negotiation

Published by admin on

Myth: Negotiations are fixed-sum
Myth: Fixed sum-whatever is good for one party or person must be bad for the other party
Truth: Most are variable sum-if parties work together, they can create more joint value than if they are purely combative; However, they cannot be purely trusting because any value created must be claimed by someone at the table
Walton & McKersie’s conceptualization:
Negotiation is a mixed-motive enterprise; parties have incentives to cooperate as well as compete.
Myth 2: You Need to Either Be Tough or Soft
o Myth: Must choose between either behaving toughly, or “reasonably” / softly
o Truth: Neither tough nor soft; rather, principled
o “Enlightened” view: to achieve their own outcomes they must work effectively with the other party, but also leverage their own power and strengths
•Myth 3: Good Negotiators are Born
o Myth: good negotiating skills are something you are born with
o Truth: most excellent negotiators are self-made, naturally gifted negotiators are rare
o Effective negotiation requires practice and feedback. Experience is helpful, but not sufficient
Myth 4: Life Experience is a Great Teacher
Only partly true that experience results in improvement. Experience without feedback is largely ineffective in improvement
3 Strikes of Casual Experience
1. No feedback = no improved performance
2. Selective memory only remember successes and forget failures
3. Experience improves confidence, but not necessarily our accuracy
Myth 5: Good Negotiators Take Risks
o Myth: Using “threats” or “bluffs” creates effective negotiating. Also known as the “tough” style
o Truth: Rarely effective. Negotiator should evaluate risk, determine the appropriate time to make the final offer, make excellent decisions in the face of uncertainty
Myth 6: Good Negotiators Rely on Intuition
o Myth: Many believe negotiating involves a lot of “gut feeling”, or intuition
o Truth: Does not serve people well. It must involve deliberate thought and preparation.
• Prepare Well
• Develop self-awareness of strengths and shortcomings
• Create proactive strategies
The two most important questions you need to ask are?
1. “What do I want?”
2. “What are my alternatives?”
winner’s curse
occurs when a negotiator makes an offer that is immediately accepted by the other party
ego defensive behavior triggers?
competitive communication, retaliatory behavior, negative perceptions of the counter party, and attitude polarization
BATNA
o Negotiators should be willing to accept any set of terms superior to their BATNA and reject outcomes that are worse than their BATNA
o Not something that a negotiator wishes for, but it is rather determined by objective reality
BATNA is time sensitive
o Your BATNA is either improving or deteriorating as a result of market forces, environmental and situational conditions, so you should constantly try to improve your BATNA
o Falling in love rule: not falling in love with one set of circumstances
When should your BATNA change?
o Your BATNA should only change as a result of objective facts and evidence
Determining your reservation point
o Reservation points: a quantification of a negotiator’s BATNA with respect to other alternatives
o Reservation points have the most direct influence on the final outcome
o Failure to assess reservation points can lead to two outcomes:
1. Agreement to an outcome that is worse than the BATNA
2. Reject an offer that is better than the BATNA
focal points
salient numbers, figures, or values that appear to be valid but have no basis on fact
beware of sunk costs
o Sunk costs: money that you have invested that is lost
o People have a hard time forgetting the past, and often try to recoup sunk costs
o Sunk costs not only influence our own behavior but the behavior of the counterparty
what happens if you lack a well formed reservation point
you risk agreeing to a settlement that is worse than what you could do by following another course of action, or you may walk away from a profitable deal
are the target point and reservation point the same thing?
