Introduction to the The Art of Negotiation

Introduction to the The Artof Negotiation Dr. Charles R. (Bob) Greer Neeley School of Business Texas Christian University

Learning Points from Used Car Exercise • Not leaving enough room for concessions • Making concessions too quickly • Inability to deal with extreme offers • Not asking enough questions • Revealing weaknesses • “I need transportation…” • “I like the car…” • Failure to discover the other side’s needs • Failure to use the power of silence

Learning Points from Used Car Exercise – cont. • Not enough time devoted to preparation • Negotiating against yourself • Failure to establish linkages • Not expanding the bargaining mix • Forgetting your BATNA • “Selling” instead of negotiating • Claims of competing offers (fraud) • Asking, “Is that your final offer?”

Learning Points from Used Car Exercise – cont. • Failure to use krunches: • “I was looking for a little more…” • “What can you do for me on this?” • “Can you help me out a little on this one?” • “That’s a little high for me.” • “Can you cut me some slack on this?” • “Please help me a little on this one.” Source: Cooper Management Institute

Negotiation Defined “Negotiation is a discussion between two or more people with a goal of reaching agreement on issues separating the parties when neither side has the power--or the desire to use its power--to get its own way.” Byrne 1987

An Expert Negotiator An expert negotiator is one who has committed every conceivable mistake in the area of negotiations.

Common Negotiation Mistakes • Failure to negotiate • Inadequate preparation • 90% of negotiation success comes from preparation • Accepting the first offer • Not leaving enough room for concessions • Making concessions too quickly • Failure to consider the other side’s needs • Negotiating too much – pyrrhic victories

Common Negotiation Mistakes -- cont. • Focusing too much on your weaknesses • Failure to consider intangibles • Forgetting your best alternative to a negotiated agreement (BATNA) • Failure to recognize other side's tactics • e.g. the good guy - bad guy, exploding offer, 1st one who accepts, short fuse, “We don’t negotiate,” etc. • Failure to ask enough questions • Failure to use an integrative approach when appropriate

Common Negotiation Mistakes -- cont. • Beginning with a distributive style or hard ball style • Inadequate face saving opportunities for the other side • Displaying too much interest: “You should not convey to an opponent, either by word or action, that you want whatever the opponent has.” John Ilich, professional negotiator Power Negotiating

Common Negotiation Mistakes -- cont. • Beginning with a distributive style or hard ball style • Inadequate face saving opportunities for the other side • Losing focus on one's original goals • Positional bargaining in win-win situations • Premature commitment with no back door • Absence of linkage

Common Negotiation Mistakes -- cont. • Failure to limit information: “Have more than thou showest, Speak less than thou knowest.” William Shakespeare, 1564-1616

Common Negotiation Mistakes -- cont. • Responding with anger: “…whatever accounts for the person’s bluster, nothing can be gained by you reacting in anger…and if it’s a personality trait you’re dealing with, an emotional response on your part isn’t going to cure it…seeing you respond in anger will just convince him that the tactic is working.” Fuller, Manager’s Negotiating Answer Book

A Matter of Perspective “A dog will look up to you, A cat will look down on you, But a pig, A pig will look you in the eye and see an equal.” Sir Winston Churchill Pigs don’t care don’t care about what you deserve and neither do some at the top of the food chain. You get what you negotiate – not what you deserve!

Negotiation Models Types: • Distributive • Integrative (win-win, principled) • Mixed • Intra-organizational

Tactics & Counter-Tactics • Exploding offer (variation of vanishing asset) • Ask for reasonable time to consider the offer • Good guy-- bad guy/hard hearted partner • Assume that there are two bad guys • Resist the urge to concede too much to the “good” guy • Limited authority • Obtain insights on practices of other side • “Take me to your leader”

Tactics & Counter-Tactics – cont. • Take It or Leave It • Don’t “hear” the ultimatum and try to continue to negotiate • Competing Offers • Simultaneous offers to two candidates for one job • First one to accept gets the job

Tactics & Counter-Tactics – cont. • Nibble • Defined: Just before accepting you ask for a small concession, such as another $500 in moving expenses, workshop for skill development, etc. • Negotiate the nibble…no free lunch. • Delay and asking for more time • Generate additional offers for bargaining power • Soft krunches • “Can you help me out on this? I think we’re really close.”

