Ch.3- Strategy and Tactics of Integrative Negotiation
XII. The Integrative Negotiation Process
A. Choosing a free flow of information promotes the development of good integrative solutions.
1. Negotiators must be willing to reveal their true objectives and to listen to each other carefully.
2. Willingness to share information is not a characteristic of distributive bargaining situations, in which the parties distrust one another, conceal and manipulate information, and attempt to learn about the other for their own competitive advantage.
3. Research shows that negotiators who did not reveal the availability of a good alternative received some benefits to themselves, but those who did share information about their alternatives received additional benefits.
B. Attempting to understand the other negotiator’s real needs and objectives
1. Understanding the other’s needs, realizing the other party’s priorities are not the same as your own, can stimulate more exchange of information, have a better understanding of the nature of the negotiation, and achieve higher joint profits.
C. Emphasizing the commonalities between the parties and minimizing the differences
1. To sustain a free flow of information and an effort to understand the other’s needs and objectives, negotiators may require a different outlook or frame of reference.
2. Individual goals may need to be refined through collaborative efforts directed toward a collective goal. At times the collective goal is clear and obvious, and other it is not clear or easy to keep in site.
D. Searching for solutions that meet the needs and objectives of both sides.
1. The success of integrative negotiation depends on the search for solutions that meet the needs and objectives of both sides.
2. In this process, negotiators must be firm but flexible
3. A low level of concern for the other’s objectives may drive one of two forms of behavior.
a. Making sure that what the other obtains does not take away from one’s own accomplishments.
b. Attempting to block the other from obtaining his or her objectives because of a strong desire to win or to “defeat the opponent.”
XIII. Key Steps in the Integrative Negotiation Process
Pareto efficiency: The goal of creating value is to push the claiming value line to a point where there would be “no agreement that would make any party better off without decreasing the outcomes to any other party.”
A. Identify and define the problem
1. This is a critical step for integrative negotiation because it sets broad parameters regarding what the negotiation is “about” and provide an initial framework for approaching the discussion.
2. Should be comprehensive enough to capture complexities of the situation.
a. Define the problem in a way that is mutually acceptable to both sides.
b. State the problem with an eye toward practicality and comprehensiveness.
c. State the problem as a goal and identify the obstacles to obtaining this goal.
d. Depersonalize the problem.
e. Separate the problem definition from the search for solutions.
B. Understand the problem and bring interests and needs to the surface
1. Types of interests
a. Substantive interests – relate to the focal issues under negotiation – economic and financial issues.
b. Process interests – related to the way a dispute is settled. They can be both intrinsic and instrumental.
c. Relationship interests – one or both parties value their relationship with each other and do not want to take actions that will damage it
(1) Intrinsic relationship – parties value the relationship both for its existence and for the pleasure or fulfillment that sustaining it creates.
(2) Instrumental relationship – parties derive substantive benefits from the relationship and do not wish to endanger future benefits by souring it.
d. Interests in principle – principles deeply held by the parties and serve as the dominant guides to their actions.
(1) Some principles include: concerning what is fair, what is right, what is acceptable, what is ethical.
2. Some observations on interests
a. There is almost always more than one type of interest underlying a negotiation.
b. Parties can have different types of interests at stake.
c. Interests often stem from deeply rooted human needs or values.
d. Interests can change.
e. Surfacing interests.
f. Surfacing interests is not always easy or to one’s best advantage.
g. Focusing on interests can be harmful to a group of negotiators whose consensus on a particular issue is built around a unified position rather than a more generalized set of interests.
C. Generate alternative solutions to the problem
1. Inventing options: generating alternative solutions by redefining the problem or problem set.
a. Expand the pie – add resources in such a way that both sides can achieve their objectives.
b. Logroll – successful logrolling requires the parties to establish (or find) more than one issue in conflict; the parties then agree to trade off among these issues so that one party achieves a highly preferred outcome on the first issue and the other person achieves a highly preferred outcome on the second issue.
c. Use nonspecific compensation – allow one person to obtain his objectives and pay off the other person for accommodating his interests.
d. Cut the costs for compliance – one party achieves her objectives and the other’s costs are minimized if he agrees to go along.
e. Find a bridge solution – when the parties are able to invent new options that meet all their respective needs they have created a bridge solution. Successful bridging requires a fundamental reformulation of the problem so that the parties are not discussing their positions but disclosing information that will satisfy needs.
2. Generating alternative solutions to the problem as given.
a. Brainstorming – generating as many solutions to the problem as possible. The following rules should be observed when engaging in brainstorming:
(1) Avoid judging or evaluating solutions.
(2) Separate the people from the problem.
(3) Be exhaustive in the brainstorming process.
(4) Ask outsiders.
b. Surveys – asking a large number of people to list all possible solutions they can imagine.
c. Electronic brainstorming – A facilitator uses a series of questions to guide input from participants, who type their anonymous responses into a computer.
D. Evaluate those alternatives and select among them.
1. Narrow the range of solution options – focus on those that one or more negotiators strongly support.
2. Evaluate solutions on the basis of quality, standards, and acceptability – how good are the solutions? How acceptable are they to those who have to implement them?
3. Agree to the criteria in advance of evaluating options – this can be helpful in narrowing or selecting options.
4. Be willing to justify personal preferences.
5. Be alert to the influence of intangibles in selecting options – it is good practice to help the other party identify intangibles and make them public as part of the evaluation process.
