Negotiation

Nothing is agreed until everything is agreed

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What is Negotiation?
Alternative Methods of Making Decisions
1. Say No It is appropriate when you cannot endure the offer but you can endure the consequences.

2. Persuasion The Selling Approach: Sales people persuade people to make decisions in their favor by selling benefits. Inability to persuade, however, leads to conflict.
3. Problem-Solve Requires trust between parties and recognition that the problem is mutual. But candor could be used against you. 4. Chance Decide by tossing a coin. 5. Negotiate Mutual dependence of each decision maker on the other, and involves voluntary exchange of something you want for something they want.

6. Arbitrate When decision-makers cannot agree, third party involvement can be contemplated. The arbitrator should be acceptable to both parties and the decision must be accepted. 7. Coercion Involves the application of pressure by informing the other party of the consequences of saying no, either with a friendly face or by blatant intimidation. Leads to retaliation. 8. Postpone Buys time for emotions to settle, but may also be seen as a blocking move to refuse any agreement. Common practice of countless organizations. 9. Instruct This is the appropriate choice when the person instructed is obliged and certain to carry out the instruction.
Managers do not normally expect subordinates to question their instructions when their instructions are within the terms of their relationship.

10.

Give in

This is what we do when we accept an instruction, because it is a fair instruction or to argue would be fruitless or need too much time. Giving in is not as weak an option as it sometimes seems. Every time you buy an item at the seller's asking price (take it or leaving), you are giving in.

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What is negotiation?
Negotiation as a decision-making technique is appropriate when: People voluntarily want to exchange things that they have for things that they want, creating wealth in the process. Each party needs the consent of the other party and thereby effectively has veto-power. Because parties cannot simply take what they want, each party must accommodate the other party as well. Negotiation has developed as the process through which the activity of trading and exchanging tangible or intangible things between people is conducted.

Advising Negotiators (Approaches to negotiation)

Description, prescription and prediction are different, yet overlapping, approaches and, by recognizing which is being used in discussions about negotiation, we can assess the relative credibility of contributions to the pool of advice.

Description Describing events that have relevance to the negotiation is useful. Should not go beyond stating facts, even though it is those facts that may lead to disagreement about what is and what is not. Prescription Prescribing is what is done when think about what ought to happen. Asking for advice is asking for a prescription. An example of a prescription is to avoid interrupting other people because experience taught us that it blocks fruitful negotiation. Prediction Predictions are statements about what we think will happen. This is the crucial one in negotiations because it is our predictions that we act upon and they either turn out to be true or they are proven false.

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Distributive bargaining
Best strategy
Determine other parties range before making an offer. Not likely, but if no other issues exist (single- issue negotiation), then there is no obvious solution. Both negotiators strive hard to make the other do the moving towards to your price to win the contest. In these contests there is a winner and a loser and people do not like losing. loselose outcome: Both negotiators could end up unhappy with the outcome.

Comment[r1]

The buyer/seller dilemma

Motivations for the entry price could be: to cover a mark-up over his costs or from a gut feeling he has for or some detailed knowledge of, what the market will bear or from a consideration of tactics

The total negotiating range is the gap between the entry prices of each negotiator.

Negotiation range implies distance and the need to come together implies movement. Hence, do not open with your final price and give yourselves negotiating room.

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The exit price is the limit beyond which a negotiator does not intend to go in the current circumstances.

The gap is any area between the two exit prices that does not overlap with one another.

The essential condition for a single-issue negotiation to be successful is for the exit prices of each negotiator at least to meet. The settlement range is the single point 120.

The settlement range is the overlap between the exit prices of each negotiator, because within this range a settlement is possible, though, as always, it is not assured
Negotiator(s) might accept an offer in the settlement range or: keep trying to improve the price and see just how far he will go delaying a settlement might fall foul of the others impatience after a generous offer he waits that the next move should come from the seller and not from him such misunderstandings can stimulate a lot of aggravation

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When a negotiator discloses his entry price he also implies something about his exit price. If buyers offer (entry price) is higher than sellers entry price, the seller will immediately revise his negotiating range and will increase ( buyers entry) the exit price to match the buyers entry.

The Run Down Bar Example:

Seller believes selling a run down bar and sets their price accordingly. Buyer is being something else, which is to them much more valuable (real estate), but did not disclose their intentions. Sellers sold at their asking price. Buyers flipped the property for 15x profit. Moral: Know what the value may be, even if not obvious.

The Negotiators Surplus The settlement price (designate as P*), is any price in the overlap between the exit prices (settlement range) where the negotiators meet.
The entire settlement range is the negotiators surplus that has to be distributed between them. The difference between the exit price of either negotiator and the settlement price, which is somewhere in the settlement range, is the sellers surplus/ buyers surplus:

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These are just the principles. Neither negotiator knows exactly how large the settlement range is. The further away negotiators move from their entry positions, the harder they often fight to protect their positions. It is entirely possible that there is a settlement range between negotiators, but they still end up in deadlock because of this.

How the Negotiators Surplus helps form a strategy There is no way of knowing for sure that any particular offer is as far as (exit price) the other negotiator will go. Assume that the first offer is never an exit offer. It follows that all offers should be treated as if there is another, last or exit, offer in reserve. The broad strategy is to move the price to the others exit price. Sharing the surplus, knowing the others exit price, but it gives an advantage to other negotiator, unless it discloses a false one. To be sure that other disclose his correct exit price built trust with repeated deals or eg. a money back guarantee if buyer is not satisfied.
Mediation could be defined as a method of discovering if there is an available surplus for the negotiators to distribute without jeopardizing their longer term interests. If you believe the other negotiator is pretending that his current offer is his exit price, you could express your doubts about the offer with statements like: I know you can do better than that. Nobody can realistically expect to offer so little with the profit levels you have attained this year. Are you kidding? Can you be serious? Do you think I am stupid?

Should the last offer be close to, or at, his exit point, and you are pushing him to move but he cannot. The situation for him is analogous to that of the innocent prisoner interrogated as a suspected member of a conspiracy. The more the negotiator protests that his current price is his exit price, the more he convinces a negotiator who is predisposed to assume that he is lying that his suspicions of duplicity are justified. Frustration leads to anger and in negotiation it leads to deadlock (in interrogation, unhappily, it can lead to violence) You have no way of knowing for sure that any particular offer is as far as the other negotiator will go. Always assume that the first offer is never an exit offer, refrain
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from treating a first offer as if it were. All offers should be treated as if there is another, last or exit, offer in reverse.

Negotiating situations where both negotiators know each others exit price, or where they can make a good guess at it: partners negotiating the distribution of a know commission, sharing a known prize in a lottery. Fairness as a distribution principle operates most effectively where there are no asymmetries in the claims of the negotiators for their share of the sum available. To prevent these asymmetries being overlooked by a one-sided manipulation of the negotiating process, we should arrange for each negotiator to declare their price in some honest manner at the start of the negotiation rather than leave it to be inferred, and perhaps misjudged, or even misrepresented, during the negotiation.

The strategic problem of uncertainty about the values and interests of the other negotiator can be addressed by looking for clues as to what determines where, and why, the other negotiator is likely to place his entry and exit points. People do not set their goals arbitrarily, and searching for the basis of their goals is essential if we are to prepare for what they might look for when they attempt to do business with us. Do not underestimate the powerful background effect of the notion of equity in the distribution of a surplus between the negotiators. It pervades a great deal of the thinking people have about what is, and is not, a good deal for them. Find a distribution of the equity that met both negotiators objectives

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Module 3
Farmer Jones

Preparation for negotiation

What is the point of trading a sack of potatoes for a sack of potatoes? Determine what is available for trade for your goods/service. Analyze the market to determine what is suitable to trade for. Advertise what you are prepared to trade, for acceptable goods/services and terms. new markets even for better deals. The activity of preparation reduces wasted effort and time, identifies gaps in the information needed to make decisions by trading, and establishes the criteria for judging the merits of possible traded solutions. Much of time spent in face-to-face negotiation is prolonged because of no preparation. The Negotek Preparation Method (Negotiation Ldt.) supports you in your preparation.

