Negotiation Organizational Communication

2 Main take-aways Principles of negotiation can be used in any situation of interpersonal conflict Principles – Negotiate over issues, not positions – Expand the pie (integrative negotiation) before dividing it (distributive negotiation); Search for opportunities for log-rolling, where negotiators differ on importance & payoff for settlements – Use the right strategies Ask for what you want (esp. for women) Ask questions & reveal information to find log rolling opportunities, Consider multiple issues simultaneously Build trust, don’t use threats – Prepare. Know your own priorities, your partner’s priorities, your alternatives & your least acceptable deal

3 How is Negotiation related to Organizational Communication? Negotiation is the process of communication btw two or more people with divergent interests to reach a joint decision Can be used in most cases of conflict between interests – E.g., Setting terms of an employment contract Interest in getting best worker Interest in getting best salary Interest in getting an interesting assignment – E.g., Deciding approaches to HCII website redesign Interest to have an improvement in the short term Interest to have best site in the long term – E.g., Disciplining a teammate Interests of Sharon to have flexibility for family Interest of rest of team to increase Sharon’s reliability

4 Negotiation Skills Are a Core Competency Key communication & influence tool for interdependent relationships (in & outside the workplace) Way to solve conflicts Most people not very good at negotiation – E.g., over 80% of corporate executives and CEOs leave money on the table in negotiations – People don’t realize this & can’t self-classify Goal of negotiation is to improve your ability to: – Create value – Claim value – Build trust Research basis in economics and psychology

5 What Does it Mean to Be an “Effective Negotiator”? Individual level – Getting valued resources (money, people, projects) – Maintaining & building relationships – Enhancing your reputation – Building/maintaining trust – Enjoying peace of mind Company level – Profitable deal making (effective sales force) – Getting positive (rather than negative) press – Enhancing reputation of company – Building the brand

6 Major Traps of Negotiation Leaving money on the table (lose-lose negotiation) Settling for too little (winner’s curse) Walking away from the table (hubris) Settling for terms that are worse than your current situation (agreement bias)

7 Negotiation myths Negotiations are fixed-sum You need to be either tough or soft Good negotiators are born Good negotiators need to be risk-takers Good negotiators rely on intuition Experience is a great teacher

8 Women don’t ask In US, men are more likely than women to negotiate salary – E.g., Among new MBAs, 52% of men vs 12.5% of women negotiated starting salary  male starting salaries 8.5% higher Babcock, L., Gelfand, M., Small, D., & Stayn, H. (2006). Gender differences in the propensity to initiate negotiations. In D. D. Cremer, M. Zeelenberg & J. K. Murnighan (Eds.), Social psychology and economics (pp. 239–262). Mahwah, NJ: Erlbaum.

9 Experimental Analog Men & women were told that they would receive cash payment ($3–$10) for playing Boggle by themselves. Their goal was to create as many words as possible. At end, all participants were offered the minimum ($3) payment. Participants were not informed of how the payment was determined nor given any performance feedback. If they initiated a negotiation, they could receive more money (up to $10), and if not, they received just $3. Study 1: Not cues to negotiate “You have now completed four rounds of Boggle and will be compensated between $3 and $10. Please indicate to the experimenter that you are finished, so that he or she can score your rounds. Then you will be paid.” Study 2: Added cue to negotiate: “The exact payment is negotiable.”

10 Study 3 Study 3: Framing – No negotiation cue – Negotiation cue: “You will be compensated between $3 and $10. The exact payment is not fixed, and you can negotiate for more if you want. Many participants negotiate for a higher payment.” – Ask cue: “ You will be compensated between $3 and $10. The exact payment is not fixed, and you can ask for more if you want.. Many participants ask for a higher payment.”  Women need encouragement to ask Small, D. A., Gelfand, M., Babcock, L., & Gettman, H. (2007). Who goes to the bargaining table? The influence of gender and framing on the initiation of negotiation. Journal of Personality and Social Psychology, 93(4), 600.

11 Two fundamental processes in successful negotiation Distributive negotiation – Divvying up some fixed resource (e.g., price) – Normally entails a single issue – Goal is to gain as much of the resource as possible Integrative negotiation – Finding solutions that maximize the resource before divvying it up – Possible with multi-issue negotiations, where the parties care about the issues differently Most negotiations involve both. – Rule: first grow the pie & then divide it – It is possible to convert a distributed negotiation into an integrative one, by adding issues

12 Negotiators’ Mental Models OrientationWin/loseWin/win StrategyPositional, distributive;Principle-based; oriented; power-basedinterest-based GoalSlice the pieExpand the pie, then slice the pie ApproachSingle issue; Multiple issues; sequential bargainingsimultaneous discussion of issues OffersSingle offers; take-it-or-leave-itMultiple offers OutlookShort-term; no future relationshipLong-term; build long- term relationship Claiming Value Mental ModelCreating Value Mental Model Naïve Expert