6. Use subgroups to evaluate complex options.
7. Take time out to cool off.
8. Explore different ways to logroll.
a. Exploit differences in risk preference – it is possible to create a package that recognizes differences in risk preferences.
b. Exploit differences in expectations about the likelihood of future events. This can permit the parties to invent a solution that addresses the needs of both.
c. Exploit differences in time preferences – invent solutions that address the parties’ preference of either short-term needs or long-term rewards.
9. Keep decisions tentative and conditional until all aspects of the final proposal are complete.
10. Minimize formality and record keeping until final agreements are closed.
XIV. Factors That Facilitate Successful Integrative Negotiation
A. Some common objective or goal
1. A common goal is one that all parties share equally, each one benefiting in a way that would not be possible if they did not work together.
2. A shared goal is one that both parties work toward but that benefits each party differently.
3. A joint goal is one that involves individuals with different personal goals agreeing to combine them in a collective effort.
B. Faith in one’s problem-solving ability
1. Parties who believe they can work together are more likely to do so.
2. Expertise in the focal problem area strengthens the negotiator’s understanding of the problem’s complexity, nuances, and possible solutions.
3. Expertise increases both the negotiator’s knowledge base and his or her self-confidence, both of which are necessary to approach the problem at hand with an open mind.
4. Direct experience in negotiation increases the negotiator’s sophistication in understanding the bargaining process and approaching it more creatively.
5. There is also evidence that knowledge of integrative tactics leads to an increase in integrative behavior.
C. A belief in the validity of one’s own position and the other’s perspective
1. Integrative negotiation requires negotiators to accept both their own and the other’s attitudes, interests, and desires as valid.
2. One must believe in the validity of your own perspective—that what you believe is worth fighting for and should not be compromised.
D. The motivation and commitment to work together.
1. For integrative negotiation to succeed, the parties must be motivated to collaborate rather than compete.
2. Motivation and commitment to problem solving can be enhanced in several ways:
a. The parties can come to believe that they share a common fate.
b. The parties can demonstrate to each other that there is more to be gained by working together than by working separately.
c. The parties can engage in commitments to each other before the negotiations begin. Such commitments have been called presettlement settlements and are distinguished by three major characteristics:
(1) The settlement results in a firm, legally binding written agreement between the parties.
(2) The settlement occurs in advance of the parties undertaking full-scale negotiations, but the parties intend that the agreement will be replaced by a more clearly delineated long-term agreement which is to be negotiated.
(3) The settlement resolves only a subset of the issues on which the parties disagree and may simply establish a framework within which the more comprehensive agreement can be defined and delineated.
E. Trust
1. Mistrust inhibits collaboration.
2. Generating trust is a complex, uncertain process that depends in part on how the parties behave and in part on the parties’ personal characteristics.
3. To develop trust effectively, each negotiator must believe that both he/she and the other party choose to behave in a cooperative manner.
F. Clear and accurate communication
1. Negotiators must be willing to share information about themselves, for example, revealing what they want and why.
2. Negotiators must understand the communication, or meaning each party attaches to their statements.
G. An understanding of the dynamics of integrative negotiation
1. Several studies indicate that training in integrative negotiation enhances the ability of the parties to successfully pursue the process.
XV. Why Integrative Negotiation is Difficult to Achieve
A. The history of the relationship between the two parties - The more competitive and conflict-laden their past relationship, the more likely negotiators are to approach the current negotiation with a defensive, win-lose attitude.
B. A belief that an issue can only be resolved distributively - Conflict dynamics tend to lead negotiators to polarize issues or see them only in win-lose terms.
C. The mixed-motive nature of most negotiation situations - Most situations contain some elements that require distributive bargaining processes and others that require integrative negotiation.
Wednesday, January 20, 2010
Study material Ch2: Strategy and Tactics of Distributive Bargaining
V. The Distributive Bargaining Process
A. Distributive bargaining strategies and tactics are useful when a negotiator wants to maximize the value obtained in a single deal, when the relationship with the other party is not important, and when they are at the claiming value stage of negotiations.
1. The target point is a negotiator’s optimal goal, or the point at which she/he would like to conclude negotiations. The optimal goal is also referred to as resistance.
2. The resistance point is a negotiator’s bottom line – the point beyond which a person will not go. This is not known to the other party and should be kept secret. The resistance point is a high price for the buyer and a low price for the seller.
3. The asking price is the initial price set by the seller, or the first number quoted by the seller.
4. Both parties to a negotiation should establish their starting, target, and resistance points before beginning a negotiation.
5. The spreads between the resistance points, called the bargaining range, settlement range, or zone of potential agreement are very important. It is the area where actual bargaining takes place. When the buyer’s resistance point is above the seller’s he is minimally willing to pay more than she is minimally willing to sell for, there is a positive bargaining range.
B. The role of alternatives to a negotiated agreement
1. Alternatives are important because they give negotiators the power to walk away from any negotiation when the emerging deal is not very good.
a. The role of alternatives are two fold:
(1) Reach a deal with the other party
(2) No settlement at all
C. Settlement Point
a. For agreement to occur, both parties must believe that the settlement is the best that they can get (within a positive bargaining range).
