Negotiation sessions final

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NEGOTIATION

AIBS INTRODUCTION

Negotiation is the process of bargaining, Where two parties ,trying to reach an agreement on mutually accepted terms to acquire each others wants.

Example:

- Buyer trying to negotiate with supplier over a price of a product.

- Negotiation for salary between

employee & employer.

AIBSDEFINITIONS OF NEGOTIATION

In the words of Bill Scott ,” a negotiation is a form of meeting between two parties: OUR PARTIES & OTHER PARTIES”.

According to J.A. Wall, ”negotiation is a process in which two or more parties exchange goods or services and attempt to agree on the exchange rate for them.”

Winston’s Advanced Dictionary,” the discussions & bargaining that goes on between parties before a contract is

settled or deal is agreed upon”.

AIBSNATURE OF NEGOTIATION

It requires involvement of two parties. Requires flexibility. A process not an event. Needs effective communication. Continuous process( i.e. between buyer & seller,

employer & employee for wages, working hours etc) Win- win situation for parties involved.

AIBSP’s OF NEGOTIATION

Personalities : negotiator initiating negotiation must have convincing power, effective communication skills, can influence people & process of negotiation.

Pace : main points should be covered in discussions, also proper breaks must be introduced to maintain interest of peoples involved.

Plan : main agenda on which negotiation is to be carried on.

Purpose : aim is required otherwise it will result in wastage of money, manpower & time.

Like P’s of Marketing, essentials of negotiation are called as P’s of negotiation. They are as follows:

AIBSFACTORS AFFECTING NEGOTIATION

• PLACE: Familiarity with surrounding helps in boosting confidence.

• TIME: Time should be adequate for smooth exchange of ideas & securing agreement before it is to late .

• ATTITUDE: Attitude of both parties should be positive, i . e, willingness to make an agreement or deal.

SUBJECTIVE FACTORS: Like relation of two parties involved, status difference, information & expertise.

AIBSTHE NEGOTIATION PROCESS

PREPARATION AND PLANNING

DEFINITION OF GROUND RULES

CLARIFICATION AND JUSTIFICATION

BARGAINING AND PROBLEM SOLVING

CLOSURE AND IMPLIMENTATION

AIBSNEGOTIATION PROCESS

OFFER

COUNTER OFFER

CONCESSIONCOMPROMISE

AGREEMENT

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OFFER: First proposal made by one party to another in the negotiation stage.

COUNTER OFFER: Offer made by second party to first party, or proposing their offer against first party offer.

CONCESSION: Increase or decrease made in the offer or change in the idea.

COMPROMISE: Sacrifice made by both or one party. AGREEMENT: Point where both parties agrees,

which is beneficial to both.

AIBSThe Result of a Negotiation

• Loss/Loss : Take the cake away so that neither party gets it.

• Win/Lose : Give it to one party or cut it unevenly.• Draw : Cut the cake down the middle.• Win/Win : Make two cakes which are of a much

larger size than the present size.

AIBSGuidelines For Successful Negotiations

Positive Attitudes Narrow down to few points of dispute /conflict controversyStep By step approachFind out the other parties state of mind culture background's Likes & dislikes

Hide your prove desireDon’t disclose your deadlinesThink before you speakKnow your market informationBring your own expert

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NEGOTIATION STRATEGIES

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• NEGOTIATION GOALS• PROCESS OF STRATEGY DETERMINATION

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NEGOTIATION STRATEGIES

Strategy is the overall approach for conducting the negotiation.

Tactics are particular actions used to implement a strategy.

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NEGOTIATION STRATEGIES

Whereas a strategy provides the overall approach used throughout the negotiation, a tactic is particular action used at a specific time during the negotiation to serve a more limited role or purpose.

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NEGOTIATION GOALS

Categories of goals which in turn affect the negotiator’s choice of strategy and tactics.

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Categories of Negotiation Goals

Aggressive goalsCompetitive goalsCooperative goals Self-centered goalsDefensive goalsCombinations of goals

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AGGRESSIVE GOALS

Seeks to undermine, deprive, damage or otherwise injure a rival or opponent.

Example: Taking a customer or supplier away from a competitor in order to hurt the competitor.

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AGGRESSIVE GOALSAggressive goals seek to damage an opponent.

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COMPETITIVE GOALS

One side seeks to gain more from the negotiation than the other side.

In fact the negotiator hopes to obtain as large a comparative advantage as possible.

