Two Kinds of Negotiations • Distributive: Who will claim the most value; NEGOTIATING Zero ‐ sum Negotiation – Wage negotiations between management and unions Basic Concepts and Ideas for – Buying a car Management Negotiations Two Kinds of Negotiations Distributive v. Integrative • Distributive • Integrative – Win ‐ lose – Win ‐ win • Integrative : Cooperation to achieve maximum – Individual gain – Joint gain benefits; Win ‐ win negotiation – Opposed interests – Congruent interests – Long term partnerships – Short ‐ term – Long ‐ term – After financial terms or competitive aspects of a – Single issue – Multiple issues deal have been set – Not flexible – Flexible – Not creative – Creative Distributive or Integrative? Distributive or Integrative? • During an employment interview, a physician • A hospital wants to separate its property from knows he only needs the job for six months. its neighbor with a high wooden fence. The Because of that, he intends to negotiate for neighbor company thinks a high wooden the highest salary possible, no matter what fence would be an eyesore. other benefits may be offered.
Multiphase and Multiparty Multiparty Negotiations Negotiations • Implemented over time in different phases • More than two party's • Context allows parties to negotiate based on • Natural coalitions: Shared interests follow ‐ through and continuing communication • Single ‐ issue coalitions: Unite to support or • One hospital system buying other hospitals block a single issue • A hospital buying group practices Strategies for Multiparty Negotiations Strategies for Multiphase Negotiations • Familiarity with other party’s communication • Your party’s interest and coalition interests and negotiation style • If weak, consider forming a coalition with • Build trust others • Monitor other party to insure follow ‐ up • Breaking other party coalition: successful when if is a single issue coalition • Walk away from disconcerting negotiations Four Concepts for Establishing a BATNA Negotiation Framework • Preferred course of action in the absence of a • “A negotiated solution is only advantageous deal when a better option in not available.” • Best Alternative to a Negotiated Settlement • Knowing alternative actions absent of a deal (BATNA) • Reservation or walk away price • Point of saying “no” to an unfavorable deal • Zone of Possible Agreement (ZOPA) • Value Creation Through Trades • Know BATNA before negotiating
You’re negotiating a lease agreement on office Reservation Price equipment with a salesperson (A) for the supplier. • Accept the deal only if the A is lower than the highest monthly • Walk ‐ away point fee you’re willing to pay. • Derived from BANTA, but not the same • Meet with another office equipment supplier to see what their leasing arrangements cost. • May be similar if it is only about money • Buy used office equipment instead of leasing new equipment. BATNA v. Reservation Price ZOPA • When preparing to negotiate with a commercial landlord • Range in which a deal can be made over a lease for office space, you consider that you are currently paying $20 per square foot. This number is your • Reservation price determines ZOPA’s BATNA. – A buyer has set a reservation price of $275,000 for • You also take into account the fact that the new location would be closer to clients and provide a more attractive the purchase of a commercial warehouse and workspace, thus you'd be willing to pay $30 per square would like to pay as little as possible. The seller foot. That's your reservation price. has set a reservation price of $250,000 and would • If more than $30 per square foot is required, you'll walk away and attempt to lease space in a different building. like to obtain as much as possible. The ZOPA, • During the negotiation the landlord insists on $35 per – Therefore, is the range between $250,000 and square foot and won't accept anything lower, thereby indicating that his reservation price is $35 per square foot. $275,000. Value Creation Through Trades • Negotiating parties can improve positions by Seller Buyer trading the values at their disposal • Integrated negotiations •$250K $275K • Each party gets something in return for something it values much less ‐‐‐‐‐‐ ZOPA ‐‐‐‐‐‐‐ • Book collectors; professional athletes
Preparing to Negotiate: 9 Steps To A Preparing to Negotiate: 9 Steps To A Deal Deal 4. Improve your BATNA 1. Determine satisfactory outcomes first – Determines “say no” point Good for you, good for them – Improve BATNA before and during talks Motivations, concerns, needs of party's 5. Assess who has authority 2. Identify opportunities to create value – Decision maker; authority of negotiator Common ground, compromise, trades – Establish at the beginning of negotiations 3. Identify you BATNA and reservation price 6. Study the other side Yours and theirs, if possible – Personality, style, background, culture, goals Recognize when to hold ‘em, when to fold ‘em values; personal connections, research Preparing to Negotiate: 9 Steps To A Negotiation Tactics Deal 7. Prepare for flexibility in the process • At the beginning: – Be patient, not always as planned – Positive tone, openness to other sides concerns – New people, unexpected developments – Review agenda 8. Gather objective criteria for fairness – Discuss expectations – Offer information about interests and concerns, – Continuing relationship with other side but be cautious – Explain what is favorable/unfavorable 9. Alter the process in your favor – Hidden or set agendas; make logistical changes Tactics for Integrative Negotiations Tactics for Distributive Negotiations “The most important trip in life is meeting people half way.” • Disclose little, learn much • Inquire about the other sides interests, needs, concerns • Establish an anchor: start first offer in the right place • Provide significant information about your circumstances; your interests, issues • Make cautious concessionary moves constraints. • Set time lines • Look for differences to create value • Offer multiple proposals and/or packages • Take your time • Signal Interest in closing the deal
Barriers to Agreement Barriers to Agreement • Die ‐ hard bargainers • Lack of trust – Know their game – Emphasize the need for integrity – Be guarded in the information you disclose – Request documentation – Suggest alternative options if they do not share – Add contingencies; penalties for noncompliance information or incentives for early performance – Be willing to walk away Mental Errors in Negotiations • Differences in gender and culture • Irrational escalation – Study and realize differences • Partisan perceptions – Consider assumptions each party brought to the • Unreasonable expectations table • Overconfidence • Difficulties in communication • Unchecked emotions – Ask for a break – Raise the misunderstood issue for clarification
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