D. Bargaining Mix
1. The agreement necessary on several issues: the price, the closing date of the sale, renovations to the condo, and the price of items that could remain in the condo (such as drapes and appliances).
E. Fundamental Strategies
1. Push for a settlement close to the seller’s resistance point, thereby yielding the largest part of the settlement range for the buyer.
2. Convince the seller to change his/her resistance point by influencing the seller’s beliefs about the value expected from a particular outcome.
3. If a negative settlement range exists, try to convince the seller to reduce his/her resistance point to create a positive settlement range or to change his/her own resistance point to create an overlap.
4. Convince the seller to believe that this settlement is the best possible
5. Two important tasks in a distributive bargaining situation.
a. Discovering the other party’s resistance point.
b. Influencing the other party’s resistance point.
F. Discovering the other party’s resistance point.
1. Learning about the other party’s resistance point, target, motives, feelings of confidence, and so on, the more likely you will be able to have a favorable settlement. You do not want the other party to know your resistance point. Because each party wants to know the other’s resistance point, communication can become complex.
G. Influencing the other party’s resistance point.
1. The following factors are important in attempting to influencing the other party’s resistance point:
a. The value the other attaches to a particular outcome;
b. The costs the other attaches to delay or difficulty in negotiations;
c. The cost the other attaches to having the negotiations aborted.
2. Understanding your own situation, and the value of your particular outcome, will help you to understand the other person’s. Four major positions show how this affects the distributive bargaining process:
a. The higher the other party’s estimate of your cost of delay or impasse, the stronger the other party’s resistance point will be.
b. The higher the other party’s estimate of his or her own cost of delay or impasse, the weaker the other party’s resistance point will be.
c. The less the other party values an issue the lower the resistance point will be.
d. The more the other party believes that you value an issue the lower their resistance.
VI. Tactical Tasks
A. There are four important tactical tasks for a negotiator in a distributive situation to consider
1. Assess the other party’s target, resistance point, and cost of terminating negotiations
a. Indirect assessment means determining what information an individual likely used to set target and resistance point sand how he or she interpreted this information.
(1) Indirect indicators can be a source to assess the other party’s resistance point, and can include observations, consulting documentation and publications, speaking to experts.
b. Direct assessment, in bargaining, is where the other party does not usually reveal accurate and precise information about his or her outcome values, resistance points, and expectations.
2. Manage the other party’s impression of the negotiator’s target, resistance point, and cost of terminating negotiation, while also guiding him or her to form a preferred impression of them.
a. Screening activities – say as little as possible. Instead, use words to ask the other negotiator questions.
b. Direct action to alter impressions - through selective presentation:
(1) Negotiators reveal only the facts necessary to support their case.
(2) Lead the other party to form the desired impression of their resistance point or to open up new possibilities for agreement that are more favorable to the presenter than those that currently exist.
(3) Emotional reaction to facts, proposals, and possible outcomes.
(i) There are several hazards in taking direct action: perception of dishonesty, which can lead to the other party conceding on minor points to defeat the maneuverer at his or her own game.
3. Modify the other party’s perception of his or her own target, resistance point, and cost of terminating negotiation.
4. Manipulate the actual costs of delaying or terminating negotiations through:
a. Planning disruptive action: Increasing the costs of not reaching a negotiated agreement.
b. Forming an alliance with outsiders who can somehow influence the outcome of the negotiation.
c. Manipulating the scheduling of negotiations can put the other party at a considerable disadvantage by enhancing your position and protect you from the other party’s actions.
VII. Positions Taken During Negotiation
A. Opening offer
1. Making the first offer is advantageous to the negotiator making the offer because he or she can anchor a negotiation. Exaggerating an opening offer is advantageous because:
a. It gives the negotiator room for movement thereby giving him or her time to learn about the other party’s priorities.
b. May create an impression in the other party’s mind that:
(1) There is a long way to go before a reasonable settlement will be achieved
(2) A greater number of concessions will have to be made to find a common ZOPA.
2. Two disadvantages to exaggerating an offer include:
a. Potential rejection by the other party.
b. The perception of a “tough” attitude that can harm a long-term relationship.
B. An opening stance is the attitude the negotiator will adopt during a negotiation (competitive, belligerent, moderate, etc.). To communicate effectively, a negotiator should try and send a consistent message through both the opening and stance.
C. Usually met with a counteroffer, initial concessions define the initial bargaining range; they communicate to the other party how you intend to negotiate.
D. Role of concessions – Negotiations would not exist without them.
1. There is ample data to show that parties feel better about a settlement when the negotiation involved a progression of concessions than when it didn’t.
E. The pattern of concessions made during a negotiation contains valuable information, though not always easy to interpret.
F. Final offer - a negotiator wants to convey the message that there is no further room for movement. One way to accomplish this is to make the last concession substantial.
VIII. Commitment
Commitment is the taking of a bargaining position with some explicit or implicit pledge regarding the future course of action.
A. Tactical considerations in using commitments
1. Contingency plans should be made.
2. Commitments exchange flexibility for certainty of action, but they create difficulties if one wants to move to a new position.
