Presented by

- VAL JIWA- FULL-TIME MBA

Master of Business Administration(MBA)

2007 ELECTIVE

2

2

Table of contents

Abstract 4

1. Introduction 5

2. Issues and parties 6

3. Process 9

4. Literature Review 11

5. Conclusion 15

References 16

Appendix 1 17

Appendix 2 18

3

3

Abstract

Collins Compact Dictionary defines negotiation as “a talk with others in order to reach an

agreement”. Why did Jina want to take up the offer of Company X? In retrospect, the

solution seemed obvious to Marshal and Jina. Negotiation was once considered an art

practiced by the naturally gifted. To some extent it still is, but increasingly we, in the

business world, have come to regard negotiation as a science – built on creative

approaches to deal making that allow everyone to walk away winners of sorts. Analyzing

the case of Marshal and Jina that was mentioned at the beginning of this paper, an

investigative mind-set of the boss made him ask all the right and relevant questions and

finally the question why which enabled him to come up with a solution to their problem.

However, as Coutu opined, that one can’t help feeling that the scholarly ink and

classroom simulations don’t do enough to prepare businesspeople for the really tough

negotiations – the ones where failure is not an option.

4

4

1. INTRODUCTION

Collins Compact Dictionary defines negotiation as “a talk with others in order to reach an

agreement”. In other words, negotiation does not happen without a talk. A talk in this

respect essentially means discussing and asking the right questions in order to derive at

the right or optimal solution. By asking the right questions, you can at least avoid making

the wrong decisions or walk away from bad bargains. By asking the right questions, one

can practice to become a skilled negotiator as the right answers put together should

enlighten one to arrive at the right conclusions and find a solution that is favorable to

both or all parties concerned.

A healthy negotiation is one that takes into consideration the well-being of all parties

concerned and strives to achieve that by understanding the inherent problems. It is very

difficult, if not impossible, to arrive at a favorable position if one or more parties are not

on the same platform or are trying to outdo each other and find a solution that is favorable

only to them. Is such a case, negotiation becomes extremely strenuous and requires the

expertise and skill of a better qualified negotiator. Not only does this consume a lot of

time but it can also in some case become a costly affair. For example, in the case of a

5

5

married couple, when the mother of the child denies visitation rights to the father of the

child, the situation can become very emotional as well as costly to both the parties

concerned as the court has to intervene.

In the next chapter, we’ll have a look at a real life situation where two colleagues,

Marshal and Jina, were caught up in a dilemma in their lives just when they decided to

pursue their career.

2. ISSUES AND PARTIES

Marshal and Jina are colleagues who worked in the same department in an airline office.

More than colleagues there were also the best of friends. They had a wonderful and

healthy working relationship devoid of any office politics. They have been working in the

same department for five years in the same position. Having worked for so long, they

both had enough and more experience to move forward and pursue for the next high rung

of the corporate ladder. Both of them aspired and dreamt about getting a higher position

and climbing the ladder.

One day they sat and talked about it and decided to work towards it. The alternatives they

had were either to aim for a promotion within the organization or get a higher paying job

elsewhere in another organization. On second thoughts they decided to try both and take

whichever comes first. They both prepared impressive CVs and posted them in various

recruitment agencies. They also went about enquiring informally about job vacancies and

6

6

even told their boss, who was the General manager of the company, that they would be

interested in climbing the corporate ladder and to consider their case if they were any

openings within the organization. The boss was a very understanding man who promised

very sincerely to consider them if there were any openings in the higher positions. After

doing their part, both Marshall and Jina decided to wait it out until they were called out

for interviews.

The following month, there was an announcement within the organization that the airlines

were opening up new destinations. Hence the CEO of the airline wanted the sales target

of the company to be up by 40%. This would imply sweating out the sales force and

hiring more of them. As such Marshal and Jina were both asked by the General Manager

to apply for the job. They were both thrilled and gladly did so. While they were waiting,

Jina was called by another airline company, who we’ll call here company X, for an

interview. Jina began preparing for the interview and was very confident on the morning

when she appeared for the interview. The interview went very well and Gina was told by

Company X that they would contact her 2 weeks later.

Meanwhile, much to both of their surprise, Marshal too got called out for an interview by

the airline company where they were working. His interview went very well too. Both

Marshal and Jina were on top of their world when they heard the news the following

week that they got selected for the positions that they applied for because both of them

stood out among the other candidates because of their experience and performances. They

went about celebrating and informing their friends and families about the good news. Jina

7

7

was given a time of one month to hand in her resignation and join the new company.