What Do We Need to Do First?

The first task in a (difficult) negotiation before taking any course of action: Collect and analyze data Data is more persuasive than unsubstantiated opinions Seek evidences that supports credibility of data useful Keep emotions out of picture

Identify the Tradable Items

An important part of every preparation is to collect data. The collection of data and its analysis support your proposals. The negotiators are guided to their wants by identifying their interests (motivators) and from their interests selecting the issues that will achieve those interests, and for all issues they would need to decide their positions, or preferably the range of positions that they will aim to achieve. Interests are the motivations (fears, hopes, concerns) of a party that show why one solution is preferred to another. They encompass the overriding goals of the party. Interests are most conveniently found by asking why? you want something to happen. Wants are what you want, interests are why you want them. The negotiable issues and the positions achieved within the range of possible solutions deliver the negotiator's interests. Common interests are interests which achieved benefits both negotiators.
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Competing interests are interests which if achieved benefit one negotiator but not the other. The dispute is a disagreement on the solution to a certain subject where both parties have interests. An issue is a decision for negotiation which must be agreed by both parties. Negotiators prioritize issues, as it is by trading among the issues that the negotiator finds the solution. The negotiable issues constitute the agenda. Negotiable issues, if agreed, deliver the negotiators interests. A position is a point in a negotiation range. There is a range of positions on each issue. The negotiator's entry and exit points are positions, as are all points between them. Positions, if agreed, deliver the negotiable issues which deliver the interests. Negotiation is a means of making decisions on What issues and positions will deliver our interest(s)? the basis of data.

A tradable is anything (issues and positions) that a negotiator trades, or can trade. In short, the single word tradable replaces the two words issues and positions. Examples of tradable:
price trade-in value financing $ (e.g. amount of loan) interest rate down-payment training warranty period software maintenance delivery when paid how paid (cash or credit note) rate of penalty amount of incentive minimum acceptable uptime of a machine

The trades negotiators agree to (or not) on each issue and position are the output of the negotiation.

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FACULTY BOARD, MOD 7, Styles of negotiation Why do you want to sell your house? Interest is why you want to sell it e.g., you need to move to better location; larger family (kids, in laws). Issue: selling the house. Nothing more. No mention of the amount at all. Candidates in the negotiation exam who mention a quantity when identifying issues ALWAYS fail such questions. Positions: negotiators think in ranges of positions from the most/least they ask for (Entry) to the least/most they will accept (Exit), as things stand (they might vary the range of positions depending on what they can trade for it). Hence: your interest is to move location; the issue is to sell the house; the position: is the price between 500,000 and whatever. Issues are not positions. We often identify an agenda item: sell the house, before we identify a position, and as our exit price is also a position, which we do not disclose, it does not appear on the common agenda! To say we want to sell the house for 500,000 is to state a position in our range of acceptable positions, undisclosed between our entry and our exit prices. Yes, any price in our range (as things stand) is acceptable, though it may not be acceptable in practice if the conditions placed on that price in our range by the buyer is unacceptable.

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How important is each tradable?

Typical sort into High, Mid and Low value tradable items (also in Negotek): High value: - Need to be obtained if there is to be an agreement at all (must criteria, walk away criteria). - Inexperienced negotiators tend to make almost everything of high importance which increases the risk to an otherwise acceptable agreement. - The fewer, the better. Medium value: - Those tradables you expect to achieve your positions but which would not cause you to walk away from an agreement. - Effective and well-prepared negotiators would want to have more tradables prioritized as of medium rather than of high importance. Low value: - All tradables you are willing to trade for high or medium tradables. - They are not give-aways in the sense that you are willing to concede them. They are always traded Recognize that your low or mid value items may be of high value to the other party, therefore do not part with (verzichten auf) them cheaply. Try to identify the valuations of the other party on each tradable to identify what may be easily exchanged. Comparative valuations 1 Comparative valuations 2

Comparative valuations 3

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What are the Negotiable Ranges for Each Tradable?

For each tradable, it should be determined an entry and an exit point. The Negotek Planner sometimes called the PREP Planner is a layout design for the useful and necessary information for preparing a negotiation. At a glance you can see the relative importance of issues, ranges, and potential tradables in the negotiation. EXAMPLE OF A VALUATION (NEGOTEK FORMAT)
Our Valuation Priority of Entry Tradables High 1 89% 4 High Medium 2 4(a) 4(b) 4(c) Low 3 3(a) 3(b) 3(c) 5 Exit Their Valuation (Exit?) Entry Priority of Tradables High 1 3 5 Medium 2 3 3(a) 3(b) 3(c) Low 4 4(a) 4(b) 4(c)

70 Low

? ?

70 High Individual Monthly High 10 000 1 Point Monthly Low 1 000 5 Points 6 Monthly

Annual 10 000 1 Points Monthly

Quarterly 2 000 5 Point Quarterly

? ? ? ? ? ? ? ? ?

Low 2 000 5 Points 6 Monthly All

Self-financing

4 000 1 Point Quarterly Individual

Very difficult to speculate as to other parties ranges (entry and exit points) and their priorities on each tradable.

Benefits of Preparation
less emotional, more factual to save wasted time and effort in the debate phase to identify information gaps as an agenda for information seeking in the debate phase to establish criteria for evaluating solutions and help to decide if a negotiated solution is possible to identify and sort out the issues and positions (tradables) knowing the differences in the positions gives command of the data knowing the differences in the positions identifies what are the possible solutions that would be mutually acceptable to identify potentials for trade (between tradables, within tradables ranges)

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Steps for preparation

When preparing, follow these steps: Step 1: Collect and analyze data. To be sure that we know what we are negotiating about, not to negotiate about impression, feelings and assumptions. Step 2: Identify the interests and the tradables (NEGOTEK Prep. Planner). Identify the interests of both parties and the tradables which affect the interests of the parties. Step 3: Prioritize the tradables in HML (NEGOTEK Prep. Planner). Use a simple High (H); Medium (M); Low (L) approach where H are walk-away issues, M are issues you want to achieve and L are issues you are willing to trade (but not give away). Step 4: Set out the tradables in HML order (NEGOTEK Prep. Planner). Step 5: Add the entry and exit points (NEGOTEK Prep. Planner). Add the entry and exit points for each tradable. At this point we have addressed all of the objectives of preparation listed earlier and are in a position to make a first-cut proposal. Step 6: Anticipate as much as we can about the other party: the character of the negotiator (Red or Blue stylist) past negotiation experiences with this negotiator reputation

Negotiation is more than a discussion. It is about making decision.