B. Establishing a commitment
1. A commitment statement has three properties
a. A high degree of finality
b. A high degree of specificity
c. A clear statement of consequences
2. There are several ways to create commitment:
a. Public pronouncement
b. Linking with an outside base
c. Increase the prominence of demands
d. Reinforce the threat or promise
3. Several things can be done to reinforce the threat in a commitment
a. Review similar circumstances and their consequences
b. Make obvious preparations to carry out the threat
c. Create and carry out minor threats in advance, leading the other party to believe that major threats will be fulfilled.
4. Preventing the other party from committing prematurely
a. Approaches to preventing commitment:
(1) Denying negotiator the necessary time.
(2) Ignore or downplay a threat by not acknowledging the other’s commitment.
C. Finding ways to abandon a committed position
1. There are four avenues to use in abandoning a commitment:
a. Plan a way out
b. Let it die silently
c. Restate the commitment
d. Minimize the damage
IX. Closing the Deal
A. Provide alternatives – rather than making a single final offer, provide two or three alternative packages for the other party that are roughly equal in value.
B. Assume the close – having a general discussion about the needs and positions of the buyer, then act as if the decision to purchase something has already been made.
C. Split the difference – the most popular tactic used; used when an agreement is close, suggesting that the parties split the difference.
D. Exploding offers – An offer that contains an extremely tight deadline in order to pressure the other party to agree quickly.
1. The purpose of an exploding offer is to convince the other party to accept the settlement and to stop considering outcomes.
E. Sweeteners – negotiators need to include the sweetener in their negotiation plans or they may concede too much during the close.
X. Hardball Tactics
A. Dealing with typical hardball tactics – there are several choices about how to respond.
1. Ignore them
2. Discuss them
3. Respond in kind
4. Co-opt the other party
B. Typical hardball tactics
1. Good cop/bad cop
a. Weaknesses:
(1) Relatively transparent
(2) Difficult to enact – requires a lot of energy toward making the tactic work
2. Lowball/high ball
a. Risk in using this tactic:
(1) The other party will think it is a waste of time to negotiate and stop the process.
b. Strategies for using this tactic:
(1) Insisting that the other party start with a reasonable opening offer and refusing to negotiate further until he or she does
(2) Stating your understanding of the general market value of the item being discussed, supporting it with facts and figures, thus showing the other party that you won’t be tricked
(3) Threatening to leave the negotiation, showing dissatisfaction in the other party in using this tactic
(4) Responding with an extreme counter offer
3. Bogey
a. Negotiators use this tactic to pretend that an issue is of little or no importance to them, when it actually is quite important.
4. The nibble
a. Weaknesses in using the nibble:
(1) The party using the nibble did not bargain in good faith.
b. Combating the nibble tactic:
(1) Respond with each nibble with the question “What else do you want?”
(2) Have your own nibbles prepared for exchange.
5. Chicken
a. Combining a large bluff with a threatened action to force the other party to “chicken out” and give them what they want.
b. Weakness of chicken tactic:
(1) Turns the negotiation into a serious game in which one or both parties find it difficult to distinguish reality from postured negotiation positions.
(2) Difficult to defend against.
6. Intimidation
a. An attempt to force the other party to agree by means of an emotional ploy. Negotiators intimidate by:
(1) Using anger
(2) Increasing the appearance of legitimacy
(3) Guilt
7. Aggressive behavior
a. Aggressive tactics include:
(1) Relentless push for further concessions
(2) Asking for the best offer early in negotiations
(3) Asking the other party to explain and justify his/her proposals
8. Snow job
a. Snow jobs occur when negotiators overwhelm the other party with so much information that he/she has trouble determining which facts are real or important, and which are distractions.
XI. Distributive Bargaining Skills Applicable to Integrative Negotiations
A. Many distributing bargaining skills are also applicable to integrative negotiations when negotiators need to claim value, or decide how to divide their joint gain. Some applicable skills include:
1. Setting clear target and resistance points
2. Understanding and working to improve their BATNA
3. Starting with a good opening offer
4. Making appropriate concessions
5. Managing the commitment process.
A. Distributive bargaining strategies and tactics are useful when a negotiator wants to maximize the value obtained in a single deal, when the relationship with the other party is not important, and when they are at the claiming value stage of negotiations.
1. The target point is a negotiator’s optimal goal, or the point at which she/he would like to conclude negotiations. The optimal goal is also referred to as resistance.
2. The resistance point is a negotiator’s bottom line – the point beyond which a person will not go. This is not known to the other party and should be kept secret. The resistance point is a high price for the buyer and a low price for the seller.
3. The asking price is the initial price set by the seller, or the first number quoted by the seller.
4. Both parties to a negotiation should establish their starting, target, and resistance points before beginning a negotiation.
5. The spreads between the resistance points, called the bargaining range, settlement range, or zone of potential agreement are very important. It is the area where actual bargaining takes place. When the buyer’s resistance point is above the seller’s he is minimally willing to pay more than she is minimally willing to sell for, there is a positive bargaining range.
B. The role of alternatives to a negotiated agreement
1. Alternatives are important because they give negotiators the power to walk away from any negotiation when the emerging deal is not very good.
a. The role of alternatives are two fold:
(1) Reach a deal with the other party
(2) No settlement at all
C. Settlement Point
a. For agreement to occur, both parties must believe that the settlement is the best that they can get (within a positive bargaining range).
