NEGOTIATION“People negotiate all the time”.

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Negotiation

• A process of communicating back and forth for the purpose of reaching a joint decision when you and the other side have some interests that are shared and others that are opposed.

• Hard versus soft negotiation styles.

CHARACTERISTICS OF A NEGOTIATION

• There are two or more parties.• There is a conflict.• Parties negotiate by choice.• Negotiate with expectation of ‘give and take’.

Role Play

• Any four volunteers from the class– Two of them would enact on a situation where

positives of negotiation is presented (Rite approach to Negotiation)

– Other two would present the negative aspect of negotiation

Video

Process of Negotiation

STAND YOUR GROUND AND DO NOT NEGOTIATE

• When threat of loosing every thing exists.• Sold out-running at capacity, raise your prices.• Unethical demand.• Nothing at stake.• No time/Hurry.• Waiting is useful.• Unprepared.

ESSENTIALS OF SUCCESSFUL NEGOTIATIONS

Mgt of Tangibles.(a) Price(b) Terms of Agreement

Mgt of Intangibles -Psychological Motivations (a) Need to win. (b) Need to defend. (c) Need to appear fair.

INTERDEPENDENCE

• INDEPENDENT.• DEPENDENT.• INTERDEPENDENT.

INTERDEPENDENT SITUATIONS1. ZERO SUM OR DISTRIBUTIVE SITUATION(a) There can be only one winner.(b) Parties are attempting to get larger share

of pie of a fixed resource.(c) Purpose of negotiation is to ‘claim value’.

2. NON-ZERO- SUM OR INTEGRATIVE SITUATION (a) Mutual gain. (b) Many people can achieve their goal. (c) Purpose of negotiation is to ‘create value’.

DISTRIBUTIVE SITUATION

• Negotiator’s are motivated to win the competition and beat other party or gain largest piece of a fixed resource.

• Often employ win-lose strategy and tactics.• Accept the fact that there could be only one

winner.• Purpose of negotiation is to gain lion’s share.

INTEGRATIVE SITUATION

• In contrast, negotiators employ win-win strategy and tactics.

• Attempts to achieve goal for both parties.• Purpose is to create value.• Example : wedding - bride, groom and both

families; all are happy and satisfied.

IMPLICATIONS

• Negotiator must recognize the situation and iden appch.( ie time or resource limit, other party likely to be competitive)

• Negotiator must be versatile with both appch.• Negotiator’s perception likely to be biased

towards Distributive situation.

CONFLICT - SHARP DISAGREEMENT

• INTRAPERSONAL CONFLICT.• INTERPERSONAL CONFLICT.• INTRAGROUP CONFLICT.• INTER GROUP CONFLICT

CONFLICT MGT : THE DUAL CONCERNS MODEL

• Postulates people have two indep type of concerns-Cooperativeness, Assertiveness.

• Contending. Stronger own concern, op strat will be on lower rt side (in model). Threats, Punishments etc.

• Yielding. Stronger others’ concern, op strat will be on upper left side (in model). Has definite advantage.

• Inaction. Little concern for own and others, op strat will be on lower left side (in model). Party prefers to retreat.

• Problem Solving. High concern for both, op strat will be on upper right side (in model).Maximize outcome.

STRATEGY AND TACTICS

DISTRIBUTIVE BARGAINING

DISTRIBUTIVE BARGAINING

• Goal of one party is in direct conflict with other.• Resources are limited.• Each party attempts to maximize the outcome.• Highly desirable to get info from other party.• Other party will give info (contrived) as to its

advantage.• Negotiators employ strategy to obtain info about other

party but deny/conceal own info. (Ethics? Will be covered later).

• In fact, it’s competition- who gets more.

DEFINITIONS

• ASKING PRICE. Initial price set by seller.• INITIAL OFFER. Initial price quoted by buyer.• RESISTANCE PRICE OF BUYER. Beyond which

buyer will not go.• RESISTANCE PRICE OF SELLER. Bellow which

seller will not sell.• TARGET POINT. At which buyer will like to

conclude deal (also called buyer’s aspiration/preferential price).

Settlement Point. Both parties know, they have to settle far less than their target point (preferential price).Bargaining Mix. Negotiators must include issues imp to them in the agreement, therefore iden them during pre-negotiation/ planning stg

ROLE OF ALTERNATIVES

• It gives negotiators power to walk away.• If more alternatives, goal can be set higher.• If no alternative, less scope of negotiation, eg sole

supplier.• In Distr Bargaining, good negotiators iden realistic

alternatives beforehand.• Good negotiators try to improve alternatives during

negotiation, but need to be clear about their best alternative (BATNA).

• BATNA governs-close a deal or walk away.• Stronger BATNA, more power to negotiator.

TACTICAL TASKS

• Assess other party’s target point, resistance point and cost of terminating negotiation.

• Manage other party’s impression about own target point, resistance point and cost of terminating negotiation.

• Modify other party’s perception of his/her own target point, resistance point and cost of terminating negotiation.

• Manipulate actual cost of delaying or termination

METHOD OF ASSESSING OTHER PARTY

• DIRECT. - Ask Negotiator.• INDIRECT. News papers, Journals, Magazines’ –ratings, Info

search about negotiator. Source cultivated, Msg intercepted, codes broken, waste papers’ from exec’s baskets, Interests, Track record of honesty, Integrity, Expectation, Offices bugged, Informers recruited, Entertainment with liquor to extract info, Provocation, Threat, Stimulation of exasperation, Angrily walking off negotiation. In Real Estate, since when property is in market, Size of Union Fund, % of workers as union members, Size of Inventory. Market condition of Company’s product /popularity level (more popular less willing to bargain).(Ethical issues will be discussed later)

• Note. Beware of unethical practices of other party.

