04 Integrative Negotiations Part 2

NEGOTIATION FUNDAMENTALS
Prof Stephen W. Nason

Professor of Business Practice
© Prof Stephen W. Nason – All Rights Reserved
Negotiation Outline: Where are We Going?
Negotiation
Fundamentals Processes Contexts Remedies
Nature of Perception Salary Negotiation

Negotiation & Biases Negotiations Envelope
Distributive VC
Negotiating Style Video Analysis
Negotiations Negotiations
Integrative Hard Ball Tactics Disputes Persuasion

Negotiations
Coalitions &
Strategy International Best Practices
Multiple Parties
& Tactics Negotiations
M&A
Conclusion
Groups Negotiations
Difficult
Negotiations
© Prof Stephen W. Nason – All Rights Reserved 2
Succeeding in Negotiations
You will never lose if you understand your:
 Bottom Line (Reservation Point)
 BATNA (Best Alternative to a Negotiated Agreement)
You maximize your chances of succeeding gloriously if you:
 Trade
Negotiation Fundamentals
Negotiation Outline
Negotiations Identify & Add
Issues
Add Resources
Claiming Value: Creating Value:
Distributive Neg. Negotiation Tactics Find non‐specific
Compensation
Reservation Prioritize interests
Price Cut Costs
Trade
BATNAs Bridge Gaps
Use Bets
PREPARATION Search for
Information
PSS
Build trust
Ask questions Trade info. Mult.sim.offers
Reservation Point (Your Bottom Line)
For the Seller (Station Owner)
 The absolute minimum that the seller is willing to accept
 Anything lower will result in the seller losing money
 Anything lower is worse than no settlement at all
For the Buyer (Texoil)
 The absolute maximum that the buyer is willing to pay
 Anything higher will result in the buyer paying more than the item is worth
 Anything higher is worse than no settlement at all
(Cont)
What is Station Owners’ Bottom Line?
 $..... (better than nothing)
 $..... (BP offer)
 $..... (what is needed after taxes)
 $..... (what is needed for your dream)
 $..... (what the station is worth?)
(Cont)
What is Texoil’s Bottom Line?
 $..... (cost of new station)
 $..... (cost of upgrading station with minimart)
 $..... (Boss’ max allowed)
 $..... (what the station is worth)
How do you determine what your bottom line is?
How Do You Determine What Your
Bottom Line Is?
Minimum profit?
– Irrelevant!
1. What are your alternatives if the negotiation fails
2. Choose your Best Alternative (BATNA)
3. Compare the value of your Best Alternative to the current situation
Use BATNA to determine the Bottom Line
Best Alternative To a Negotiated Agreement
(BATNA)
 Your best alternative if the negotiation fails
 You should never accept an offer in a negotiation that is worse than your
BATNA
 Need understand not only your own BATNA but you opponent’s BATNA as
well
 Your BATNA is your POWER
Best Alternative to a Negotiated Settlement
(BATNA)
What was Texoil’s BATNA?
 Build a new station for $.....
What was their reservation price?
 ….. or …..?
 Shouldn’t they be the same?
Texoil’s Reservation Point
Texoil’s BATNA = Build a new station for $..... K
 How would a new station compare to the old station?
– New has mini mart
– New has updated equipment
 What is this worth
– Mini mart costs ….. K
– Modern pumps cost ….. K
 A station without mini mart and new pumps
– ….. – …… – ….. = …..
– Old station at ….. = new station at …..
– Texoil’s RP for old station = ….. K
What is the Station Owner’s BATNA?
 Accept BP offer for ….. K
– Travel for 1 year (only ….. K when return)
 Keep working and sell in several years?
– 5 years?
– Live in a slum
– Spouse has nervous breakdown
 Try sell someone else?
– Unlikely
 Give up your dream
All are Unacceptable
Owner’s Reservation Point
True Bottom Line:
 $.....
Romantic’s Bottom Line: Cost of 2 year dream
 $.....
Bargaining Zone: Texoil Case
Texoil
Initial offer Buyer Max
$ ?? $.....
/
/
/
/
$...... $ ??
Min Station Initial offer
Owner Seller
Texoil
$ ?? $.....
/
/
/
/
$...... $..... $ ??

Station
Min Min Initial offer
Owner Seller
Practical Romantics
What is the fundamental source of POWER in
Negotiations?
Your BATNA
Why is the Reservation Point Important?
1. Know your own reservation point
and you will NEVER lose!
2. Know your opponent’s reservation point
and you will almost always win!
Initial offer Texoil Max

$ ?? Buyer $.....
/
/
/
/
$..... Station $ ??