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Module 4

Debate in negotiation

Debate is the act of two-way communication. We send and receive messages and confirm or revise our perceptions of the other party. The most effective debate is possible when we display debating behavior intended to keep the relations good and to get information on the others positions. Debate sets the tone for negotiation. It removes or creates obstacles to agreement. It conditions the expectations of the negotiators. It confirms their prejudices or overthrows them. It reveals or camouflages what the negotiators wants. Debate determines if there can be agreement, but not what the agreement exactly looks like.
Debate takes up > 80% of all time spent negotiation. (Proposal ~10% , Bargain ~5%)

Rackham & Carlisle on effective behaviors

Ineffective negotiating behaviors are such as jovial remarks*** (thereby irritating), defend/attack spirals (its not our fault), immediate counter-proposing (thereby disagreeing), argument dilution with irrelevant material, and labeling disagreement (I disagree, because).
***It is when 'jovial' remarks become treated as sarcastic that the problems begin. What is funny to you may be treated as offensive to your listener. There are no 'rules' about what is jovial and what is not. You should know the difference from your social experience. To the extent that negotiation is a conversation, you should be aware of circumstances and context. Prof Kennedy

Effective behavior is characterized by seeking information by questioning, testing for understanding by summarizing, behavior labeling (Can I ask?, Can I make a suggestion?), and stating feelings (I feel some doubts, I'm very worried, I'm not sure how to react) rather than expressing opinions, remaining silent. The more you display effective negotiating behavior, the better you can maneuver yourself into a good debating position.

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Types of debate
Destructive argument
Destructive debate has the effect of moving us away from a solution or an acceptable decision. Where agreement would in principle be possible, the list of progress obstructing behaviors below can result in deadlock, sub-optimal outcomes, expensive legal battles etc. 1. Irritation Irritation generates negative responses. Your idea of a generous and reasonable offer might not be shared by your counterpart. People you irritate are seldom inclined to assist you in achieving your goals. 2. Assertions and assumptions Do not make assertions or assumptions about what drives the other party. You could be wrong. Even when you think you are right and you say so the other party might not admit it, yet display destructive and mistrusting behavior afterwards. 3. Interruption The best way to get informed about the other partys drives is not to interrupt but to let them finish. Question them and let them demolish their own case. 4. Blocking Blocking is making subjects not negotiable: blocked off from any debate or agreement. Question them on why they block it. Listening to a view point is not an endorsement of it, for nothing is agreed unless and until we explicitly state our agreement. 5. Point scoring Point scoring at someone elses expense is self-defeating. Leads to bad atmosphere and the other negotiator will be less inclined to help you achieve your objectives. 6. Attacking/blaming Often used to soften up and intimidate the other negotiator, but it usually leads to counter-attack and defense and a movement away from agreement. 7. Threats They seldom if ever have the desired effect (namely to get somebody to comply with your wishes) and almost always have the opposite effect (they provoke them to dig in).

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Constructive debate: SAQSS

Constructive debate moves us towards a solution or an acceptable decision. This is characterized by behavior that serves our goal of seeking a solution agreeable to our interest. Solution oriented debate is constructive and disconnected from how the other party behaves. This does not guarantee success, but it provides the best circumstances. 1. Neutral Statements These are statements that inform the other party of views, opinions, attitudes etc. 2. Assurance This behavior assures the other party of your good intentions and positive attitude towards your relationship. Tell them you are in the solution business. 3. Questions Intended to get informed about the other partys interests. Open- rather than closed questions, since they invite elaboration from the other party. 4. Summarizing This is an excellent method of finding out if both parties have the correct understanding of what is under debate. 5. Signaling The signal is an invitation to explore other possibilities than the one currently discussed. It is an indicator of a potential solution, without any commitment of the signaler.

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How not to disagree

Negotiators begin with different solutions to the same problem and, hopefully, end with a common solution. Differing opinions and different solutions are a common cause of tension. Tension causes mistakes--misjudgment, or too quick a judgment. Handling disagreements: Be aware that the other side might be right and you may be wrong! Ask questions, and get facts about what qualifies their statement. It may turn out that contention is indeed based on separate issues and there is really no contention at all. If it does, indeed, turn out that we disagree with their qualification, we can agree to disagree, and then move to the debate phase. Negotiations can break down because the disagreement is too fundamental or badly handled--PEOPLE GET IN THE WAY OF THE DEAL! One way to make a fundamental disagreement WORSE is to insist that the other side acknowledge that they are in the wrong or change their views as a precondition to settlement. Fundamental disagreements can be handled by separating the negotiable issues from the beliefs of the negotiators. Focus should be kept on what can be achieved - no matter how small and seek to build agreement step by step. INHIBITIONS are whatever motivates the other negotiators to reject our suggested solution. (Often hidden and need to be dug out - the party may not even be sure themselves as why they oppose our solution and prefer their own, embarrassment, unknown interest, not understanding our proposal.)

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Signaling... How do we move without giving in?

Towards agreement without giving in
A Signal is a willingness to move, usually by a shift in language from firm absolute statements to vaguer relative statements. Examples for signals: It would be extremely difficult to meet that delivery date. We do not normally extend our credit facilities. It is highly unlikely that my boss will agree to a free upgrade. Under these circumstances we cannot agree to compensation. As things stand our prices must remain as listed. I can't give you a better discount on your current volumes. The signal indicates an invitation to explore other possibilities. It is the weakest and safest commitment to a move. There is absolutely no danger (like a safe conduct pass) of giving in because it invites the other negotiator to move by following the signal without commitment on the part of the signaler. There is a close affinity between inhibitions and signaling the one usually identifies the other. A signal is an indicator of a potential solution--An inhibition is an indicator of a potential problem. Before making a proposal to deal with either, we must clarify the signal/inhibition to ensure (by asking) that we understand its scope and therefore its potential:
There is no question that New Zealand is adamant that the French agents will not be released to freedom.

The power of effective debate

In negotiation we cannot negotiate a debate, nor can we negotiate principles, beliefs, prejudices, feelings, hopes, ideals and attitudes. We can only negotiate proposals. The power of effective debate is its direct route to effective (and winnable) proposals. The debating phase can last a long or short period of time. To prolong debate longer than necessary is a major source of risk in negotiation. When people get in the way of a deal it is almost always caused by the mismanagement of the debate phase. Not all differences can be reconciled, but if the unreconcilable difference can be understood, then both parties are better off.

Statements, Assurance, Questions, Summaries and Signals (SAQSS) are measured risk blue behaviors.

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Module 5

A proposal is not a bargain

Making proposals
Proposals make a suggestion of how two negotiators might agree on some issues they are discussing. In return for movement on an issue, a party can move on the same or another issue. Signaling is hinting preparedness to move, proposing is making a tentative suggestion on the form movement could take. Signaling is the bridge to Proposing. The problem is the tendency to use vague language in the proposal phase that might prove to be damaging during the later bargaining phase. It is the ability to shift from loose informal proposal language to tight formal and assertive proposal language that improves proposal performance. Non-assertive , very weak language (and ultimately self-defeating), to express your needs:
I wish I hope I would like It would be nice Could we Would this suit you

Example of assertive language:

I need I require We prefer We want It is necessary that We must insist If you do then we could consider If you acceptthen I will reconsider

Effective proposals consist of two parts: the condition and the offer The condition can be either vague or specific The offer is always vague. Ineffective proposals consist of only the offer Proposals are always tentative, and decrease in tentativeness as the bargaining phase approaches.

As the idea of a proposal is to test the water as to a possible solution, it is not of huge importance which side does this first, unless conditions dictate who goes first. -> Not put too much in a proposal. Tone is important as a proposal has a purpose (to be received and responded to).

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Three main rules: It should be conditional (the condition first, followed by the offer) It should be presented for what it is (unadorned), without explanation After submitting the proposal, you should go silent (shut up!) Proposals gain from brevity. Language is all. The tone is significant. It has a purpose. Using short, vague content is an attempt to entice the other side into listening to what you have to say and open up the possibility of doing business with them where each party gets some of what each wants. The important message is in the vague yet conditional offer:
I could consider We could perhaps look at that. It might be possible to do something. We might be able to adjust in some way our terms. Perhaps we could go over that area again.
vague condition / vague offer
- If you support our claim for landing rights in Germany, I would seriously consider supporting your proposal for landing and pick-up rights in Singapore. - If you look at the manning levels, we will look at the shift differential. - If you tell me what would meet your client's needs, I could be prepared to respond with a positive offer.

specific condition / vague offer

- If you accept two persons per room, I could consider providing you with more bed-nights per week. - If you accept the changes in the vendor's contract that I have set out in my paper, I will consider the possibility of your becoming a sole supplier to our sites. - If you agree to clauses 6 and 7 as they stand, then I will reconsider our policy on third-party maintenance.

