT POSITIONS

 Interests:

 Why do you want what you want? Why do you

have the goal you have?

 Positions: What you want

 No reasons, no justification, just a demand

Positions are what you want, interests are why you want it.

POSITIONS VERSUS INTERESTS

Position 1 I want the orange Position 2 I want the orange

Why?

FIND OUT THE OTHER PARTY’S INTERESTS

 Do research  Ask questions ???

IDENTIFYING INTERESTS

 Why do I want the position I demanded?  How will it help me?  What purposes will it serve for me?  What will happen if the other party says no to my

demand?

 What will happen if the other party says yes to my

demand?

• V. INVENT OPTIONS FOR MUTUAL GAIN

 To invent creative options:  Think up possible decisions first ; Decide later  Broaden the options on the table rather than look

for a single answer

 Search for mutual gains  Look through the eyes of different experts  How would each expert diagnose the situation &

what kinds of approaches they may suggest

INVENT OPTIONS FOR MUTUAL GAIN

 Broaden your

Options

 Trap: The tendency to

search for the single best answer  Mythical fixed pie

• VI. USE OBJECTIVE CRITERIA

TO EVALUATE OPTIONS

 Search for a standard such as market value, expert

• pinion, law

 This way, neither party is “giving in” to the other

and a fair agreement is possible

 Explanations are helpful in persuading the other side

to agree

 We are asking for $50,000 in fees

How did you arrive at that figure? Is it supported by market data?

EXPANDING THE PIE

 Build trust and share information  Ask questions regarding interests & priorities  Provide information  Unbundle issues to create potential for tradeoffs  Negotiate multiple issues simultaneously  Make offers in packages  Make multiple offers at the same time

PRACTICE

Seller Buyer

DIFFICULT NEGOTIATOR TIPS

 Pre-decide what you will and will not give up for

the sake of the relationship

 Prepare emotionally, tell yourself “this is

temporary”

 Ask factual questions… “How did you get to those

numbers?” “You said that was illegal, have you spoken to an attorney? Do you need time to speak to an attorney?”

 If you disagree, start out with “I might be wrong

but…” then name the parts you disagree with. Or “What you say could be correct, but my boss will raise the following concerns…”

 Stand your ground. “Please let me finish” or “Of

course you would expect me to take these numbers back to my people for verification.”

RECOMMENDED READING

 Getting to Yes: Negotiating Agreement

Without Giving In by Roger Fisher & William Ury

 Crucial Conversations Tools for Talking

When Stakes Are High, 2nd Edition by Kerry Patterson, Joseph Grenny, Ron McMillan & Al Switzler

 Contract Negotiations by Gregory A. Garrett  The Five Dysfunctions of a Team: A

Leadership Fable by Patrick Lencioni

KERI KOZLOWSKI J.D., M.P.H.