However, Marshal was given only two weeks before he could join his colleagues in the

new department.

However, the bombshell came unexpectedly. The General Manager of the company

decided that he could not afford to lose two very experienced people from the same

department without filling up the same. This would mean a huge loss for the company in

terms of customer service. Customers would suffer which the company could not afford

to do so at this stage when they needed more of them to fill up the extra flights flying to

the new destinations. Moreover, the Commercial Director of the company, whom the

General Manager reported to, would not allow such a scenario.

This would mean bringing in people from other lower departments to fill the gap within

this department. However, the glitch was that in order to handle this department, the

workers would have to undergo three months of training. As Marshal and Jina could not

wait for that long, they started panicking. On one hand, Company X was pressurizing Jina

to respond to them immediately and, on the other hand, Marshal was given an ultimatum

to either stay in the same department or to accept the offer of promotion.

Marshal and Jina were in a dilemma. They did not want to jeopardize their career on

account of this, a golden opportunity which they were preparing for and had waited for

all this while, neither did they want to kick out the company that they so long worked for

and who was loyal to them as well.

8

8

Once again they sat and talked about how to go about it. They couldn’t come to a

conclusion. Both of them were feeling bad to let the other person down. At the same time,

the chances being offered were also too good to be true.

3. PROCESS

Marshal and Jina then decided to approach their boss and ask for help and advice, being

the kind and reasonable man that he was. The boss on hearing their story was also in a

dilemma. The negotiation seemed to be at a dead end, with the boss out of ideas for

pushing through a deal. So they were both asked to come back the next day by when the

boss would have a solution to their problem. The boss, who was known within the

company as a gifted negotiator, here then decided to act as a negotiator between them and

try and solve the problem by offering them a couple of choices.

The next day Marshal, Jina and the boss sat at the negotiating table. The boss decided to

ask them a couple of questions. Then he asked the final question to Jina: Why? Why did

Jina want to take up the offer of Company X? The response surprised the boss. Company

X was offering Jina a double promotion and a slightly higher salary. Marshal, on the

other hand, was offered a small promotion and double the salary by the same company in

another department.

Armed with this knowledge, the boss proposed a solution that allowed both Marshal and

Jina to quickly wrap up a deal. Marshal would give Jina 10% of his salary every month

9

9

which would amount to more than what Company X was offering Jina and a verbal

commitment by the company to promote her the next time when the vacancy arrived

provided Jina trains enough people to take over her department.

In retrospect, the solution seemed obvious to Marshal and Jina. But both of them assumed

that they understood each other’s motivations and, therefore, didn’t explore them further.

Both were trying to find a solution to a problem that was not fully diagnosed. All it took

them is do was define the problem and ask the question why. The boss on the other end

probed and decided to ask questions and got all the relevant and critical answers out of

Jina. He even attempted to ask what the deal of Company X was. This enabled him to

come to the conclusion that money was the prime motivation for Jina to take up the offer

which is exactly what the boss then offered her.

The boss succeeded in this case because he challenged the underlying assumptions which

then motivated him to enter into talks with both the parties. In other words, framing the

right questions would bring out the right answers necessary to find the solution to the

problem.

Though every case scenario may not be as simple as the above, the rule of thumb is to get

as much information as possible and challenge underlying assumptions. It would also

help if one can find out the causes of the problem.

10

10

4. LITERATURE REVIEW

Negotiation was once considered an art practiced by the naturally gifted. To some extent

it still is, but increasingly we, in the business world, have come to regard negotiation as a

science – built on creative approaches to deal making that allow everyone to walk away

winners of sorts. Executives have become experts at “getting to yes”, as the now-familiar

terminology goes. Nevertheless, some negotiations stall or worse, never get off the

ground (Kolb & Williams, 2001).

The best way to get what you’re after in a negotiation – sometimes the only way –

is to approach the situation the way a detective approaches a crime scene.

- Malhotra and Bazerman (2007)

Malhotra et al. (2007) in their article “Investigative Negotiation” delineates five

principles underlying investigative negotiation and show how they appear in myriad

situations. In nutshell, they are as follows:

1) Don’t just discuss what your counterparts want – find out why they want it.

2) Seek to understand and mitigate the other side’s constraints.

3) Interpret demands as opportunities.

4) Create common ground with adversaries.

5) Continue to investigate even after the deal appears to be lost.