D. Bargaining Mix
1. The agreement necessary on several issues: the price, the closing date of the sale, renovations to the condo, and the price of items that could remain in the condo (such as drapes and appliances).
E. Fundamental Strategies
1. Push for a settlement close to the seller’s resistance point, thereby yielding the largest part of the settlement range for the buyer.
2. Convince the seller to change his/her resistance point by influencing the seller’s beliefs about the value expected from a particular outcome.
3. If a negative settlement range exists, try to convince the seller to reduce his/her resistance point to create a positive settlement range or to change his/her own resistance point to create an overlap.
4. Convince the seller to believe that this settlement is the best possible
5. Two important tasks in a distributive bargaining situation.
a. Discovering the other party’s resistance point.
b. Influencing the other party’s resistance point.
F. Discovering the other party’s resistance point.
1. Learning about the other party’s resistance point, target, motives, feelings of confidence, and so on, the more likely you will be able to have a favorable settlement. You do not want the other party to know your resistance point. Because each party wants to know the other’s resistance point, communication can become complex.
G. Influencing the other party’s resistance point.
1. The following factors are important in attempting to influencing the other party’s resistance point:
a. The value the other attaches to a particular outcome;
b. The costs the other attaches to delay or difficulty in negotiations;
c. The cost the other attaches to having the negotiations aborted.
2. Understanding your own situation, and the value of your particular outcome, will help you to understand the other person’s. Four major positions show how this affects the distributive bargaining process:
a. The higher the other party’s estimate of your cost of delay or impasse, the stronger the other party’s resistance point will be.
b. The higher the other party’s estimate of his or her own cost of delay or impasse, the weaker the other party’s resistance point will be.
c. The less the other party values an issue the lower the resistance point will be.
d. The more the other party believes that you value an issue the lower their resistance.
VI. Tactical Tasks
A. There are four important tactical tasks for a negotiator in a distributive situation to consider
1. Assess the other party’s target, resistance point, and cost of terminating negotiations
a. Indirect assessment means determining what information an individual likely used to set target and resistance point sand how he or she interpreted this information.
(1) Indirect indicators can be a source to assess the other party’s resistance point, and can include observations, consulting documentation and publications, speaking to experts.
b. Direct assessment, in bargaining, is where the other party does not usually reveal accurate and precise information about his or her outcome values, resistance points, and expectations.
2. Manage the other party’s impression of the negotiator’s target, resistance point, and cost of terminating negotiation, while also guiding him or her to form a preferred impression of them.
a. Screening activities – say as little as possible. Instead, use words to ask the other negotiator questions.
b. Direct action to alter impressions - through selective presentation:
(1) Negotiators reveal only the facts necessary to support their case.
(2) Lead the other party to form the desired impression of their resistance point or to open up new possibilities for agreement that are more favorable to the presenter than those that currently exist.
(3) Emotional reaction to facts, proposals, and possible outcomes.
(i) There are several hazards in taking direct action: perception of dishonesty, which can lead to the other party conceding on minor points to defeat the maneuverer at his or her own game.
3. Modify the other party’s perception of his or her own target, resistance point, and cost of terminating negotiation.
4. Manipulate the actual costs of delaying or terminating negotiations through:
a. Planning disruptive action: Increasing the costs of not reaching a negotiated agreement.
b. Forming an alliance with outsiders who can somehow influence the outcome of the negotiation.
c. Manipulating the scheduling of negotiations can put the other party at a considerable disadvantage by enhancing your position and protect you from the other party’s actions.
VII. Positions Taken During Negotiation
A. Opening offer
1. Making the first offer is advantageous to the negotiator making the offer because he or she can anchor a negotiation. Exaggerating an opening offer is advantageous because:
a. It gives the negotiator room for movement thereby giving him or her time to learn about the other party’s priorities.
b. May create an impression in the other party’s mind that:
(1) There is a long way to go before a reasonable settlement will be achieved
(2) A greater number of concessions will have to be made to find a common ZOPA.
2. Two disadvantages to exaggerating an offer include:
a. Potential rejection by the other party.
b. The perception of a “tough” attitude that can harm a long-term relationship.
B. An opening stance is the attitude the negotiator will adopt during a negotiation (competitive, belligerent, moderate, etc.). To communicate effectively, a negotiator should try and send a consistent message through both the opening and stance.
C. Usually met with a counteroffer, initial concessions define the initial bargaining range; they communicate to the other party how you intend to negotiate.
D. Role of concessions – Negotiations would not exist without them.
1. There is ample data to show that parties feel better about a settlement when the negotiation involved a progression of concessions than when it didn’t.
E. The pattern of concessions made during a negotiation contains valuable information, though not always easy to interpret.
F. Final offer - a negotiator wants to convey the message that there is no further room for movement. One way to accomplish this is to make the last concession substantial.
VIII. Commitment
Commitment is the taking of a bargaining position with some explicit or implicit pledge regarding the future course of action.
A. Tactical considerations in using commitments
1. Contingency plans should be made.
2. Commitments exchange flexibility for certainty of action, but they create difficulties if one wants to move to a new position.
