Chapter 10 Closing the Deal

Agree or Walk Away? Classic conflict – at least two interdependent parties, with incompatible goals Classic conflict – at least two interdependent parties, with incompatible goals What to do when negotiating isn’t working What to do when negotiating isn’t working 10-2

Negotiating Skills Skill 10.1: Create an agreement template Skill 10.1: Create an agreement template Skill 10.2: Claim or retain value at the end of a negotiation Skill 10.2: Claim or retain value at the end of a negotiation Skill 10.3: Identify the causes for stalemate and techniques to move past them Skill 10.3: Identify the causes for stalemate and techniques to move past them Skill 10.4: Learn how to avoid or eliminate bargaining traps Skill 10.4: Learn how to avoid or eliminate bargaining traps Skill 10.5: Build a relationship in a negotiation Skill 10.5: Build a relationship in a negotiation 10-3

Chapter Case: To Agree or Not to Agree, That Is the Question Four-party agreement on the operation of a multimillion dollar public hospital came down to final signatures on the deal Four-party agreement on the operation of a multimillion dollar public hospital came down to final signatures on the deal Governor wanted one more concession from city and county officials Governor wanted one more concession from city and county officials Parties could not legally agree with final demand, so agreed to use “best efforts” to issue $12 million in bonds Parties could not legally agree with final demand, so agreed to use “best efforts” to issue $12 million in bonds Closing went forward on deal Closing went forward on deal 10-4

Agreement Template Document that includes critical issues Document that includes critical issues Memorializes important aspects of deal and “what-ifs” Memorializes important aspects of deal and “what-ifs” Includes: parties, intent, roles, consequences, exit strategy Includes: parties, intent, roles, consequences, exit strategy 10-5

Put It in Writing Written deal serves three purposes Written deal serves three purposes Communication – make sure all heard the same deal Communication – make sure all heard the same deal Commitment – signing the deal shows investment Commitment – signing the deal shows investment Contract – evidence of deal may be binding Contract – evidence of deal may be binding 10-6

Tactics at End of Negotiation To avoid concessions To avoid concessions Silence Silence Walkaway Walkaway Promise an exchange Promise an exchange To exact concessions To exact concessions Nickel and diming Nickel and diming 10-7

Moving Past Stalemate Review the concessions both parties have already made Review the concessions both parties have already made Utilize a third party Utilize a third party Handle emotions Handle emotions Move to informal negotiations Move to informal negotiations 10-8

Traps to Avoid Handling Emotions Label your opponent’s behavior to yourself Label your opponent’s behavior to yourself Acknowledge your own emotions Acknowledge your own emotions Recognize emotions may make you uncomfortable Recognize emotions may make you uncomfortable Identify what’s causing the emotion Identify what’s causing the emotion Express your emotions appropriately Express your emotions appropriately 10-9

Tactics for Success: Asking the Right Questions Use open-ended questions to elicit creative thinking: “Do you think?” Use open-ended questions to elicit creative thinking: “Do you think?” Use window question that calls for opponent to explain position: “What were you saying about...?” Use window question that calls for opponent to explain position: “What were you saying about...?” Use series of questions to promote dialogue: “Exactly what...? Is there flexibility...?” Use series of questions to promote dialogue: “Exactly what...? Is there flexibility...?” Question to uncover hidden concerns: “Am I missing something?” Question to uncover hidden concerns: “Am I missing something?” Question to enhance creativity: “Have you considered...?” Question to enhance creativity: “Have you considered...?” 10-10

Bargaining Traps Conflict spiral occurs when one party initiates a contentious communication and the other party responds in kind; which elicits another contentious communication and so on Conflict spiral occurs when one party initiates a contentious communication and the other party responds in kind; which elicits another contentious communication and so on How to break conflict spirals? How to break conflict spirals? Refocus negotiations by Refocus negotiations by not reciprocating not reciprocating Respond with mix of contentious Respond with mix of contentious and noncontentious and noncontentious Label behavior as unproductive Label behavior as unproductive 10-11

Bargaining Traps (cont’d) Psychological entrapment occurs when a party escalates commitment to a previously chosen, though failing, course of action and becomes so invested in reaching agreement, no longer cares if it’s a good agreement Psychological entrapment occurs when a party escalates commitment to a previously chosen, though failing, course of action and becomes so invested in reaching agreement, no longer cares if it’s a good agreement To avoid psychological entrapment To avoid psychological entrapment Make sure to establish BATNA at start Make sure to establish BATNA at start Be willing to walk away rather than give into anything less than original BATNA Be willing to walk away rather than give into anything less than original BATNA 10-12

Joint Problem Solving to Avoid Bargaining Traps Diagnose the problem Diagnose the problem Reexamine goals to set realistic target Reexamine goals to set realistic target Reframing a change as “new direction” not as “giving in” Reframing a change as “new direction” not as “giving in” Reduce target Reduce target 10-13

Other Barriers to Agreement Ideologically based conflict Ideologically based conflict More difficult because tradeoffs and compromises are seen as selling out More difficult because tradeoffs and compromises are seen as selling out One sees one’s own position as “fairer” because based on one’s ideals One sees one’s own position as “fairer” because based on one’s ideals Often results from one representing his or her own “group” against others Often results from one representing his or her own “group” against others 10-14

Other Barriers to Agreement (cont’d) Decision-making conflict arises when parties must Decision-making conflict arises when parties must Communicate needs without revealing too much Communicate needs without revealing too much Assimilate information quickly Assimilate information quickly Understand the needs Understand the needs of the other party of the other party 10-15

Barriers to Agreement (cont’d) An irrational opponent Assume your opponent is not really irrational and proceed rationally Assume your opponent is not really irrational and proceed rationally Recognize it as a strategy and respond by being cooperative Recognize it as a strategy and respond by being cooperative Treat your opponent as irrational and be prepared to walk away Treat your opponent as irrational and be prepared to walk away 10-16

Building a Relationship Use skilled negotiators Use skilled negotiators Follow up on agreement after it is implemented Follow up on agreement after it is implemented Establish face-to-face meetings as agreement is being implemented Establish face-to-face meetings as agreement is being implemented Recognize may need to renegotiate some parts of deal Recognize may need to renegotiate some parts of deal 10-17