CHAPTER 1 THE NATURE OF NEGOTIATION INB 350

CHAPTER 1 THE NATURE OF NEGOTIATION INB 350 Lecture By Ms. Adina Malik (ALK) 1 -1

LEARNING OBJECTIVES What is negotiation? How is it different from Bargaining? What are the characteristics of negotiation? When do negotiation occur? What are the negotiation skills required for the negotiation process? How does interdependence affect the negotiation process? What is the difference between ‘creating value’ and ‘claiming value’ through negotiation? What are the types of conflict in negotiation and how do they affect negotiation? The dual concern model 1 -2

INTRODUCTION Negotiation is something that everyone does, almost daily. 1 -3

APPROACH TO THE SUBJECT Bargaining: describes the competitive, win-lose situation, for example; haggling over price that happens in shops. Negotiation: Negotiation occurs when parties try to find a mutually acceptable solution to a complex situation. It is cooperative and win-win. Negotiation is an interpersonal decision-making process necessary whenever we cannot achieve our objectives single-handedly. In the business world, people negotiate at multiple levels and contexts—within departmental or business units, between departments, between companies, and even across industries. 1 -4

NEGOTIATIONS Negotiations occur for several reasons: Resources are scarce and it helps to share or divide a limited resources. To create something new that neither party could attain on his or her own. To resolve a problem or dispute between the parties. 1 -5

CHARACTERISTICS OF A NEGOTIATION SITUATION 1. 2. 3. 4. There are two or more parties There is a conflict of needs and desires between two or more parties Parties negotiate because they think they can get a better deal than by simply accepting what the other side offers them Parties expect a “give and take” process 1 -6

CHARACTERISTICS OF A NEGOTIATION SITUATION 5. 6. Parties search for agreement rather than: Fight openly Break off contact permanently Take their dispute to a third party Successful negotiation involves: Management of tangibles (e. g. , the price or the terms of agreement) Resolution of intangibles (the underlying psychological motivations such as winning, losing, saving face). Intangibles are often rooted in personal values and emotions. 1 -7

NEGOTIATION SKILLS There are ten best practices to improve negotiation skills: ØBe prepared ØDiagnose the fundamental structure of the negotiation ØWork the BATNA (Best Alternative To a Negotiated Agreement) ØBe willing to walk away ØRemember the intangibles ØActively manage coalition ØSavor and protect your reputation ØRemember that rationality and fairness are relative ØContinue to learn from experience ØMaster the key paradoxes 1 -8

NEGOTIATION SKILLS Ø Master the key paradoxes: ü ü ü Claiming vs. creating value Sticking by principle vs. being resilient to the flow Sticking with the strategy vs. opportunistic pursuit of new option Honest and open vs. closed and opaque Trust vs. distrust 1 -9

INTERDEPENDENCE In negotiation, parties need each other to achieve their preferred outcomes or objectives This mutual dependency is called interdependence Interdependent goals are an important aspect of negotiation Win-lose: I win, you lose Win-win: Opportunities for both parties to gain Example: project management team. 1 -10

INTERDEPENDENCE Interdependent parties are characterized by interlocking goals Having interdependent goals does not mean that everyone wants or needs exactly the same thing A mix of convergent and conflicting goals characterizes many interdependent relationships. Example: Project Management Team. 1 -11

TYPES OF INTERDEPENDENCE AFFECT OUTCOMES Interdependence & The Structure of the Situation shape processes and outcomes Zero-sum or distributive – one winner For Example: Two people are running a race so the situation is competitive. So there is a negative correlation between the two’s goal attainment. Non-zero-sum or integrative – mutual gains situation For Example: The combination of Musician & Lyric writer. 1 -12

MUTUAL ADJUSTMENT Continues throughout the negotiation as both parties act to influence the other Negotiation is a process that transforms over time & mutual adjustment is one of the key causes of the changes that occur during a negotiation The effective negotiator needs to understand how people will adjust and readjust and how the negotiations might twist and turn, based on one’s own moves and the other’s responses. 1 -13

MUTUAL ADJUSTMENT AND CONCESSION MAKING When one party agrees to make a change in his/her position, a concession has been made Concessions restrict the range of options When a concession is made, the bargaining range is further constrained. Example: Sarah would prefer to get a salary of $65, 000, but she scales her request down to $60, 000 (eliminating all possible salary options above $60, 000). 1 -14

TWO DILEMMAS IN MUTUAL ADJUSTMENT Dilemma of honesty Concern about how much of the truth to tell the other party Dilemma of trust Concern about how much negotiators should believe what the other party tells them 1 -15

VALUE CLAIMING Negotiators face two related tasks, value claiming and value creation (Lax & Sebenius 1985). Opportunities to “win” or share resources Claiming value: result of zero-sum or distributive situations where the object is to gain largest piece of resource and is often described as `increasing the size of the pie'. Example: Haggling over the price of a rug at a foreign bazaar. Example: Two brothers fighting over the only pizza in the house. 1 -16

VALUE CREATION Creating value: result of non-zero-sum or integrative situation where object is to have both parties do well and is often described as Expanding the Pie. • Value creation offers several benefits to negotiators, including the identification of all available resources, the ability to meet the aspirations of both parties and the creation of more stable and enduring agreements (Pruitt 1983) • Example: Planning a wedding so that the bride, groom and both families are happy and satisfied, while the guests have a wonderful time. Example: Kids exchanging their tiffin. 1 -17

