NegotiationPrimer

Week 1

Mgt 547

Week 1

Mgt 547

Trades Would Not Take

Place Unless It Were

Advantageous To The Parties

Concerned.22

PartiesWho will or could be at the

table?• What relationships exist or could be built?

– Supportive?

– Antagonistic?

• Are there Coalitions– Ability to build, maintain or break up coalitions is essential.

• Who’s not at the table (hidden table)?– Individuals who are involved but not physically present during negotiation

– Individuals who should be at the table but are not

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IssuesWhat is the agenda of

issues to be negotiated?• How important is the

outcome?

• How important is the relationship?

• Unbundle issues

• Unbundle relationships

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IssuesQuestions• Are you negotiating the right

agenda of substantive issues• Would adding or eliminating

issues help move things forward• How important is the

relationship? Has conflict created barriers?

• Can issues be unbundled?

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Negotiation Primer 6

Positions• Stated wants for a particular issue

• The opening offer

• Leads to – Escalation of commitment– Entrenchment

• Emphasizes competition.

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InterestsNeed to uncover underlying

goals of the parties Claim Value• Seek gains by exerting power

• Seek gains by withholding information

• Seek gains by positional bargaining

Create Value• Seek gains by advancing shared goals

• Seek gains through beneficial trades

• Seek to secure insecure contracts

• Trading gains

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04/19/23 Negotiation Primer

By identifying where you want to go and what you wish to achieve, you are more

likely to get there and get what you want.

• Establish bargaining range– Pessimistic

– Realistic

– Optimistic

• Prioritize interests

EstablishNegotiation Standards

04/19/23 Negotiation Primer

Negotiation Standards:Selling a House

Interest Priority Pessimistic Realistic Optimistic

1. Sale Price 60 $150,000 $175,000 $200,000

2. Terms 25 Personal Note FHA Loan Bank Loan

3. ClosingDate

10 When OtherHouse is sold

60 Days 30 Days

4. Agent Fees 5% 7% 5% 3%

BATNA The Best Alternative to a

Negotiated Agreement is a course of action if there is no

agreement

• Knowing what your BATNA is gives you power in a negotiation

• BATNA’s are not always clear• Related to reservation price or walk-away

position

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Negotiation Primer 11

BATNABarriers and Opportunities

• What happens if you are unable to reach an agreement• What happens to your counterpart?• Are there ways you can strengthen your BATNA or weaken

your counterpart’s• Are you overconfident about winning?• Would it help to bring in an outside part to help deflate

expectations?• Can you alter others’ perceptions of their BATNA by breaking

up or building coalitions?• Are there potential agreements that would leave you and your

counterpart better off than your walk-away values?

Zone of Possible Agreement (ZOPA)The spread between the negotiators

resistance points

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$82,000 Minimum Salary

GAP

No ZOPA

$78,000 Highest Salary Offer from Firm

$82,000 Minimum Salary

GAP

No ZOPA

$78,000 Highest Salary Offer from Firm

$75,000 Minimum Salary

ZOPA

$78,000 Highest Salary Offer from Firm

$75,000 Minimum Salary

ZOPA

$78,000 Highest Salary Offer from Firm

Negotiation Primer 13

Claiming and Creating ValueHow can value be created and who will get it?

Claiming Value (Distributive Bargaining)• All negotiations involve the distribution of outcomes.• Single issue negotiations are purely distributive. That is, one person's gain is

the other party's loss.• Assume the pot if fixed (Scarce resources problem)• Outcome is more important than the relationship

Creating Value (Integrative Bargaining)• Negotiations are not always win-lose propositions• Hinges on matching what one side finds or expects to be relatively cost-free

with what the other side expects to be most costly and vice versus. • The creation of mutual gains does not mean they will be evenly divided• Expanding the pie and dividing the pie are parts of the same process• Relationship and outcome may be important

Negotiation Primer 14

Determine Ground Rules

Controlling the process helps to control the

outcome.

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Ground Rules• Order that issues will be discussed

• Location -- Where is the product located? The items to be negotiated?

