Negotiation notes - Dave Lawson PDF

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General Portion 1. What are the key reasons why effective negotiation skills are increasingly important in the business world? o Dynamic nature of business – people must renegotiate their existence in organizations throughout their careers, have multiple careers, must be able to integrate your interests with others and recognize the inevitability of competition o Interdependence – people need to know how to integrate their interests and work across business units and functional areas, must be able to promote your own interests while simultaneously creating joint value with others, balance of cooperation and competition o Economic Forces – need to know how to operate in uncertain and ambiguous environments o Information Technology – culture of 24/7 availability, expected to be available to negotiate at a moment’s notice o Globalization – must effectively cross cultural boundaries to do your job, challenges of language barriers, currency issues, context, cultural norms, etc. 2. What are the most prevalent myths about negotiation, and how do these myths hamper people’s ability to learn effective negotiation skills? o Negotiations are Fixed-Sum – whatever is good for one person must be bad for the other party, but negotiations are actually variable-sum meaning that working together will crease more joint value than being combative. But also can’t be purely trusting because value must ultimately be claimed by someone at the table. Have incentives to both cooperate and compete o You Need to be either Tough or Soft – don’t have to be a tough/punitive negotiator or a soft/concessionary negotiator. Effective negotiators are principled and realize that to achieve their own outcomes they must work effectively with the other party while leveraging personal powers and strengths o Good Negotiators are Born – most excellent negotiators are self-made, not born. Don’t judge your negotiation ability by your used car buying skills. Effective negotiation requires practice and feedback. While we learn by doing, experience is helpful but not sufficient o Life Experience is a great teacher – Experience in the absence of feedback is largely ineffective in improving negotiation skills and makes it impossible to improve. Our memories are selective, meaning that we are more likely to remember successes and forget failures. Experience can improve confidence, but not necessarily accuracy (overconfidence can be bad and cause you to take unwise risks). o Good negotiators take risks – risks are not always effective, being the tough “take it or leave it” negotiator won’t always work. Rather, you should learn to evaluate risk, determine appropriate time to make a final offer, and how to make good decisions in the face of uncertainty. o Good negotiators rely on intuition – Intuition doesn’t always serve people well. Instead, you must prepare systematically, become aware of your strengths and shortcomings, develop proactive strategies, and be a deliberate planner. Preparation is key in a successful negotiation. 3. Why should negotiators break down the issues in a negotiation into multiple issues, rather than engage in a single-issue negotiation?(19 & 82) o Single-issue negotiations are negative because they are purely fixed sum. Identifying other issues can create integrative potential. If you have a singleissue, you should focus on how to segment it into multiple or add issues.

When there are multiple issues in play, there are more ways to accommodate different parties. Especially because most negotiations are not fixed-pie and are mixed-motive, the ability to provide creative solutions that benefit everyone are increased when there are multiple issues to be solved. What are the most important factors to consider when making concessions in negotiation (so as to maximize your share of the bargaining zone)? (48) o Pattern of Concessions: Negotiators who make fewer and smaller concessions maximize their slice of the pie. Never double up on concessions. They are made with the expectation of the other party also conceding something, so be patient and wait for a counter response. o Magnitude of Concessions: A tough, stoic stance early that transitions into a larger concession later one proved to be a much more effective strategy than generous concessions early on. GRIT model (Graduated reduction in tension) is based on creating the feeling of reciprocity where as negotiations play out, a relationship is built therefore increasing concessions. o Timing of Concessions: Immediate concession receive negative feedback. Gradual concessions are met with much more positive feedback. Be prepared to address some of the misconceptions about the meaning of win-win negotiations. Why do these misperceptions contribute to leaving money on the table in negotiation situations?(70 & 72) o People believe Win-Win means: o Compromise: This is how the pie is divided. Win-win deals with how the pie is enlarged, not how it is divided. o Even Split: This deals with how the bargaining zone is divided amongst negotiators. Two people argue over orange: Even split gives each half, but what if one wants the juice and one wants the rind o Satisfaction: No guarantee that this means money and resources have not been wasted. “Happy” negotiators almost never expand the pie o Building a Relationship: This is important in negotiation, but interest in the other party leads to a lack of creative solutions = no expanding pie o All of these misconceptions do not allow creative opportunities to be leveraged in order to create an integrative negotiation situation where all possibilities are explored; they are very one sided and too-simple of solutions What are the fundamental differences between tough and soft negotiators, and what are the disadvantages of adopting either stance? o Tough negotiators are unflinching as they make high demands, concede little, hold out until the very end, and often reject offers that are within the bargaining zone. A disadvantage of being a tough negotiator is that they often walk away from potentially profitable interactions and gain reputations for being stubborn. o Soft negotiators typically offer too many concessions, reveal their reservation point and are so concerned about how the other party feels that they give away too much of the bargaining zone. Soft negotiators agree too readily and never receives much of the bargaining surplus. What are some of the most common errors made by negotiators who are attempting to expand the pie of resources? o False conflict - people believe their interests are incompatible with the other party’s when they are not o Fixed pie perception - belief that other party’s interests are directly and completely opposed to one’s own interests o

