Integrative Negotiation Strategy: Expanding the Pie Approach

1. CHAPTER 3 Strategy and Tactics of Integrative Negotiation 整合型谈判 (expanding the pie 增大蛋糕) Approach: a comparative view

2. Negotiations As Joint Problem Solving In an integrative bargaining situation, “it may be possible for the negotiators to enlarge the pie before cutting it. In order to squeeze out potential joint gains, the negotiators must do some joint problem solving” (Raiffa, 1982)

3. Pareto Efficient Frontier “An agreement is defined as Pareto efficient when there is no other agreement that would make any party better off without decreasing the outcomes to any other party.” “With any Pareto inefficient agreement, there exists an alternative that would benefit at least one party without injuring any party.” (Neale & Bazerman, 1991) Your goal as a negotiator to reach Pareto optimality in a negotiated agreement. Q: why don’t most outcomes end up on the frontier?

4. Pareto Efficient Frontier

5. The Negotiator’s (Prisoner’s dilemma) The non-separability of integrative and distributive negotiations “Value that has been created must be claimed” (Lax & Sebenius, 1986) Buttactics that claim value can impede its creation

6. Pareto Efficient Frontier

7. Scoring Systems • Develop one. Use it! • Why? • “Quantitative information helps the recipient of that information” • (Raiffa, 1982) • Consider and quantify all issues • Aids in determining overall reservation price • Allows you to compare package deals, multiple offers, etc. • Quick assessment of trade-offs, concessions, and the like

8. Distributive vs. Integrative Negotiations • Distributive • Involve only one issue • Simply dividing the pie • “Almost strictly opposing interests” – each party is attempting to maximize his/her share of the fixed-pie payoff • Involves fixed-sum games – one person’s gain is another person’s loss (win-lose situation) Integrative • Involve multiple issues • Opportunity for enlarging the pie • Can increase the benefits available to each side by “capitalizing on differences in parties’ preferences” • Always involves distributive component

9. Tools and Strategies • Scoring Systems • Interests vs. Positions • Package Deals • Sharing Information

10. Scoring Systems • Develop one.Use it! • Why? • “Quantitative information helps the recipient of that information” • (Raiffa, 1982) • Consider and quantify all issues • Aids in determining overall reservation price • Allows you to compare package deals, multiple offers, etc. • Quick assessment of trade-offs, concessions, and the like

11. Sample Scoring System Weighted Issue Option Values Weights (W) Options Values (V) (W*V) 50% $200,000 100 50 $190,000 80 40 $180,000 50 25 $170,000 30 15 30% London 10030 New York 6018 Tokyo 6018 S ingapore 309 Siberia 00 20% 4 weeks 10020 3 weeks 9018 2 weeks 357 100% Issue 1 Compensation 2 L ocation 3 Vacation

12. Sample Scoring System Weighted Option Values Options Values (V) (W*V) $200,000 100 50 $190,000 80 40 $180,000 50 25 $170,000 30 15 London 10030 New York 6018 Tokyo 6018 S ingapore 309 Siberia 00 4 weeks 10020 3 weeks 9018 2 weeks 357 2 L ocation 30% 3 Vacation 20% 100%

13. Sample Scoring System Weighted Option Values Values (V) (W*V) 100 50 80 40 50 25 30 15 100 30 60 18 60 18 30 9 0 0 100 20 90 18 35 7 Issue Weights(W) 50% Issue 1 Compensation Options $200,000 $190,000 $180,000 $170,000 London New York Tokyo Singapore Siberia 2 L ocation 30% 3 Vacation 20% 4 weeks 3 weeks 2 weeks 100%

14. Sample Scoring System Weighted Values (W*V) 50 40 25 15 30 18 18 9 0 20 18 7 2 weeks 35 100%

15. Sample Scoring System 2 eeks 35 7 100%

16. Good scoring systems are… • Complete • All important issues are identified and quantified • Measurable • Provides a common metric for comparing qualitatively different issues • Operational • Can be used to sort out specifics re what sets of alternatives are preferable to others • Allow for someone else to negotiate on your behalf • Useful • Easily allows to translate qualitative issues to quantitative ones • Keep your scoring system flexible and dynamics, you may want to add issues or outcomes during the negotiation.

17. Computers and Spreadsheets • Advantages • Quickly and efficiently track the effect of changes in information (if you have a clearly thought-out scoring system) • Save time and mental resources (think while the other side punches the calculator…) • Disadvantages • Can get drawn into interacting with your computer instead of your counterpart • You can lose flexibility – letting your tool drive, rather than facilitate, the process • Don’t let your scoring system control you

18. Interests vs. Positions • “Your position is something you have decided upon.Your interests are what caused you to so decide.” • “Interests define the problem.” • “For every possible interest there usually exist several possible positions that could satisfy it.” • “When you look behind opposed positions for the motivating interests, you can often find an alternative position which meets not only your interests but theirs as well.” • (Fisher, Ury, & Patton, 1991)

19. So…. • Separate Positions from Interests • -­Positions are prone to ego-involvement • -­Positions endanger ongoing relationship • Focus on Interests, not Positions • -­Interests may differ • -­ Risk and time preferences may differ • -­Expectations may differ

20. Issue by Issue vs. Package Deals? • Issue by issue • Becomes a sequential distributive negotiation • More contentious–impasse more frequent • Takes longer • Package dealsunderstanding interests and priorities • Finding issues to trade off – give them what they want and get what you want in return • Flexibility (real and perceived) • Improves outcomes and efficiency • Exception

21. Getting Information for Integrative Agreements • Build trust and share information • Ask diagnostic questions to understand priorities and interests • Listen to the answers • Don’t be afraid to rephrase questions and to seek clarifications (ask why and why not) • Ask about preferences for different scenarios (generate more options) • Give away some information about preferences and priorities • Make package (multi-issue) offers

22. What information should I share? • Give away some information --Priorities among issues(i.e., rank ordering) • DO NOT reveal your preferences for specific alternatives on particular issues (or your reservation price) • Honest on priorities • Negotiator’s individual gain not hindered by revealing priorities among issues (i.e., rank ordering) • If both sides strategically misrepresent their value tradeoffs, then inefficient contracts will often result

23. How flexible should I be? • “Firm with respect to one’s ends (i.e., one’s interests) • … flexible with respect to the means to these ends, continually seeking new alternatives until a mutually acceptable one can be found.” • (Pruitt, 1983) • Think creatively about possible alternatives–do not search for a single answer

24. Negotiator Toolbox: Integrative Negotiation Strategies • Prepare a scoring system --Analyze issues, BATNAs, and reservation prices---think about interests underlying positions • Use the negotiations to collect information about integrative possibilities • Make a proposal incorporating all issues • Ask what is wrong with your proposal • Ask diagnostic questions and listen; don’t argue • Build trust and be cooperative---share integrative information (do not disclose your reservation price) • Trade off when there are differences in preferences • Be firm on interests, but open to options