Negotiation

Steven Guest
Steven.guest@esade.edu

1
BBA | Negotiation | 2020/2021
 Negotiation

Session 2 |1. Batnas and the claiming

game

2
BBA | Negotiation | 2020/2021
FRASIER
CASE
 QUESTIONS FOR FRASIER

1. Who are the parties in the Frasier case and what are their interests? How can
the various parties influence the negotiation?
2. What is NBC's Batna? And Paramount's? What is your best estimate of their
respective reservation prices?
3. How can value be created in this negotiation? Who gets it? What obstacles
might prevent agreement? How can these be overcome?
4. How should we judge Graboff's success in the negotiation?
HISTORY
TIME SLOT

• 1993: Thursday 9.30pm on NBC → Prime time +

“Thursday is the number one priority for this network”.
High income on advertising & generating 38% of the
network’s overall revenues.
• Mid-1990s: NBC, in order to distribute success, moved
Thursday series to other days. Second time-slot:
Tuesday 8pm
• 1998-1999: Moved again to Thursdays at 9pm to
replace Seinfields → seen as a replacement
• December 1998: Ratings were down-> “Frasier is no
Seinfeld”
 HISTORY
2000: PARAMOUNT OFFER

• Extension of the contract for an increase of $5m per episode

• NBC worries: Frasier was and old show (7 years old) and might decline in
the future.
• NBC declined Paramount offer and moved the show from Thursdays to
Tuesdays at 9pm. If it went down, in a year NBC would be in a position
strong enough to bargain the show.
• Frasier’s cast and producers felt betrayed by the network.
Frasier Case Study. How
the story went (Midpoint
Rule)

#1
#2 $8.0 “floated
NBC in the press”
#3
Offers $6.0

$4.75
#4 Paramount
#5 $5.5 Offers
$5.0

Final Deal: $5.4ish million

From: Subramanian, Frasier (A) (Harvard Business School Case 9-801-447)

 HISTORY
2000: PARAMOUNT OFFER

• Using contingencies to allocate risks

• Audience
• Guarantees on stars
• Extra pots of money for development
• Strike guarantees
 SEVEN-ELEMENT
PREPARATION GUIDE (FISHER AND ERTEL)

• Alternatives to the negotiated deal (both)

– Select and improve batna, identify theirs
• Interests (both)
– Identify; clarify; probe for underlying interests
• Options on the negotiated deal
– Create options to meet interests; maximize joint gains
• Criteria for decisions
– Use external standards as a sword and shield; fairness of the process; offer
them attractive ways to explain their decision
• Relationship
– Separate people from the issue; build working relationship
• Commitment
– Identify issues to be included in the agreement, steps to agreement
• Communication
question my assumptions; identify what to listen for;
1. INTERESTS, WHAT DO PEOPLE REALLY WANT?

1. Mistakes
• positions rather than interest
• Thinking only about what you want

2. Well prepared negotiator

• Look for interests behind positions
• Prioritize your interests
• Consider the other side’s interests
1. INTERESTS, WHAT DO
PEOPLE REALLY WANT?

Steps
• Identify relevant parties (my side and theirs)
• Clarify interests (mine, theirs, others) (personal, professional)
• Probe for underlying interests (importance)
2. OPTIONS?
WHAT ARE THE BEST POSSIBLE AGREEMENTS OR BITS
OF AGREEMENT

• Common mistakes
» Taking a narrow, one-sided focus (consider their side, have fallbacks)
» Neglecting the value in difference
• The well prepared negotiator
» Look for ways to work together
» Find value differences (risk, timing, preceptions)
2. OPTIONS?

1. create options to meet interests

•Find ways to maximise joint gains

3. ALTERNATIVES
WHAT WILL I DO IF WE DO NOT AGREE

1. Common mistakes
Not thinking of a BATNA
Assuming BATNA is the same old thing
• The well prepared negotiator
Think of my alternatives to a negotiated agreement
Select and improve my Batna
Identify Alternatives Open to the Other side
Estimate their Batna
4. LEGITIMACY

1. Common mistakes
Ignoring legitimacy altogether
Failing to think how your counterpart will explain the agreement
Thinking of only one objective rationale
2. The well prepared negotiator
Develop a range of fairnesss
Consider “fair” process
Preparing to help them explain the result
5. COMMUNICATION

1. Common mistakes
Focus on rehearsed lines
Ignoring blind spots

2. The well prepared negotiator

Prepare for two-way communication
6. RELATIONSHIP
1. Common mistakes
Confusing the relationship and substance
Assume relationship is given and it is their fault
2. The well prepared negotiator
Prepare to address relationship and substance independently
Prepare to take unconditionally constructuve steps to improve the
relationship
7. COMMITMENT

