Post on 16-Aug-2015
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Principles to Successful Principles to Successful NegotiationsNegotiations
Kathleen LagraveKathleen Lagrave
2007 Awards Trip2007 Awards Trip
Negotiating: A Life SkillNegotiating: A Life Skill
Negotiating is everywhere:Negotiating is everywhere: Family membersFamily members FriendsFriends NeighborsNeighbors ColleaguesColleagues Business associatesBusiness associates
Applying these principles will help Applying these principles will help you achieve a balanced agreementyou achieve a balanced agreement
Misunderstanding About Misunderstanding About NegotiatingNegotiating
Nobody should loses in an agreementNobody should loses in an agreement But in practice, many accept But in practice, many accept
agreements that work against their agreements that work against their best interestbest interest
Why?Why? Process information incorrectlyProcess information incorrectly Allow our judgment to be swayed by Allow our judgment to be swayed by
emotions or irrelevant eventsemotions or irrelevant events
A Rational ApproachA Rational Approach
The interplay in negotiations is as The interplay in negotiations is as variable as human personalityvariable as human personality
It is unlikely to conform perfectly to It is unlikely to conform perfectly to any business modelany business model
However, if you understand the However, if you understand the underlying dynamics of negotiations, underlying dynamics of negotiations, you will be able to isolate:you will be able to isolate: Common biasesCommon biases MistakesMistakes
Your Two Goals Your Two Goals Integrative NegotiationsIntegrative Negotiations
Increase the size of the “pie”Increase the size of the “pie” Extend the range of the issues in a Extend the range of the issues in a
negotiations to make the deal bigger negotiations to make the deal bigger and betterand better
Distributive NegotiationsDistributive Negotiations Maximize your “share” of the pieMaximize your “share” of the pie
Your goal is to work towards bothYour goal is to work towards both
Irrational Tendencies in Irrational Tendencies in NegotiationsNegotiations
Watch out for these:Watch out for these: Unrealistic ExpectationsUnrealistic Expectations Escalation of CommitmentEscalation of Commitment Over-competitivenessOver-competitiveness AnchorsAnchors FramesFrames
Irrational Tendencies in Irrational Tendencies in NegotiationsNegotiations
Unrealistic ExpectationsUnrealistic Expectations Under-confident – we undervalue our Under-confident – we undervalue our
assets and what we have to bargain assets and what we have to bargain withwith
Other party may reduce value of assetsOther party may reduce value of assets Over-confident – often think they know it Over-confident – often think they know it
all in advance and shut out new sources all in advance and shut out new sources of information and refuse to consider of information and refuse to consider alternatives and creative solutions alternatives and creative solutions which can increase the size of the “pie” which can increase the size of the “pie”
Irrational Tendencies in Irrational Tendencies in NegotiationsNegotiations
Escalation of CommitmentEscalation of Commitment If it is taking too long to reach an agreement, we get If it is taking too long to reach an agreement, we get
nervousnervous We feel the pressure of time and effort building upWe feel the pressure of time and effort building up This leads us to escalate our commitment and accept a This leads us to escalate our commitment and accept a
deal which actually makes us worse offdeal which actually makes us worse off Sometimes this is a tactic of the opposing partySometimes this is a tactic of the opposing party
Over-competitiveness Over-competitiveness Humans love to competeHumans love to compete Pushes us into the mind set of “your loss, is my gain”Pushes us into the mind set of “your loss, is my gain”
Distributive NegotiationsDistributive Negotiations We lose sight of important opportunities which may We lose sight of important opportunities which may
expanded the “pie”expanded the “pie” Integrative NegotiationsIntegrative Negotiations
Irrational Tendencies in Irrational Tendencies in NegotiationsNegotiations
Setting the wrong “anchor” or $$ valueSetting the wrong “anchor” or $$ value Research shows that people consistently Research shows that people consistently
look for and rely on anchors in making a look for and rely on anchors in making a judgmentjudgment
Example: Depressed job market: take a job Example: Depressed job market: take a job with a salary below industry average with a salary below industry average
Anchor: Having a job in a depressed market is Anchor: Having a job in a depressed market is better then not having a job at allbetter then not having a job at all
Sometimes anchors have very little Sometimes anchors have very little applicability to the current situationapplicability to the current situation
