BUSINESS NEGOTIATIONS Leighton Wilks HROD 493 Fall 2011

Introduction Me! • Leighton Wilks • HROD • SH 460 • lrwilks@ucalgary.ca

You! • Name • Area of focus • Something interesting?

The Course • Perhaps the most useful course of your degree! • Negotiation is both an art and a science

• Will discuss material but you must decide what works best for you

• Never be a good musician by studying music • Class is experiential

• We will negotiate, debrief, discuss • Participation is a must (be on time, prep for negotiation) • Don’t be afraid to push your “comfort zone” • Remember – this isn’t real!

The Textbook • Essentials of Negotiation

• Canadian Edition

• A fee of $35.00 is required to cover copyright • Not open to negotiation • Cash only

Assignments • Class Participation (10% - 1.25% per negotiation) • Individual Assignment (30%)

• Self-appraisal paper (10 pages max) • Due on December 8th

• Group Project (20%) • Multimedia project & analysis paper (10 pages max) • Groups of 4-5 • Paper – December 8th

• Midterm Exam (20%) • In class on October 20th

• Final Exam (20%) • Scheduled by registrar

Admin Stuff • Office hours

• Mondays (13:30 – 14:30) • SH 460 • Or by appointment – email is best!

• PPT presentations will be posted on Friday prior to class • No need to read chapters or PPT prior to class

• Unless otherwise stated

• If you miss class it is your responsibility to contact me for your negotiation role • I can’t email or post the roles!

Negotiation

Negotiation - decision-making situations in which two or more interdependent parties attempt to reach agreement • All of us negotiate, almost daily

• Many small negotiations, few large negotiations • Skills apply to the boardroom, personal relationships

• Negotiations occur for several reasons: • To agree on how to share or divide a limited resource • To create something new that neither party could attain on his or

her own • To resolve a problem or dispute between the parties

Characteristics of a Negotiation

• Two or more parties • Conflict of interest between two or more parties

• Parties negotiate because they think they can get a better deal than by simply accepting what the other side offers them

• Parties expect a “give and take” process

Negotiation Exercises Present the opportunity to: • Practice and assess your negotiation behavior in a “safe”

environment • Examine the behaviors of others and see how they react

to you • Get feedback on your interaction with others • Experiment with various negotiating strategies • Compare the success of your strategy to those used by

others • Understand that there is no “cookbook” solution

Negotiation Time! (almost) The Negotiator’s Code

• I will always be prepared • I will not change facts that alter power • I will not show others my role • I will treat my role seriously

(professionally) • I will wait to discuss my negotiation in the

debrief • I will be honest and forthcoming in the

debrief • Class discussion stays in class

NEGOTIATION BASICS And I mean the basics…

Negotiation Characteristics

Successful negotiation involves: • Management of tangibles

• Price • Terms of Agreement • Timing

• Resolution of intangibles • Need to win or beat the other party • Need to look important or tough • Need to appear fair and honorable • Need to defend an important position

Interdependence

In negotiation, parties need each other to achieve their preferred outcomes or objectives

• This mutual dependency is called interdependence • Interdependent parties are characterized by interlocking

goals • Having interdependent goals does not mean that

everyone wants or needs exactly the same thing • A mix of convergent and conflicting goals

characterizes many interdependent relationships

Interdependence, Processes & Outcomes

• Interdependence (convergent and conflicting goals) and the structure of the situation shape processes and outcomes

This results in two types of negotiation • Distributive – one winner • Integrative – mutual gains (all parties win)

Distributive Negotiation • Also known as fixed pie, zero sum, win-lose

• One person’s gain is the other’s loss

• Directly conflicting interests • Each person is trying to maximize

his/her share of the payoff (pie) • Value claiming!

Distributive Negotiation Total Value

Integrative Negotiation • Also known as non-zero-sum or win-win

• Finding ways to increase the amount of pie on the table

• Finding solutions that are of value to both parties

• Value creation (and claiming)!

Integrative Negotiation Total Value

Value Claiming and Value Creation

• Most actual negotiations are a combination of claiming and creating value processes • Negotiators must be able to recognize situations that

require more of one approach than the other • Negotiators must be versatile in their comfort and use of

both major strategic approaches • Negotiator perceptions of situations tend to be biased

toward seeing problems as more distributive/ competitive than they really are

OTHER IMPORTANT CONCEPTS Chapter 1

Tangibles & Intangibles Tangibles • Price • Financing • Terms of agreement

Intangibles • Need to look good • Need to look strong • Need to look fair

Mutual Adjustment

• Continues throughout the negotiation as both parties act to influence the other

• 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 other’s responses

• This is the “art” of negotiation

Two Dilemmas in Mutual Adjustment

Dilemma of honesty • how much of the truth to tell the other party?

• Too much and they can take advantage of you • Too little and you may not identify integrative opportunities • Too little a may result in a lack of trust by the other negotiator

Dilemma of trust • How much negotiators should believe what the other party

tells them • Too much and the other party may take advantage of you • Too little and you will have difficulty reaching an agreement

Most integrative solutions will be identified when both parties are honest about their needs (interests) and establish trust!

Two Dilemmas in Mutual Adjustment

Concession Making • When one party agrees to make a change in his/her position, a concession has been made

• When a concession is made, the bargaining range is further constrained

• Concessions can signal when negotiations are reaching a conclusion • Getting smaller, and smaller, and smaller

• Never, ever, ever make two concessions in a row • Sign of a bad negotiator (negotiating with yourself)

BATNA Best Alternative To a Negotiated Agreement • Having a BATNA gives you tremendous power!!! • Counterpart’s perceptions of your BATNA is very

important • A good negotiator will establish a BATNA prior to the

negotiation • A good negotiator will do everything possible to improve

his/her BATNA • A good negotiator will walk away from the negotiation

based on his/her BATNA • Know when to hold em, know when to fold em, know when to walk

away, know when to run!

Putting it Together Buying a house

Q: Was this a distributive or integrative negotiation? Q: Did you have a BATNA?

Four Hallmarks of Successful Negotiation

•Value is created •Value is claimed •Other party feels good •Protect or enhance the negotiation relationship

•This is a very important slide!