Because learning changes everything Negotiation Section 01 Negotiation

Because learning changes everything. ® Negotiation Section 01: Negotiation Fundamentals Chapter 02: Strategy and Tactics of Distributive Bargaining © 2019 Mc. Graw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of Mc. Graw-Hill Education.

The Distributive Bargaining Situation The target point is a negotiator’s optimal goal. • Also called a negotiator’s aspiration. The resistance point is a negotiator’s bottom line. • Also called a reservation price. The asking price is the initial price set by a seller. • The buyer may counter with their initial offer. The spread between resistance points – the bargaining range, settlement range, or zone of potential agreement – is important. • When the buyer’s resistance point is above the seller’s, there is a positive bargaining range. © Mc. Graw-Hill Education 2

The Role of Alternatives to a Negotiated Agreement What will you do if no agreement is reached? • What is your best alternative to a negotiated agreement – BATNA? • What is your worst alternative to a negotiated agreement – WATNA? Alternatives give negotiators the power to walk away. • Negotiators can set their goals higher and make fewer concessions. • Good bargainers know their realistic alternatives before starting discussions and try to improve their alternatives during negotiation. Strong BATNAs can influence how a negotiation unfolds. • Negotiators with strong BATNAs usually make the first offer. • Benefits of a good BATNA are strongest when the bargaining range is small and negotiations are competitive or unlikely to reach agreement. © Mc. Graw-Hill Education 3

Settlement Point The fundamental process of distributive bargaining is to reach a settlement within a positive bargaining range. • Both sides want to claim as much of the bargaining range as possible. Both parties know they may have to settle for less than they prefer, but hope it is better than their own resistance point. • Both must believe the settlement is the best they can get. • Very important, both for the agreement and for the support of the agreement after negotiation ends. Another factor affecting satisfaction with the agreement is whether the parties will see each other again. • Those expecting future negotiations with the other party are less likely to use distributive bargaining. © Mc. Graw-Hill Education 4

Bargaining Mix The package of issues for negotiation is the bargaining mix. • Each item in the mix has its own starting, target, and resistance points. • Some items are important to both parties, others only to one party. • Negotiators need to understand what is important to them and to the other party, and take this into account during the planning process. As the bargaining mix gets larger, there is more opportunity for trade-offs across issues. • This part may require integrative negotiation strategies and tactics. © Mc. Graw-Hill Education 5

Discovering the Other Party’s Resistance Point The more you can learn about the other party’s target, resistance point, motives, and so on, the more likely you will settle favorably. At the same time, you do not want the other party to have certain information about you. • Your resistance point, some of your targets, and any information on weaknesses is best kept concealed. • You may want the other party to have certain information. • Some factual and correct. • Some contrived to lead the other party to believe things favorable to you. Each side wants to obtain information and conceal information. • As a result, communication can become complex, conveyed in a type of code that evolves during the negotiation. © Mc. Graw-Hill Education 6

Influencing the Other Party’s Resistance Point The resistance point is set by the value expected from a particular outcome – the product of the worth and costs of an outcome. A factor in shaping the other person’s understanding of what is possible is the other’s understanding of your own situation. • The other party’s understanding of your value for a particular outcome, costs you attach to delay, and your cost of ceasing negotiations. The four major ways to weaken the other party’s resistance point. • Reduce the other party’s estimate of your cost of delay or impasse. • Increase the other party’s estimate of their own cost of delay or impasse. • Reduce the other party’s perception of the value of an issue. • Increase the other party’s perception that you value an issue. Take care when trying to influence the other party’s resistance point. © Mc. Graw-Hill Education 7

Tactical Tasks Within distributive bargaining, there are four important tactical tasks concerned with targets, resistance points, and the costs of terminating negotiations. • Assess the other party’s target, resistance point, and cost of terminating negotiations. • Manage the other party’s impression of the negotiator’s target, resistance point, and cost of terminating negotiations. • Modify the other party’s perception of their own target, resistance point, and cost of terminating negotiations. • Manipulate the actual costs of delaying or terminating negotiations. © Mc. Graw-Hill Education 8

Assess the Other Party’s Positions The negotiator can pursue two general routes for information on the other party’s target and resistance points. • Indirect assessment. • Determine what information the other party likely used to set target and points and see how they may have interpreted this information. • A variety of information sources can be used for this indirect assessment. • Direct assessment. • Sometimes, the other party will provide accurate information if in need of a quick settlement. • If the other party is not so forthcoming, other methods can be used. • Recruit spies. • Provoke the other party into an angry outburst. • Simulate exasperation and walk out of negotiations. © Mc. Graw-Hill Education 9