Min Owner Seller Initial offer
Negative Bargaining Zone
 What do we do if there is a negative bargaining zone?
– Trick the other side
– Agree to end the negotiation and move on
– Be creative, is it really negative?
 How could we move from negative to positive bargaining zone?
– Be creative, is it really negative?
Texoil
$ ?? $.....
/
/
/
/
$..... $ ??
Min Station Initial offer
Owner Seller
Texoil
$ ?? $.....
$..... $ ??
Station
Min Initial offer
Owner Seller
Integrative Bargaining: Increase both
Slices of the Pie
Integrative Negotiations Create Value
Negotiation over how to increase resources so all parties receive more
 Shift negotiations away from opposing parties’ stated positions to
opposing parties’ interests
 By dealing with interests are able to find solutions that result in a higher
joint benefit than through distributive bargaining
Integrative negotiations create new value for everyone
Distributive negotiations split up and apportion current value
How Can You Maximize Your Results?
Trade!
 Each party gives up their low priority interests in exchange for getting their
high priority interests.
– Ask:
1. Does each have different interests?
2. Do they put different weights on the same interests?
– If the answer to either question is yes then can trade issues.
Trade away less important issues
in exchange for more important issues.
In Order to Trade You Must Understand the
Difference between Interests vs. Positions
 Stated Positions ‐ what one party in a negotiation saysthey want
 Underlying Interests (Ch 5)‐ what that party reallywants
– Need to be aware of own interests
– Need to be aware of other parties interests
• Even if other party does not fully understand own interests
• If you understand other party’s interests better than they do it gives you a
big advantage
But It Is Very Difficult to View the World
As Your Opponent Does
What makes seeing the word form your opponents perspective so difficult?
1. You don’t know their situation
2. Partisan Perspective (selective perception and egocentrism)
3. Competitive Approach
4. Negotiation situation itself (lots of information that is not shared or even
consciously realized)
Trading Based On
Differences Among Issues Creates Value
What sort of differences?
– Priorities
– Competencies
– Time horizons
– Costs of capital
– Forecasts and expectations
– Attitudes towards risk
– Tax opportunities
– Performance measures
– Anything!
Find differences, prioritize, trade
Trade Issues: Techniques
 Unbundle issues
 Add new issues
 Discover preferences
– (Probing for real interests on each issue)
 Start trading
 Make package deals, not single issue offers
Tactics for Developing Integrative Solutions
Identify and Add additional issues:
 Develop as many of your own issues as you can
 Find as many of your opponent’s issues as you can
 Prioritize the issues
 Trade
What are the Issues?
Owner Texoil
 $..... K boat debt  Profits
 $..... K repairs  Expanding world wide
 $..... K living expenses  Expand in LA port area
 $..... K maintenance  Increase station ownership
 $..... K for return until find a new job  Modern stations, mini mart &
 Spouse nervous breakdown modern pumps
 Cant run station alone  Good station managers
 No mini mart
 Need run it 24 hours, not enough
staff
What are the Issues?
Owner Texoil
 $..... K boat debt  Profits
 $..... K repairs  Expanding world wide
 $..... K living expenses  Expand in LA port area
 $..... K maintenance  Increase station ownership
 $..... K for return until find a new job  Modern stations, mini mart &
 Spouse nervous breakdown modern pumps
 Cant run station alone  Good station managers
 No mini mart
 Need run it 24 hours, not enough
staff

$ ?? Buyer $.....
/
/
/
/
$..... Station $ ??


$ ?? Buyer $......
$..... Station $ ??