• Parties Who Can Attend and/or participate

• Are specific props required to set the stage for the negotiation?

• Are any topics off limits?

• Do you want to discuss your interests in any particular order?

• Are there time limits?

• Do you want to specify up front procedures if an impasse is reached?

• Confidentiality Agreements

• Are there specific terms (e.g. rush order, delivery procedure) that need to be define?

If time is short, should you negotiate over procedural issues before the "official" negotiation?

Negotiation Primer 16

ASSUMPTIONSThe well prepared negotiator thinks through

his or her assumptions and checks out perceptions against realities.

• Do you understand the problem domain well enough to ask the right questions? If not, do more research

• Are you making any assumptions that were undermine the deal or leave bad feelings?

• Are they important enough that you need to check them out with the other party?

• What key phrases from the other party should you listen for that might lead you question your assumptions?

Negotiation Primer 17

Accredit Your Proposal

• Enhances a proposal by using: logic, market value, precedents, value of the agreement or the relationship, scientific standards and your personal and organizational credibility.

Negotiation Primer 18

Possible Ways to Accredit Proposal

• External standards as a shield or sword (industry benchmarks, salary surveys, scatter diagram)?

• Testimonials from customers• Financial worksheets• Visuals (letterhead, product samples, sample contracts)• Draft agreement• Legal precedence• Business/ Marketing Plan• Professional Presentations• Resumes and net worth analysis of key employees, investors

Negotiation Primer 19

Strategy and TacticsStrategy involves the overall

approach to negotiations. Distributive Bargaining• Fixed pot of potential value to be divided among the parties• What one gains, another loses• Goal is to claim value• Get the biggest slice of the pie!

Integrative Bargaining• Offers ways to enlarge the pie• Variable amount of resources which are valued differentially.• Convergent or Congruent Interests.• High Motivation to Attain “Right Solution.” • Goal is to create value• Sufficient level of trust • Problem solving Orientation

TT

Negotiation Primer 20

Strategy and Tactics• Strategy involves the overall approach to

negotiations. – Avoidance– Forcing– Accommodation– Compromise– Problem Solving

TT •Tactical Maneuvers help you get what you want to achieve•Tactical Maneuvers help you get what you want to achieve

Distributive Integrative

Threats Packaging

Scarcity Unbundling

Flattery Time Preferences

Misleading Economies of Scale

Flattery Risk Sharing

Lowering Aspirations Cost cutting

Linking

Negotiation Primer 21

Tricky Tactics• Sometimes the behaviors

negotiations engage are on the EDGE of legality or the EDGE of ethical behavior

TTPhony Facts (lies or false assumptions High Ball/Low Ball

Higher authority Bogey

Add Ons Chicken

Personal Attacks Exaggerated Assertions

Good guy/Bad Guy Threats

Intimidation Scoundrel

Lack in Tactics /Fait Accompli Scrambled Eggs

Take it or Leave It False Deadlines

Bargaining In Good Faith

• Once an offer has been made, it remains valid until the intended recipient rejects or accepts it

• Not falsify their intentions nor information to the other party

• If demands are made which are granted, then the party will accept the terms offered and not ask for more

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The Worst Outcome Is When, By Overreaching Greed,No

Bargain Is Struck And A Trade That Could Have Been

Advantageous To Both Parties Does Not Come Off At

All.Benjamin Franklin

• Best negotiators practice negotiation like a tennis pro practices her serve.

• Starting point is to identify the parties, the issues, the alternatives and interests.

• All negotiations involve the distribution of outcomes. Single issue negotiations are purely distributive. That is, one person's gain is the other party's loss.

• Negotiations involving multiple issues which are valued differently, open the door for integrative solutions

• Knowing your BATNA (Best Alternative to a Negotiated Agreement) gives you power in a negotiation. It 's your walk away position.

• It is important to identify your opening position and resistance point as well as acquire information to identify the other party’s resistance point and opening position. Together, these define the ZOPA (Zone of Possible Agreement)

Take Aways

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