11

11

Negotiation informs all aspects of business life. But the costs of failure can be high

(Coutu, 2002). Sebenius (2001) reckons many negotiators know a lot about negotiating

but still fall prey to a set of common errors. The best defense is staying focused on the

right problem to solve. In his famous article titled “Six Habits of Merely Effective

Negotiators”, Sebenius outlines the six common mistakes that keep even experienced

negotiators from solving the right problem. They are the follows:

1) Neglecting the other side’s problem: Since the other side will say yes to its

reasons, not yours, agreement requires understanding and addressing your

counterpart’s problem as a means to solving your own.

2) Letting price bulldoze other interests: Negotiators who pay attention exclusively

to price turn potentially cooperative deals to adversarial ones.

3) Letting positions drive out emotions: Great negotiators understand that the dance

of bargaining positions is only the surface game; the real action takes place when

they’ve probed behind positions for the full set of interests at stake.

4) Searching too hard for common ground: Many of the most frequently overlooked

sources of value in negotiation arise from differences form the parties.

5) Neglecting BATNAs: The real negotiation problem should be “real versus

BATNA”, not one or the other in isolation.

6) Failing to correct for skewed vision: You may be crystal clear on the right

negotiating problem – but you can’t solve it correctly without a firm

understanding of both sides’ interests, BATNAs, valuations, likely actions, and so

on.

12

12

Savvy negotiators not only play their cards well, they design the game in their favor even

before they get to the table. In their analysis of hundreds of negotiations Sebenius & Lax

(2003) uncovered barriers in three complementary dimensions. The fist is tactics; the

second is deal design; and the third is setup (See Appendix 1). Following three

paragraphs are excerpts from their article titled “3-D Negotiation: Playing the Whole

Game” that describes in great deal that negotiations succeed or fail based on the attention

executives pay to these three common dimensions of deal making.

Tactics are interactions at the bargaining table. The common barriers to yes in this

dimension include a lack of trust between parties, poor communication, and negotiators’

“hardball” attitudes. Useful tips on mastering tactics include reading body language,

adapting your style to the bargaining situation, listening actively, framing your case

persuasively, deciding on offers and counteroffers, managing deadlines, countering dirty

tricks, avoiding cross-cultural gaffes, and so on.

Deal design is the negotiators’ ability to draw up a deal at the table that creates lasting

value. Here negotiators work to diagnose underlying sources of economic and

noneconomic value and then craft agreements that can unlock that value for the parties.

Setup refers to reshaping the scope and sequence of the game itself to achieve the desired

outcome. Here negotiators act away from the table ensuring that the right parties are

approached in the right order, to deal with the right issues, by the right means, at the right

time, under the right set of expectations, and facing the right no-deal options.

13

13

Even if you follow the above rules and regulations and be meticulous and conscientious

about deal-making, sometimes they fail in the implementation stage. Techniques that can

help you seal a deal may end up torpedoing the relationship when it’s time to put the deal

into operation. The product of a negotiation isn’t a document; it’s the value produced

once the parties have done what they agreed to do. Negotiators who understand that

prepare differently than deal makers do (See Appendix 2). They also negotiate

differently, recognizing that value comes not from a signature but from real work

performed long after the ink has dried. If signing the document is your ultimate goal, you

will fall short of a winning deal. Ertel (2004) reckons making a leap to an implementation

mind-set requires five shifts. These five approaches can help your negotiating team

transition from a deal maker mentality to an implementation mind-set.

1) Start with the end in mind: Imagine the deal 12 months out: What has gone

wrong? How do you know if it’s a success? Who should have been involved

earlier?

2) Help them prepare, too: Surprising the other side doesn’t make sense, because if

they promise things they can’t deliver, you both lose.

3) Treat alignment as a shared responsibility: If your counterpart’s interests aren’t

aligned, it’s your problem, too.

4) Send one message: Brief implementation teams on both sides of the deal together

so everyone has the same information.

5) Manage negotiation like a business process: Combine a disciplined preparation

process with postnegotiating reviews.

14

14

5. CONCLUSION

Analyzing the case of Marshal and Jina that was mentioned at the beginning of this paper,

an investigative mind-set of the boss made him ask all the right and relevant questions

and finally the question why which enabled him to come up with a solution to their

problem. The intense pressure that they were facing by the new companies could have

resulted in costly mistakes. The boss acted as a good negotiator here which prevented

them from falling prey to the set of common errors outlined by Sebenius. As for the

dimensions mentioned earlier, the boss succeeded as a negotiator by using the 2-D

dimension which is the deal design. Deal design seeks to create value for both parties

concerned. The solution to the problem created value for both Marshal and Jina. As a

negotiator the boss also succeeded in designing a deal that worked in practice. In other

words, the deal that was struck at the beginning was well carried out through the

implementation stage as well because it was a practical solution.