If this happens, you have to work on changing If this happens, you have to work on changing the anchor that has been previously setthe anchor that has been previously set
Irrational Tendencies in Irrational Tendencies in NegotiationsNegotiations
Setting the wrong “frame”Setting the wrong “frame” People can react very differently to identical People can react very differently to identical
proposals when the perspective or framing changesproposals when the perspective or framing changes Instead of focusing on risk, focus on opportunityInstead of focusing on risk, focus on opportunity Instead of purchase price, focus on net profitInstead of purchase price, focus on net profit
Both the type of information brought into a Both the type of information brought into a negotiation and the word choice and phrasing can negotiation and the word choice and phrasing can influence how elements are being understood and influence how elements are being understood and interpretedinterpreted
Know your “frames” and the opposing party’s Know your “frames” and the opposing party’s “frames” before entering into a discussion and test “frames” before entering into a discussion and test your perspectives to make sure they align with the your perspectives to make sure they align with the opposing party’sopposing party’s
How to avoid irrational tendenciesHow to avoid irrational tendencies
Your goal is to get the best possible Your goal is to get the best possible deal that deal that improves your positionimproves your position
We often make the mistake of We often make the mistake of assuming because we are in assuming because we are in negotiations, we must reach an negotiations, we must reach an agreement and because of this we agreement and because of this we will escalate our commitments will escalate our commitments irrationallyirrationally
To avoid this, we need to assess our To avoid this, we need to assess our alternativesalternatives
How to avoid irrational tendenciesHow to avoid irrational tendencies
BATNABATNA Reservation PriceReservation Price TargetTarget Be open to new informationBe open to new information FairnessFairness TrustTrust
BATNABATNA
What is your What is your BBest est AAlternative lternative TTo a o a
NNegotiated egotiated AAgreement?greement? This is the absolute bottom lineThis is the absolute bottom line Know what this is before going into Know what this is before going into
negotiationsnegotiations If an agreement is NOT better then If an agreement is NOT better then
your BATNA, you are worse off – walk your BATNA, you are worse off – walk away!away!
Reservation PriceReservation Price The value The value belowbelow which you would rather which you would rather
accept an impasse and settle for BATNAaccept an impasse and settle for BATNA Your goal is NOT to just get any deal nor is Your goal is NOT to just get any deal nor is
it to accept a deal that makes you just it to accept a deal that makes you just slightly better offslightly better off
Your goal is to get the best deal you canYour goal is to get the best deal you can Although it may seem irrational to accept Although it may seem irrational to accept
impasse over an agreement that improves impasse over an agreement that improves your position, you sometimes need to your position, you sometimes need to show the willingness to walk away from a show the willingness to walk away from a marginal agreement in order to achieve an marginal agreement in order to achieve an excellent oneexcellent one
TargetTarget
Opposite of the reservation priceOpposite of the reservation price This is what you would like to achieveThis is what you would like to achieve Your dream agreement!Your dream agreement! When negotiating, be sure to focus When negotiating, be sure to focus
on the target not your reservation on the target not your reservation price or BATNAprice or BATNA
The target helps you establish your The target helps you establish your anchor and frameanchor and frame
New InformationNew Information
Stay open to mutually beneficial Stay open to mutually beneficial proposalsproposals
Good opportunities may expand the “pie”Good opportunities may expand the “pie” Know your counterpart’s BATNA and Know your counterpart’s BATNA and
reservation price (RP)reservation price (RP) This will help you set your strengths and This will help you set your strengths and
see if they are in-line with yourssee if they are in-line with yours Try to find out the underlying goals and Try to find out the underlying goals and
interests that motivate your opponent’s interests that motivate your opponent’s stated positionstated position
New InformationNew Information
Be careful . . . Be careful . . . Our memories are often unreliable and Our memories are often unreliable and
selectiveselective We remember vivid, spectacular or We remember vivid, spectacular or