Silence as a Negotiating Tactic “Just because the river is quiet does not mean that the crocodiles have gone away.” Malay proverb

Expand theBargaining Mix • Expand your notion of potential means of need satisfaction • Identify items of high value to you and low cost to the other side • Include items on which you can make concessions • Trade timing of funds for magnitude • Consider trade-offs of the present for the future

CompetitiveorDistributiveBargaining • Is based on power or perceived power • Involves distortion of information • Involves screening • Involves obstructive or deceptive tactics • Is necessary for some situations • Is not inherently unethical • Is a win-lose process • Is not oriented toward the other side’s needs • Involves narrowing a bargaining range

Defining theBargaining RangeSource: Extracted with slight modification from Lewicki, Hiam, and Olander, Think Before You Speak • Define your walkaway point (resistance point) in advance. • Have a good alternative (BATNA). • Determine the degree of focus on this deal – is this relationship only secondary. • Get as much information as you can without giving much (if any) away. • Set the opening as high or low as realistically possible (opening offer).

General GuidelinesforCompetitiveorDistributiveBargainingSource: Extracted from Lewicki, Hiam, and Olander, Think Before You Speak • Stick to your planned target and walkaway points. • Do not reveal your target point too early. • Never reveal your walkaway point. • Get the other party to make big concessions. • Keep your concessions few and small. • Know the other party’s level of concern for the outcome and the costs of ending negotiation.

Elements in CompetitiveorDistributive BargainingSource: Extracted with slight modification from Lewicki, Hiam, and Olander, Think Before You Speak • Knowing costs for both sides • Researching the other party • Understanding the role of constituencies • Making concessions • Understanding the pattern of concessions • Using and recognizing commitment • Using and recognizing tactics • Coping with tactics

Discovering Other Side’sCosts, Strengths, Weaknesses & Commitment: Examples: • How long has the property been on the market? • How many cars are on the lot? • How long have the cars been on the lot? • How large is the strike fund? • How large are inventories? • How many unfilled orders are there? • How long does it take to fill orders?

Managing the Other Side’s Perceptions of YourCosts, Strengths, Weaknesses & Commitment Examples: • calculated incompetence • channel everything through one spokesperson • present a great many items • concede on minor points with fanfare

Managing the Other Side’s Perceptions of YourCosts, Strengths, Weaknesses & Commitment -- Cont. Examples: • blocking • don’t hear a question • misconstrue a question and answer another • answer with a question • screening • say little • use silence

Contemporary Advice “Never get angry. Never make a threat. Reason with people.” Don Corleone Community Leader and Negotiator The Godfather

The Use of Silence as a Negotiating Tactic “When things are in turmoil, utilize silence. Silence is more eloquent than writing, more forceful than words. It has never betrayed anyone. If you doubt your own wisdom, remain silent.” “In silence, we conceal our own shortcomings, and hear the mistakes of others. Even the unwise have been considered wise in their silence.” Author Unknown

Expanded Discussion of Tactics & Counter-Tactics-cont • Competing Offer • Recognize that your competitors can't pay unreasonable prices • Take It or Leave It • Don't "hear" the ultimatum and continue negotiating. • Provide the other sidean excuse for graceful retreat/face saving.

Expanded Discussion of Tactics & Counter-Tactics- cont. • Extreme Offer or Highball/Lowball • Ask how they came up with that amount. • Remind the other side of the necessity of reaching a fair deal for both parties. • Resist large concessions when the other side follows up with a small concession. • Don't reinforce this tactic by giving unwarranted concessions. • Time Invested • Recognize your reluctance to walk away after investing time in negotiations

Expanded Discussion of Tactics & Counter-Tactics -- cont. • Lack of Interest/Cool and Aloof • Don't be overly swayed by the other side's identification of faults with product/service. • Threats and Bluffs • In general, short unexaggerated threats are often more valid. • Generally counterproductive. • Stone Wall/Resort to Company Policy • Discuss the tactic with the other side. • Communicate that your organization also haspolicies

Expanded Discussion of Tactics & Counter-Tactics -- cont. • Delay • Recognize that the weaker party will often attempt to delay. • Attempt to set deadlines based on objective events. • Provide information on issues the other side uses as reasons for delay.

BargainingNuggets • Negotiators can gain advantage by viewing the other side as an individual who has individual needs -- as opposed to a powerful powerful organizational monolith. • Negotiators also can gain advantage by exploiting interdependencies by appealing to interested constituencies. • Advantage may be lost if attempts to apply influence through constituents detracts from the trust established with the other negotiator.

Bargaining NuggetsNegotiator Interdependencies Company A Constituents Company B Constituents Negotiator for Company A Negotiator for Company B

Introduction to the The Art of Negotiation