1. Common mistakes
Not knowing what “done” looks like
Assume everyone knows what we are talking about
Failing to determine actions needed to reach agreement
2. The well prepared negotiator
Plan ahead for operational commitments
Clarify purpose, product and process of meetings
Plan the process for getting to a commitment
 CONTINGENCY CONTRACTS

1. Why are contingent contracts overlooked?

2. Turn difference into value
Eg Client wants turnaround plan but then gets an offer for buyout of 100.
Consultancy says we can make this into a 200 m business. Suspicious?
3. Bypassing biases:
Overconfidence (risk) and egocentrism
levelling the playing field ... Asymmetry
Deceit
Reducing risk and exposure ... Creates goodwill- share benefits,
cushion downturns
Motivating
4. BUT ...... YOU MUST HAVE continued interaction, enforceability,
transparency
Simulación
Moms.com
Integration level

1. didn’t recognise exchange

(6 runs / finance in 1+)
2. Recognised Exchange but
not juniors
(8 runs, upfront)
3. Recognised Exchange and
juniors (500,000 @ 15,000)
Contingency clauses

1. based on differences

2. diagnose honesty of others

3. reduce risks when sharing

4. increase incentive to perform and comply

5. manage biases in the decision making process

6. resolve problema of overconfidence

Lessons

1. Find Exchange
2. Add in variables to benefit both
3. Find differences
in time
in risk preference
4. constuct contingencies
VALUE CREATION TOOLKIT

1. 1. Preparation
2. 2. During
3. 3. Posterior
 1. STRATEGIES FOR PREPARATION

1. Identify your multiple interests

2. Create a scoring system
3. Calculate an RV for the overall package
4. Identify the other party's multiple interests
 2. STRATEGIES DURING NEGOTIATION

1. Multiple issues should ideally be negotiated simultaneously

2. Logroll between variables
3. Make package offers
4. Leverage differences of all types
Sources of value : preferences, resources, time, risk
Non competing variables
Economies of scale
 3. STRATEGIES TO EMBELISH THE DEAL

Look for a Post Settlement Settlement (PPS)

1. Post negotiation strategies to add value
2. Acknowlede progress in first deal
3. Suggest aspects of deal you wish could be improved
4. Suggest thinking outside the box
5. State not looking for new agreement but just add value
SEVEN-ELEMENT PREP GUIDE

• Alternatives to the negotiated deal (both)

– Select and improve batna, identify theirs
• Interests (both)
– Identify; clarify; probe for underlying interests
• Options on the negotiated deal
– Create options to meet interests; maximize joint gains
• Criteria for decisions
– Use external standards as a sword and shield; fairness of the
process;
– offer them attractive ways to explain their decision
• Relationship
– Separate people from the issue; build working relationship
• Commitment
– Identify issues to be included in the agreement, steps to
agreement
• Communication
question my assumptions; identify what to listen for
 THE IMPORTANCE OF FAIRNESS

They must feel as if they have done well!

Don’t gloat ! Don’t tell them how well you’ve done!
Fairness is a question of standards or criteria
We dont normally know how well the market does so satisfaction depends on
1. Results
2. Process
3. Self Identity
4. Relationship
R HOLBROOKE ASKS “WHY”

US Demand - 25 to
22 % of UN Budget
2001
 INVESTIGATIVE NEGOTIATION

1. Ask “why”
2. reconcile interests not demands –
3. create common ground with allies or
uncommon allies
4. interpret demands as opportunities
5. Don’t dismiss anything as their problem
- see if we can help them with their
problem
6. dont let negotiations end with a
rejection of your offer
7. understand difference between selling
and negotiating
 STRATEGIES TO ELICIT INFORMATION

1. Building trust and sharing information

2. Asking (indirect) questions.
3. Giving away some information. On relative priorities
4. Negotiating multiple issues simultaneously.
5. Making multiple offers simultaneously.
 Different tensions in negotiations

1. Tension between creating and sharing

value (NEG DIALEMA)
2. Tension between empathy and
assertiveness
3. Tension between principals and agents
 Tension verses empathy

High
Collaboration

Empathy

Low
Low High
Assertiveness
 3. TENSION BETWEEN
PRINCIPALS AND AGENTS

1. Reap full benefits of hiring an agent through Agency benefits

1. Knowledge
2. Resources
3. Skills
4. Strategic advantages
2. Problem of agency costs and Sources of tension
1. Different preferences
2. Different incentives
3. Different information
3. Mangement mechanisms
1. Incentive contracts (contingencies, %, hourly fees, fixed fees,
bonuses/penalties)
2. Monitoring systems
3. Bonding
 FOUR DIMENSIONS OF
SUBJECTIVE VALUE

1. 1. Feelings about the Instrumental Outcome

2. 2. Feelings about Oneself
3. 3. Feelings about the Process
4. 4. Feelings about the Relationship

1. CURHAN, ELFENBEIN, AND XU, 2005

Jared R. Curhan, Hillary A. Elfenbein, and Heng Xu. www.subjectivevalue.com.