catastrophic events, over mundane onescatastrophic events, over mundane ones We tend to be easily influenced by We tend to be easily influenced by
“presentation” over substance – “presentation” over substance – salesmanshipsalesmanship
Seek out hard figures and evaluate them Seek out hard figures and evaluate them carefullycarefully
FairnessFairness
Humans are very sensitive to Humans are very sensitive to fairness issuesfairness issues
Often a negotiation will fail from an Often a negotiation will fail from an economically rational agreement if economically rational agreement if one of the parties believes they have one of the parties believes they have been unfairly treatedbeen unfairly treated
Be aware of “fairness” and the Be aware of “fairness” and the perception of itperception of it
TrustTrust
Trust is essential to maintaining a Trust is essential to maintaining a perception of fairnessperception of fairness
We are less likely to suspect ulterior We are less likely to suspect ulterior motives, traps or deceptionmotives, traps or deception
Accidental mistakes are less likely to Accidental mistakes are less likely to escalate into impassible challenges if trust escalate into impassible challenges if trust is establishedis established
Although some “posturing” is expected, Although some “posturing” is expected, never misrepresent your assetsnever misrepresent your assets
Most negotiations move well beyond a Most negotiations move well beyond a “one-shot” deal“one-shot” deal
It’s Time to Negotiate!It’s Time to Negotiate! Build Rapport –Build Rapport –
Negotiators are people tooNegotiators are people too Courtesy, expressions of friendly concern re: health and Courtesy, expressions of friendly concern re: health and
family, interest in his/her business situation establish trustfamily, interest in his/her business situation establish trust This helps encourage cooperative, integrative problem-This helps encourage cooperative, integrative problem-
solvingsolving Continue Gathering InformationContinue Gathering Information
Helps assess counterpart’s BATNAHelps assess counterpart’s BATNA Helps ID trade-offsHelps ID trade-offs Opportunities to expand “pie”Opportunities to expand “pie” Ask opened questionsAsk opened questions
What are the advantages and disadvantages of the current What are the advantages and disadvantages of the current products you dispense (or procedures you do)?products you dispense (or procedures you do)?
Do your LAERDo your LAER
It’s Time to Negotiate!It’s Time to Negotiate!
Exchange InformationExchange Information When your counterpart is reluctant to divulge When your counterpart is reluctant to divulge
information, it is useful to initiate an exchange information, it is useful to initiate an exchange of informationof information
Find out their true interests – This is the Find out their true interests – This is the “unknown”“unknown”
Take turns asking and answering questionsTake turns asking and answering questions This builds trust and understandingThis builds trust and understanding Helps to discover items that you value Helps to discover items that you value
differently and that you can trade offdifferently and that you can trade off Also, may help to increase the “pie”Also, may help to increase the “pie”
It’s Time to Negotiate!It’s Time to Negotiate!
First Offer -This is tricky!First Offer -This is tricky! Advantage of letting opponent make first offer:Advantage of letting opponent make first offer:
Offer is better than what you would expectOffer is better than what you would expect Disadvantage of letting opponent make first offer:Disadvantage of letting opponent make first offer:
Opponent has set an anchorOpponent has set an anchor Many times the position of the anchor strongly affects Many times the position of the anchor strongly affects
the final outcomethe final outcome When deciding what to do, information is your When deciding what to do, information is your
strongest allystrongest ally If you do make the first offer, make sure the offer is If you do make the first offer, make sure the offer is
ambitious but also discussableambitious but also discussable Reasonable enough that the other party does NOT walk-Reasonable enough that the other party does NOT walk-
awayaway
It’s Time to Negotiate!It’s Time to Negotiate!
Bidding StrategiesBidding Strategies Bids are offers but also signalsBids are offers but also signals Big changes/bids indicate that you are Big changes/bids indicate that you are
probably willing to make even further probably willing to make even further concessionsconcessions
Smaller bids indicate less willingness to Smaller bids indicate less willingness to changechange
Careful of the speed of your offer/bidCareful of the speed of your offer/bid Faster your respond, more eager you will Faster your respond, more eager you will
appear = more concessions you may makeappear = more concessions you may make
It’s Time to Negotiate!It’s Time to Negotiate!