no
Identify the issues of the negotiation
o You can create integrative potential
o Should brainstorm how a single issue may be segmented into multiple issues or attempt to add new issues
Identify equivalent multi-issue proposals
o Determine a variety of different combinations of the issues that all achieve the target or aspiration point
o Premature Concession: Gives up important bargaining ground and moves too close to the BATNA (i.e. giving a range)
Assess your risk propensity
o Most people are risk seeking when it comes to losses and risk averse when it comes to gains
o Reference point: what a person considers to be a gain or a loss
strategic risk
o The riskiness of the tactics that negotiators use at the bargaining table
o Negotiators choose between cooperative tactics (info sharing and brainstorming) and competitive tactics (threats and demands)
BATNA part 2
o Many people’s BATNAs are uncertain because potential alternatives arrive sequentially
o Negotiators who view the glass as half full are more inclined to reach agreement, whereas negotiators who view the glass as half empty are more likely to use threats and exercise their BATNAs
contractual risk
the risk associated with the willingness of the other party to honor its terms; negotiators with negative frames (risk seeking) are more likely to reach integrative agreements than those with positive frames (risk averse)
endowment effects
o Buyers and sellers might want to adopt different bargaining positions, but their private valuations for the object shouldn’t differ as a consequence of who has possession
o Reference points lead buyers and sellers to have different valuations for objects
counterfactual thinking
thinking about what might have been but did not occur
Violations of the sure thing principle
if alternative X is preferred to Y in the condition that some event, A, occurs, and if X is also preferred to Y in the condition that some event, A, does not occur, then X should be preferred to Y, even when it is not known whether A will occur
overconfidence effect
unwarranted levels of confidence in people’s judgment of their abilities and the likelihood of positive events and underestimates the likelihood of negative events
one shot negotiation
a transaction occurs and no future ramifications accrue to the parties
transactions vs disputes
1. Dispute-when negotiations take place because a claim has been made by one party and has been rejected by the other 2. Transaction-parties come together to exchange a resource
3. The difference between transaction and disputes concerns the alternatives to mutual settlement
4. In a transaction situation, parties resort to their BATNAs; in a dispute, negotiators often go to court
linkage effects
the fact that some negotiations affect other negotiations
is agreement required?
• No, agreement is a matter of preference
• One party can walk away if disagreement occurs
is ratification required
• Ratification-whether a party must have a contract approved by another group
• No: some will say it is, but it really is not
are negotiations public or private?
Both Public and Private
pie slicing strategy 3
o Strategy 3: Research the other party’s BATNA and estimate their reservation point
• when the counterparty discloses their BATNA at the outset of the negotiation, negotiators actually make less demanding offers, disclose more truthful info, and settle for less profit
Should I Reveal My Reservation Point?
• No, if you do, the other party will offer you your reservation point, but not more
when people do, they’re trying to build trust and good faith, but there are better ways to build trust
lying
• lying isn’t good for two reasons:
1. lying is unethical
2. lying hurts your reputation
Should I Make a Final Offer or Commit to a Position?
• Saying this is my final offer should be done only when you really mean it and are prepared to walk away from the negotiation table, but you should only walk away if your BATNA is better than the counterparty’s offer
Does the Negotiation Contain More Than One Issue?
• if the negotiation contains more than one issue; it is the differences in preferences, beliefs, and capacities that may be profitably traded off to create joint gain
fixed-pie perception
• the belief that the other party’s interests are directly and completely opposed to one’s own interest
• the biggest detriment to the attainment of integrative agreements are the assumptions we make about the counterparty and the negotiation situation
• in most mixed motive negotiations, parties realize they have two incentives vis-a-vis the other party: cooperation and competition
strategies that don’t really work
• commitment to reaching a win-win deal
• compromise: negotiators often mistake win-win negotiations for equal concession negotiations
• focusing on a long term relationship
• adopting a cooperative orientation: prevents negotiators from focusing on the right information at the right time; relational accommodation
• taking extra time to negotiate: people tend to work to fill their time
strategies that work
see study guide
3 stages in the evolution of the integrative negotiator
(1) old fashioned negotiator-negotiator comes from the old school of bargaining and believes that one must adopt a tough, hard stance, (2) flower child negotiator-one who gets turned on to win-win negotiations and is so busy expanding the pie that he or she forgets to claim resources (at a disadvantage in terms of slicing the pie), and (3) enlightened negotiator-realizes that negotiation has a pie expanding aspect but at the same time doesn’t forget to claim resources
knowledge based trust
grounded in behavioral predictability and it occurs when a person has enough information about others to understand them and accurately predict their behavior; if no risk is present in an exchange situation exploitation cannot occur, but high levels of trust develop
identification based trust
grounded in complete empathy with another person’s desires and intentions; trust exists between people because each person understands, agrees with, empathizes with, and takes on the others values because of the emotional connection between them, so they act for each other
negotiating with friends
see study guide
sins of omission and commission
sins of commission (active lying) are regarded as more unethical than sins of omission
costs of lying
1. The liar can be caught and face criminal charges, 2. if the liar is not caught, their reputation and trustworthiness can be damaged, 3. can lead to a culture in the organization where lies and suspiciousness increases, 4. isn’t strategic because a negotiator who lies about their reservation price effectively decreases the size of the bargaining zone and the probability of impasse increases
multiparty negotiations
Formed when a group of three or more individuals, each representing his or her own interests, attempts to resolve perceived differences of interest.
