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CONCEPT OF NEGOTIATION
Negotiation: It is a process in which two or more individuals or groups having common or conflicting goals, state and discuss proposals for specific terms of a possible agreement. Types of Negotiation: Distributive: Often referred to as a fixed pie or fixed sum. Also known as competitive or hard bargaining negotiation. A win lose situation. Example: Purchasing a car or a house. Interest of both the parties are self serving.
CONCEPT OF NEGOTIATION
Integrative: Often described as the win-win situation. Parties form a long term relationship for mutual gains,
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The parties and their interests: The parties to a negotiation can be friends trying to agree on what movie to see or world leaders trying to avoid war. Interdependency Common goals Flexibility Ability to make a decision.
Very often parties shun negotiation. But the fact is we all negotiate. The basis of most negotiations is some form of conflict and people are afraid of conflict. The concerns are Sharing a scarce resource. If we truly fear conflict, we avoid taking any position and not get what we want and we take an unrealistic position and still not get what we want.
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Negotiation is a voluntary activity: either party can break away from or refuse to enter into discussion at any time. A negotiation usually starts because at least one of the parties wants to change the status quo and believes that a mutually satisfactory agreements is possible. Timing is a critical factor in negotiation and affects the ultimate outcome of the discussion. The progress is strongly influenced by the personal values, skills, perceptions and emotions of the parties.
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Delay Silence and Bracketing. Bracketing is directing the concentration to a specific area of negotiation and then listen aggressively. Limited Authority The Bottom Line- This is the point below which you will not go. No Nibbling- Ability to withdraw and then return and then keep the pressure on. Expectation and Control-This is where you say, this part is not negotiable but that part is. Auctions- eg. I can get it cheaper somewhere else. Concessions Rationale Message Sending Deadlines
Collaboration: It is a process through which parties who see different aspects of a problem can explore their differences and search for solutions that go beyond their limited vision of what is possible. To assemble a representative sample of the stakeholders and let them work out on an agreement among themselves.(in the given example). This option has the advantage of dealing with interrelated issues. It allows for a solution that is acceptable to all.
Negotiation strategy can be defined as the overall approach chosen when confronted with a bargaining situation. It is very often confused with tactics which are the techniques used at the bargaining table. It does not include the efforts that occur away from the bargaining table, to set up the most promising situation.
NEGOTIATION STRATEGY
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Information: This is the heart of negotiations. It shapes our appraisal of reality, our negotiation strategy, our BATNA, our expectations of what can be achieved and the outcome of a negotiation. The most important information we need is BATNA. Power: In the words of Patrick J. Cleary, former chairman of the National Mediation Board More than anything else-yes even more than money-the negotiation process is about power, ego and saving face
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Principled negotiators openly discuss the issues and interests that are important. They separate positions from interests Separate the people from the positions. Develop mutual gain options. Discuss on objective criteria such as principles and facts
1. Position versus interest A position may be defined as a specific demand that the party has chosen. Interests include the needs desires concerns and fears that caused the party to chose that position.
Position versus interest of neighbours smith and jones Smith Position-the dog must go.we will not move Interest-we need peace and quiet place, our house is new and so we prefer to stay in it.
Jones Positions-the dogs must stay, we will not move. Interests we must let the dogs out in our enclosed yards, we love the neighbourhood and want to stay in the same street near our friends.
2.Separate people from positions. People conduct negotiations. They have feelings, ego, anger and other human emotions. Position is the specific demand that a party has chosen.human responses to the positions taken by other parties can easily derail a bargaining situation that might otherwise be successful. This is practically true if the parties can maintain a long term relationship.
Example- a wife and a husband planning for a weekend. The husband wants to gout to play golf with friends and the wife to their farmhouse. The issue is not where but how do they want to spend the weekend and what do they want.
Focus on objective criteria Parties present offers based on objective criteria such as facts, principles or standards.
Develop mutual gain options- case Page 150 west coast music inc Page 161 explanation
Multiple Equivalent Simultaneous Offers(MESOs) It provides for a creation of a scoring system to compare qualitatively different issues so that the best option can be defined. 3 steps1. Identify and then prioritize issues in the negotiation, determining their weights in relative values to the parties. 2. 2. identify the different outcomes or options available for each issue establishing one as the standard and thus worth 100 points and then consider the ralative value of each other option by comparison to that standard.
