Principles to successful negotiations

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


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”


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


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


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”


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


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


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


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

Meet back at ?????Meet back at ?????

ForFor

Date post:	16-Aug-2015
Category:	Sales
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Principles to successful negotiations

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