Common errors in making proposals:

the offer is presented before the condition, which always weakens the impact on the listener the offer is specific use of question-proposals which is always weaker than a statement-proposal to make no condition

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Receiving proposals
Dont interrupt the proposal. Listen in full. A tactical short-term silence/ pause can be advantageous. See if they will commit to more by being silent. - Silence also makes it appear that you are considering what you heard. Should never be rejected or accepted outright, question it on its condition and/ or offer to clarify or invite an extension to be made Responses to a proposal should always be in the form of a question. Questions not only provide additional, perhaps vital information, but also indicate to the proposer that they are being taken seriously. They seek to clarify the proposer's position... attempt to get him to be more specific... give content to his vague offers... and ensure that the listener understands what is being proposed. Questioning to clarify, or to invite an extension of a proposal is the most effective response one can make. All other reactions break up the movement toward settlement and can move one back into the debate phase. What benefit is in the proposal for us? Feel free to tie into other tradables What about the other issues is an effective way if there is no movement to shift to another issue before risking a deadlock. Nothing is agreed until everything is agreed and nothing is given away! Be willing to use SAQSS Use SAQSS (Statements, Assurances, Questions, Summaries and Signals) when receiving a proposal. Effective ways of responding to a proposal: 1. 2. 3. 4. Clarify what is meant by the proposal by questioning its condition and/or offer Consider what the proposer is inferring about the scope for a deal Tell the proposer what aspects of the proposal you do and do not like Respond with your own alternative proposal

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Summarizing tradables
We trade because we value things differently (in preparation categorized in high, medium, low) and the things we trade are tradables.
Valuations we made in preparation will need to be amended or modified. With the information gained during the debate phase and any proposals, the other sides tradables should be reassessed. List of all proposals Make a list of all proposals. The list is an indicator of how big the gaps are on the tradables, or whether there are overlaps with your exit point for any of the currently mentioned tradables (there may be other potential tradables which you have not yet raised and for which, obviously, you have no information on exit or entry points). Summarizing of proposals In debate we summarize what people have said to each other; in proposing we summarize what each has proposed. The summary after each proposal introduces an element of order into our interactive chaos (manage the untidiness and your proneness to error). It also sets up the bargaining phase or invites new proposals. It creates the possibility of either negotiator moving from tentative conditional proposals (i.e. conditional vague offers) to the bargain (i.e. conditional specific offers), if it doesnt work go right back into debate. If central inhibitions have not yet been addressed, new proposals are required.

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Module 6

Bargaining for an agreement

From Proposals to Bargaining

The Bargaining Phase is the fourth and final phase. A bargain is ALWAYS a specific condition linked to a specific offer. There is no room for ambiguity, state exactly what you want and exactly what you offer: if you do such and such, then I will do so and so. The result is either agreement or a return to the Proposing Phase. Difference between a proposal and a bargain: Proposal Condition Offer Non-specific or specific ALWAYS non specific Bargain ALWAYS specific ALWAYS specific

The effective bargain moves a proposal to conclusion. Preferred language: if and then so. OFFER loaf of bread call off strike Saturn automobile pay raise of 8% Fri, Sat, Sun off If you do such and such, then I will do so and

CONDITION pay $1.29 to obtain bread agree to 10% pay increase for workers pay $15,450 increase productivity by 6% over last year 10 hour work days Monday through Thursday

The offering of a bargain is not necessarily the end of the matter--they are subject to the same process of consideration (debate, propose, bargain).

Linked trading
If we negotiate because we value things differently, it is in the bargaining phase that we focus on the differing valuations. Nothing, absolutely nothing, should be given away, no matter how little it is worth to you. The paradox of bargaining is that those things that are worth little, or less, to you in themselves, could be worth a great deal to you in the bargaining phase if they are worth more to the other negotiators. The form of the bargain is the conditional offer, and the tradables available to the negotiators are the potential content of the conditional offers.
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Tradables widen the focus of a negotiation; the more tradables, the easier it is to avoid deadlock. Two tradables linked together into a bargain, each valued differently by the other, could lead to a breakthrough. Creating lists of tradables - properly a task of the preparation phase, but also a task when stuck in the bargaining phase, where its significance is more easily recognized is only part of the creative work of the negotiator. The bargainer has to use them effectively and timeously. The key to the effective use of tradables is always to link them together, using movement on one as a condition of movement on another, or the introduction or acceptance of a new one as a condition of accepting those already on the table. By linking their conditional offers across each tradable they engage in what has been described as a negotiation dance.

Bargaining to Close the Deal

To offer a bargain is to call for a close to the negotiation. It is an explicit statement of agreement that you are prepared to settle without further elaboration. Traded concession bargains helps a bargain over the last final hurdle the final movement for the deal These can take many forms (usually relatively small items/ quantity, and often less intangible). Summary bargain everything previously proposed is summarized as a bargain and a deal is asked for. The repetition of summary bargains or the refusal to consider further small movements usually leads to the or else bargain (the take it or leave it, its my final offer). offered smugly can lead to disaster offered with sincerity reflects the urgency of settling there and then The adjournment bargain uses the summary bargain with a twist let's sleep on it... let's table the matter until morning... let's meet again on Friday... The risks in the adjournment: when out of your presence, rivals may offer them a better deal, they may have second thoughts... The adjournment bargain should only be used as a last resort and in an attempt to avoid the or else bargain.

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The agreement
The outcome of a negotiation is a decision that decision is either
an agreement, or a failure to agree

Since "nothing is agreed until everything is agreed", extreme caution must be taken to ensure that the parties actually understand just what it is that they have agreed to! Regular summarizing of statements, proposals, and bargains is a must! Verbal restatement, writing it up there and then. In this phase, closing ploys are sometimes used to get a better bargain in the euphoria of pending agreement (see Streetwise Manipulation).

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Module 7

Styles of negotiation

Much of the success of negotiations depends on a willingness to co-operate and if there is trust between the parties. Lack of co-operation and trust leads to negotiating behavior that is not useful when attempting to reach agreement. This is caused because there are incentives to defect from co-operation, or when lack of trust forces one party to play safe and defect and so minimize risk. In a series of transactions, spreading risk minimizes the chance of defection, because until the last transaction there is an incentive to co-operate. Outcome is often dependent on each parties simultaneous choice between co-operate and defection. Win-win depends on simultaneous co-operation. Lose-lose is the opposite. Trust is based on what people do and have done, not on what they say they will do.

The Negotiators Dilemma

The negotiators dilemma is the occurrence of no-co-operative behavior whilst co-operative behavior leads to the best results. It is best illustrated with the Prisoner s Dilemma, illustrating why lack of trust between two parties causes the parties to make decisions which are not in the best interest of either of them.

The Prisoners Dilemma

Two prisoners are charged with murder, but the magistrate cannot prove it from the evidence available and needs a confession. In order to secure a confession, he separates the prisoners so that they cannot co-ordinate their response, and have to rely on trusting the other prisoner to co-operate at the same time, and he offers them a deal: You can confess or plead not guilty If you both confess, you will both get 10 years in prison If you both plead not guilty, you will both get a 3 year prison sentence If you confess and the other pleads not guilty, you will go free But if you plead not guilty and he confesses, you will get 20 years and he will go free The decision of the prisoners now depends on what they think the other prisoner will do: both pleading not guilty is the best overall solution, but means risking 20 years; confessing means a maximum sentence of 10 years. They confess, because they do not trust the other party to plead not guilty.