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8. Be prepared to discuss why BATNA is the most important source of power in a negotiation. Why should a negotiator constantly cultivate and improve his or her BATNA prior to negotiating? o BATNAs are a huge source of power within a negotiation because it gives you the ability to leave the negotiation if things aren’t turning in your favor. o Use the “fall in love with everything” rule to establish at least three good alternatives to fall back on - people become desperate and irrational with only one other option because of the fact that alternatives/deals are time sensitive o Signaling a BATNA can influence a party to make an equivalent offer o The BATNA should be improved before negotiations begin because it sets the bar for your reservation point - you should be willing to accept any terms superior to the BATNA and reject worse outcomes, thus if it is a bad alternative, you don’t have much power in the negotiation 9. What are some of the advantages and disadvantages to negotiations between business people, and how do they differ from purely personal negotiations?(141) o Business people - more likely to expand the pie, unlike personal - where they often settle too quickly. o Business people often have to build trust quickly, unlike personal - wo have built trust over time. o ADV: Negotiators who have personal relationships with the other side are more likely to engage in win-win deals. Levels of cooperation decrease as social distance between parties increases. o When reaching an impasse, friends typically open up, while strangers tend to haggle o DIS: People are more concerned with the concept of fairness when negotiating with friends when negotiations dictate we should get a good deal for ourselves. Too willing to compromise o Business: Adv: More likely to use equity rule where those who contribute more receive more. Friends more likely to use equality rule o More likely to use exchange norms i.e. Market pricing = everything is reduced to a single metric that facilitates easy comparisons o Dis: Negotiate with people you don’t like. Business tends to be hierarchical in structure, which can add a negative element 10. Why is creativity often downplayed or ignored in the process of negotiation? o Negotiators focus on the competitive aspect of the deal and forget about the creativity aspect. This tendency is driving by the fixed pie perception, the belief that it is a win-lose enterprise. --ignore · Why is negotiation important in the business world o Dynamic nature of businessà most people do not stay at the same job that they start with § 91% of millennial plan to work at their first job for 3 years § people must renegotiate their existence in organizations through their careers § people must continually create possibilities, integrate their interests with others, and recognize the inevitability of competition both within and between companies o Interdependenceà people need to know how to integrate their interests and work across business units and functional areas § Increasing degree of specialization and expertise by people in the business world shows that people are more and more dependent on others

o Economic forcesà people need to know how to negotiate in uncertain economic circumstances (unemployment) o Information technologyà creates a 24/7 culture of availability § Business managers are expected to negotiate at any given point § Delta has 12 people manage their twitter account o Globalizationà managers need to communicate effectively with many cultures § Need to developed negotiation strategies that can be employed with people of different nationalities, backgrounds, and personalities · Most common myths about negotiation, how do these myths hamper people’s ability to learn effective negotiation skills o Negotiations are fixed sumà whatever is good for one person is bad for the other § Hamperà in some cases their may be overlap of interests which will help the negotiation, if that is ignored reached an agreement is difficult o You need to be either tough or soft à must leverage their strengths and must work effectively with counterparty § Hamperà too tough makes you aggressive, too soft makes you easy to exploit o Good negotiators are bornà good negotiators are self made § Hamperà people wont take the time out and learn to be a good negotiator o Life experience is a great teacherà § Hamperà no feedback doesn’t allow us to learn, we only remember our success’s and not our failures and don’t learn from failures, accuracy isn’t improved o Good negotiators take risksà tough negotiators, using threats and bluffs § Hamperà doesn’t actually lead to success o Good negotiators rely on intuitionà doesn’t make you effective § Hamperà effective negotiation involved deliberate thought and preparation in a systematic way · Why multiple issues? o Creates integrative potential o Negotiators expand their options o Makes it easier to reach target point o Job negotiation about salaryà talk about signing bonus, group placement, vacation days · Most important factors to consider while making concessions o Patternà those who make fewer and smaller concessions maximize their slice of the pie, should not make more than one concession at a time during negotiating § Unilateral- made by one side § Bilateral- made by both sides o Magnitudeà need to consider how much to concede, unwise to make greater concessions than the counter party § Graduated reduction in tension (GRIT) model based of reciprocity principle o Timingà immediate, gradual, or delayed § Immediateà worse off § Gradualà better off · Misperceptions of win-win, why do they contribute to the idea of leaving money on the table. WinWin is NOT o Compromise à refers to the middle ground § You don’t want that, you want to enlarge the pie. By not doing so you are leaving potential money on the table o Even splità its not a 50/50 split § Orange example o Satisfaction