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Create three different offers, three because research indicates that parties can effectively compare three offers, without feeling overwhelmed by too many options
STRATEGIES-CONT.
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The Economic Matrix-It is applicable when a negotiation situation involves several issues of economic value and a fixed amount of resources available for the parties to negotiate. 3-D Negotiation- Negotiators David A.Lax and James K Sebenius developed this unconventional tactics. The first dimension consists of the tactics used at the bargaining table. The second dimension is the deal design i.e. specifics of a proposal. The third dimension is the set up of the negotiation- the parties involved, the issues, the sequence of issues to be decided, outside influences and the timing of negotiation. They suggest that the negotiators will be more successful, if they involve all three dimensions in bargaining
NEGOTIATION STRATEGY
When negotiating as a team, following points should also be considered. 1. Who will lead the discussion? 2. Who will verify facts? 3. Who will ask what questions? Who answers the other sides questions? 4. Who will work to reduce tension? (optional, according to the situation)
NEGOTIATION STRATEGY
In addition to determine the strategy, the style to adopted should also be decided. According to Thomas and Kilmann the approaches can be grouped into five categories: 1. Collaborating: To manage by maintaining interpersonal relationships and ensuring that both parties to the conflict achieve their personal goals. 2. Compromising: This approach assumes that winwin solution is not possible. The objective is to find mutually acceptable solution which partially satisfies both the parties.
NEGOTIATION STRATEGY
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Accomodating: It refers to maintaining the interpersonal relationship at all cost, with little or no concern for goals of the parties involved: Controlling: The focus is to take steps for goals of the parties, whatever the cost to the relationship.A power oriented approach. Avoiding: the avoider views conflict as something to be shun at all costs. The style might take the form of diplomatically diverting an issue, postponing or withdrawing from a threatening situation.
STRATEGIES-CONT.
The MESO technique involves three basic steps: 1. Identify and then prioritize three or more issues in the negotiation, determining their weights and relative values to the parties. 2. Identify the different outcomes or options, available for each issue, establishing one as the standard and then consider the relative value by comparing with the standard value. 3. Create three different offers, three because research indicates that parties can effectively compare three offers, without feeling overwhelmed by too many options.
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Clearly define the expected goals i,e, what exactly do you expect to gain from the process. Clearly decide upon your BATNA-Best Alternative to a Negotiated Agreement. Identify the issuesThe greater the number, the better. Intangible issues should be listed as well as tangibles like price and quantity. Intangibles could include things like timing of payment, mode of payment etc. Add throwaways i.e. issues which have little or no value to you but could be of value to the other party.
PLANNING
Set Priorities- This can be done by a. Ranking all the issues from the highest priority to the lowest priority. b. Assigning percentage weights (relative importance ) to the items the total weight must be 100% and throwaway items can be given a 0% weight. c. Dividing the items into four broad categoriesEssential items that must be gained for a settlement. Important items that you would like to gain but are willing to trade to achieve essential or other important items. Desirable items that have secondary value. Throwaway items that may have value only to the other party.
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PLANNING
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Develop Support Arguments- Why about each issue should be thought of supported with facts logic and argument which could be based on certain data or a similar deal.
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PERCEPTION
Perception is: The process by which individuals connect to their environment.
The process of ascribing meaning to messages and events is strongly influenced by the perceivers current state of mind, role, and comprehension of earlier communications. People interpret their environment in order to respond appropriately The complexity of environments makes it impossible to process all of the information People develop shortcuts to process information and these shortcuts create perceptual errors
Negotiators approach each negotiation guided by their perceptions... Determine exactly what is being said and what is meant. Defined as the process of screening, selecting, and interpreting stimuli so that they have meaning to the individual.
PERCEPTUAL DISTORTION
Four major perceptual errors: Stereotyping Halo effects Selective perception Projection
STEREOTYPING
One individual assigns attributes to another solely on the basis of the others membership in a particular social or demographic group. For example Age Gender Race Religion
HALO EFFECTS
People generalize about a variety of attributes based on the knowledge of one attribute of an individual. For example Positive halo effect Smiling person is honest. Negative halo effect Frowning person is dishonest.