3, 3
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The success of the prisoners dilemma lies in the fact that they cannot co-operate and have to rely on what they think the other does. The magistrates success is that he can secure convictions, because the prisoners irrational behavior interferes with their best interest. The Prisoners dilemma is whether to do what is best for your self or best for both of you.

The Card Game

Another illustration of this principle is a profit maximising game, in which negotiators play with blue and red cards and get scores depending on the combinations of cards they play: 10 rounds are played and the goal is to maximise their scores. After 4 rounds and after 8 rounds they can co-ordinate. The scores for rounds 9 and 10 are doubled.

Clearly it is in the best interest of both players to play blue cards throughout the game, since they can maximize their scores to be 36 each. This does not happen in 92% of the cases. The fear of suffering a loss because the other might play red makes the majority play a red card, thereby minimizing their risk of loss to 3 points, with a potential win of 5 points. Playing blue with a potential loss of 5 whilst the prospective gain is 3 is often considered an undesirable risk: you can be taken advantage of (giving but not getting). Those who play blue and receive red usually play red over the next round in retaliation. At the end of 4 rounds, most players have less than 12 points. Then they co-ordinate. If one player has played one blue, they could agree to even the scores in round 5 and then play blue cards. In the 10th rounds there is another incentive to play a red card. Thus, players play red, not because they dont see that playing blue is better, but because they act in self-protection: playing red ensures a smaller loss then when good intentions are betrayed. People do not defect because they want to, but because they must.

Red and Blue Styles of Negotiation

Red Style negotiating behavior is based on more for me means less for you: aggressive, domineering, immovable, devious and bad mannered. Bombastic and patronizing manner. Results oriented. Competitive. To protect themselves: I play red not because I want to, but because I must. To exploit others: I play red not because I must, but because I want to. Red ploys: Tough guy/ soft guy Setting preconditions Threats etc. Overvaluing features of the deal or future opportunities
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Do not judge a Red style solely on the basis of the tone of the negotiators; rely instead always on your judgement of the content of the proposal. The Blue Style negotiating behavior is based on more for me means more for you: the promotion of a long-term relationship and straight dealing. Submission, preference for peace not war, desire for tranquility. Collaborative. Need desperately to be liked, even loved, and in pursuit of this goal they concede everything. Blue ploys: Measured risk/ testing for blue responses on minor matters Always linking issues Realistic offers Seek and reveal interests One takes at the expense of the other and the other gives to the singular benefit of the other; therefore neither is a preferred style. Red/Blue continuum: Extreme Red Moderate Red Moderate Blue Extreme Blue

The Purple Negotiator

The most effective behavior is not to adopt either of these styles, but rather to switch between them, as the circumstances require. This is referred to as the Purple Style. Combine your Red side with your Blue side in assertive conditional proposals and bargains and do not let them be separated ever!

The difficult Negotiator

In the games we have seen so far, the goal was to maximize scores. We saw that this is difficult because a lack of trust forces one to play red. How do you deal with a negotiator that deliberately plays red? You get results based on the merits of a case, rather accepting something because of behavior. The consequences of matching blue and red styles are as follows:
Comment[r2]

Playing blue means being exploited, thus negotiators often play red, at least not to be exploited. Thus, we return to the negotiators dilemma: I play Red not because I want, but because I must. But this hardly leads to desired outcomes

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Robert Axelrod showed with his Tit-for-Tat (TFT) game that a structural reaction to the behavior of the other party shows them the right way. If they play red, you play red. What you really want is to get them to play blue. By reacting consistently the other negotiator will find that if they play red, you do and if they play blue, you will.

Dealing with a difficult negotiator

Is he generally difficult or only difficult with you? It might be you that is the cause of the difficulty and not them. Their behavior is their business but let their (your) behavior not affect the outcome. Do not encourage behavior by giving in: concentrate on the disputed issues by concentrating on the merits of the case or by the principle of trading Realizing that his behavior is not going to influence the outcome does more to change his behavior than confronting the behavior directly. - The pseudo game of passing the blame and responsibility for the alleged damage of the strike to the other side - Employers who agreed with their employees that they had a right to go on strike but that their strike would not affect the outcome would fare better. - Letting them know how effective their behavior is by showing how much it upsets you only reinforces their behavior; If my manner hurts you the remedy is in your hands - give me what I want and I will stop bullying you. For the Purple Negotiator toughness is the resolve to come to a traded outcome.. Combine red and blue; red conditions combined with blue offers. Negotiate exchangeable tradables.

Comment[r3] Recall the summary of the strategy: always open Blue, never initiate Red (be nice); play whatever the other player plays in the previous round (be consistent punish red play; reward blue play instant forgiveness without being vindictive). Comment[r4] The THOMSON case or shop steward

Comment[r5] The three elements of dealing with the difficult negotiator are:

1. Cut the connection between

Making progress with a Purple style in an Red negotiation

The Purple stylist places an emphasis on what he wants to do rather than justifying what he feels he must do. Break the negotiations down into smaller parts to measure the risk and style of the other party. Purple stylist breaks up the process into numerous little games of Prisoner's dilemma. To open with own vulnerabilities like problems with deadlines or cash flow could be dangerous. The determined Red negotiator always exploits the too open Blue negotiator what is seen to be a weakness. All the activities summarized by SAQSS (Statements, Assurance, Questions, Summaries and Signals) are measured risk Blue behaviors. None of them are sudden-death risks.

their behavior and outcome (their behavior is their business not ours; our behavior is our business unconditionally); and combine 2) and 3) as our behavior strategy into a package;

2. Decide on the merits of the

issues; and

3. Negotiate exchangeable
tradables.

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Negotiations tend to concentrate on issues and the positions people hold on the issues. - Interests overriding motivator why somebody wants something - Issues agenda item what they want, expressed in positions - Positions focus of stance on the issue Example: A wage rate is an issue, 20 an hour is a position. An adequate standard of living is an interest. Disputes are about positions but their stances are driven by their interests. Therefore dig to identify the interests of the other side so that the proposals and offers can satisfy both your own, and their interests. Interests can be used to change the positions, and therefore facilitate settlement. Some interests are irreconcilable (the Irish Troubles) those interests may become an obstacle, not facilitator, to a settlement. In those cases it is best to concentrate on reconciling substantive issues and positions. Test the style (Red or Blue) of the other party - Reverse deal to test the style If a fair proposal is made by yourself to another party and it is rejected, turn it around so that they are offered the same deal you asked for. If that too is rejected, out of hand, you are dealing with a Red style play. - Agreement without quibble If other party agrees to a contingency without a quibble he must be pretty certain of his forecasts (price profit). Similar tests are common with delivery dates and for performance standards (with penalties for failing to meet them). Conditional proposition or a red demand joined with a blue offer, IFTHEN Conditional Purple propositions trump all styles. In the Art of the Deal Donald Trump says: If you have what the other person wants, you have a deal. Negotiation is about getting what you want from someone who wants something from you. Thats trading a purple conditional style. The Purple stylist understands what the Red player is up to (a Red ploy recognized is a ploy disarmed) and can indulge in some controlled Red behavior to send a signal or to test the intentions of the other negotiator.

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A printed contract is the written expression of the distrust each partner has of the other. The over detailed contract says that you do not trust them (especially in Japan). In other contexts, a contract is a useful test of somebody's intentions. If they are willing to sign the contract, then they are willing to be bound by the written obligations and promises they made in the negotiation. If they are unwilling to sign a contract then they are not to be trusted at all. However, if you insist on a contract, you might cause offence by making them think that you do not trust them! Being Red is a short-time advantage.

