NEGOTIATION

(COMPREHENSIVE)
T Mohan Kumar Click to edit Master subtitle style State Bank Staff College Hyderabad

4/15/12

What is Negotiation?

Negotiation can be defined in practical terms as making ones way around, for example, Negotiating the traffic when driving to office. Various forces, such as, a)conflicting, b)competing, c)impeding and d)enabling factors, make negotiation unavoidable. When driving, a)others driving in different directions /speeds, b)those 4/15/12 wishing to overtake us,

Who Negotiates?

Everyone negotiates - sometimes with situations, when we become impersonal, driven by our interests or needs alone, or - with others, when we have no choice but to get personal, having to take in to consideration their interests or needs too
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In the example of driving, the

Why?

We negotiate because we have needs to be met or interests to be furthered. Others come to the negotiation with us for similar reasons from their sides. Sometimes, the negotiating parties mistake their positions relating to the issue for their interests in the issue.
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How?

How one negotiates depends on a number of factors - Personalities of the negotiators - Styles of the negotiators - Skills of the negotiators - Situation of negotiation - Stances of the negotiators - Preparation for negotiation
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Personality

Differences in personality lead to differences in approaches to negotiation. Important personality variables are - Self esteem and confidence - Trust in others - Values and beliefs - Emotional intelligence - OCEAN (openness, conscientiousness, 4/15/12 extroversion, agreeableness &

Styles

While various theories and interpretations exist for styles of negotiation, in this presentation, the Thomas Kilmann Conflict Mode classification is adopted. According to this model, there are 5 styles : - Avoiding - Accommodating - Compromising 4/15/12

Negotiation Styles
ACCOMMODATING CONCERN FOR OTHERS COLLABORATING

COMPROMISING

AVOIDING

COMPETING

CONCERN FOR SELF

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Avoiding
Strength Shows indifference nWill assess risk first nHas low needs
n

Weakness Cannot make decisions nDislikes negotiating nFails to prepare nIs not comfortable with people /differences
n

Best for Avoiding entry into bad deals nTesting the market when issues are trivial nRelationship is insignificant nAvoiding no win situation
n

Accommodating
Strength Seeks relationship nShows concern for others nValues friendship
n

Weakness Wants to be well liked nConcedes easily nPreserves relationships at own expense nGives too much away
n

Best for
Seeking entry into new markets nDealing with relationship oriented markets nWhen you are powerless but have no wish to block the other person nWhen you realize you are wrong
n

Compromising
Strength Makes quick decisions nLikes making deals nHas no strong positions nIs easy to deal with nIs open to counter proposals
n

Weakness Is win-lose oriented nAccepts lower outcomes nIs satisfied with quick results nIs short term oriented nGives in easily
n

Best for Cooperation is important but time & resources are ltd. nWhen finding even sub-optimal solution is better than a stalemate nIssues that are not considered important nBreaking deadlocks nRestarting discussion
n

Competing
Strength Is a risk taker nCares for own needs nControls discussions nIs persuasive /persistent nEnjoys pressure
n

Weakness Is not interested in other party nIs mostly short term oriented nIs unwilling to shift positions nIs poor listener nLeads to frequent breakdowns
n

Best for Emergency decisions nYou are right and being right is more important than preserving relationships nCompetitive Markets nWhen similar styles are used
n

Collaborating
Strength
n

Weakness

Best for

nLong term deals Shares information nIs a slow nCreates values decision maker nRepeat business nIs win-win oriented nCan be nComplex unrealistic at nSeeks win-win negotiations times nImportant Deals deals nTakes time nDevelops options nRequires nIs good listener thorough nAsks a lot of preparation questions

Skills

Negotiation skills which need to be inherent or developed are:

Preparation and planning skill Knowledge of the subject Ability to think clearly and rapidly under pressure and uncertainty

Ability to express thoughts 4/15/12

Situation

Situation could refer to the type of negotiation possible, namely - Distributive or - Integrative or Other situational variables such as - Place (venue) - Time (deadlines etc.) - Pressure of other factors, etc.
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Situation Distributive Negotiation

Parties compete over the distribution of a fixed sum of value. The key question in a distributed negotiation is, Who will claim the most value? A gain by one side is made at the expanse of other. The Sellers goal is to negotiate as high a price as possible; the Buyers goal is to negotiate as low a price as 4/15/12 possible.