CONFLICT Conflict may be defined as a: “An expressed struggle between at least two interdependent parties who perceive incompatible goals, scare resources and interference from others in achieving their goals” (Wilmot & Hocker, 2001, p. 41) Conflict occurs whenever: – Disagreements exist in a social situation over issues of substance. – Emotional antagonisms cause frictions between individuals or groups. 1 -18

TYPES OF CONFLICT Substantive conflict: A fundamental disagreement over ends or goals to be pursued and the means for their accomplishment. (task oriented-dealing with organizational goals, products, services and systems) Emotional conflict: Interpersonal difficulties that arise over feelings of anger, mistrust, dislike, fear, resentment, etc. (clash of personalities) 1 -19

LEVELS OF CONFLICT Intrapersonal or intra-psychic conflict Conflict that occurs within an individual We want an ice cream cone badly, but we know that ice cream is very fattening Interpersonal conflict Conflict is between individuals Conflict between bosses and subordinates, spouses, siblings, roommates, etc. 1 -20

LEVELS OF CONFLICT Intra-group Conflict is within a group Among team and committee members, within families, classes etc. Intergroup Conflict is intergroup Conflict can occur between organizations, warring nations, feuding families, or within splintered, fragmented communities. These negotiations are the most complex. 1 -21

LEVELS OF CONFLICT Inter-organizational conflict Ø Occurs in the competition and rivalry that characterize firms operating in the same markets. Ø Occurs between unions and organizations employing their members. Ø Occurs between government regulatory agencies and organizations subject to their surveillance. Ø Occurs between organizations and suppliers of raw materials. 1 -22

DYSFUNCTIONS OF CONFLICT 1. 2. 3. 4. 5. 6. 7. 8. Competitive, win-lose goals Misperception and bias Emotionality Decreased communication Blurred issues Rigid commitments Magnified differences, minimized similarities Escalation of conflict 1 -23

FUNCTIONS OF CONFLICT 1. 2. 3. 4. 5. 6. 7. Makes organizational members more aware and able to cope with problems through discussion. Promises organizational change and adaptation. Strengthens relationships and heightens morale. Promotes awareness of self and others. Enhances personal development. Encourages psychological development—it helps people become more accurate and realistic in their selfappraisals. Can be stimulating and fun. 1 -24

STYLES OF CONFLICT MANAGEMENT Although conflicts can be managed in a variety of ways, individuals’ CMS are typically based on a two-dimensional typology, the so called “dual concern model”: concern for self (assertiveness dimension) and concern for other’s interests and outcomes (cooperative dimension) (Pruitt & Rubin, 1986). 1 -25

THE DUAL CONCERNS MODEL Five major strategies for conflict management has been identified in this model 1 -26

PROBLEM SOLVING Actors show high concern in obtaining own outcomes, as well as high concern for the other party obtaining their outcomes Negotiators pursue this approach whenü Issues are complex ü Time is available ü Working together will facilitate maximizing joint outcome: resources ü Synthesis of ideas are needed to provide better solution 1 -27

PROBLEM SOLVING Problem solving approach is also known as collaborating or Integrating approach Main aim of this approach is to ü ü Seeking the satisfaction of everyone’s Concerns by working through differences Finding and solving problems so everyone gains as a result. 1 -28

CONTENDING Actors pursue own outcomes strongly, show little concern for other party obtaining their desired outcomes. Contending approach is also known as Dominating or Competing approach. Contention seeks to persuade the other party to agree to a solution that favors one's own interests. Negotiators pursue this approach when issue is important to you, speedy decisions are needed, unfavourable decision may be costly to you, or you are not looking for a long term relationship with the other party. 1 -29

YIELDING Actors show little interest in whether they attain own outcomes, are quite interested in whether the other party attains their outcomes. Yielding approach is also known as Accommodating or Obliging Strategy Yielding involves lowering one’s own aspirations and to ‘let the other win’ and gain what he/she wants. Yielding is an effective way to close negotiations when issues are unimportant and time pressures are high. You are willing to give up something in exchange for something from the other party in future. 1 -30

INACTION Actors show little interest in whether they attain own outcomes, little concern about whether the other party obtains their outcomes. Also known as ‘Avoiding Strategy’. Negotiators pursue this approach when Issue is trivial. The strategy of inaction is usually used to increase time pressure on the other party. 1 -31

COMPROMISING Actors show moderate concern in obtaining own outcomes, as well as moderate concern for the other party obtaining their outcomes. Negotiators pursue this approach when- Goals of parties are mutually exclusive Parties are equally powerful Integrating and dominating styles are not successful Temporary solution 1 -32

COMPROMISING In compromising approach, parties: ü work toward partial satisfaction of everyone’s concerns. ü Seek acceptable rather than optimal solutions so that no one totally wins or loses. Pruitt and Rubin (1986) do not identify compromising as a viable strategy. According to them: Parties are going for lazy problem solving involving a halfhearted attempt to satisfy the two parties interest. Yielding approach pursued by both the parties. 1 -33

The Dual Concern Model 1 -34

CONCLUSION These four processes are central to any negotiation. More recent writing, although still strongly committed to problem solving, has been careful to stress that each conflict management approaches has its advantages and disadvantages and can be more or less appropriate to use given the type of interdependence and conflict context. 1 -35