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Module 8

Rational Bargaining?

We have seen that behavior and willingness to co-operate often determine the outcome of negotiations, but irrational behavior and lack of trust result in non-co-operative play. So is rational bargaining possible at all? You negotiate because it makes you in some sense better off, because you both expect to gain something over what you have before your bargain.

John Nashs economic focus

John Nashs solution to the bargaining problem is about what makes one solution better than all the other potential solution, not about the process of bargaining or human behavior. Nash is solely interested in the content of the solution, and takes an economical approach. Nash assumes: Highly rational bargainers Equal bargaining skills Full knowledge of tastes and preferences between bargainers Utility maximizing behavior A tradable has a certain numerical utility to the bargainers Example of a negotiation based on Nash:

The Nash solution in a Negotek PREP format

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With Nash the bargainers would agree to exchange the goods in whatever way that maximized their joint gains in utility (utility product).
Bill Goods received in trade knife pen toy Total Net gains Utility Gains 6 10 4 20 12 Jack Goods received in trade book whip ball bat Total Net gains Utility Gains 4 2 2 2 10 6

Loses 2 2 2 2 -8

Loses 2 1 1 -4

TWO WAYS OF NEGOTIATING A TRADE: Zero sum/ non-cooperative behavior Non-zero sum/ cooperative behavior

Benefits of Bargaining
Negotiators have at least one common interest because the consequences of non-agreement means acceptance of the status quo. The fact that they are willing to negotiate implies each believes something can be improved. Maximizing joint gains as a bargaining objective. Cooperation must be present!
B ENEFITS OF B ARGAINING A P P Paula) Q Q Quirk) R S B,C,D status quo utility of negotiator 1 (e.g. Paula) maximum utility of Negotiator 1 (e.g. utility of Negotiator 2 (e.g. Quirk) maximum utility of negotiator 1 (e.g. P wins, Q static Q wins, P static win, win

The Real Bargaining Problem

The real bargaining problem lies in the dichotomy of zero sum and non-zero sum, or non-co-operative and co-operative, behaviors in negotiation. The real bargaining problem is not just how people choose to behave that counts, it's how both independently choose to behave and then how their choices interact when they negotiate together.

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Distributive Bargainer: Zero sum and non-cooperative One gets everything - at the expense of the other party Integrative Bargainer: Non-zero sum and cooperative Both parties receive joint gains Two distinct methods of negotiation: Claimers see negotiation as the distribution of a fixed amount between them and you. The bigger their share the smaller is yours. This type of zero-sum transaction, they gain, you lose, often leads to manipulation and power games. Creators see negotiation as a means to joint gain - an agreement that both parties voluntarily enter into is likely to be better than no agreement at all - it must create additional value for both parties (win, win) - could create previously un-thought of solutions, which creates additional value Negotiators have a choice in the way they behave (it is limited to reactive behavior towards the other negotiator's choice--and vice versa--This being the case, awareness of this fact is the first step to proactively changing behavior in the negotiation process towards Nash's solution)...

Rationality and Irrationality

Negotiating rationally means making the best decisions to maximize your interests. People do not instinctively behave rationally, and only a small minority negotiates for joint maximization of gains. Training helps, but there is considerable difficulty in reaching win-win propositions unless there is trust between the parties. This would imply that win-win outcomes usually happen only in cases where there is a long-standing relationship.

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Decision making biases that blind negotiators to opportunity and prevent them from gaining as much as possible from a negotiation: Irrational Escalation - staying in the game just to prove that you will be the last one standing (even if it means you no longer have any feet to stand on!) Escalation behavior is common in auctions ($20 bill), as well as strikes, marketing campaigns, price wars and competitive acquisitions. Fixed Pies The assumptions of zero-sum bargaining lead people to believe that they can only gain at the expense of the other party. It seems to me that if it is in their best interest, it can't be in our best interest. Negotiate the easy issues first may remove potential trade-offs from the equation. It leads to claiming and ignores that negotiation can also lead to the creation of more. Anchoring People give a high or low initial entry position, thinking that this means they will have a better chance of ending up with a better bargain. Referent Behavior The way you frame an option can determine your willingness to accept an agreement. Example: Bank customers are more willing to pay increases in charges and fees than they are increases in interest rates. Reframing referent points is a more rational response to unintended deadlock over them and can dramatically change your choice of alternative outcomes. Reframing is a matter of perception. Is the glass half empty or half full? Fallacies of Prominence Negotiators are influenced more by the information that is easily available (see problems from own specialism) than they are by its relevance to the current decision. The rational remedy for negotiators is a more thorough search for relevant data and proper analysis of what is available. Overconfidence Overconfidence is one of the more common errors of negotiators. Deciding what you want is the main task of the preparation but finding out what they want is the main task of the debate. Overconfidence produces inflexibility, lack of movement, lack of trading, impasse and deadlock.

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Deductive rationality
Herbert Simons deduced behavioral model (deductive model) for individual rational choice: Identify the problem Search for alternate solutions and their consequences Preference order the solutions and select a course of action Simon assumed rational choice on the part of a decision maker. His model is not linear in nature. At each step, further identification, discussion and backtracking is possible by iteration. Caveat: What works for the rational individual may not work for a negotiating pair. Herbert Simon asserted that decision-makers are not perfectly rational because they are bounded by deficits in the information necessary to be perfect decision-makers: people do not have the time or the information processing ability to make perfect decisions. People thus decide on satisficing criteria because of their bounded rationality: they decide upon minimum acceptable criteria. The maximiser's choice is determined by restrictive assumptions and the satisficing choice is determined by the negotiator's perceptions.

Fisher and Ury: PRINCIPLED NEGOTIATION

Principled Negotiation is negotiation on the merits that serve the best interest. You look for mutual gains, and one must insist that the result will be based on objective standards The method of principled negotiation is hard on the merits and soft on the people. It employs no tricks and no positional posturing. Principled negotiation shows you how to obtain what you are entitled to and still be decent. It enables you to be fair while protecting you against those who would take advantage of your fairness. The method of principled negotiation finds its best expression in assisting in the sorting out of public or communal disputes (new airport runway) than to commercial bargaining and it lies closer to mediation methodology than to traditional bargaining. Its an extreme (naive) Blue approach. Principled negotiation is an insightful process but it is not the alternative to traditional negotiation that its proponents celebrate.

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Fisher and Urys Prescriptions

This prescriptive model is widely used by mediators in dispute resolution, but may have less value for commercial negotiators, who need to realize joint gain. These prescriptions deserve support as well as critique. The four prescriptions of principled negotiation: 1. 2. 3. 4. Separate the people from the problem Focus on interests, not positions Generate a variety of possibilities before deciding what to do Insist that the result be based on some objective standard SEPARATE PEOPLE FROM THE PROBLEM The behaviors of people should be irrelevant with respect to the outcome of the negotiation: it is not the people you are interested in. The outcome is going to be affected only by the merits of what they have to offer. You are not interested in changing these people either. Let them get their own counsel. However, the contradiction lies in that disconnection of people from the problem requires co-operation, Blue style behavior. FOCUS ON INTERESTS, NOT POSITIONS Often good advice, especially when dealing with fiercely defended positional posturing. But the advice suggests that positioning itself is a barrier and that is only true when positions are separated from the issues they are connected to. Focus on interests is not enough: what we want (a position) cannot simply be separated from why we want it (an interest). A focus on interests does not remove the need to decide on positions. INVENT OPTIONS FOR MUTUAL GAIN: GENERATE A VARIETY OF OPTIONS Fisher and Ury advise to do more than just deal with two competing solutions, for example by brainstorming and developing new solutions, which commit everyone and thus moving from red to blue play. Judgment is suspended until the options are listed. In one-on-one negotiations that dominate private decision-making, this prescription may be too ambitious because there are simply no more options than the ones available. INSIST ON OBJECTIVE CRITERIA To insist on objective criteria is to misunderstand negotiation in a commercial environment. Objective criteria might be helpful in legal battles, but in commercial negotiations subjectivity rules! Perhaps industry benchmarks are available as objective criteria but it is doubtful if they have any relevance in a negotiation. Third parties might be allowed to arbitrate on behalf of parties , but they cannot decide on behalf of them Facilitators, tribunals, counsels etc. may work for larger organizations, but do not for day-to-day negotiations.

