Negotiations and Distributive Negotiations

Negotiation A social process in which conflict is resolved Results in an allocation of resources or an agreement on how individuals will work together in the future Five characteristics of negotiation Two or more parties You anticipate a better outcome as a result of the negotiation The parties involved prefer mutual agreement to other outcomes The parties involved understand that there will be give and take Tangible and intangible components are involved in the negotiation

When negotiating makes sense When you need the help of others When others can give you more than what you can get on your own When you are willing to give up resources valued by others When working with another party can help you overcome challenges with other parties

Distributive negotiation Competitive Win-lose Focus on claiming value Negotiators’ goals are in direct conflict Resources are limited Instrumental concerns only: do not care about the relationship with the other party Pulled from 4th edition, pg 27 On instrumental concerns, note that they don’t care about the relationship with the other party

Tools for distributive negotiations BATNA- Best Alternative To a Negotiated Agreement What would you pursue if this negotiation doesn’t work? Reservation value What your BATNA is valued at in the negotiation Can be dollars, points, land, flying pigs, etc… Aspiration value The value you aspire to in the negotiation Pulled from 4th edition, pg 27 On instrumental concerns, note that they don’t care about the relationship with the other party

Zone Of Possible Agreement The set of all possible deals that would be acceptable to both parties Seller’s reservation value Buyer’s reservation value Pulled from 4th edition, pg 27 On instrumental concerns, note that they don’t care about the relationship with the other party Bargaining Zone

First offers in negotiation First offers can Anchor a distributive negotiation Help to define the ZOPA Extreme first offers can let you make concessions (thus aggressive offers do not necessarily make you aggressive)….but it also can backfire Make a first offer only when you have sufficient information about your own and the other party’s aspirations and walk away points See galinsky’s article.

Integrative negotiation Figure out what motivates the person (ask why) Then attempt to satisfy these interests Be surprisingly cooperative Work with parties that perceive you as an opponent Find opportunities in others’ demands Be concerned about their problems too Make all negotiations a learning opportunity Don’t get distracted by trying to understand what people want…there are already too many people in the negotiation focusing on this. Instead allow people to define what they want, then ask why they want it. By working to satisfy these interests, you will be able to discover multiple issues in the negotiation where you will eventually be able to make tradeoffs Surprise your partner by being cooperative. Most negotiators come in with the assumption that you will be competitive. By entering the negotiation with a “problem solving” mindset and seeing all other negotiators as you helpers in this effort, you will foster trust and coopration in those you negotiate with. - To be cooperative, you might join forces with another party who previously perceived you as their opponent, by asking why you can propose creative solutions that give both parties (not just you) new opportunities, and in demonstrating concern for others problems you can change the tone of the negotiation to a problem-solving environment, not a competitive performance.

Strategies for integrative solutions in the negotiation Focus on multiple issues at once Allows you to be creative Helps overcome more difficult issues Provide a trusting and cooperative environment Give your partner several options Allows you to ensure that you get an optimal outcome Promotes your willingness to be cooperative One of the key concepts to integrative negotiations is to focus on more than one issue. This helps you to see where tradeoffs can be made, helps you to prioritize the issues for yourself and for your partner, helps you see what the underlying interests and themes in the negotiation are, and gives you an opportunity to expand the pie and claim more of it. The other benefit to multiple issues is that often negotiators believe that they need to focus on the most difficult issue first. When they do that they often get stuck on that issue, bad feelings are created, and the negotiation goes sour. Being aware of multiple issues can help you recognize where tradeoffs can be made so that both the easy and difficult solutions are overcome. Second, think back to our graph where we had the line representing the creation of value. There may be offers that provide you with the same value, but appear more or less appealing to your partner. By knowing multiple issues you can create several “packages” that give you the same value, but give your partner the choice of what works best for him or her. Finally, trust is a major component of integrativeness. It suggests that you want what is best for the other person as well as yourself, which puts them at ease and helps them to think in a more problem solving mode than a defensive mode. Starting out with integrative mindset will increase trust in the negotiation, which will then increase cooperation and the potential to reach optimal agreements.

Types of issues in new recruit Distributive “zero-sum,” “fixed pie” Different preferences, but same values Congruent Integrative Different preferences but DIFFERENT values Allows for trades There are three types of issues that we see in new recruit. (see slide list)