Manage the Other Party’s Impression of Your Position Negotiators need to screen information about their own position. • Concealment is the most general screening activity. • When using a representative, calculated incompetence may be used. • In team negotiations, channel communication through a spokesperson. • Present many items for negotiation, only a few of which are important. Negotiations can use direct action to alter impressions. • Selective presentation reveals only the facts to support your case. • Justify your positions in order to influence the other party’s impressions. • Display emotional reaction to facts, proposals, and possible outcomes. • Time and detail of presentation conveys importance of an issue. • Use care when choosing to take direct action. © Mc. Graw-Hill Education 10

Modify the Others’ Perceptions of Their Own Position A negotiator can alter the other party’s impressions of their own position by making outcomes less attractive or costs higher. • One approach is to interpret for the other party what the outcomes of their proposal will really be. • Maybe highlighting a previously overlooked item. • Another approach to modifying the other’s perceptions is to conceal information. • Concealment strategies carry ethical hazards and negotiators must ensure they negotiate in good faith. © Mc. Graw-Hill Education 11

Manipulate the Costs of Delay or Termination There are three ways to manipulate the costs of delay. • Plan disruptive action. • Public picketing, boycotting, and locking negotiators in a room until they reach agreement are all forms of disruptive action that increase costs. • Form an alliance with outsiders. • Involve other parties who can somehow influence the outcome in the process, this will also increase the costs of delay. • Manipulate the scheduling of negotiations. • Use the negotiation schedule to increase time pressure. • Opportunities to increase or alter the timing of negotiation vary widely. © Mc. Graw-Hill Education 12

Positions Taken During Negotiation Effective distributive bargainers need to understand the process of taking positions during bargaining, including the following. • The importance of the opening offer and the opening stance. • The role of making concessions throughout the negotiation process. Each party takes a position at the beginning of negotiations. • Negotiation is iterative and provides opportunity for both sides to communicate information and their positions may change. You must be sensitive to two factors when creating offers. • Value characteristics are how much the issues and options of different issues are worth to a negotiator. • Content characteristics involve the way the negotiation is constructed. © Mc. Graw-Hill Education 13

Opening Offers and Opening Stance Making the first offer is advantageous as it can anchor a negotiation. An opening stance is the attitude a negotiator will adopt at the start of negotiation. Those with better BATNAs are more likely to offer first. Choose carefully as opponents may respond in kind. Exaggerated opening offers give room for movement. Keep a consistent message with opening offer and stance. • Sends the message of a long way to go and makes them doubt their own position. • When the messages conflict, the other party may find them confusing. • But it may be seen as too tough and rejected. © Mc. Graw-Hill Education 14

Initial Concessions Opening offers, met with counteroffers, define the bargaining range – after which is time to hold firm or offer concessions. • The first concession conveys a message of how you will proceed. Elements at the start of negotiations communicate intentions. • An exaggerated opening offer, a determined opening stance, and a very small initial concession signals a position of firmness. • Research shows firm negotiators achieve better economic outcomes. There are several good reasons for a flexible position. • Taking different stances throughout a negotiation may reveal the other party’s targets by observing their reactions. • Negotiators may use cooperation hoping for a better agreement. • Flexibility keeps the negotiations proceeding. © Mc. Graw-Hill Education 15

Role of Concessions are central to negotiation – without them, negotiation would not exist. Negotiators generally resent a take-it-or-leave-it approach. Parties feel better about a settlement when the negotiation involved a progression of concessions rather than not. • Intangible factors may be as important as the tangibles. Reciprocal concessions cannot be haphazard. To encourage further concessions, negotiators may link their concessions to a prior concession made by the other. • “Because you have reduced your demand for X, I am willing to concede on Y. ” © Mc. Graw-Hill Education 16

Pattern of Concession Making The pattern of concessions made during a negotiation contains valuable information – though not always easy to interpret. • When successive concessions get smaller, the obvious message is that the concession maker’s position is getting firmer. • Consider two salesmen telling their clients they have no more concessions they can make. • The believable salesman is the one who has made four previous concessions of decreasing value. • The unbelievable salesman has made three previous concessions of the same value. In multi-issue negotiations, skilled negotiators will offer different forms of a potential settlement worth about the same to them. © Mc. Graw-Hill Education 17

Figure 2. 4: Pattern of Concession Making for Two Negotiators Jump to slide containing descriptive text. © Mc. Graw-Hill Education 18

Final Offers Eventually, a negotiator conveys a message that there is no more room for movement – the present offer is the final one. • They may choose to let the absence of concessions be the signal. One way to convey the message is to make the last offer more substantial. • This implies the negotiator is throwing in the remainder of the negotiating range. • A personalized concession also signals the last concession. © Mc. Graw-Hill Education 19

Commitment One definition is the taking of a bargaining position with some explicit or implicit pledge to a future course of action. • The purpose is to remove ambiguity about the negotiator’s intended course of action. • They also reduce the other party’s options and are designed to constrain the other party to a reduced portfolio of choices. Often interpreted by the other party as a threat. • Some can be threats but others are statements of intent, leaving the responsibility for avoiding disaster in the hands of the other party. • They involve future promises. Because of their nature, they require a follow through in action. © Mc. Graw-Hill Education 20