Negotiation informs all aspects of life – business, career, social as well as personal life.

Every interaction with people involves to varying degrees some kind of negotiation.

Bookstores are abounding with endless stream of handbooks on negotiation, many of

them bestsellers. Most of the top business schools in the world have entire academic

departments devoted to the subject. All these point to the fact the negotiation is becoming

an all-important facet of our everyday lives. However, as Coutu opined, that one can’t

help feeling that the scholarly ink and classroom simulations don’t do enough to prepare

businesspeople for the really tough negotiations – the ones where failure is not an option.

15

15

REFERENCES

Coutu D.L, 2002, “Negotiating Without a Net: A Conversation with the NYPD’s

Dominick J. Misino”, Harvard Business Review, October.

Ertel D, 2004, “Getting Past Yes: negotiating as if Implementation Mattered”, Harvard

Business Review, November.

Kolb D.M & Williams J, 2001, “Breakthrough Bargaining”, Harvard Business Review”,

February.

Malhotra D & Bazerman M.H, 2007, “Investigative Negotiation”, Harvard Business

Review”, September, p.73.

Sebenius J.K, 2001, “Six Habits of Merely Effective Negotiators”, Harvard Business

Review, April.

Sebenius J.K & Lax D.A, “3-D Negotiation: Playing the Whole Game”, Harvard

Business Review, November.

.

16

16

Appendix 1

FOCUS COMMON BARRIERS

APPROACH

1-D Tactics(people & processes)

Interpersonal issues,poor communication,“hardball” attitudes

Act “at the table” toimprove interpersonalprocesses and tactics

2-D Deal design(value & substance)

Lack of feasible orDesirable agreements

Go “back to the drawingboard” to design dealsthat unlock value that lasts

3-D Setup(scope & sequence)

Parties, issues, BATNAs,And other elementsdon’t support a viable process of valuable agreement

Make moves “away from the table” to create a more favorable scope and sequence

Source: Harvard Business Review

17

17

Appendix 2

DEAL-MINDED NEGOTIATORS Versus IMPLEMENTATION-MINDED NEGOTIATORS

Negotiation tactics

Assumption Behaviors“Surprising them helps me. They may commit to something they might not have otherwise, and we’ll get a better deal”.

Introduce new actions or information at strategic points in negotiation.

Raise new issues at the end.

Assumption Behaviors“It’s not my role to equip them with relevant information or to correct their misperceptions”.

Withhold information.

Fail to correct mistaken impression.

Assumption Behaviors“My job is to get the deal closed. It’s worth putting a little pressure on them now and coping with their unhappiness later”.

Create artificial deadlines.

Threaten escalation.

Make “this day only” offer.

Assumption Behaviors“As long as they commit, that’s all that matters. Afterward, it’s they problem if they don’t deliver”.

Focus on documenting commitments rather than on testing the practicality of those commitments.

Rely on penalty clauses for protection.

Assumption Behaviors“The fewer people involved in making this decision, the better and faster this will go”.

Limit participation in discussions to decision makers.

Keep outsiders in the dark until it is too late for them to derail things.

Assumption Behaviors

“Surprising them puts us at risk. They may commit to something they cannot deliver or will regret”.

Propose agendas in advance.

Suggest questions to be discussed and provide relevant data.

Raise issues early.Assumption Behaviors“I don’t want them entering this deal feeling duped. I want their goodwill during implementation, not their grudging compliance”.

Create a joint fact-gathering group.

Commission third-party research and analysis.

Question everyone’s assumptions openly.

Assumption Behaviors“My job is to create value by crafting a workable agreement. Investing a little extra time in making sure both sides are aligned is worth the effort”.

Define interests that need to be considered for the deal to be successful.

Define joint communication strategy.

Assumption Behaviors“If they fail to deliver, we don’t get the value we expect”.

Ask tough questions about both parties’ ability to deliver.

Make implementability a shared concern.

Establish early warning systems and contingency plans.

Assumption Behaviors“If we both fail to involve key stakeholders sufficiently and early enough, whatever time we save now will be lost during implementation”

Repeatedly ask about stakeholders.

Whose approval is needed?

Whose cooperation is required?

Who might interfere with implementation?

18

18

Surprise

Decision making and stakeholders

Realistic commitments

Closing techniques

Information sharing