Negotiations in Academia and Beyond

1. Negotiationsin Academia and Beyond Elena Zinchenko May 11, 2013

2. A typical first job interview

3. Negotiations • Negotiations are viewed as potentially adversarial situations so we either • Avoid them altogether • Agree to the proposals by the other side too quickly • Cut them short by compromise (“splitting the difference”) • Or: Play tough

4. Negotiating First Job Offers $213K Assuming no further negotiation and 3% raises per year… $197K Assuming 3% return on investment per year… Present Value of Negotiating > $600,000 $76K $70K Salaries at age 65  Gap is $15,758 Salaries at age 30  Gap is $5,600

5. Benefits of Negotiation • Early negotiations matter quite a bit later on! • There is much to gain from negotiating in life • Most important step in negotiation is deciding to negotiate in the first place • Should you negotiate first job offers? • Yes!

6. Competing Collaborating Concern for the self(Importance of Stakes) Compromising Avoiding Accommodating Concern for the other (Investment in Relationship Building) Five Approaches to Negotiation / Conflict Management Your Negotiating Style

7. Thought Experiment • Imagine that you are one of twelve people, all of whom are strangers, sitting at a big round table in a conference room. Someone comes into the room and makes the following offer: “I will give a prize of one thousand dollars to each of the first two people who can persuade the person sitting opposite to get up, come around the table and stand behind his or her chair” • The first two people who can persuade the person sitting opposite to get up and stand behind their chair, get $1000. Everyone else gets $0. • How will you respond to this offer?

8. Thought Experiment • “I don’t want to play” (avoider) • “Let’s split the $1000. You can either get behind my chair or I will get behind your chair” (compromiser) • Race around the table and stand behind your opposite’s chair. You act while everyone is still negotiating. You trust your opposite to share the money. (accommodator) • “Quick, get behind my chair! I’ll share the money with you!” (competitor) • “Let’s both get behind each other’s chairs! We can each make a thousand dollar!” (collaborator)

9. The Good News • Our attitude towards negotiations is shaped by the view that it is a “win-lose” between our interests and the other party. • Most important negotiations in your life will benefit from a collaborative approach when you maximize both your interests and the interests of the other party.

10. Types of Negotiations • Distributive • One-shot, zero-sum, single issue, claiming value • Examples from real life? • Integrative • Long-term relationships, multiple issues, creating value • Examples from academia • Job offer negotiation, lab manager hire, authorship dispute, academic committee responsibility, etc. • Other • Weekend plans, business deals, etc.

11. Negotiation Basics • BATNA(Best Alternative To a Negotiation Agreement) • The stronger it is the better position you are in • Reservation Price • Don’t exceed it • ZOPA(Zone of Possible Agreement) Seller’s Reservation Price Seller's Aspiration Buyer’s Aspiration Buyer’s Reservation Price ZOPA / Bargaining Zone

12. Distributive Negotiation Strategy $4,000 $10,000 Seller’s Reservation Price Seller's Aspiration Buyer’s Aspiration Buyer’s Reservation Price $2,000 $8,000 ZOPA / Bargaining Zone

13. Strategies for a Distributive Negotiation • High initial offer • Be aggressive but not offensive • Offer a real justification – do not alienate/offend the other party • Starting high allows you to make concessions • The more concessions you make, the more others like you • The Norm of Reciprocity • Returned favors often exceed original ones • Realistic final offer • End within a ZOPA • Tip: Show pain and make smaller concessions when approaching your target (not your RP!)

14. Beware of Biases • Overconfidence • Anchoring on own reservation price • Insufficient adjustment • Irrational commitment to a previously chosen strategy • Winner’s curse • The mythical fixed pie

15. Integrative Negotiation • Explore ways to make both sides better off • Principle 1: Care about interests not positions • Avoid positional bargaining • Strategy: • Write your interest behind every position • i.e., salary vs childcare/mortgage; startup funds vs space • Evaluate your priorities and rank order them • Think about your partner’s interests and priorities • Asymmetrical information • Uncertainty

16. Preparing for a Negotiation

17. Integrative Negotiation Principle 2: Joint gains are created by differences If everyone agreed, there would be no negotiation! • Exchange what is “cheap” for what is “expensive” Eg., start date vsstartup funds; salary vs vacation days This creates more value for both parties rather than compromising (splitting the difference) • Challenge: How to discover the relative priorities of your negotiating partner?