dealing with coalitions
a (sub) group of two or more individuals who join together in using their resources to affect the outcome of a decision in a mixed motive situation involving at least 3 parties.
problems with voting and majority rule
o Fail to recognize the strength of individual preferences
o Does not promote integrative tradeoffs among issues
o Groups negotiating under unanimous rule reach more efficient outcomes than groups operating under majority rule
o Disagreement on method for voting
o Voting does not eliminate conflicts of interest
voting paradoxes
o Condorcet Paradox: demonstrates that the winners of majority rule elections will change as a function of the order in which alternatives are proposed
o Impossibility Theorem: unstable voting outcomes. States that the derivation of group preference is indeterminate; No method can combine group members’ preferences in a way that guarantees group preference is maximized when groups contain three or more members and are facing three or more options
consensus agreements
o Require the consent of all of the parties to the negotiation before an agreement is binding. Do not simply imply unanimity
Parties agree publicly to a particular settlement, even though their private views about the situation may be in conflict
o Problems: Time consuming and Often lead to compromise
communication breakdowns
◦ Error in sending a message
◦ Inaccurate or distorted
private caucusing
◦ When groups grow large, one way of simplifying negotiations is for negotiators to communicate in smaller groups known as private caucuses
◦ Problems: Full-group is more time consuming, but enhances equality of group members’ outcomes, increases joint profitability, and minimizes perceptions of competition
perspective taking failures
• People are remarkably poor at taking the perspective of others
• Curse of Knowledge: people who are privy to information and knowledge that they know others are not aware of nevertheless acts as if others are aware of it, even though it would be impossible for the receiver to have this knowledge
key strategies for multiparty negotiations
1. Manage the Information and Systematize Proposal Making, 2. use brainstorming wisely, 3. Strive for Equal Participation, 4. Allow for Some Points of Agreement, Even if Only on Process, and 5. avoid sequential bargaining
multiparty strategy: Manage the Information and Systematize Proposal Making
• Tunnel Vision: tendency for people in group negotiations to underestimate the number of feasible options available
• Groups are strongly encouraged to make several multi-issue proposals and to keep a record of which proposals have been considered
multiparty strategy: use brainstorming wisely
• Solitary Brainstorming: a strategy whereby group members independently write down ideas for resolving negotiations, and then later, when the group meets, they share those ideas
multiparty strategy: strive for equal participation
• Uneven Participation: problem wherein one or two people do all the talking, thwarts information exchange in groups
multiparty strategy: allow for some points of agreement, even if only on process
◦ Avoid reaching agreement just for the sake of reaching settlement but, instead, agree on the process of reaching settlement
multiparty strategy: avoid sequential bargaining
◦ Sequential Bargaining: discuss one issue at a time (most often used)
◦ Simultaneous Bargaining: Several issues are under consideration any given time
◦ By independently discussing and voting on each issue, negotiators cannot fashion win-win trade-offs among issues
key challenges of coalitions
1. The information of the coalition
2. Coalition maintenance
3. The distribution of resources among coalition members
optimal coalition size
◦ Ideally, coalitions should contain the minimum number of people necessary to achieve a desired goal.
