Distributive Integrative Inte Integr grative: Cooperation to - - PDF document

Basic Concepts and Ideas for Management Negotiations

 Dist

Distribu butive: Who will claim the most value; Zero-sum Negotiation

• Wage negotiations between management and

unions

• Buying a car
• RAC

 Inte

Integr grative: Cooperation to achieve maximum benefits; Win-win negotiation

• Long term partnerships
• After financial terms or competitive aspects of a

deal have been set

 Distributive

• Win-lose
• Individual gain
• Opposed interests
• Short-term
• Single issue
• Not flexible
• Not creative

 Integrative

• Win-win
• Joint gain
• Congruent interests
• Long-term
• Multiple issues
• Flexible
• Creative

 During an employment interview, a physician

knows he only needs the job for six months. Because of that, he intends to negotiate for the highest salary possible, no matter what

• ther benefits may be offered.

 A hospital wants to separate its property from

its neighbor with a high wooden fence. The neighbor company thinks a high wooden fence would be an eyesore.

 Implemented over time in different phases  Context allows parties to negotiate based on

follow-through and continuing communication

 One hospital system buying other hospitals  A hospital buying group practices  More than two party's  Natural coalitions: Shared interests  Single-issue coalitions: Unite to support or

block a single issue

 Your party’s interest and coalition interests  If weak, consider forming a coalition with

• thers

 Breaking other party coalition: successful

when if is a single issue coalition

 Familiarity with other party’s communication

and negotiation style

 Build trust  Monitor other party to insure follow-up  Walk away from disconcerting negotiations  “A negotiated solution is only advantageous

when a better option in not available.”

 Best Alternative to a Negotiated Settlement

(BATNA)

 Reservation or walk away price  Zone of Possible Agreement (ZOPA)  Value Creation Through Trades  Preferred course of action in the absence of a

deal

 Knowing alternative actions absent of a deal  Point of saying “no” to an unfavorable deal  Know BATNA before negotiating

 Accept the deal only if the A is lower than the

highest monthly fee you’re willing to pay.

 Meet with another office equipment supplier to see

what their leasing arrangements cost.

 Buy used office equipment instead of leasing new

equipment.

 Walk-away point  Derived from BANTA, but not the same  May be similar if it is only about money

 When preparing to negotiate with a commercial landlord

• ver a lease for office space, you consider that you are

currently paying $20 per square foot. This number is your BA BATN TNA.

 You also take into account the fact that the new location

would be closer to clients and provide a more attractive workspace, thus you'd be willing to pay $30 per square

• foot. That's your reserv

reservat atio ion price price.

 If more than $30 per square foot is required, you'll walk

away and attempt to lease space in a different building.

 During the negotiation the landlord insists on $35 per

square foot and won't accept anything lower, thereby indicating that his reserv reservation price price is $35 per square foot.

 Range in which a deal can be made  Reservation price determines ZOPA’s

• A buyer has set a reservation price of $275,000 for

the purchase of a commercial warehouse and would like to pay as little as possible. The seller has set a reservation price of $250,000 and would like to

• btain as much as possible. The ZOPA,
• Therefore, is the range between $250,000 and

$275,000.

Seller Buyer

• $250K $275K
• ----- ZOPA-------

 Negotiating parties can improve positions by

trading the values at their disposal

 Integrated negotiations  Each party gets something in return for

something it values much less

 Book collectors; professional athletes

1.

Determine satisfactory outcomes first

Good for you, good for them Motivations, concerns, needs of party's

2.

Identify opportunities to create value

Common ground, compromise, trades

3.

Identify you BATNA and reservation price

Yours and theirs, if possible Recognize when to hold ‘em, when to fold ‘em

• 4. Improve your BATNA
• Determines “say no” point
• Improve BATNA before and during talks
• 5. Assess who has authority
• Decision maker; authority of negotiator
• Establish at the beginning of negotiations
• 6. Study the other side
• Personality, style, background, culture, goals

values; personal connections, research

• 7. Prepare for flexibility in the process
• Be patient, not always as planned
• New people, unexpected developments
• 8. Gather objective criteria for fairness
• Continuing relationship with other side
• Explain what is favorable/unfavorable
• 9. Alter the process in your favor
• Hidden or set agendas; make logistical changes

 At the beginning:

• Positive tone, openness to other sides concerns
• Review agenda
• Discuss expectations
• Offer information about interests and concerns, but

be cautious

 Disclose little, learn much  Establish an anchor: start first offer in the right

place

 Make cautious concessionary moves  Set time lines  Offer multiple proposals and/or packages  Signal Interest in closing the deal  Inquire about the other sides interests,

needs, concerns

 Provide significant information about your

circumstances; your interests, issues constraints.

 Look for differences to create value  Take your time

 Die-hard bargainers

• Know their game
• Be guarded in the information you disclose
• Suggest alternative options if they do not share

information

• Be willing to walk away

 Lack of trust

• Emphasize the need for integrity
• Request documentation
• Add contingencies; penalties for noncompliance or

incentives for early performance

 Differences in gender and culture

• Study and realize differences
• Consider assumptions each party brought to the

table

 Difficulties in communication

• Ask for a break
• Raise the misunderstood issue for clarification

 Irrational escalation  Partisan perceptions  Unreasonable expectations  Overconfidence  Unchecked emotions