The problem: Positions often mask interests There may be a better/more efficient way to satisfy their interest, or yours, than their demand

Malhotra/Bazerman’s Principles Don’t just ask what – ask why: Holbrooke/wife’s taxi Seek to reconcile interests, not demands: Gore/Nader Create common ground with uncommon allies: Nader/Bush Interpret demands as opportunities: Builder penalty/bonus Don’t dismiss anything as “their problem”: Cost of shipping Don’t let negotiations end with rejection of your offer: Linda’s Q: was it price? Or features Understand the difference between selling and negotiation: It’s about listening, not persuasion

How to do this? Build trust Speak their language – learn it, or get an expert Build a relationship, including when not negotiating Ask questions, esp. if you’re surprised/skeptical Give away some information – relative priorities, not absolute value Negotiate multiple issues – offer packages Make multiple offers – uncover their priorities Remember: Negotiation is an information game

Malhotra/Bazerman Suggestions Preparation Identify your own multiple interests Create a scoring system Calculate a reservation value for the package Identify the other side’s multiple interests Execution Negotiate multiple issues simultaneously Make package offers: Test preferences: “ABC or BCD?” Leverage differences of all types to create value

Independent Immunities Issues Royalty percentage paid by Pure Health for license Whether/to what extent Pure Health can keep/benefit from product improvements Waiver of non-compete for marketing VP Length of interim production by Prometheus

Multi-Issue Bargaining What order of discussion: One issue at a time? Review all? Trade information re preferences first? Jointly explore? What structure for trades: One or more at a time? One and “You owe me?” Packages? Recommendation: Discuss multiple issues, signal your preferences, then propose packages, seeking best fit of interests

Now negotiate Independent Immunities

Sources of Joint Gains Differences in relative importance of issues: Valuation: car, house sale Prediction of future: stock, business, land Attitude toward risk: Insurance, warranties, contingent fees Capability: Financing, PR, sales Value of time: Current vs. deferred money

How To Prepare? ID your own interests clearly; rank your preferences Ask Why do they want that? What are their interests? Use role reversal Whose interests? Bargainer and client may differ What possible contrary interests: Why might they say no? How to satisfy their goals at low cost? 6

How To ID interests in discussions? Stress relationships, repeat dealings Provide information: Why you are interested in a deal Your constraints and preferences Maybe resources/capabilities that add value Ask questions that mirror the data you give: Interests, preferences, constraints, resources Faced with a position, ask why do you need that? 6

How to develop options? Begin with an easier issue: show cooperation Explore their preferences on multiple issues Look for what you value differently Propose packages; offer adjustments and trades Avoid escalating and self-fulfilling behavior Keep working to be creative; don’t rush just to be friendly, or take positions to protect yourself

Importance of listening Talk before making offer Listen for information Negotiate on three levels: over process over information over the outcome

Empirical Findings About Skilled Negotiators Huthwaite Study of British negotiators Compared 49 successful bargainers to average group Most in labor/management, some dealmakers Based on actual negotiations Scored key differences in behavior

Planning: Skilled bargainers vs. less-skilled bargainers Consider a broader range of options Tend not to put issues in a set sequence, but do consider linkages between them Set outside limits on the outcome on each issue Consider possible areas of agreement 40% of time vs. 10% for less skilled Develop twice as many settlement options Comment on long term issues twice as often Try harder to identify the other side’s interests

Skilled bargainers ask more questions 21% of the actions of skilled, versus 10% of the actions of average bargainers Value of questions: Provide information about other side’s thinking Control agenda Avoid expressing direct disagreement Keep them from thinking, give you more time

Why Is It Hard? We see a fixed, win-lose pie We instinctively view the world from our own lens: They must care about the same things we care about Bargaining fosters competitiveness: We want to “win” and bluff/mislead about our interests A basic tension: If you are open, the other side may bluff/mislead you about their interests and real goals

Other obstacles In an actual negotiation, you have to create your own score sheet You don’t know the other party’s true score sheet, and they may conceal/misrepresent it 12

How to claim value Misrepresent your minimum (“I’ve got to get to 350…”) Misstate values of options Manipulate reciprocity: “You owe me (but a bigger one)…” Manipulate principles to propose “mutual” trades that favor you: “If you concede entirely on waiver, I’ll concede entirely on interim production”

How to avoid this in dealmaking? Begin with a “Y” strategy Look for evidence that they’re using Y’s Develop relationships and agreements Ask / negotiate / warn over apparent “X”s Retaliate if necessary—but delay and limit your response Then renegotiate process / allow them to reform