Negotiation

Kamal K Jain
kamal@iimidr.ac.in
In business, you do not get what you
deserve, you get what you negotiate.
 Why do people not ask?

False Evidence Appearing Real = FEAR

Fear has a large shadow but itself
is small

Courage is not absence of fear

but rather judgment that
something else is important than
fear

Chopped off the legs

Buying is cheaper than
asking

Only free men can negotiate.

Prisoners cannot enter into
contracts. - Nelson Mandela
By not asking you do a
disservice to the person
concerned say your boss,
your colleague or your
friend.
How?

Babcock and Laschever, Women Dont Ask

 You deprive him the
pleasure of giving
You deprive him of useful
information
Preparing for Negotiation
 Preparation
Most people take the path of least
resistance. Preparation is one of the first
places that busy people cut corners.
Therefore, you can give yourself an
enormous advantage just by taking the time
and expending the effort to prepare
properly for a negotiation.
 Elements of Preparation
Information gathering about parties,
history of issues (interview people who
have done negotiation in the past)
Analysis Preference, interest and
alternatives
Planning generating options, combining
them into packages, anticipating actions,
envisioning possible responses
 Downside of preparation
Resource limit time, money, access to
data
Informational limit uncertainty,
ambiguity, deception are common
(Negotiations are non linear phenomenon- a minor change in
initial condition can have major consequences on the
subsequent conditions, e.g. not shaking hands well)
Cognitive limits you get anchored to initial
assessment
Rethinking Preparation in Negotiation, HBS, 9-801-286
Problems with preparation

Mistaken assumptions and beliefs

may be risky
Selective perception results into
less careful listening
Preparing for Emotions

How do you want to feel going into the

negotiation? Why?

Relaxed
Focused
Confident
Composed
Alert
Bit on edge
Energetic

What can you do beforehand to put yourself in

an ideal emotional state?
What can throw you off balance during
negotiation?

What can you do in the midst of a

negotiation to regain your balance?

How do you want to feel when finished?

(satisfied, it means things are not fully under your control)

Negotiating with Emotions, HBR, Jan/Feb 2013

 Approach to the Subject

Most people think bargaining and negotiation

mean the same thing; however, the difference can
be seen in the following way:
Bargaining: describes the competitive, win-lose
situation
Negotiation: refers to win-win situations such as
those that occur when parties try to find a
mutually acceptable solution to a complex conflict
 Characteristics of a
Negotiation Situation
There are two or more parties
There is a conflict of needs and desires between
two or more parties
Parties negotiate because they think they can get
a better deal than by simply accepting what the
other side offers them
Parties expect a give and take process
 Negotiations

Negotiations occur for several reasons:

To agree on how to share or divide a limited
resource
To create something new that neither party
could attain on his or her own
To resolve a problem or dispute between the
parties
 Characteristics of a
Negotiation Situation
Parties search for agreement rather than:
Fight openly
Capitulate
Break off contact permanently
Take their dispute to a third party
Successful negotiation involves:
Management of tangibles (e.g., the price or the terms of
agreement)
Resolution of intangibles (the underlying psychological
motivations) such as winning, losing, saving face
 Understanding the Flow of
Negotiations: Stages and Phases
Negotiation proceeds through distinct phases or
stages
Beginning phase (initiation)

Middle phase (problem solving)

Ending phase (resolution)

 Preparation: Self-Assessment
What do I want?
Under-aspiring
Over-aspiring
Grass is greener on the other side
What is my alternative to reaching agreement in this
situation (BATNA)?
Be aware of focal point
Be aware of sunk costs
Identify the issues and alternatives
Assess your risk propensity

People are generally risk averse when gains are involved and are
risk seeking when losses are involved.