18. How to uncover the other’s preferences? • Isolate an issue • Doesn’t work: you won’t uncover the possibilities for mutually beneficial trade • Partners may bluff to gain some future advantage • i.e., exaggerate/downplay the value of an item • Split the difference • Doesn’t work: Destroys potential value, keeping both unsatisfied • Ask a lot of questions (although some are important) • Doesn’t work: Both parties are uncertain • You often hurt yourself by giving away too many “truths” • You cannot always trust the information the other side provides • The other side may not trust you • Information exchange may not be reciprocal

19. What to do??? Make sure you understand the interests • It’s notabout what’s most important to you – • It’s about your trade-offs • You must know your “exchange rate” It’s critical that you define your RP appropriately: • Do not set RPs on individual issues • Form only an overall RP (e.g., bottom-line $) • Identify many combinations that you will be satisfied with

20. Strategy: Multiple Whole Packages • At the table, probe your assumptions about the other side’s preferences by simultaneously offering multiple whole packages of offers • Packages should be of similar value to you • Slowly learn about the other side’s preferences by noting the relative trade-offs they prefer • Remember: When the other side doesn't know how to deceive, you can rely on their answers • Information revealed is accurate, reciprocal, and the exchange feels fair and safe

21. Important Points • Don’t assume different preferences • Using whole multiple packages strategy you may uncover similar preferences and still get something in return for a “concession” • Bluffing may result in suboptimal outcome for both parties • If stalling, add an issue! • Close a deal that would have not been possible • Build trust in the relationship • Eg.: add a future year’s budget to trade assignments for this year, or a future paper’s authorship • For authorship, it is helpful to have it done in writing (over email)

22. Summary for Value Creation • How do you negotiate to create maximum value? • Find the relative differences (and quantify them) • Don’t assume different preferences on every issue • Trade the differences

23. Summary for Value Creation • What process enables maximum value creation? • Adopt a trading mentality • Compromise is alluring, but is usually a bad idea! • Don’t isolate issues (this destroys value) • This leads to splitting differences instead of trading them • Explore the other side’s preferences by offering simultaneous multiple packages • Add more value by adding an issue and exploring post-settlement settlement

24. Before Any Negotiation, Assess • Your BATNA • And your opponent’s BATNA • The true issues/interests in the negotiation • How important each issues is for you • And for your opponent • The bargaining zone • Where trade-offs exist • The degree of your biases • “fixed pie”, framing, anchoring and adjustment, availability of information, etc.

25. PS: The Role of Gender in Negotiations Percentage of Students Who Negotiated Their Job Offer (controlling for sector) 51.5% 12.5% Women Men

26. Women in Negotiations • Gender Gap in Salaries • May be partially due to women’s reluctance to negotiate • This “self-sabotage” is justified: • Heidi/Howard study • Women who negotiate are disliked by *both* men and women • The “communal-interest” gender bias

27. Women in Negotiations • Consider yourself an agent of your constituency • Women negotiate successfully when representing someone else • Appeal to a standard • Do it nicely • “Be relentlessly pleasant” – Mary Sue Coleman, president of University of Michigan • Consider institutional constraints on how much negotiation is appropriate • Seek information from peers • Public vs private schools

28. Final Thoughts • Think of negotiation as a joint problem requiring a satisfying solution • Remember: Interests, Not Positions! • Trade the differences in preferences • Uncover your partner’s preferences by offering multiple packages • Capture value only after creating it • Be nice but do not negotiate with yourself • Make reciprocal concessions only • Diffuse emotions • People get angry when they feel disrespected or unheard • Give them a chance to be heard. Respect them. • Enjoy the process – come up with creative solutions!