Negotiating a coffee contract 15 minutes to negotiate Return to class Post your results on the board

14 Ground Rules Do not show your confidential role instructions to the other side in the negotiation, but you are free to tell them whatever you would like about your confidential role information. You may use any strategy, short of physical violence, to reach agreement, including ingratiation, bribery, side-deals or misrepresentation. However, in selecting a strategy, it is wise to consider that using it may have ramifications that go beyond that particular negotiation. Be creative in what you offer or ask for

15 Coffee results (2012) What produced this diversity in outcomes? Quantiles 100.0%maximum % % % %quartile %median %quartile % % % %minimum5.93 Summary Statistics Mean6.88 Std Dev0.42 Std Err Mean Upper 95% Mean Lower 95% Mean N11

16 Strategy Who went first? How many offers & counter offers? What strategies did you use? – Quality of the arguments – Split the difference – External standard E.g., Price to best customer = $5.93, E.g., Standard restaurant price = $ 8.10 – Increasing the value E.g., > $.20/pound adverstizing

17 Essential of Negotiation Analysis Target (aspiration) BATNA Reservation Point (RP) Bargaining zone (Zone of Possible Agreements) Bargaining surplus

18 Target or Aspiration level What you aiming for—your ideal Since aspiration level influences the offers you make and accept, set it aggressively – The best, reasonable deal you think you can get –  You need to do prep to know what is reasonable Setting it too low  winner’s curse – I had two offers on my house at the asking price before it went on the market  set the price too low Setting it too high with no concessions may lead to walking away & not getting any deal

19 What are targets in coffee negotiation? How did you arrive at them?

20 B.A.T.N.A Best Alternative To Negotiated Agreement (BATNA) – What will you do if you don’t make a deal with this partner? – Determined by your available alternatives – Defines the most you will pay (buyer) or least you will accept (seller) – Key source of power: Ability to walk away

21 Strategic advice BATNAs are not static. – May change naturally with time (e.g. new houses on the market; sequential job offers) – You can often improve yours E.g., Investing in new paint for house E.g., Finding another job offer when negotiating for salary E.g., Looking at multiple brands when car shopping Don’t fall in love with any alternative – No longer have a viable BATNA

22 Reservation price The offer below which you will walk away – When the deal no longer makes sense for you Based on BATNA To develop a reservation point: – Brainstorm alternatives – Evaluate each alternative – Attempt to improve BATNA – Calculate reservation price as precisely as possible  Probability of alternative X value

23 BATNAs and RPs in Coffee Negotiation Buyer – BATNA: ? – RP: ? Seller – BATNA: ? – RP: ?

24 Coffee Contract Bargaining Zone >=$5.95$7.40$6.50<=$8.10 Buyer’s RP Seller’s RP Seller’s Target Buyer’s Target Zone of Possible Agreement Why is this information useful to you in a negotiation? How should you get this information?

25 Strategic Advice abt RP Remember your Target is not your RP Your RP is determined by your BATNA BATNAs = Reality + Subjective probabilities + Idiosyncratic preferences Constantly try to improve your BATNA Try to understand your partner’s BATNA, since that determines his RP – Do research about your partner & the situation E.g., In negotiating for coffee with vendor, know what other customers pay E.g, in negotiating for a house, find information about comparables ( E.g, in negotiating for car, get the dealer’s cost from consumer reports E.g., in salary/job offer negotiations check salary services, what others are getting & cost of living

26 Opening the negotiation Should you go first or wait? Where should you open the negotiation? When you should make concessions? In what order? Should you use threats or false verbal commitments (e.g., “That’s the best I can do”)

27 Anchoring effects People make estimates by starting from an initial anchor value and adjusting to yield a final answers They generally insufficiently adjust Anchors are usually based on whatever information is available, regardless of relevance First offers act as anchor  advantage Use your target as your anchor – Not your RP – Not the initial offer Set aggressive, but realistic targets – Get data to know what is realistic

28 Getting the best deal in a distributed negotiation Assess your BATNA & improve it Determine your reservation point, but don’t reveal it Research partner’s BATNA & estimate reservation point Set high, but realistic target Make a first offer If other makes a first offer, make a counter offer to reanchor Plan your concession – big  small Support your offers with facts Appeal to norms of fairness

29 Power in negotiation: Slicing the Pie Know your BATNA Research partner’s BATNA Don’t reveal your BATNA/RP Set high targets Make the first offer Immediately re-anchor on others BATNA or your target if other makes a first offer Make bi-lateral, not uni-lateral concessions Make small, graduated concessions Support offer with facts Appeal to norms of fairness Don’t fall for a ‘split the difference’ trap