B. Establishing a commitment
1. A commitment statement has three properties
a. A high degree of finality
b. A high degree of specificity
c. A clear statement of consequences
2. There are several ways to create commitment:
a. Public pronouncement
b. Linking with an outside base
c. Increase the prominence of demands
d. Reinforce the threat or promise
3. Several things can be done to reinforce the threat in a commitment
a. Review similar circumstances and their consequences
b. Make obvious preparations to carry out the threat
c. Create and carry out minor threats in advance, leading the other party to believe that major threats will be fulfilled.
4. Preventing the other party from committing prematurely
a. Approaches to preventing commitment:
(1) Denying negotiator the necessary time.
(2) Ignore or downplay a threat by not acknowledging the other’s commitment.
C. Finding ways to abandon a committed position
1. There are four avenues to use in abandoning a commitment:
a. Plan a way out
b. Let it die silently
c. Restate the commitment
d. Minimize the damage
IX. Closing the Deal
A. Provide alternatives – rather than making a single final offer, provide two or three alternative packages for the other party that are roughly equal in value.
B. Assume the close – having a general discussion about the needs and positions of the buyer, then act as if the decision to purchase something has already been made.
C. Split the difference – the most popular tactic used; used when an agreement is close, suggesting that the parties split the difference.
D. Exploding offers – An offer that contains an extremely tight deadline in order to pressure the other party to agree quickly.
1. The purpose of an exploding offer is to convince the other party to accept the settlement and to stop considering outcomes.
E. Sweeteners – negotiators need to include the sweetener in their negotiation plans or they may concede too much during the close.
X. Hardball Tactics
A. Dealing with typical hardball tactics – there are several choices about how to respond.
1. Ignore them
2. Discuss them
3. Respond in kind
4. Co-opt the other party
B. Typical hardball tactics
1. Good cop/bad cop
a. Weaknesses:
(1) Relatively transparent
(2) Difficult to enact – requires a lot of energy toward making the tactic work
2. Lowball/high ball
a. Risk in using this tactic:
(1) The other party will think it is a waste of time to negotiate and stop the process.
b. Strategies for using this tactic:
(1) Insisting that the other party start with a reasonable opening offer and refusing to negotiate further until he or she does
(2) Stating your understanding of the general market value of the item being discussed, supporting it with facts and figures, thus showing the other party that you won’t be tricked
(3) Threatening to leave the negotiation, showing dissatisfaction in the other party in using this tactic
(4) Responding with an extreme counter offer
3. Bogey
a. Negotiators use this tactic to pretend that an issue is of little or no importance to them, when it actually is quite important.
4. The nibble
a. Weaknesses in using the nibble:
(1) The party using the nibble did not bargain in good faith.
b. Combating the nibble tactic:
(1) Respond with each nibble with the question “What else do you want?”
(2) Have your own nibbles prepared for exchange.
5. Chicken
a. Combining a large bluff with a threatened action to force the other party to “chicken out” and give them what they want.
b. Weakness of chicken tactic:
(1) Turns the negotiation into a serious game in which one or both parties find it difficult to distinguish reality from postured negotiation positions.
(2) Difficult to defend against.
6. Intimidation
a. An attempt to force the other party to agree by means of an emotional ploy. Negotiators intimidate by:
(1) Using anger
(2) Increasing the appearance of legitimacy
(3) Guilt
7. Aggressive behavior
a. Aggressive tactics include:
(1) Relentless push for further concessions
(2) Asking for the best offer early in negotiations
(3) Asking the other party to explain and justify his/her proposals
8. Snow job
a. Snow jobs occur when negotiators overwhelm the other party with so much information that he/she has trouble determining which facts are real or important, and which are distractions.
XI. Distributive Bargaining Skills Applicable to Integrative Negotiations
A. Many distributing bargaining skills are also applicable to integrative negotiations when negotiators need to claim value, or decide how to divide their joint gain. Some applicable skills include:
1. Setting clear target and resistance points
2. Understanding and working to improve their BATNA
3. Starting with a good opening offer
4. Making appropriate concessions
5. Managing the commitment process.
Monday, January 18, 2010
Study Material: Ch:1 by Prof. Rama Rao
Business Negotiations
Summary Notes
Ch.1-The Nature of Negotiation
I. Characteristics of a negotiation situation
A. Characteristics common to all negotiation situations
1. There are two or more parties, individuals, groups or organizations.
2. There is a conflict of needs and desires between two or more parties, and the parties must search for a way to resolve the conflict.
3. Parties negotiate because they think they can get a better deal by negotiating than by simply accepting what the other side will voluntarily give them or let them have.
4. When negotiating, a give and take is expected. To reach an agreement, both sides will modify their opening statement to find a middle ground; they compromise.
5. The parties prefer to negotiate and search for agreement rather than to fight openly, have one side dominate and the other capitulate, permanently break off contact, or take their dispute to a higher authority to resolve it.
6. Successful negotiation involves the management of tangibles and also the resolution of intangibles.
a. Tangible factors: the price or the terms of agreement
b. Intangible factors: The underlying psychological motivations that may directly or indirectly influence the parties during a negotiation. They have an enormous influence on negotiation processes and outcomes, so it is crucial for negotiators to understand how they affect decision making and tangible outcomes. Examples of intangible factors include:
(1) The need to “win” or avoid losing
(2) The need to look “good” to those you’re representing
(3) The need to defend an important principle or precedent in a negotiation; and
(4) The need to appear “fair” or “honorable” or to protect one’s reputation.