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Fisher & Urys BATNA

Best Alternative To No Agreement Best Alternative To a Negotiated Agreement An analogy with the economic opportunity cost principle: pursuing an opportunity costs its best alternative (buying an Audi A8 costs an apartment in Prague). A BATNA is not an agreement, but the alternative that remains when no agreement is reached. Obviously, an agreement on an issue should always be better than its BATNA.

A useful tool for preparation, e.g. by focusing on your levels of dependence and commitment, it gives you a feel for your power in a negotiation.
For example: If you are selling your car and were offered 2000 yesterday then anything you are offered today has a BATNA of 2000. If you are offered 3000, that's above the BATNA so you might take it. If you are offered 1000 that's below the BATNA so would probably reject it.

Negotiators as Mediators
Mediators can help if parties are stuck on issues (positional bargaining) or on interests (Principled Negotiation) or on both (traditional negotiations)? They facilitate agreement. If there is no third party, one of the parties in the negotiation could play this role, but it is doubtful whether this is acceptable to the other party because of a conflict of interest. All one can do, is try to display effective negotiating behavior and independent behaviors like going to the balcony to reflect, look at it from their side etc.

Definition: Mediation is an intervention by an acceptable, impartial and neutral third party, who has no authoritative decision-making power, to assist the disputing parties in voluntarily reaching their own mutually acceptable settlement of the issues in dispute.

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Module 9 Karrass)

Streetwise

Manipulation

(Chester

Negotiation has always had associations with devious and manipulative ploys that vary from the secretively sly, through to openly barefaced rip-offs. Becoming streetwise is another approach to negotiation. Every ploy has its counter Bad ploying behavior only looks good to people whom avoid looking in mirrors. Ployers usually lack evidence to support their positioning.

Power and Ploys

Those negotiators claim they manipulate only to protect (I play Red ploys not because I want to, but because I must!). themselves All ploys aim to influence your expectations of the negotiated outcome. Your expectations of a negotiated outcome derive from your perceptions of the other party's power over you. The less power you believe that I have, the higher your expectation of the outcome in your favour. You often accord greater relative power to other negotiators than the context warrants and you lower your expectations accordingly. In short, you end up negotiating with yourself.

Your perceptions of their power Power is the ability to get someone to do what they otherwise would not do, and manipulative ploys and tricks are about making people do more than they otherwise would. Manipulation coerces you to concede more.

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Three Types of Ploys

All ploys belong to one of three main types: dominance, shaping and closing. Dominance (early stages of the negotiation) Achieving dominance enables one party to set the tone and the tempo (not to say the temper) of the following sessions. Characteristically, dominance behavior is about defending extreme positions. Shaping (middle phase of negotiation) In debating the parameters of a possible settlement (signaling, proposing, packaging and bargaining), numerous opportunities appear that can shape the deal. Some of them are about cheating in its crudest form and negotiators who use them are using disreputable methods true dirty tricks. Closing (end of negotiation) Certain ploys flourish in the end game, or the close, of the negotiation and are about pressurizing the opponent to settle on the last offer. To combat the use of ploys you need to neutralize their effects: Understand their purpose Identify it Expose or counter - Exposing risks embarrassing the perpetrator - Forget expose if you wish maintain the relationship and not interesting in Winning an ago contest - Exposing what you believe is a ploy could be disastrous if it is not a ploy Neutralizing a ploy seems by far the better response, with some slight risk that they interpret your neutralizing move as your ploy. To neutralize a ploy normally only requires that you identify it.

Dominance Ploys
Visual dominance ploys. The early signs of insolvency. Prop your prices up. Pre-conditions. Could be helpful (NDAs), but are mostly irrelevant. You do not negotiate not to negotiate. Distinguish between ploys and confidence-building measures. Non-negotiable. It means that it is very important to them and you want something back for it! Rigging the agenda either by rigging the content or by rigging the order of business. It presupposes hidden constraints on what will follow.

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Shaping Ploys
Final offers. If someone has no absolute power over you, they cannot start a negotiation with a final offer. Why bother to negotiate? Fait accompli by sending a signed contract to the other party. Tough guy/ soft guy. Either two people as a team in roles or a single person with the unsympathetic boss or the distant committee in the background. Similar to good cop/bad cop. The Bogey. They adore the product, but it does not fit the budget. They are testing you. I also love Rolls-Royces, but only start buying one when I think I can finance it. If not, they must buy something else somewhere else. Also, the red player implies padded prices, which insults your cost accountants: never change the price of your offer just like that! The Krunch. You have got to do better than that!. If buyers are known to resort to the krunch, they invite sellers to anticipate it by the Red ploy of padding their prices. The Nibble. Nibbling on the deal by shipping just too much, delivering late, adding hidden charges, slightly inferior merchandise. Red play that leads to revenge, but worse, firms spend astronomical amounts patching this kind of nibbling up. Salami ploy. Get firm agreement in stages that add up to what couldnt be agreed to before. Sell cheap, get famous ploy Add-on ploy. Increase the price after agreement. What good is a house with no roof? Limited authority ploy Higher, or escalating authority

Closing Ploys
Quivering Quill. Fountain pen in the hand, and begging for extra concessions. Never give anything away for free! Yes, but Everything is agreed, but As soon as they find that the yes, but ploy does not lead to a quick win but to another negotiation, they will stop it. Now or never. Foreshadowed by the hints of a pending deadline. Deadlines are always questionable. Some are serious, some are dubious. Best to ignore. Take it or leave it. Another all or nothing gamble (as the now or never ploy is). If your BATNA is better than taking the deal, you can opt to leave it. Split the difference means that the other is prepared to move 50%. You must insist that while she may be allowed to move 50%, you are not

PLOYERS ARE LIKE FASTEST GUN IN THE WEST, THERE ARE ALWAYS FASTER ONES SOMEHERE WHO ARE READY FOR A SHOWDOWN. ONLY OFFER TO MOVE CONDITIONALLY

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Module 10
Personality

Personality and Power in negotiation?

The role of personality in negotiation and its effect on negotiating style is much debated. Certain personalities are supposed to have ineffective negotiating styles. It would be useless to train someone to become a negotiator if this were true. Conversely, if personality would influence negotiating behavior, would there be time to analyze it sensibly (external perspective)? Gavin Kennedy makes a case for dealing with the behavior of the other negotiator (Purple conditionality), rather than psychoanalyzing him and masking our own ineffective behavioral tendencies (internal perspective).

Personality Style of Negotiators

Rubin & Brown postulated that two variables influence negotiation: Interpersonal orientation (social ability and social awareness) Motivational orientation (competitor or co-operator) Mix them together:

Collaborators go for results, are team players, problem-solvers ie. they fix. Competitors result through power, rather than relationship. Fight, trick, Red. Accommodators are relationship oriented, make concessions, smooth. Avoiders avoid, hide, pessimists. All personality types can change their behavior for a negotiation without necessarily having to change their personalities. Gavin Kennedy offers the hypothesis that all personalities can negotiate or can learn to negotiate and personality typing of the other negotiator does not make you a better one.