Halo Effects Occur in Perception when... Very little experience with the party Generalization occurs based on knowledge of the party in other contexts Party is well known Qualities have strong moral implications
SELECTIVE PERCEPTION
Occurs when the perceiver singles out certain information that supports or reinforces a prior belief, and filters out information that does not confirm that belief. For example Smiling Frowning
PROJECTION(PERCEPTUAL DISTORTION)
Occurs when people ascribe to others the characteristics or feelings that they possess themselves. For example Frustration Delays
COGNITION
Cognition refers to mental processes that include attention, remembering, producing and understanding, solving problems, and making decisions. Cognitive psychology is the branch of psychology that studies mental processes including how people think, perceive, remember and learn. As part of the larger field of cognitive science, this is related to attention, memory, perception, problem solving, decision making, judgement
Negotiators have a tendency to make systematic errors when they process information. These errors, collectively labeled cognitive biases, tend to impede negotiator performance.
COGNITIVE BIASES
Irrational escalation of commitment Mythical fixed-pie beliefs Anchoring and adjustment Issue framing and risk Availability of information The winners curse Overconfidence The law of small numbers Self-serving biases Endowment effect Ignoring others cognitions Reactive devaluation
COGNITIVE BIASES
Availability of information
Operates when information that is presented in vivid or attention-getting ways becomes easy to recall. Becomes central and critical in evaluating events and options
Overconfidence
The tendency of negotiators to believe that their ability to be correct or accurate is greater than is actually true
Self-serving biases
People often explain another persons behavior by making attributions, either to the person or to the situation The tendency, known as fundamental attribution error, is to:
Overestimate the role of personal or internal factors Underestimate the role of situational or external factors
Endowment effect
The distinction between mood and emotion is based on three characteristics: Specificity Intensity Duration
Aspects of the negotiation process can lead to positive emotions Positive feelings result from fair procedures during negotiation Positive feelings result from favorable social comparison Emotions can be used strategically as negotiation gambits
Aspects of the negotiation process can lead to negative emotions Negative emotions may result from a competitive mindset Negative emotions may result from an impasse
Emotions play an important role in the process of negotiation. Affect effect: Disposition of mind or affectivity influences the various stages of the negotiation process. We divide it into two parts. Positive Affect- It says that happy people are more likely to exchange information and be creative in negotiations. Its drawback is that it distorts perception of self performance, such that performance is judged to be relatively better than it actually is. Positive emotions generally have positive consequences for negotiations They are more likely to lead the parties toward more integrative processes They also create a positive attitude toward the other side They promote persistence
EMOTION
Negative Affect-It has detrimental effects on various stages in the negotiation process. The most researched negative emotion is, Anger. Anger disrupts the process of negotiation and angry negotiators cooperate less. Negative Emotions They may lead parties to define the situation as competitive or distributive They may undermine a negotiators ability to analyze the situation accurately, which adversely affects individual outcomes They may lead parties to escalate the conflict They may lead parties to retaliate and may thwart integrative outcomes
COMMUNICATION
COMMUNICATION
Communication is the process of passing information and understanding from one person to another. Communication processes, both verbal and nonverbal, are critical to achieving negotiation goals and to resolving conflicts. What Is Communicated during Negotiation?
Offers, counteroffers, and motives Information about alternatives Information about outcomes Social accounts Explanations of mitigating circumstances Explanations of exonerating circumstances Reframing explanations Communication about process
Offers, counteroffers, and motives Information about alternatives Information about outcomes Social accounts Explanations of mitigating circumstances Explanations of exonerating circumstances Reframing explanations Communication about process
Use of language
Logical level (proposals, offers) Pragmatic level (semantics, syntax, style)
Communication is experienced differently when it occurs through different channels People negotiate through a variety of communication media by phone, in writing and increasingly through electronic channels or virtual negotiations Social presence distinguishes one communication channel from another. The ability of a channel to carry and convey subtle social cues from sender to receiver
Use of questions: two basic categories Manageable Cause attention or prepare the other persons thinking for further questions: May I ask you a question? getting information How much will this cost? generating thoughts Do you have any suggestions for improving this?
Use of questions: two basic categories Unmanageable questions Cause difficulty Where did you get that dumb idea? give information Didnt you know we couldnt afford this? bring the discussion to a false conclusion Dont you think we have talked about this enough?