II. Interdependence
A. Working interdependently allows parties to achieve a possible outcome that is better than they could achieve by working on their own.
B. Most relationships between parties may be characterized in one of three ways: independent, dependent, or interdependent.
1. When the parties depend on each other to achieve their own preferred outcome they are interdependent; they are characterized by interlocking goals.
2. Independent parties are able to meet their own needs without the help and assistance of others.
3. Dependent parties must rely on others for what they need; the dependent party must accept and accommodate to that provider’s whims and idiosyncrasies.
C. Types of Interdependence Affect Outcomes
1. The interdependence of people’s goals, and the structure of the situation in which they are going to negotiate, strongly shapes negotiation processes and outcomes.
a. Zero-sum distributive: Competitive situation where there is only one winner.
b. Zero-sum integrative: Goals are linked to achieve a mutual gain.
D. Alternatives Shape Interdependence
1. BATNA: Best Alternative to a Negotiated Agreement
a. Whether you should or should not agree on something in a negotiation depends upon the attractiveness of your best available alternatives.
b. Negotiators need to understand their BATNA, as well as the other parties’.
III. Mutual Adjustment
A. Interdependent parties have an influence on the others’ outcomes and decisions. As parties act to influence each other in a negotiation, they engage in a mutual adjustment.
1. It is important to recognize that negotiation is a process that transforms over time, and mutual adjustment is one of the key causes of the changes that occur during a negotiation
2. An example would be to look at Sue Carter’s job situation. She would like to leave her present employer and take an available job at a large multinational bank. The job description announced the salary as “competitive.” Her prospective manager, Max, perceives her as a desirable candidate and is ready to offer her the job. She did not state her minimally acceptable salary. She has decided the bank will pay no more than necessary and that her minimum would be accepted quickly.
a. A closer look reveals that she is making her decision on how she anticipates Max will react to her actions.
b. Sue is assessing the indirect impact of behavior on herself.
c. Sue is choosing among behavioral options with a thought: not only how they will affect Max, but also how they will then lead Max to act toward Sue.
d. Sue knows that Max believes she will act in this way and makes her decision on the basis of this belief.
3. The effective negotiator needs to understand how people will adjust and readjust, and how the negotiations might twist and turn, based on one’s own moves and the others’ responses.
4. The best strategy for successful mutual adjustment to the other is grounded in the assumption that the more information one has about the other person, the better.
5. Mutual adjustment and concession making
a. When one party alters his/her position based on the other party’s suggestion to do so, a concession has been made.
b. Concessions constrain the bargaining range
6. Two dilemmas that all negotiators face in mutual adjustment:
a. Dilemma of honesty – how much of the truth to tell the other party?
b. Dilemma of trust – how much should negotiators believe what the other party tells them?
7. Two efforts that help a negotiation create trust and beliefs:
a. Outcome perception
b. Process perception
8. The pattern of give-and-take is also essential to joint problem solving in most interdependent relationships. Satisfaction with negotiation is as much determined by the process through which an agreement is reached as with the actual outcome obtained.
IV. Value Claiming and Value Creation
A. Distributive bargaining
1. The purpose this type of negotiation is to claim value—to do whatever is necessary to claim the reward or gain the largest piece possible.
B. Integrative bargaining
1. The purpose of this approach to negotiation is to create value, or find a way for all parties to meet their goals and share the reward.
C. Most negotiations are a combination of claiming and creating value. There are significant implications to this:
1. Negotiators must be able to recognize situations that require one approach or the other
2. Negotiators must be versatile in their comfort and use of both strategic approaches.
3. Negotiator perceptions of situations tend to be biased toward seeing problems as more distributive / competitive than they really are.
D. Successful coordination of interdependence has the potential to lead to synergy, which is the notion that “the whole is greater than the sum of its parts.”
E. Lax and Sebenius in their book “The Manager as Negotiator,” describe key differences among negotiators:
1. Differences in interests,
2. Differences in opinions,
3. Differences in risk aversion, and
4. Differences time preference.
F. Conflict may be defined as a "sharp disagreement or opposition" and includes "the perceived divergence of interest, or a belief that the parties' current aspirations cannot be achieved simultaneously".
Intrapersonal or intrapsychic conflict occurs within an individual
Interpersonal conflict is between individuals
Intra group conflict
Intergroup conflict
G. Functions and Dysfunctions of Conflict
H. Dual Concerns Model: Contending, Inaction, Yielding, Compromising,& Problem solving
I. Negotiators need to be aware of the potential differences between them can serve as barriers to reaching an agreement. Exploring common and different interests to create value can set the foundation for a lasting agreement.
Summary Notes
Ch.1-The Nature of Negotiation
I. Characteristics of a negotiation situation
A. Characteristics common to all negotiation situations
1. There are two or more parties, individuals, groups or organizations.
2. There is a conflict of needs and desires between two or more parties, and the parties must search for a way to resolve the conflict.
3. Parties negotiate because they think they can get a better deal by negotiating than by simply accepting what the other side will voluntarily give them or let them have.
4. When negotiating, a give and take is expected. To reach an agreement, both sides will modify their opening statement to find a middle ground; they compromise.
5. The parties prefer to negotiate and search for agreement rather than to fight openly, have one side dominate and the other capitulate, permanently break off contact, or take their dispute to a higher authority to resolve it.