Situation Integrative Negotiation

In Integrative Negotiation, parties cooperate to achieve/ maximize benefits by integrating their interests into an agreement. This is also known as a win-win negotiation. The key questions is: How can the resource be best utilized? Integrative negotiations tend to occur in following situations: Structuring of complex long-term 4/15/12 Strategic Relationships or other

DISTRIBUTIVE VERSUS INTEGRATIVE NEGOTIATIONS

Characteristic Outcome Motivation Interests Relationship Issues involved Ability to make trade-offs Solution
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Distributive Win-lose Individual gain Opposed Short-term Single Not Flexible Not creative

Integrative Win-win Joint and individual gain Different but not always Opposite Longer or Shortterm Multiple Flexible Creative

Stances

Negotiation succeeds or fails depending on various factors. Some of the stances adopted by negotiators are: Rigid vs Flexible Position vs Interest Closed vs Open One way vs Two way

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Most stances come from habit and

PREPARATION Information
Research both/all parties Analyze the basis of power for both Do SWOT for both Prepare questions in advance What is the BATNA of the opponent What is their awareness in regard to your issues and needs Brutally admit to assumptions and biases 4/15/12

BATNA
BATNA is an acronym for:

Best Alternative To
a
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Negotiated

Why BATNAs Matter

BATNAs tell you when to accept and when to reject an agreement

When a proposal is better than your BATNA: ACCEPT IT When a proposal is worse than your BATNA: REJECT IT

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BATNA

Best Alternative to a Negotiated Agreement Develop your BATNA

List your alternatives Evaluate your alternatives Establish your best as your BATNA

Consider their BATNA Have a Reservation Point the least you 4/15/12 will accept

BATNA- Best Alternative to a Negotiated Agreement

Ideal----------------------------------A
Negotiations Zone

Intend---------------------------------B

Must avoid--------------------------- C
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BATNA
Example

AExample: person goes for [Showroom car salesman purchase. V/s customers] [To negotiate with

showroom sales man for lesser price]

The salesman is not agreeing 4/15/12

Bargaining Zone Model of Negotiation

Your initial point Your target point Your resistanc e point

Area of potential agreeme nt Opponents resistance point

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Opponent s target point

Opponents initial point

EXAMPLE

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PREPARATION Concessions

Where can we be flexible? What concessions can we make? What can we give in order to what we want TRADE What value the concessions have to the other party? What will you ask in return?
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PREPARATION Strategy

Keep it SIMPLE and FLEXIBLE Avoid confusing strategy ( means) with objectives ( objectives) E.g. Take the train ( strategy ) to London (objectives ). If you meet a gate adjourn or reconsider .

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PREPARATION Tasks

Leader- conducts the negotiation, gives information, expresses opinions, makes proposals, trades concessions. Summarizer- asks questions to test understanding, draws attention to , clarifies , summarizes to buy thinking time, confirms areas of disagreement and agreement . Does NOT give personal opinions, information's, and concessions. Observer- watches, listens, records and tries to understand the motivation , concerns, priorities, & inhibitions. Sometimes, same person will do all the

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Eight Steps of Negotiations

Prepare Organize Propose Package Bargain/ Discuss/ Analyze Agree Close Adjourn

EFFECTIVE NEGOTIATION

Successful relationships are built on communication and trust. Lack of trust leads to win-lose or lose-lose result. Negotiation is one way of creating trust or deciding whether trust is justified. 4/15/12

The Negotiators Dilemma

B Cooperates A Cooperates Both cooperate Both have a good outcome B Competes A Cooperates B Competes A has terrible outcome, B has great outcome A Competes A Competes B Cooperates A has great outcome, B has terrible outcome Both compete Both have mediocre outcome

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NEGOTIATION TIPS
1)

Do not underestimate your power. Do not assume that other party knows your weaknesses. It is a mistake to assume you know what the other party wants. Never accept the 1st offer. Dont fear to negotiate.

2)

3)

4) 1)

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THIRD-PARTY NEGOTIATIONS
1. 2. 3. 4. 5.

Investigation Mediation Conciliation Arbitration Adjudication

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HAPPY NEGOTIATING !
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4/15/12