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Andrew Gottchalk, a trainer on Personality

Gottchalk identified four relevant personality types and combined them with two behavioral concepts: A Habit Zone & A Managed Zone. The habit zone changes slowly, but the managed zone can change quickly to suit circumstance. The managed zone should prevail and one can be trained to display more managed behavior. Gottchalk identifies four personality styles: Tough Style. Dominant. Aggressive. Likes control. Take it or leave it. Best dealt with by avoiding small talk, emphasize goals and give them recognition. Warm Style. Supportive, understanding, people-oriented. Does not say what they want. Best dealt with by building trust but keep a friendly distance. Numbers Stylist. Analytical. Conservative. Reserved. Issue-oriented. Heartless. Best dealt with by showing respect for the expertise, but keep thinking of the larger objectives. Dealer. Flexible. Goal oriented and compromising. Sees opportunities in everything and knows how to do it as well. Do not finish what they start. Best dealt with by being positive but keep your controls up, even repeating your demands.

Gottchalk defines as the way we come across. It's the pattern of behavior that other people see and hear when we negotiate. Each negotiating style is a recognizable bundle of behaviors.
Gavin Kennedy doesnt believe this too, he only believes on his Purple style behavioral approach!

Power in Negotiation
Considerations of power influence perceptions that influence behavior once face to face with the other party. Time spent on assessing the power balance before negotiation opens, and re-assessing it during the face-to-face phases, is time well spent. Power is the ability to get someone do something that they otherwise would not do and, the ability to stop them doing what they otherwise would. It is the ability to resist the power of another, and re-assess power as the amount of resistance that must be used to overcome the exercise of somebody elses power. Power as an ability to do something can come from different sources that motivate (positively or negatively) the person who feels it. French & Raven systematized the source Reward, Coercive, Legitimate, Referent, Expert. of power into 5 types:

Changes in the sources of power will change the relationship and changes in relationships alter the distribution of power.
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But by the time you know that you have negotiation power, it is already too late to exploit your knowledge. Negotiation is a process and the tactical moves play an important part in that process. Negotiation power is subjective, its in your head and the other part head. As power only becomes available to you through perceptions, your judgement about its relevance is purely subjective. With subjective judgement comes uncertainty and risk, both of which weaken the practical relevance of an objective measurement of power.

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Module 11

Culture and negotiation?

Correcting the cultural error for a Japanese negotiation would not help the Westerner to avoid the same negotiating mistake elsewhere, however correcting the negotiation mistake would help her wherever she negotiated. Whenever you make a proposal you do not follow a silence with an elaboration of your proposal, and certainly never follow with improvements (ie. unilateral concessions) to it. Silence in negotiation can be a powerful signal and is only intimidating to inexperienced negotiators from any culture.

Cultural Relativism
The cultural relativist believes that if you want to do business with people the world over, knowing about the differences between them is an obvious, necessary, essential advantage. The cultural universalist believes that, while awareness of the cultural norms of the people you visit may be beneficial, your competence in negotiation skills is more important. The process of negotiation is universal across all cultures. Culture like personality, influences behavior but neither fundamentally changes the universal negotiating process of obtaining what we want from someone who wants something from us. Culture defines a group and personality defines an individual, but neither defines negotiation a phased process. Gavin Kennedy believes that there are no such phenomena as western or eastern negotiating processes, but a universal four-phased process of negotiation (prepare, debate, propose, bargain). Guanchi is a traditional personal relationships cemented by continuous, often life long, reciprocal favors in Chinese business, administration and politics. Cultural relativists are left stranded as the exponents of special cases like this Chinese culture trait ceased to be. Negotiators, as exponents of the enduring and universal phenomenon, are not required to revise their concepts as economies develop.

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Do People Negotiate in Different Processes?

Philip Gullivers cross-cultural research concludes that the negotiating process is universal, and is an 8-phase model, similar to Gavin Kennedys 8-step model. It is important to recognize the existence of cultural diversity and it is advisable to acquire knowledge of the relevant cultural imperatives and how they interact for working in. However, cultural knowledge will not save if your negotiation skills are primitive. Understand the universality of the negotiating process. Cultural relativism misses the target.

What is culture?
Culture is about those values, believes, self-justifying assumptions and world views of members in the distinctive groups with whom we deal. Culture encompasses their histories, received experiences, accounts of events, political perspectives, myths, folklore, collective memories, religious or mystical ideas, philosophical outlooks, rituals and social preferences. (Differences between a countrys sub-cultures.) Aggregating people from a culture is problematic. Anthropologists warn rightly against ethnocentric conclusions about other cultures. Each cultural identity has several dialects. In studying the role of culture, you embark on a vastly complex field, much of which is still tentative, deeply controversial and weak in applicability.

Cultural Relativists Challenge

Geert Hofstedes work, based on IBM and data processing, showed that attitudes and values varied with the nationality of the respondents. He defines culture as the collective programming of the mind which distinguishes one human group from another and initiated the scientific study of the impact of culture on business behavior. He used a concept of power distance to measure the interpersonal power or influence of bosses over subordinates in 40 different countries. Dimension (indexes): Power distance, Individualism vs. Collectivism, Masculinity vs. Femininity, Uncertainty avoidance. But again, changes suggest that cultural imperatives are fragile. And Hofstedes research is biased by a non-representative international sample, ie. IBM employees only.

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Hofstede explains particular behaviors in terms of the professed attitudes and beliefs of a particular culture (Simple model: 1. Behaviors, 2. Attitudes, 3. Beliefs & Values). These behaviors may be completely explained from within the universal paradigm of negotiation and do not require tenuous connections to specific sets of local attitudes and beliefs. Negotiating with members from a particular culture it is more beneficial to be trained to deal with Red and Blue negotiating behaviors than it is to be trained to identify ascribed characteristics according to national identity, leading negotiators to assume mistakenly that the individuals who happen to be at the table share these ascribed cultural imperatives.

Trompenaars research: Culture is the way in which a group of people solves problems. Five orientations: Universalism vs. Particularism, Individualism vs. Collectivism, Neutral vs. Emotional, Specific vs. Diffuse, Achievement vs. Ascription Those orientations describe the way culture influences how human beings deal with each other. Trompenaars draws his conclusions from many examples of non-business interactions and transcribes these to business negotiations with varying degree of (im)plausibility. Cultural relativisms main weakness is that it makes its assertions without direct evidence from negotiations.

Chinese Negotiations / Unique Negotiations in India?

The time spent pursuing unique negotiation advice for specific countries or cultures would be better spent on raising basic negotiation competences that have universal application in all countries.

------------------------------------------------------------------Cultural relativism reveals relevant and interesting things you should know about the habits and manners of other societies, and all competent negotiators must become familiar with it if they really want to do serious business.

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Four Phases/ Two Styles approach

Prepare
Data Interests Issues Priorities Positions

Debate
A shape tone of negotiation and investigates room for agreement Constructive: SAQSS Destructive: Irritate, assert, interrupt, block, point-scoring, attack, blame, threaten

Propose
Specific or non-specific conditions. non-specific offers Receiving proposals: questions! Summarizing tradables Specific conditions, specific offers: IF THEN Linking tradables Summary bargain

Red Style: More for me means less for you Tough guy/ Soft guy Overvaluation Preconditions Threats Ploys Aggressive, dominant, devious

Purple Style: Combine your play of red moves with blue moves Red conditions, blue offers

Blue Style: More for me means more for you Measured risk Linking issues Realistic offers Seek and reveal interests

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