The mind and heart, p. 10-18

Preparation: Assessing the Other Party
Who are the other parties?
Are the parties monolithic?
What is the background of the other parties?
Other negotiators BATNAs
 Preparation: Assessing the Situation
Is the negotiation one-shot, long-term, or repetitive?
Do the negotiations involve scarce resources, ideologies, or
both?
Is the negotiation one of necessity or opportunity?
Is the negotiation an exchange or dispute situation?
Are there linkage effects?
Is agreement required?
Are there time constraints or other time-related costs?
Where do the negotiations take place?
Are negotiations public or private?
Is third-party intervention a possibility?
Are there conventions in terms of the process of negotiation?
Do negotiations involve more than one offer?
Is there a power differential between parties?
Is precedent important?
 Positive Bargaining Zone
Sellers Bargaining Range

Positive Bargaining Zone

Buyers Bargaining Range

$5 $10 $15 $20

ST, Sellers Target Point

BR, Buyers Reservation Point

SR, Sellers Reservation Point

BT, Buyers Target Point
 Bargaining Surplus
Sellers Bargaining Range

Negative Bargaining Zone

Buyers Bargaining Range

$5 $10 $15 $20

ST, Sellers Target Point

SR, Sellers Reservation Point

BR, Buyers Reservation Point

BT, Buyers Target Point
Basic Rules of Negotiation
Remain Focused
Know the other party
Be Reasonable
 Use your words carefully

Those who write history with words

often forget that history is made with
words
Loose lips sink ships.

Jet airways
Pilots are
Compliment

You can accomplish almost anything so

long as you dont care who gets the
credit.

Flattery is the infantry of negotiation. -

Lord Chandos
 Sense of Humor
A sense of humor is a tremendous asset to any
dealmaker.
When negotiations begin, everyone is a little
nervous. It's natural. With tensions running high,
there's no better social lubricant than humor. As
Victor Borge once said, "Laughter is the shortest
distance between two people."
As discussions grind on, humor brings perspective
and can stimulate creative solutions, like this one:
"I wanted a new TV. My wife wanted a new car.
So we compromised. We got the TV, but keep it in
the garage."
 Use Creativity

Lamp post added value and cards and Roosevelt case in

six habits of effective negotiator
Strategy and Tactics of
Distributive Bargaining
 The Distributive Bargaining
Situation
Goals of one party are in fundamental,direct
conflict to another party
Resources are fixed and limited
Maximizing ones own share of resources is
the goal
 The Distributive Bargaining
Situation
Preparationset a
Target point, aspiration point
Walkaway, resistance point
Asking price, initial offer
 The Distributive Bargaining
Situation
Party A - Seller

Walkaway Point Target Point Asking Price

Rs 400 Rs 500 Rs 600

Initial Offer Target Point Walkaway Point

Rs 350 Rs 450 Rs 550

Party B - Buyer
 The Role of Alternatives to a
Negotiated Agreement

If there are no attractive alternatives:

Negotiators have much less bargaining power
 Fundamental Strategies
Push for settlement near opponents resistance
point
Get the other party to change their resistance
point
If settlement range is negative, either:
Get the other side to change their resistance point
Modify your own resistance point
Convince the other party that the settlement is
the best possible alternative
 Keys to the Strategies

The keys to implementing any of the four

strategies are:
Discovering the other partys resistance
point *
Influencing the other partys resistance
point*
 Classified
For sale: Honda City 1.5 E MT 2004 model.
Silver color, show room condition, new
tyre, battery. Price 530,000
 Assessing the other partys resistance point *

Indirect Assessment find information used by the

opponent to determine (unions fund position,
manufacturers inventory position, property on sale
for the duration etc)
Direct Assessment Opponent reveals so that it is
not considered as a bargaining ploy (show wallet).
Provoking the other party into an angry outburst
hoping slip of tongue.
Influencing the other partys resistance point*

Highlight the cost of delay

Show little interest in the thing your opponent
perceives valuable
Highlight the value of the thing that you offer
 Tactical Tasks of Negotiators
Assess outcome values and the costs of
termination for the other party
Manage the other partys impressions
Modify the other partys perceptions
Manipulate the actual costs of delay or
termination
Assess Outcome Values and the Costs
of Termination for the Other Party
Indirectly
Determine information opponent used to set:
Target
Resistance points
Directly
Opponent reveals the information
 Manage the Other Partys
Impressions
Screen your behavior:
Say and do as little as possible