Tactical Consideration in Using Commitments Like many tools, commitments are two-edged. • They exchange flexibility for certainty of action, but create difficulties if you want to move to a new position. • You should also make contingency plans for a graceful exit if you need it – but keep the contingency plan a secret. Commitments may be useful to you as a negotiator, but you want to prevent the other party from becoming committed. • If they should take a committed position, keep open one or more ways for them to get out of the commitment. © Mc. Graw-Hill Education 21

Establishing a Commitment There are three properties to a commitment statement. • A high degree of finality, a high degree of specificity, and a clear statement of consequences. Public pronouncement. • This increases potency and reduces the chance of changes. Linking with an outside base. • Link with outside allies, or make it difficult to break a commitment. Increase the prominence of demands. • Repetition is one of the most powerful tools for prominence. Reinforce threat or promise. • Simple, direct statements of demand are the most effective. © Mc. Graw-Hill Education 22

Prevent the Other from Premature Commitment It is important to prevent the other party from committing. • People often commit when angry – so pay attention to anger levels. • Deny your opponent the necessary time to make a commitment. • Ignore or downplay a threat. There are times when it is to your advantage for the other party to become committed. • When your opponent takes a position early, you may want to lock it in. • This can be handled in one of two ways. • By identifying the significance of the commitment when it is made. • By taking notes and keeping track of the other’s statements. © Mc. Graw-Hill Education 23

Finding Ways to Abandon a Committed Position Plan a way out. • Simultaneously plan a private way out of any commitment. Let it die silently. • After some time, make a new proposal without mentioning the first. Restate the commitment. • Restate the commitment in more general terms, changing some details to fit your current needs. Minimize the damage. • If the other party backs off a committed position, help them save face. • One way is to make a public statement about how the other party’s move was for a noble or higher outside cause. © Mc. Graw-Hill Education 24

Closing the Deal Provide alternatives. • Provide two or three alternative packages – people like choices. Assume the close. • Act as if the decision has already been made. Split the difference. • When an agreement is close, suggest the parties split the difference. Exploding offers. • This offer has a very tight deadline, applying pressure to agree quickly. Sweeteners. • Save a special concession for the close – but plan ahead. © Mc. Graw-Hill Education 25

Assessing the Quality of the Agreement Objective outcomes. • Include assessment of the agreement against the negotiator’s target and resistance points. • Another way is to compare against what the other party would have paid, but this information is not always available, or is suspect. Subjective value. • Feelings about the outcome – distributive fairness. • Feelings about the self – Did you lose face? • Feelings about the process – Did the other party listen? • Feelings about the relationship – Do you trust the other negotiator? There is no perfect assessment, but try. © Mc. Graw-Hill Education 26

Hardball Tactics Designed to pressure negotiators into doing things they normally would not do. • Their presence signals a distributive bargaining approach. • Their effect is unproven and can backfire. • Many find these techniques offensive. • Many negotiators consider these tactics out-of-bounds • The authors do not recommend using these tactics. It is important to understand hardball tactics and how they work. • So you can recognize, and deflect, them when used against you. © Mc. Graw-Hill Education 27

Dealing with Typical Hardball Tactics A good strategic response is identify the tactic quickly and understand how it works – response will depend on your goals. Discuss them. • Label the tactic and indicate you know what is going on. Ignore them. • Not responding to a threat is often the best way of dealing with it. Respond in kind. • You can always respond with a hardball tactic of your own. Co-opt the other party. • Try to befriend the other negotiator before they use such tactics on you. © Mc. Graw-Hill Education 28

Hardball Tactics and Their Weaknesses Good cop/bad cop. Chicken. • • Turns negotiations into a serious game, difficult to avoid. Transparent and easily countered, difficult to enact. Lowball/highball. Intimidation. • • May use anger, legitimacy, or guilt, teams may help. The risk in using this is the other party may end talks. Bogy. Aggressive behavior. • • Halt negotiations, a team may help here too. Deceptive and difficult to enact, may get trapped. Nibble. • Many feel this is bargaining in bad faith, may illicit feelings of revenge. © Mc. Graw-Hill Education Snow job. • Ask questions and listen carefully to deflect this tactic. 29

Distributive Skills Used in Integrative Negotiations Distributive bargaining skills are applicable in integrative negotiation when claiming value. Applicable skills include the following. • Setting clear target and resistance points. • Understanding and working to improve your BATNA. • Starting with a good opening offer. • Making appropriate concessions. • Managing the commitment process. © Mc. Graw-Hill Education 30

End of Chapter 02. Because learning changes everything. ® www. mheducation. com © 2019 Mc. Graw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of Mc. Graw-Hill Education.