o Building a relationshipà people who seem to have the most interest in building a relationship often fail to reach integrative agreements § So focused on reaching the agreement that they fail to use strategies to enlarge the pie · What are the fundamental differences between soft and tough negotiators, and what are the disadvantages of adopting either stance? o Hard negotiators view the negotiation as a battle of wills and emphasize the results that they achieve. They often: treat participants as adversaries, are suspicious of other negotiators, use threats, are confrontational, focus on positions, and are unwilling to concede. o Soft negotiators focus on preserving the relationship ahead of the results and often sacrifices results. They often treat negotiators as friends, are trusting of other participants, extend offers, are not confrontational, focus on positions, and are willing to concede. o Disadvantages § Hard · § Soft · What are some of the most common errors made by negotiators who are attempting to expand the pie of resources? o False Conflict § People believe that their interests are incompatible with the other party’s interests. Parties often fail to realize that the other party does have some interests that are compatible with their own and often reach settlements that are less ideal for both parties (aka lose-lose effect). Negotiators can avoid this by not making assumptions and also by avoiding making premature concessions. o Fixed-Pie Perception § This is the belief that the other party’s interests are directly and completely opposed to one’s own interests. Few conflicts are purely win or lose, and many negotiators fail to recognize this. · Be ready to discuss why BATNA is the most important source of power in a negotiation. Why should you constantly cultivate and improve you BATNA prior to negotiating? o BATNA is a Best Alternative To a Negotiated Agreement. They should be willing to accept any set of terms superior to their BATNA and reject outcomes that are worse than them. It’s determined by objective reality. Make sure that it cannot be manipulated by the other negotiator. The most important piece of information that a negotiator can have is the BATNA of the other party, as it gives you way more power. BATNA is often considered the measure of balance of power in a negotiation. If other parties need you in order to reach their BATNA, your BATNA is strong. By looking at BATNA as an ongoing, changing measure of negotiating strength, as a mechanism for deciding whether and/or when to quit, we develop a disciplined, informed approach to our negotiations. · What are some of the advantages and disadvantages of negotiations between businesspeople and how do they differ from purely personal negotiations? o Business people are much more likely to use an exchange norm than friends who negotiate. An example of this is market pricing where everything is reduced to a single value or utility metric that allows comparison of many things. This is an advantage bc as mentioned you can compare much, but also it lets people negotiate by making references to ratios of this metric. One disadvantage might be the fact that the business person could be someone we don’t like and might be offensive. Example of this might be a man and woman negotiating for a deal but the man is sexist and offensive. This pays into the disadvantage of hierarchy, where businesses are generally organized around rank and status. People are more willing to expand the pie, but feel worse about the relationship. Another disadvantage is the idea of swift trust: many new business relationships require that strangers come together and do a task then immediately disband so they require swift trust. · Why is creativity often downplayed or ignored in the process of negotiation? o Negotiators often overlook the creative aspect of negotiating and focus on the competitive aspect of negotiations. This is driven by the “fixed pie perception” or the belief that negotiation is win or lose.

People often believe that compromise is not viable and they then may be reluctant to be creative and change their point of view. o Inert Knowledge Problem § Inability to access relevant knowledge when we most need it. This is often because we are unable to remember something that is relevant to the negotiation o Availability Heuristic § The more prevalent a group or category is judged to be, the easier it is for people to bring instances of this group to mind. Negotiators are biased more because of this. Related to idea that people think others agree with them more than they actually do o Representativeness § Have a basis of stereotypes about people leading to biased mindset o Anchoring and Adjustment § Anchors we use are often arbitrary and should not be set in stone § We often make insufficient adjustments away from the anchor o Unwarranted Causation § Causality between 2 events is unwarranted bc we do not know the direction o Illusionary Correlation § Tendency to see invalid correlation between events o Belief Perseverance § People continue to believe something that isn’t true even when it’s revealed it’s not true o Functional Fixedness § Problem solver bases strategy on familiar methods § Problem bc previously learned strategies hinder the development of effective strategies in new situations o Selective Attention § We only perceive 1% of all information in our visual field o Limits of short term memory § Self explanatory...