Example:Receiving the highest possible price.Paying the lowest possible price.

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COMPETITIVE GOALSA competitive goal means getting more than the other party.

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COOPERATIVE GOALS Cooperative goals are achieved through an agreement that leads to mutual gain for all negotiators and their respective sides. This achievement is also referred to as win-win negotiating.

Example: Forming a joint venture, partnership, or corporation to engage in business opportunities to achieve a mutual profit.

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COOPERATIVE GOALS With cooperative goals, agreement leads to mutual gain.

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SELF-CENTERED GOALSSelf-centered goals are those that depend solely on what one’s own side achieves.

• Scenario: two large accounting firms merge. The tremendous size of the new firm raises a self centered goal to find sufficient prestigious space in a single location. The goal is reached when the new firm negotiates a lease for 15 floors in a major midtown New York office building.

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SELF-CENTERED GOALS

Self-centered goals seek a particular result regardless of what the other side receives.

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DEFENSIVE GOALS

One seeks to avoid a particular outcome. Examples:

• Avoiding a loss of respect.• Preventing a strike.• Avoiding the loss of a customer or

supplier.

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DEFENSIVE GOALS

Defensive goals seek to avoid a particular result.

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COMBINATION OF NEGOTIATION GOALS

Each negotiation usually has multiple goals. – Case: In a collective bargaining negotiation, a

transportation firm seeks to have its employees make prompt deliveries in order to maintain its business volume. This is a self-centered goal. A defensive goal is suggested if the maintenance of volume is intended to avoid a loss of customers. The goal is also aggressive to the extent that the same activity lures new customers away from competitors, a result which is likely to weaken the latter.

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PROCESS OF STRATEGY DETERMINATION

Strategies are chosen for use in a particular negotiation in order to achieve your side’s goals. The nature of those goals will affect the choice of strategy or strategies.

A variety of factors determine the best strategy for a negotiating situation.

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PROCESS OF STRATEGY DETERMINATION

The choice of strategy also may be affected by the answers to a number of questions, such as:

• Does the negotiation involve a transaction or a dispute?

• Is there more than one issue involved?• Can new issues be introduced into the

negotiation?• Are the parties’ interests short-term or

long-term?• Are the parties’ relationships long-term, limited to

one negotiation or some where in between?

AIBSNegotiation Strategy: Determination Process

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AIBSMAIN NEGOTIATION STRATEGIES

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• AVOIDANCE STRATEGY• COMPETITIVE STRATEGY• COLLABORATIVE STRATEGY• ACCOMMODATIVE STRATEGY

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MAIN NEGOTIATION STRATEGIES

THE DUAL CONCERNS MODEL How much concern does the actor have

for achieving the substantive outcomes at stake in this negotiation? (substantive goals)

How much concern does the negotiator have for the current and future quality of the relationship with the other party? (relationship goals)

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1. AVOIDANCE STRATEGY(The Nonengagement Strategy)

Reasons of why negotiators might choose not to negotiate:

1. If one is able to meet one’s needs without negotiating at all, it may make sense to use an avoidance strategy.

2. It simply may not be worth the time and effort to negotiate.

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Avoidance Strategy

3. The decision to negotiate is closely related to the desirability of available alternatives.

Alternatives are the outcomes that can be achieved if negotiations don’t work out

4. Avoidance may be appropriate when the negotiator is responsible for developing others into becoming better negotiators.

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Active-Engagement Strategies

• Competition • Collaboration • Accommodation

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2.COMPETITIVE STRATEGY

Distributive Bargaining Win-Lose Bargaining (I win, you lose)

Zero-sum game: whatever extent one party wins something, the other party losses

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Competitive StrategyDistributive Bargaining refers to the process of dividing or distributing scarce resources

Two parties have different but interdependent goalsThere is a clear conflict of interests

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Distributive Bargaining

The essence of Distributive Bargaining is who gets what share of fixed pie.

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Examples of Distributive Bargaining

• A wage negotiation • A price negotiation • A boundary or

territorial negotiation

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Staking Out the Bargaining Zone

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3.COLLABORATIVE STRATEGY

Integrative Bargaining Win-Win Bargaining (I win, you win)

Positive-sum situations are those where

each party gains without a corresponding loss

for the other party.

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Integrative Bargaining

The law of win/win says “Let’s not do it your way or my way; let’s do it the best way”

Greg AndersonThe 22 Non-negotiable

Ways of Wellness

Integrative Bargaining is about searching for common solutions to problems that are not exclusively of interest to only one of the negotiators.