Listening: three major forms 1. Passive listening: Receiving the message while providing no feedback to the sender 2. Acknowledgment: Receivers nod their heads, maintain eye contact, or interject responses 3. Active listening: Receivers restate or paraphrase the senders message in their own language
Role reversal
Negotiators understand the other partys positions by actively arguing these positions until the other party is convinced that he or she is understood Impact and success of the role-reversal technique
1. Effective in producing cognitive changes and attitude changes 2. When the positions are compatible, likely to produce acceptable results; when the positions are incompatible, may inhibit positive change 3. Not necessarily effective overall as a means of inducing agreement between parties
Achieving closure
Avoid surrendering important information needlessly Refrain from making dumb remarks
Be prepared
Understand and articulate your goals and interests Set high but achievable aspirations for negotiation
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BEST PRACTICES
5. Master the key paradoxes of negotiation
Claiming value versus creating value Sticking by your principles versus being resilient to the flow Sticking with the strategy versus opportunistic pursuit of new options Facing the dilemma of honesty: honest and open versus closed and opaque Facing the dilemma of trust: trust versus distrust
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BATNA
BATNA=best alternative to negotiated agreement The alternative that negotiators can turn to if no agreement is reached in negotiation examples of BATNAs in Car Sale Negotiation Salary Negotiation Union-Management Negotiation
BATNA
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ELEMENTS OF BATNA
Deadlines Alternatives Ones resources Other partys resources Information Experience Knowing the interests of negotiation
BATNA
DISCOVERING BATNA
Prepare a list of all possible actions that you will take if no agreement is reached Focus on some of the bright options Select the one most suited
BATNA
Following points have to be kept in mind while determining ones BATNA Cost Feasibility Impact Consequences
Factors of International NegotiationEnvironmental context Political and legal pluralism International economics Foreign governments and bureaucracies Instability Ideology Culture External Stakeholders
Immediate Context Relative bargaining power (not just investment) Levels of conflict Relationships between negotiators Desired Outcomes Immediate Stakeholders
Understand the multiple influences of several factors on the negotiation process Update this understanding regularly as circumstances change
DIMENSIONS OF CULTURES
Hofstede studied 50 cultures and found four main dimensions to explain differences: Individualism/collectivism Power distance Career success/Quality of life Uncertainty avoidance
INDIVIDUALISM/COLLECTIVISM
Definition: the extent to which the society is organized around individuals or the group Individualism/collectivism orientation influences a broad range of negotiation processes, outcomes, and preferences
Individualistic societies may be more likely to swap negotiators, using whatever short-term criteria seem appropriate Collectivistic societies focus on relationships and will stay with the same negotiator for years
POWER DISTANCE
Definition: The extent to which the less powerful members of organizations and institutions (like the family) accept and expect that power is distributed unequally Cultures with stronger power distance will be more likely to have decision-making concentrated at the top of the culture.
UNCERTAINTY AVOIDANCE
Definition: Indicates to what extent a culture programs its members to feel either uncomfortable or comfortable in unstructured situations Negotiators from high uncertainty avoidance cultures are less comfortable with ambiguous situations--want more certainty on details, etc.
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Culture as dialectic
All cultures contain dimensions or tensions that are called dialectics Example: Judeo-Christian parables too many cooks spoil the broth and two heads are better than one offer conflicting guidance This can explain variations within cultures
Culture in context
No human behavior is determined by a single cause All behavior may be understood at many different levels simultaneously
Definitions of negotiation Negotiation opportunity Selection of negotiators Protocol Communication Time sensitivity Risk propensity Groups versus individuals emphasis Nature of agreements Emotionalism
Negotiation outcomes Research suggests that culture has an effect on negotiation outcomes, although it may not be direct and it likely has an influence through differences in the negotiation process in different cultures Some evidence suggests that cross-cultural negotiations yield poorer outcomes than intracultural negotiations
Culture has been found to have significant effects on the negotiation process, including:
Accountability to a constituent influenced negotiators from individualistic and collectivistic cultures differently
Effect of culture on negotiator ethics and tactics Differences exist in the tolerance of different negotiation tactics in different cultures Negotiators who trusted the other party were less likely to use questionable negotiation tactics Effects of culture on conflict resolution Within collectivistic countries, disagreements are resolved based on rules, whereas in individualistic countries, conflicts tend to be resolved through personal experience and training
Strategies are arranged based on the level of familiarity (low, moderate, high) that a negotiator has with the other partys culture
LOW FAMILIARITY
MODERATE FAMILIARITY
Adapt to the other negotiators approach (unilateral strategy) Involves making conscious changes to your approach so it is more appealing to the other party Coordinate adjustment (joint strategy) Involves both parties making mutual adjustments to find a common process for negotiation
HIGH FAMILIARITY