Trade: Specific Techniques
 Create new value: explore integrative aspects
 Trade issues: find differences and trade
– Obtain added resources
– Non‐specific compensation
– Cost cutting
– Bridging
Negotiation Outline
Issues
Add Resources
Compensation
Price Cut Costs
Trade
BATNAs Bridge Gaps
Use Bets
Information
PSS
Build trust
Obtain added resources:
 When the conflict arises due to resource shortages find a way to increase
total amount of resources
(Continued)
Non‐specific compensation:
 One party gets what they want and the other party gets paid in some
unrelated issue
– Ask, can we give the other party something that is not included in how we are
currently thinking about the negotiation
 Examples of Non‐Specific compensation
– Owner help Texoil Expand ‐ Free advertising on sails and hull
How Can One Side Cut Costs of the Other?
Cost cutting:
 One party gets what they want in exchange for reducing the costs to the
other party of conceding
– Ask what are the costs to the other party and how can we pay those costs
 How can one side cut costs of other?
– Cut owner’s costs:
• Provide oil at cost
• Health care
• Line of credit
(Continued)
Bridging:
 Find a new creative option that satisfies the main interests of both parties
– Reformulate the conflict to consider the wider variety of solutions that
address the underlying interests of both parties
Which Teams Had the Best Integrative
Agreements?
 Teams that create the most value for both sides
– Offering a job is better than offering advertising
– Offering both is better than offering just one
 Teams with specific agreements
– If say “give owner a job” is not that meaningful
– How much will the salary be: $1 or $1,000,000? (Makes a big difference)
How Can You Trade for Issues You Do Not Know
Exist?
Texoil does not know about the trip or the Salary concerns
 So how can you trade what you do not know?
 Find out
– Prepare
– Gather Information
How to Get Info Necessary to Reach an
Integrative Agreement?
Prepare, prepare, prepare, and then …
 Prepare some more
Prepare What?
 Identify the true decision maker
 Look for common ground
 Surface potential problems (why might they say no)
 Search for solutions to the other sides problems
How Else Can You Trade for Issues You Do Not
Know Exist?
Texoil does not know about the trip or the Salary concerns
 So how can you trade what you do not know?
 Find out
– Prepare
– Gather Information
– Probe! Ask Questions
Integrative Negotiations
Negotiation Outline
Issues
Add Resources
Compensation
Price Cut Costs
Trade
BATNAs Bridge Gaps
Use Bets
Information
Integrative Agreement?
Ask questions
 If probe (ask and listen) can get info necessary to:
– Determine others reservation point
– Determine difference real underlying interests
– Find integrative solution
What If The Other Side Is Not Clear On Their
Own Interests?
Look at the situation from their perspective
Probe: Ask questions
 Ask about them
 Ask about their hopes and dreams
 Ask what they will do after the negotiation is over
 Ask how the results of the negotiation will be used
 Ask how you can help deal with any issues that are not a part of the
negotiation
Often when you ask questions the other side
will resist answering. Why?
They think you may take advantage of them or the info they provide
So successful negotiators …
Build Trust
 without trust it is hard to get good information and optimal outcomes
Easiest way to build trust?
 Behave trustworthy
But build trust carefully
 If you are trustworthy and share info and the other party uses it to there
advantage you loose out
Getting Information:
Strategically Disclose Information
Strategically disclose information
 Trade a little information in exchange for a little back
 Start with information that can’t hurt you or is not that important
 Build to more important information
 Give up information equally or slower
Make Multiple Offers to Get Information
Make multiple offers simultaneously
 Make two or three offers simultaneously
 Have them vary on one or two dimensions that you can assess
 Build on the offer that elicits the most positive response
Use Post‐Settlement Settlements get all
Remaining Information
Search for post‐settlement settlements
 Once settlement reached, reopen negotiations (or bring in third party) to
try to come up with a better settlement for both parties
 must agree that if either party does not like the new agreement can revert
back to the original agreement
Integrative Agreement (Continued)
In order to successfully get all the information you need you must be
 A Detective
 A Professor
 Creative
 Persistent
Remember: the other side most likely
 Will not trust you
 Will not be clear on their own preferences
Negotiation Outline
Issues
Add Resources
Compensation
Price Cut Costs
Trade
BATNAs Bridge Gaps
Use Bets
Information
PSS
Build trust
Contingent Contracts
Bet on differences
 Two parties disagree about some future event
 He thinks “A” will happen
 She thinks “B” will happen
 Now bet, say
 If “A” then he gets ____
 If “B” then she gets _____
Summary: Tactics for Succeeding at Negotiations
 Claim current value: Determine distributive factors
– (Both parties BATNAs, res. points, positions & interests)
Create new value: explore integrative aspects
 Trade issues: find differences and trade
– Identify & add additional issues
– Obtain added resources
– Non‐specific compensation
– Cost cutting
– Bridging
Negotiation Outline
Issues
Add Resources
Compensation
Price Cut Costs
Trade
BATNAs Bridge Gaps
Use Bets
Information
PSS
Build trust
Conclusion: The 4 Most Important Factors that
Determine Success in Negotiations?
1. Preparation, Preparation, Preparation, Preparation!
– Make sure you know the details of your situation perfectly!
– Research the other side’s situation to the greatest extent you can
2. BATNA: develop as many alternatives as you can and then choose your
best
3. Reservation Point: know your bottom line and all its specific components
4. Trade to create value!

04 Integrative Negotiations Part 2

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

04 Integrative Negotiations Part 2

Uploaded by

Copyright:

Available Formats

NEGOTIATION FUNDAMENTALS

Prof Stephen W. Nason

Fundamentals Processes Contexts Remedies

Nature of Perception Salary Negotiation

Integrative Hard Ball Tactics Disputes Persuasion

$...... $..... $ ??

Initial offer Texoil Max

$..... Station $ ??

Initial offer Texoil Max

$..... Station $ ??

Initial offer Texoil Max

$..... Station $ ??

You might also like