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Concepts for Integrative Bargaining

• Separate people from the problem • Focus on interests, not positions • Invent options for mutual gains • Insist on using objective criteria

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Distributive versus Integrative Bargaining

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4. ACCOMMODATIVE STRATEGY

Win-lose strategy (I lose, you win)The negotiator wants to let the other win,

keep the other happy, or not to endanger the relationship by pushing hard to

achieve some goal on the

substantive issues

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Accommodative Strategy

Accommodative Strategy is often used; When the primary goal of the exchange is

to build or strengthen the relationship and the negotiator is willing to sacrifice the outcome.

If the negotiator expects the relationship to extend past a single negotiation episode.

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• “In a successful negotiation, everyone wins. The objective should be agreement, not victory."

• “The key to successful negotiation is to shift the situation to a "win-win" even if it looks like a "win-lose" situation. Almost all negotiations have at least some elements of win-win. Successful negotiations often depend on finding the win-win aspects in any situation. Only shift to a win-lose mode if all else fails.”

Professor E. Wertheim, College of Business Administration,

Northeastern University

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NEGOTIATION STRATEGIES

1. No-Concessions2. No Further Concessions3. Making Only Deadlock-Breaking

Concessions4. High Realistic Expectations With Systematic

Concessions5. Concede First6. Problem Solving7. Goals Other Than To Reach Agreement8. Moving For Closure9. Combining Strategies

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Perception, Cognition, and Emotion

AIBSPerception, Cognition, and Emotion in

Negotiation

The basic building blocks of all social encounters are:

• Perception• Cognition

– Framing – Cognitive biases

• Emotion

AIBSPerception

Perception is:• The process by which individuals connect

to their environment.

A “sense-making” process

AIBSThe Role of Perception

The process of ascribing meaning to messages and events is strongly influenced by the perceiver’s 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 informationPeople develop shortcuts to process information and these shortcuts create perceptual errors

AIBSPerceptual Distortion

• Four major perceptual errors:–Stereotyping–Halo effects–Selective perception–Projection

AIBSStereotyping and Halo Effects

• Stereotyping: – Is a very common distortion– Occurs when an individual assigns attributes to

another solely on the basis of the other’s membership in a particular social or demographic category

• Halo effects: – Are similar to stereotypes– Occur when an individual generalizes about a variety

of attributes based on the knowledge of one attribute of an individual

AIBSSelective Perception

and Projection

• Selective perception: – Perpetuates stereotypes or halo effects– The perceiver singles out information that supports a

prior belief but filters out contrary information

• Projection: – Arises out of a need to protect one’s own self-concept– People assign to others the characteristics or feelings

that they possess themselves

AIBSFraming

• Frames: – Represent the subjective mechanism through which

people evaluate and make sense out of situations– Lead people to pursue or avoid subsequent actions– Focus, shape and organize the world around us– Make sense of complex realities– Define a person, event or process – Impart meaning and significance

AIBSTypes of Frames• Substantive• Outcome• Aspiration• Process• Identity• Characterization• Loss-Gain

AIBSHow Frames Work in Negotiation

• Negotiators can use more than one frame• Mismatches in frames between parties are sources of conflict• Particular types of frames may lead to particular types of arguments• Specific frames may be likely to be used with certain types of issues• Parties are likely to assume a particular frame because of various factors

AIBSInterests, Rights, and Power

Parties in conflict use one of three frames:• Interests: people talk about their “positions” but

often what is at stake is their underlying interests• Rights: people may be concerned about who is

“right” – that is, who has legitimacy, who is correct, and what is fair

• Power: people may wish to resolve a conflict on the basis of who is stronger

AIBS Approaches to Negotiation

Goal

Interests Rights Power

Approach

• Self-interest• Dispute resolution• Understanding others’ concerns

• Fairness• Justice

• Winning• Respect

Temporal focus

Distributive strategies (pie slicing)

Integrative strategies (pie expansion)

Implications for future negotiations and relationship

• Present (what needs and interests do we have right now?)

• Past (what has been dictated by the past?)

• Future (what steps can I take in the future to overpower others?)

