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The Negotiation Process: Four Stages
Chapter 2 The Negotiation Process: Four Stages
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A Key Concept for All Negotiations
2-2 Negotiator and mediator Theodore Kheel summarized a critical concept:2 “Negotiations are about changing the status quo. Unless both parties can receive something more than what the status quo provides, there is nothing for them to negotiate.” Why? If not, they will choose the status quo and walk away. 2 Theodore W. Kheel, The Keys to Conflict Resolution (New York, NY: Focus Walls Eight Windows, 1999).
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Five Negotiation Skills
2-3 Five Negotiation Skills Skill 2.1: Preparation before entering a negotiation includes deciding a BATNA Skill 2.2: Consider appropriate ground rules Skill 2.3: Develop an initial offer Skill 2.4: Anticipate posturing Skill 2.5: Decide if the negotiation is a single issue or multiple issues and if it includes two or more parties and the appropriate strategy. Also decide if an impasse occurs how it should be resolved
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The Four Stages: Stage 1: Preparation Stage 2: Opening Statements
2-4 The Four Stages: Stage 1: Preparation Stage 2: Opening Statements Stage 3: Bargaining Stage 4: Settlement
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Historical Development of the Negotiation Process
2-5 Historical Development of the Negotiation Process 1930s-50s: “Hard bargaining,” threats, bluffs, little flexibility 1980s: Getting to Yes introduced “win-win” strategy 1980s: Game Theory, Howard Raiffa’s The Art and Science of Negotiation 1990s: Interest-based bargaining (IBB) problem-solving focus Today: All these views have merged to produce a new understanding of the negotiation process
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Chapter Case: The Budget Presentation
2-6 Chapter Case: The Budget Presentation Francis, a newly appointed dept. head, asked the head of another department to describe the budget process. She told him “it’s a vicious, competitive process…we all know that we are fighting for a share of a fixed pool of funds” After the meeting you sit down with the CEO and try to get the most you can for your department, keeping in mind the presentation by the other dept. heads How does Francis prepare? Negotiate with the CEO?
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Stage 1: Preparation 2-7 Decide your BATNA - always start with a clearly defined BATNA and stick to it List all key issues either party will want decided. Include tangibles, intangibles, throwaways…the more the better! Set priorities for the key issues by either: 1. Ranking; 2. Weights (%); 3. Assign each issue to one of four priority levels—Essential, Important, Desirable, Throwaway Develop support arguments based on information, facts, logic
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What Is BATNA? BATNA = the Best Alternative To a Negotiated Agreement
2-8 BATNA = the Best Alternative To a Negotiated Agreement Always decide your BATNA before entering any negotiation! BATNA = the value or point at which you will choose no agreement over a settlement BATNA is similar to the “walk-away” value or point
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How to Determine Your BATNA! (Answer the following questions)
2-9 How to Determine Your BATNA! (Answer the following questions) If the other party withdrew from negotiations today, what are your alternatives? Can you list and place an estimated value on all the economic variables such as price, timing, warranty, options, etc.? How important is your long-term relationship with the other party? Can you assign a dollar value to it? Does it override other factors? Can you improve your BATNA by seeking new alternatives to no agreement?
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Preparation Includes Developing Support Arguments
2-10 Preparation Includes Developing Support Arguments Facts Information Logic Persuasion Why? You attempt to “level the playing field” or perception of power/leverage
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The Basic Stages of Negotiation
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Stage 2: Opening Session
2-12 Stage 2: Opening Session Ground Rules: Consider the “5 Ws” Initial offers on each issue of importance to either side are presented Posturing to state one’s case, blow off steam, etc., may include presenting conflicting views, concealing objectives, caucusing, inflexibility, unwillingness to compromise
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Items Identified for Negotiations by a Husband and Wife Building a New Home with a Limited Upgrades Budget
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Ground Rules: Consider “The 5 Ws”
2-14 Ground Rules: Consider “The 5 Ws” WHO speaks for each party, is authorized to make/reject offers, and how many people will be on each team? WHERE will negotiation take place, and what will be the seating arrangement? WHEN will negotiations begin, and how long will sessions last? HOW will offers be made, issues included in the discussion? WHAT form of final agreement is acceptable (handshake, verbal, written, notarized)?
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Bargaining Styles: Howard Raiffa’s FOTE & POTE
2-15 Bargaining Styles: Howard Raiffa’s FOTE & POTE FOTE = Full, Open, Truthful Exchange, which includes a completely open, honest, and truthful exchange of interests. FOTE is primarily only used by family, friends, long-time business associates, students POTE = Partial, Open, Truthful Exchange which includes the concealment of real interests, posturing, bluffing, etc., and causes the parties to practice “the negotiation dance.” POTE is used by most negotiators Why is POTE used more? The parties lack the trust required to engage in FOTE
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“Saving Face” 2-16 Both parties need to “save face” or avoid embarrassment during and at the end of negotiation Both parties need some “gains” to tout, if not why would they settle? Neither party presents the final deal as a “win-lose” and could potentially cause hardship for the other party Why? Payback can be a powerful motivator! Keep in mind future encounters
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Stage 3: Bargaining 2-17 Two critical variables shape the negotiation: number of parties, number of issues Two-party and single issue = “zero-sum” (assuming no long-term relationship) Two party and multiple issues = trades to achieve an efficient settlement Three parties and one issue = auction process Three parties and multiple issues = consensus by all on some or all issues
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Common Bargaining Tactics to Prepare For
2-18 Common Bargaining Tactics to Prepare For Extreme (high or low) opening offers Claiming limited authority Emotional outbursts Offering few concessions Resisting deadlines
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Possible Negotiation Situations
2-19 Number of Parties Involved Number of Issues Two Three or More One Zero-sum Outcome Auction Process Multiple Efficient Outcomes Consensus by all parties on all issues, or only some issues resolved by some parties following their BATNAs
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Stage 4: Settlement 2-20 Negotiations result in either a settlement or an impasse (stalemate) Impasse = both parties still seek an agreement but negotiations have stalled Why do parties declare an impasse even though they both still seek a settlement? Common reasons: (1) noncommunication of interests; (2) excessive emotional involvement; (3) failure of one or both to realize the interests of the other party and thus offer a settlement which exceeds their BATNA
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Beyond Impasse: Third-Party Interventions
2-21 Beyond Impasse: Third-Party Interventions Facilitation --- known friend or family member is trusted to provide assistance by meeting separately with both parties and suggesting a settlement Mediation --- third party assists the parties in the development of a mutually acceptable settlement Arbitration --- third party is empowered to make a “final and binding” decision on all unresolved issues
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The Closing 2-23 With a verbal agreement (if between family members or friends); a handshake; or a written, signed, and dated document the negotiation ends Both sides realize gains beyond their walk-away point (BATNA)
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