◦ Coalitions are difficult to maintain because members are tempted by other members to join other coalitions, and because agreements are not enforceable
Getting out of the vicious circle P. 228
dividing the pie: the core solution
◦ a set of alternatives that are undominated. An alternative is in the core if no coalition has both the power and desire to overthrow it.
the shapley model
◦ Determines the overall payoff a player can expect on the basis of his or her Pivotal Power (the ability to change a losing coalition into a winning coalition)
◦ When all players bring equal resources, the Shapley value is the total amount of resources divided by the total number of people Equal Division Principle/Equity Principle
Raiffa’s hybrid model
◦ A hybrid model in which the mean of the Shapley and core values
tips for low power players
◦ Weakness can be power if you can recognize and disrupt unstable coalitions
◦ Can an optimal way be found for multiple parties to allocate resources so that group members are not tempted to form coalitions that may hinder group welfare?
• Usually not.
• Although several defensible methods can be used to allocate resources among coalition members, no single best way exists
Principal-Agent Negotiations & Constituent Relationships are problematic because?
a risk neutral principal must negotiate an incentive contract to motivate a risk-adverse agent to undertake costly actions that cannot be observed
advantages of using agents
Expertise
Substantive Knowledge
Networks and Special Influence
Emotional Detachment
Ratification
Face-saving
disadvantages of using agents
Incompatible Incentive Structure
Communication Distortion
Loss of Control
Agreement at any cost
challenges to constituent relationships
Identification
Accountability
Conflicts of Interest
strategies for improving constituent relationships
• Communicate with your constituents
• Do not expect homogeneity of constituent views
• Educate your constituents on your role and your limitations
• Help your constituents do horizon thinking
challenges that face negotiating teams
1. Selecting Your Teammates, 2. How many on the team, 3. Communication on the Team, 4. team cohesion, and 5. information processing
selecting your teammates criteria
• Negotiating Expertise
• Technical Expertise
• Interpersonal Skills
how many on the team
Two or three heads can be better than one, but at some point conformity pressures increase with group size, peaking at about five and then leveling off. As teams grow in size, coordination problems increase.
communication on the team
Communication, or information pooling, is facilitated if members are acquaintances or share a relationship
information processing
◦ Knowledge is distributed among team members
◦ Common Information Bias
◦ Dilemma…divide responsibility, which increases members’ dependence upon each individual member, or share information, which is clumsy and redundant
Strategies for Improving Team Negotiations
prepare together
plan scheduled breaks
assess accountability
Strategies for Improving Team Negotiations: prepare together
◦ Preparing together creates a transactive memory system in which group members understand the information others have and how and when to access it.
Strategies for Improving Team Negotiations: plan scheduled breaks
◦ To allow team members to meet privately
Strategies for Improving Team Negotiations: assess accountability
◦ assess the extent to which team members are accountable to others outside of the team
exhibit 9-9
the prisoners dilemma
◦ Scenario where cooperation and trust wins and blind pursuit of self-interest loses
◦ Confess vs. Do not confess
the tragedy of the commons
o may be applied to many real-world problems, such as pollution, use of natural resources, and overpopulation
o In these situations, people are tempted to maximize their own gain, reasoning that their pollution, failure to vote, and using polystyrene cups will not have a measurable impact on others. However, if everyone engages in this behavior, the collective outcomes is disastrous
mediation
A procedure whereby a third party assists disputants in achieving a voluntary settlement
arbitration
A procedure whereby a third party holds a hearing, at which time disputants state their position on the issues, call witnesses, and offer supporting evidence for their respective positions. After the hearing, the arbitrator issues a binding settlement.
traditional arbitration
Each side submits a proposed settlement to the arbitrator, who is at the liberty to come up with settlement terms to which both sides must agree
final offer arbitration
the disputants submit final proposals to the arbitrator, who then chooses one of the two final settlements to impose. Thus, the incentive of the parties involved is to submit a settlement that will be viewed as most fair in the eyes of the arbitrator
mediation arbitration
2 phases: mediation and arbitration
arbitration mediation
three phases:
• arbitration hearing
• mediation
• ruling phase
Strategies for enhancing effectiveness of third-party intervention
• Accept Your share of responsibility
• Test your own position
• Role-Play a third-party in your own dispute
• training in win-win negotiation
Categories: Negotiation