• Compromise • Often produces a “winner” and a “loser”; thus, unequal distribution

• Often produces a “winner” and a “loser”; thus, unequal distribution

• Most likely to expand the pie via addressing parties’ underlying needs

• Difficult to expand the pie unless focus is on interests

• Difficult to expand the pie unless focus is on interests

• Resentment• Possible retaliation• Revenge

• Possible court action• Greater understanding• Satisfaction• Stability of agreement

AIBSThe Frame of an Issue Changes as the

Negotiation Evolves

• Negotiators tend to argue for stock issues or concerns that are raised every time the parties negotiate

• Each party attempts to make the best possible case for his or her preferred position or perspective

• Frames may define major shifts and transitions in a complex overall negotiation

• Multiple agenda items operate to shape issue development

AIBSSome Advice about Problem Framing for

Negotiators

• Frames shape what the parties define as the key issues and how they talk about them

• Both parties have frames• Frames are controllable, at least to some degree• Conversations change and transform frames in

ways negotiators may not be able to predict but may be able to control

• Certain frames are more likely than others to lead to certain types of processes and outcomes

AIBSCognitive Biases in Negotiation

• Negotiators have a tendency to make systematic errors when they process information. These errors, collectively labeled cognitive biases, tend to impede negotiator performance.

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Cognitive Biases

• Irrational escalation of commitment

• Mythical fixed-pie beliefs

• Anchoring and adjustment

• Issue framing and risk

• Availability of information

• The winner’s curse• Overconfidence• The law of small

numbers• Self-serving biases• Endowment effect• Ignoring others’

cognitions• Reactive devaluation

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Irrational Escalation of Commitment and Mythical Fixed-Pie Beliefs

• Irrational escalation of commitment– Negotiators maintain commitment to a course of

action even when that commitment constitutes irrational behavior

• Mythical fixed-pie beliefs– Negotiators assume that all negotiations (not just

some) involve a fixed pie

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Anchoring and Adjustment and Issue Framing and Risk

• Anchoring and adjustment – The effect of the standard (anchor) against which

subsequent adjustments (gains or losses) are measured

– The anchor might be based on faulty or incomplete information, thus be misleading

• Issue framing and risk– Frames can lead people to seek, avoid, or be neutral

about risk in decision making and negotiation

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Availability of Informationand the Winner’s Curse

• 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• The winner’s curse

– The tendency to settle quickly on an item and then subsequently feel discomfort about a win that comes too easily

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Overconfidence and The Law of Small Numbers

• Overconfidence– The tendency of negotiators to believe that their ability

to be correct or accurate is greater than is actually true

• The law of small numbers– The tendency of people to draw conclusions from

small sample sizes – The smaller sample, the greater the possibility that

past lessons will be erroneously used to infer what will happen in the future

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Confidence or Overconfidence?

We came to Iceland to advance the cause of peace. . .and though we put on the table the most far-reaching arms control proposal in history, the General Secretary rejected it.

President Ronald Reagan to reporters, following completion of presummit arms control discussions

in Reykjavik, Iceland, on October 12, 1986.

I proposed an urgent meeting here because we had something to propose. . .The Americans came to this meeting empty handed.

Secretary General Mikhail Gorbachev,Describing the same meeting to

reporters.

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Self-Serving Biasesand Endowment Effect

• Self-serving biases– People often explain another person’s behavior by

making attributions, either to the person or to the situation

• Endowment effect– The tendency to overvalue something you own or

believe you possess

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Ignoring Others’ Cognitionsand Reactive Devaluation

• Ignoring others’ cognitions– Negotiators don’t bother to ask about the other party’s

perceptions and thoughts– This leaves them to work with incomplete information,

and thus produces faulty results

• Reactive devaluation– The process of devaluing the other party’s

concessions simply because the other party made them

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Managing Misperceptions and Cognitive Biases in Negotiation

The best advice that negotiators can follow is:

• Be aware of the negative aspects of these biases

• Discuss them in a structured manner within the team and with counterparts

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Mood, Emotion, and Negotiation

• The distinction between mood and emotion is based on three characteristics:– Specificity– Intensity– Duration

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Mood, Emotion, and Negotiation

• Negotiations create both positive and negative emotions

• 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

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Mood, Emotion, and Negotiation

• 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

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Mood, Emotion, and Negotiation

• Negative emotions generally have negative consequences for negotiations– They may lead parties to define the situation as

competitive or distributive– They may undermine a negotiator’s 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

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Mood, Emotion, and Negotiation

• 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

• Effects of positive and negative emotion– Positive emotions may generate negative outcomes– Negative feelings may elicit beneficial outcomes

• Emotions can be used strategically as negotiation gambits