MANAGE OTHER PARTY’S IMPRESSION• By Screening Activity.• “Silence is Golden”; say and do as little as possible.• Avoid look of disappointment, boredom,

restlessness or probing with interest.• Negotiate through rep (not given necessary info).• Channeling all info through Company’s spokes

person.• Snow Job (present large amount of info, concealing

real one/making difficult to discern.

ALTER IMPRESSION OF OTHER PARTY

• Make your own obj appear less attractive.• Make cost of your own obj appear higher.• Disappointment/enthusiasm /emotional reaction (can

be feigned) shows issue is imp.• Boredom or indifference shows issue is unimp.• A loud angry outburst/eagerness shows issue is imp.• Careful enquiry shows imp whereas casual acceptance

shows disinterested.• Don’t overplay an unimp issue, else other party will

demand/ expect generosity on major pts .

MODIFY OTHER PARTY’S PERCEPTION

• By making outcome appear less attractive.• By making outcome appear more attractive or

less unattractive, to the other party; eg union negotiation to reduce working hrs.

• Conceal info, eg real estate (Ethical hazard?).

MANIPULATE ACTUAL COST OF DELAY OR TERMINATION

1. DISRUPTIVE ACTION.(a) Public Picketing, eg unionized contract with a restaurant.(b) Boycotting a product.(c) Locking Negotiators in a room until they reach agreement.

2. ALLIANCE WITH OUTSIDERS. Form task forces, seek support of political action groups or organize protests to bring collective pressure

3. SCHEDULE MANIPULATION. (a) In overseas cases, negotiations scheduled immediately on arrival or at the last

minute. (b) In case of industrial buyers when they have short lead time after which

plants will be idle.

POSITIONS TAKEN DURING NEGOTIATION

• OPENING OFFER. Too low, too high, modest.• OPENING STANCE. (a) A belligerent stance may meet with

belligerence. (b) A reasonable bargaining with friendly

stance recommended.• INITIAL CONCESSIONS. If yes, how large?

ROLE OF CONCESSIONS

• Centre to Negotiation.• Negotiators unsatisfied if 1st offer accepted.• Good Distributive Bargainers do not keep

opening offer too close to Resistance Point, instead keep enough bargaining range.

• Research shows people accept 1st/2nd offer close to their Target Point, therefore one should find out other’s Target Point and avoid conceding too quickly to that Point.

GUIDELINES FOR MAKING CONCESSIONS

• Give yourself enough room.• Let/Try other party reveal.• First concede on a minor issue.• Make unimp concession and portray as big.• Make other party work hard for concessions.• Use trade off.• Concede slowly.• Do not reveal deadline, if any.

GUIDELINES FOR MAKING CONCESSIONS

• Occasionally say ‘No’.• Don’t concede too often, too soon, too much.• Don’t adopt ‘take-it-or-leave-it’ approach.• Don’t take back a concession.• Concession on a significant point should be

reciprocated.• Keep a record of concession to iden pattern.

PATTERN OF CONCESSION MAKING

• Give small concessions in succession close to Resistance Point.

• Example. (a) A gives concessions of $4 each 3 times,

thus yields $12 . (b) B gives concessions of $4, $3, $2, $1; thus

yields $10.Who is likely to be believed?

FINAL OFFER

• Make last concession more substantial, “This is all I can do.”

• If still in Bargaining Range, make personalized attempt, “I went to my boss and got this deal just for you”, which signals as last concession.

SALARY NEGOTIATION TIPS

• Delay discussion on compensation, until job is offered.

• After employer presents offer and quotes the salary , remain silent for 30 sec, thus inviting employer to mention higher start/ flexibility.

• Don’t comment on salary, instead clarify job aspects and reaffirm how you can benefit org.

• Then say the offer is a bit on the conservative side though the position is quite attractive. Would like to think it over and talk the next day.

SALARY NEGOTIATION TIPS

• Discuss salary first then negotiate Fringe Benft• Avoid over-negotiating as it would hamper

future salary reviews.• Do not accept it on the spot. Express interest,

ask for a day.• In case the offer being final one, look for

incentives, bonuses and fringe benefits.• There are more opportunities for those with

multiple or unique skills.

HARDBALL TACTICS

• Designed to pressurize Negotiators, beat other party.

• May prove to be counterproductive, cause harm to reputation, get negative publicity or lead to revenge by other party.

• Must know, so that you know, if someone uses against you.

• Example. NATO-Iraq War

DEALING WITH HARDBALL TACTICS

• Ignore them- Switch topic.• Discuss them- Propose less aggressive method• Respond in kind- May result in chaos.• Coopt the other party. Befriend , deflect issue

TYPICAL HARDBALL TACTICS

• Good Cop/ Bad Cop. Difficult to enact.• Lowball/Highball . Starts with ridiculously

low(or high) opening offer. Eg Union demanding 45% hike against going rate of 4%. Best way is not to make a counter offer but to ask for a reasonable opening offer.

• Bogey.Pretend an issue of no imp as quite imp Example. Seller may quote high rate against

rush order (actually avl in store) .

TYPICAL HARDBALL TACTICS

• THE NIBBLE. Asking for small concession, eg free tie with suit.

• CHICKEN. Two people driving car at each other on a cliff, one swerves, other is hero.

• INTIMIDATION. Use of emotional ploy (usually anger or fear) to force. Best to ignore.

• AGGRESSIVE BEHAVIOR. Best to ignore while making clear that this will not work.

• SNOW JOB. Overwhelm with so much info that difficult to discern the real issue. Strong pre-plg.