Compromise Compromise: making an agreement in which parties both get some of what they want by giving up some of what they want Meeting in the middle Splitting the difference Something accepted rather than wanted Agreement by concession Lessen the value of something Compromises occur when engaging in a distributive negotiation. Rather than compromising, use distributive negotiation tactics to get more of what you want! So the important thing to remember with value creation is that you are pushing the boundaries, not just creating something that everyone is willing to settle on. A lot of us think about a compromise as a good thing, and thus associate it with being a value creator, but do you think compromising has more to do with integrative negotiations or distributive negotiations? You are essentially settling for less than what you expected to get A lot of times we become satisfied with this because we assume that we could not have gotten what we did any other way, but really we just settled for the size of pie we had initially, rather than trying to push the boundaries Compromise is very positional focused, rather than interest focused (lets each give in on our initial positions so that we can get part of what we want) We have these definitions, but then these are also definitions of compromise This may be what a reasonable person sees as appropriate, but it is not what a skilled negotiator accepts! If your partner wants to give in, that is fine, but you should never be ok with a compromise unless you feel that it is necessary for the relationship and you care about the relationship. Remember, you are in a distributive negotiation when you are considering a compromise, so compromises are not optimal for you. By focusing on your aspiration price at all times, you can overcome the attractiveness of a compromise and get more of what you want (just as in a distributive negotiation) Value creation is not soft on the problems inherit in the negotiation.

NOT INTEGRATIVE!! Compromise Candidate Recruiter Joint Salary 86K -3000 -6000 Start date 10/15 1200 2400 Location Chicago 600 Job Assignmt C -1200 -2400 Bonus 6% 2000 800 2800 Vacation 20 days Moving % 80% 1600 400 Insurance Kaiser Total 4800 NOT INTEGRATIVE!! Need to change these 2 slides. So we discussed the importance of recognizing the difference between and integrative solution and a compromise and new recruit is able to show us quantitatively the differences. So here is a cmpromise. Essentially you are splitting down the middle of each issue. In what issues does it make sense to actually do this?

Creating value Value can be created by identifying what each party cares about most The goal of the negotiation should be to create the most value for yourself overall, not the most value on each issue

Compromise (total: 4800 points)

Improvements (total: 7800 points)

Improvements (total: 10800 points)

Pareto Optimal (total: 13200 points)

Soft vs. Hard Negotiation Soft negotiation: Emphasize goal of reaching agreement! Friendly, concessions made for relationship Change position easily, make offers, disclose your bottom line One-sided losses, aimed at reaching agreement Single Answer Hard Negotiation: Adversarial Goal is victory Hard on problem and on people: demand concessions, distrust others, threaten, mislead, Insist on your position

Choice between Hard and Soft

Choice between Hard and Soft

Choice between Hard and Soft There is another alternative: Change the Game

Principled Negotiation Separate people from the problem Focus on interests not positions Generate a variety of options before deciding on one Insist that the results be based on some objective standards

Separate the People from the Probelm Hard on Problems, soft on People Clear the air first: deal with people problems upfront so that they don’t cloud issue Walk a mile in the shoes of the other Don’t assume the worst because its “safe” Don’t play the blame game (even when deserved). Give people a stake in the outcome

Positions vs Interests https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0ahUKEwi6uc61oaTPAhVI2SYKHV1_DNgQ3ywIHTAA&url=https%3A%2F%2Fwww.youtube.com%2Fwatch%3Fv%3DmTTwcCVajAc&usg=AFQjCNHxiJBWc3R2ReIGL_V6Hl4evb6m9A&bvm=bv.133700528,d.eWE

Positions versus Interests Identifies what you want Acts as an anchor Commits you to your initial goal Harms relationships Interests Motivation behind positions Identifies which issues conflict and which simply differ Allows for flexibility in initial goal Maintains relationship On issues that conflict versus differ Conflict means that people’s preferences are opposed Differ means that people’s issues oppose See getting to yes pg. 47

Pitfalls of Position-Based Negotiation Creates unwise agreements that do not meet underlying needs Inefficiency: extreme positions and holding on to them increase length, number of concessions and probability of not reaching a settlement Endangers relationships

The importance of asking “why” Reveals interests in the negotiation Helps you understand the other party’s reason for participating in the negotiation Allows you to identify the motivations of the other party Gives both parties the opportunity to generate creative solutions Pulled from 4th edition, pg 27 On instrumental concerns, note that they don’t care about the relationship with the other party

Focusing on Interests In an integrative negotiation, we can push beyond substantial interests Relationship interests Process interests: Fairness Principle interests: Values We have discussed the idea that in integrative negotiations, we primarily focus on interests, which allows us to generate creative and mutually appealing agreements. But not only is there a greater focus on interests in integrative outcomes, we also focus on a broader selection of interests than in a distributive negotiation. When we have talked about distributive negotiations in previous classes, I have tried to emphasize that in a distributive negotiation, you don’t really care about the relationship. In an integrative negotiaion, you often do care about the relationship, which is why you want mutually beneficial outcomes. These are focused on the quality of your relationship with the other person. Process interests are about the procedures that lead to the decision. Usually these have to do with how fair the procedures were during the negotiation. Rsearch on procedural fairness and how that makes people percieve the outcome as more fair Principle interests have to do with an individuals values and beliefs. You want to be aware of the other party’s principle interests since these are a main source of contention is violated. And they are difficult to repair.