6. Successful negotiation involves the management of tangibles and also the resolution of intangibles.
a. Tangible factors: the price or the terms of agreement
b. Intangible factors: The underlying psychological motivations that may directly or indirectly influence the parties during a negotiation. They have an enormous influence on negotiation processes and outcomes, so it is crucial for negotiators to understand how they affect decision making and tangible outcomes. Examples of intangible factors include:
(1) The need to “win” or avoid losing
(2) The need to look “good” to those you’re representing
(3) The need to defend an important principle or precedent in a negotiation; and
(4) The need to appear “fair” or “honorable” or to protect one’s reputation.
II. Interdependence
A. Working interdependently allows parties to achieve a possible outcome that is better than they could achieve by working on their own.
B. Most relationships between parties may be characterized in one of three ways: independent, dependent, or interdependent.
1. When the parties depend on each other to achieve their own preferred outcome they are interdependent; they are characterized by interlocking goals.
2. Independent parties are able to meet their own needs without the help and assistance of others.
3. Dependent parties must rely on others for what they need; the dependent party must accept and accommodate to that provider’s whims and idiosyncrasies.
C. Types of Interdependence Affect Outcomes
1. The interdependence of people’s goals, and the structure of the situation in which they are going to negotiate, strongly shapes negotiation processes and outcomes.
a. Zero-sum distributive: Competitive situation where there is only one winner.
b. Zero-sum integrative: Goals are linked to achieve a mutual gain.
D. Alternatives Shape Interdependence
1. BATNA: Best Alternative to a Negotiated Agreement
a. Whether you should or should not agree on something in a negotiation depends upon the attractiveness of your best available alternatives.
b. Negotiators need to understand their BATNA, as well as the other parties’.
III. Mutual Adjustment
A. Interdependent parties have an influence on the others’ outcomes and decisions. As parties act to influence each other in a negotiation, they engage in a mutual adjustment.
1. It is important to recognize that negotiation is a process that transforms over time, and mutual adjustment is one of the key causes of the changes that occur during a negotiation
2. An example would be to look at Sue Carter’s job situation. She would like to leave her present employer and take an available job at a large multinational bank. The job description announced the salary as “competitive.” Her prospective manager, Max, perceives her as a desirable candidate and is ready to offer her the job. She did not state her minimally acceptable salary. She has decided the bank will pay no more than necessary and that her minimum would be accepted quickly.
a. A closer look reveals that she is making her decision on how she anticipates Max will react to her actions.
b. Sue is assessing the indirect impact of behavior on herself.
c. Sue is choosing among behavioral options with a thought: not only how they will affect Max, but also how they will then lead Max to act toward Sue.
d. Sue knows that Max believes she will act in this way and makes her decision on the basis of this belief.
3. The effective negotiator needs to understand how people will adjust and readjust, and how the negotiations might twist and turn, based on one’s own moves and the others’ responses.
4. The best strategy for successful mutual adjustment to the other is grounded in the assumption that the more information one has about the other person, the better.
5. Mutual adjustment and concession making
a. When one party alters his/her position based on the other party’s suggestion to do so, a concession has been made.
b. Concessions constrain the bargaining range
6. Two dilemmas that all negotiators face in mutual adjustment:
a. Dilemma of honesty – how much of the truth to tell the other party?
b. Dilemma of trust – how much should negotiators believe what the other party tells them?
7. Two efforts that help a negotiation create trust and beliefs:
a. Outcome perception
b. Process perception
8. The pattern of give-and-take is also essential to joint problem solving in most interdependent relationships. Satisfaction with negotiation is as much determined by the process through which an agreement is reached as with the actual outcome obtained.
IV. Value Claiming and Value Creation
A. Distributive bargaining
1. The purpose this type of negotiation is to claim value—to do whatever is necessary to claim the reward or gain the largest piece possible.
B. Integrative bargaining
1. The purpose of this approach to negotiation is to create value, or find a way for all parties to meet their goals and share the reward.
C. Most negotiations are a combination of claiming and creating value. There are significant implications to this:
1. Negotiators must be able to recognize situations that require one approach or the other
2. Negotiators must be versatile in their comfort and use of both strategic approaches.
3. Negotiator perceptions of situations tend to be biased toward seeing problems as more distributive / competitive than they really are.
D. Successful coordination of interdependence has the potential to lead to synergy, which is the notion that “the whole is greater than the sum of its parts.”
E. Lax and Sebenius in their book “The Manager as Negotiator,” describe key differences among negotiators:
1. Differences in interests,
2. Differences in opinions,
3. Differences in risk aversion, and
4. Differences time preference.
F. Conflict may be defined as a "sharp disagreement or opposition" and includes "the perceived divergence of interest, or a belief that the parties' current aspirations cannot be achieved simultaneously".
Intrapersonal or intrapsychic conflict occurs within an individual
Interpersonal conflict is between individuals
Intra group conflict
Intergroup conflict
G. Functions and Dysfunctions of Conflict
H. Dual Concerns Model: Contending, Inaction, Yielding, Compromising,& Problem solving
I. Negotiators need to be aware of the potential differences between them can serve as barriers to reaching an agreement. Exploring common and different interests to create value can set the foundation for a lasting agreement.
Subscribe to:
Posts (Atom)