Negotiation RangesNegotiation Ranges First offer establishes one bound of First offer establishes one bound of
rangerange First counteroffer establishes other First counteroffer establishes other
bound rangebound range Generally most negotiations end Generally most negotiations end
somewhere in the middlesomewhere in the middle Control the negotiation range and you Control the negotiation range and you
are likely to control the final outcomeare likely to control the final outcome
It’s Time to Negotiate!It’s Time to Negotiate! ImpasseImpasse
You and your opponent cannot reach an agreement and You and your opponent cannot reach an agreement and you are at your BATNAyou are at your BATNA
How to move out of this impasse:How to move out of this impasse: Do creative, integrative problem solvingDo creative, integrative problem solving
Can you expand the “pie?”Can you expand the “pie?” Make a small concession and insist on receiving one in Make a small concession and insist on receiving one in
returnreturn If you don’t receive one in return, it is risky, but you can retract If you don’t receive one in return, it is risky, but you can retract
yoursyours Take a breakTake a break
Consult with colleagues, re-focus on counterpart’s interestsConsult with colleagues, re-focus on counterpart’s interests Make sure your anchor and framing is correct to those interestsMake sure your anchor and framing is correct to those interests
Third PartyThird Party A fresh perspective can sometimes get things back on trackA fresh perspective can sometimes get things back on track
ConcessionsConcessions
Be gracious when you receive oneBe gracious when you receive one Reassure your opponent that the Reassure your opponent that the
concession is fair and in the interest of concession is fair and in the interest of both partiesboth parties
Provide value to your concessionProvide value to your concession But avoid pouting and bitterness after But avoid pouting and bitterness after
you make themyou make them
It’s Time to Negotiate!It’s Time to Negotiate!
UltimatumsUltimatums Only give them if you are willing to follow Only give them if you are willing to follow
throughthrough If you don’t carry them out your credibility will If you don’t carry them out your credibility will
suffersuffer TerminationTermination
When your BATNA or RP are not When your BATNA or RP are not exceeded walk-awayexceeded walk-away
Be cordial and encourage future Be cordial and encourage future negotiations should circumstances negotiations should circumstances change in the future change in the future
Final CommentFinal Comment Negotiations can be frustratingNegotiations can be frustrating
But they will be less if you do NOT expect But they will be less if you do NOT expect people to behave rationally at all timespeople to behave rationally at all times
Note people’s irrationalities and make them Note people’s irrationalities and make them work for youwork for you
Control your anger and try to maintain a Control your anger and try to maintain a cordial, rational negotiationcordial, rational negotiation
Try to maintain positive emotionTry to maintain positive emotion Research shows negotiators who are in positive Research shows negotiators who are in positive
moods are more likely to achieve integrative moods are more likely to achieve integrative agreementsagreements
People prefer to do business with people they likePeople prefer to do business with people they like Remain firm in demanding a good agreement but Remain firm in demanding a good agreement but
courteous and cordial in the way you deliver that courteous and cordial in the way you deliver that messagemessage
Negotiating ExerciseNegotiating Exercise Four TeamsFour Teams
2 Rep Teams2 Rep Teams 2 Account Teams2 Account Teams
Teams will be paired up and given a Negotiation Teams will be paired up and given a Negotiation ChallengeChallenge
Break-off for 15 minutesBreak-off for 15 minutes Determine your TARGETDetermine your TARGET Determine your BATNA and RPDetermine your BATNA and RP Identify your trade-offs/concessionsIdentify your trade-offs/concessions Establish your anchor and how to frameEstablish your anchor and how to frame Identify questions you might ask for exchange of Identify questions you might ask for exchange of
informationinformation Think about possible expansions of the “pie”Think about possible expansions of the “pie”
TeamsTeams
Rep Team:Rep Team: Michelle Michelle LidaLida GinnyGinny
Rep Team:Rep Team: AshleyAshley ChristaChrista RachelRachel
Account Team:Account Team: JulieJulie JillJill JanetJanet GailGail
Account Team:Account Team: ShanaShana StacieStacie KarenKaren
Third Party Agents Third Party Agents (if necessary)(if necessary)
DaveDave SteveSteve PamPam RobinRobin HollyHolly Stephanie Stephanie (usually always booked with more pressing issues but maybe (usually always booked with more pressing issues but maybe
available)available)
List of Shared InformationList of Shared Information
These are the facts/interests that are These are the facts/interests that are known by both parties:known by both parties:
List of Unknown InformationList of Unknown Information
These are things/goals known by one These are things/goals known by one of the parties:of the parties:
They are confidentialThey are confidential On separate paper On separate paper
Will hand out to each teamWill hand out to each team