Direct action to alter impressions

Present facts that enhance ones position
 Modify the Other Partys
Perceptions
Make outcomes appear less attractive
Make the cost of obtaining goals appear higher
Make demands and positions appear more or
less attractive to the other party whichever
suits your needs
 Manipulate the Actual Costs of
Delay or Termination
Plan disruptive action
Raise the costs of delay to the other party
Form an alliance with outsiders
Involve (or threaten to involve) other parties
who can influence the outcome in your favor
Schedule manipulations
One party is usually more vulnerable to
delaying than the other
Strategy And Tactics of
Integrative Negotiation
Tactics for integrative negotiations
Inquire about the other side's interests. Ask what the other
party's needs, interests, and concerns are, and determine the
party's willingness to trade off one thing for another. Listen
carefully, because the responses you get can reveal valuable
information that can help you. Be forthcoming about your own
needs, interests, and concerns.
Provide significant information about your circumstances.
Explain why you want to make a deal. Talk about your real
interests, preferences among issues or options, and business
constraints. Reveal any additional capabilities or resources you
have that might meet their interests and could be added to the
deal.
Look for differences to create value. When you and the other party
understand each other's needs and interests, it's more likely that you'll be able
to reach a mutually satisfying outcome. Sometimes such an outcome can be
carved from the differences between you. By trading on differences, you
create value that neither of you could have created on your own.
For example, consider Martha, who owns both a retail store and a restaurant.
She is negotiating with an interior designer about renovating her restaurant.
She agrees to pay a somewhat higher price than planned for the restaurant
design; in exchange, the designer will order fixtures and furnishings for the
retail store at his trade discount. The owner would not otherwise have ready
access to these discountsyet providing them costs the designer nothing.
Value has been created for both sides.
Take your time. Don't be tempted to close the deal too quickly, especially
when the first acceptable proposal is on the table but little information has
been exchanged. Spend more time finding a deal that is better for both sides.
Signal that the proposal on the table is worth considering, but also state that it
may be improved by learning more about your respective interests and
concerns.
 What Makes Integrative
Negotiation Different?
Focus on commonalties rather than differences
Address needs and interests, not positions *
Commit to meeting the needs of all involved
parties
Exchange information and ideas
Invent options for mutual gain
Use objective criteria for standards of
performance
 Key Steps in the Integrative
Negotiation Process
Identify and define the problem
Understand the problem fully
identify interests and needs on both sides
Generate alternative solutions
Evaluate and select among alternatives
 Identify and Define
the Problem
Define the problem in a way that is mutually
acceptable to both sides
State the problem with an eye toward practicality and
comprehensiveness
State the problem as a goal and identify the obstacles
in attaining this goal
Depersonalize the problem
Separate the problem definition from the search for
solutions
Understand the Problem Fully
Identify Interests and Needs
Interests: the underlying concerns, needs,
desires, or fears that motivate a negotiator
Substantive interests relate to key issues in the
negotiation
Process interests are related to the way the dispute
is settled
Relationship interests indicate that one or both
parties value their relationship
Interests in principle: doing what is fair, right,
acceptable, ethical may be shared by the parties
 Generate Alternative
Solutions
Invent options by redefining the problem set:
Expand the pie
Logroll
Use nonspecific compensation
Cut the costs for compliance
Find a bridge solution
Generate options to the problem as a given:
Brainstorming
 Evaluation and Selection
of Alternatives
Narrow the range of solution options
Evaluate solutions on:
Quality
Objective standards
Acceptability
Agree to evaluation criteria in advance
Be willing to justify personal preferences
Be alert to the influence of intangibles in
selecting options
Use subgroups to evaluate complex options
 Evaluation and Selection
of Alternatives
Take time to cool off
Explore different ways to logroll
Exploit differences in expectations and risk/ time
preferences
Keep decisions tentative and conditional until a
final proposal is complete
Minimize formality, record keeping until final
agreements are closed
 Factors That Facilitate Successful
Integrative Negotiation
Some common objective or goal
Faith in ones own problem-solving ability
A belief in the validity of ones own position
and the others perspective
The motivation and commitment to work
together
Factors That Facilitate Successful
Integrative Negotiation
Trust
Clear and accurate communication
An understanding of the dynamics of
integrative negotiation
 Why Integrative Negotiation
Is Difficult to Achieve
The history of the relationship between the
parties
If contentious in past, it is difficult not to look at
negotiations as win-lose
The belief that an issue can only be resolved
distributively
Negotiators are biased to avoid behaviors necessary for
integrative negotiation
 Why Integrative Negotiation
Is Difficult to Achieve
The mixed-motive nature of most negotiating
situations
Purely integrative or purely distributive situations
are rare
The conflict over the distributive issues tends to
drive out cooperation, trust needed for finding
integrative solutions