Art of Negotiation Chapter 2

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Basics Stage of Negotiation
1) Preparation
2) Opening Session
3) Bargaining
4) Settlement
Preparation Stage
– Identify all the issues
– Set priorities
– Develop support argument
Identify All The Issues
– The greater the number the better
– Intangible issues should be listed as well as tangibles like price and quantity
– Add throwaways, issues that have a little importance or no value to you but that may have value to the other party.
Set Priorities
– Level 1: Essential items
– Level 2: Important items
– Level 3: Desirable items
– Level 4: Throwaways items
Essential Items
Issues that must be gained for a settlement, or else you will accept your BATNA, and not accept the agreement.
Important Items
Items that you would like to gain but are willing to trade to achieve essential or other of these items.
Desirable Items
Issues that have secondary value and could be exchanged for essential or important issues.
Throwaways Items
Items that you are perfectly willing to concede, that may have value only to the other party.
Shadow Negotiation
The game, sometimes played by negotiators, which does not center on the facts or information of the issues but instead focuses on how negotiators will deal with each other.
Opening Session Stage
– Ground Rules
– Framework for success
– Initial offers
– Posturing
Ground Rules
– Who speaks for each party, is authorized to make an offer, and accept or reject offers by the other party?
– What form of agreement is acceptable?
– Where will the negotiators meet, and what will be the seating arrangement?
– When will meetings begin, and how long will session last?
– How will formal proposals be made and issues be presented?
Framework for Success
1) A deal that is better than the BATNA
2) Satisfy interests, not positions
3) Do not leave value on the table (gains that both sides could have received
4) Saving face is important for both parties
5) Insist on a clear and operational settlement
6) Strive for an efficient process (make specific offers on issues, and once an issue is resolved, don’t bring it up again
7) Consider the long-term relationship
Initial Offer
– POTE (Partial, Open, Truthful, Exchange), the most commonly used style that includes the use of tactics such as posturing, bluffing, and the concealment of real interests
– FOTE (Full, Open, Truthful, Exchange) style
The dramatic presentation by one side of its view of the issues, facts, and feelings about the other side. It can play a positive role in negotiation because it allows parties to “blow off steam” and it provides a level of face-saving to parties who must present a strong position to others outside of the negotiation process
Elements and Techniques That Should be Anticipated
– Conflicting viewpoints
– Concealment of objectives
– Caucusing (private meeting with its own members)
– Flexibility
– Compromise
– Saving face
Bargaining Stage
– Single-issue negotiation
– Multiple-issue negotiation
Single-Issue Negotiation
– Resistance point: defined as the seller’s minimum price, and the buyer’s maximum price or BATNA
– Bracketing: the process of moving toward a middle point between the opening offers or brackets
Multiple-Issue Negotiation
– Distributive (win-lose) bargaining: both sides view their own goals as being in direct conflict with theses of the other side. The negotiators view each issue as a “fixed pie”.
– Integrative (win-win) approach: the parties do not assume they want to triumph over the other side at all costs, but instead seek a reasonable settlement of the issues
Common Tactics for Distributive Bargaining
1) Making extreme or even ridiculous opening offers (designed to cause the other side to question its own opening position)
2) Claiming limited authority
3) Making emotional outbursts (as part of the posturing strategy)
4) Offering few concessions (in return for concessions made by the other side)
5) Resisting deadlines (process move very slowly)
Traps to Avoid
– Lowball offer (no long-term relationship)
– Good guy / bad guy routine
– The whole pie versus single slices
– The nibble (it occurs when negotiators reach agreement on all of the major issues but then, as they prepare to close the deal, one side proposes a small concession on “one last” item, which they claim is needed to close the deal.
Integrative Bargaining in Multi-Issues Negotiation
1) They may have common positions on some issues (not all issues are win-lose)
2) They will probably need to use trade-offs and make concession to achieve their goals
3) They want to maintain a positive long-term relationship, and will compromise
Settlement Stage
– Impasses
– Third party intervention
– The closing
When negotiators fail to reach an agreement, and one party simply walks away from the deal and the process ends, or when both sides still desire a settlement but realize they have reached a stalemate. It occurs when both sides believe no gains can be achieved through the negotiation process they have been utilizing, and thus further bargaining sessions would be a waste of time but both sides do still prefer a settlement to walking away.
Causes of Impasses
1) Non-communcation of interests
2) Excessive emotional involvement
3) Failure of one party to understand the interests of the other party.
Third-Party Intervention
It is used when an impasse occurs, and when the negotiators want an alternative method of continuing to seek an agreement. It involves bringing an objective viewpoint to the discussion
Forms of Third-Party Intervention
1) Settlement facilitation (only one goal to reach an agreement between the parties)
2) Mediation (the third-party assists the parties in crafting a settlement agreement that the parties voluntary accept, non judgmental)
3) Arbitration (third-party empowered by the parties to make a written decision on all unresolved issues
Categories: Negotiation