Negotiation

Students to Start-Ups Entrepreneurial Skills Series Chapter 03 Negotiation

Negotiation My father said: "You must never try to make all the money that's in a deal. Let the other fellow make some money too, because if you have a reputation for always making all the money, you won't have many deals.” J. Paul Getty

Negotiation
Much business-to-business selling involves negotiating skills
The two parties need to reach agreement
Price
Others term of sale
Salesperson need to win without making deep concessions that will hurt profitability
There are 2 exchange in marketing
Routinized exchange : administered program of pricing and distribution
Negotiated exchange : price and others term area set via bargaining behavior

Negotiation – What is it? ‘ The process by which we search for the terms to obtain what we want from somebody who wants something from us’ Gavin Kennedy Confer with others to reach a compromise or agreement. Concise Oxford Dictionary To negotiate is to trade something we have for something we want. Anon ‘ Negotiation is an explicit voluntary traded exchange between people who want something from each other’ Gavin Kennedy

Debunking Negotiation Myths
Myth 1: There must be a winner & a loser
Myth 2: Appears to involve conflict
Myth 3: Negotiation is not an option
Myth 4: Only cheap, petty people haggle
Myth 5: A good negotiator is manipulative

Human Needs Manfred A. Max-Neef 1991. Human scale development: conception, application and further reflections. New York: Apex.

Negotiation
The most frequently negotiated :
Price
Contract completion time
Quality of goods and service offered
Purchase volume
Responsibility for financing
Risk taking
Promotion and title
Product safety

Three Views of Conflict
Traditional view - conflict must be avoided
Human relations view - conflict is a natural and inevitable outcome in any group
Interactionist view - some conflict is absolutely necessary
functional conflict - supports the goals of the work group and improves its performance
dysfunctional conflict - prevents group from achieving its goals

Conflict-Handling Styles Robbins et al., Fundamentals of Management, 4th Canadian Edition ©2005 Pearson Education Canada, Inc. Uncooperative Cooperative Cooperativeness Assertiveness Unassertive Assertive Forcing Resolving conflicts by satisfying one’s own needs at the expense of another’s Avoiding Resolving conflicts by withdrawing from or suppressing them Collaborating Rewarding conflict by seeking an advantageous solution for all parties Compromising Resolving conflict by each party giving up something of value Accommodating Resolving conflicts by placing another’s needs and concerns above your own

5 Levels of Communication Chris Spies, 2002

The Four Ears of Listening Undine Kayser, 2003

Active Listening Techniques (1) Centre for Conflict Resolution, Cape Town, South Africa, 1999

When to Negotiate ?
Based on Lee and Dobler :
When many factors bear not only on price, but also on quality and service
When business risks cannot be accurately predetermined
When a long period of time is required to produce the items purchased
When production is interrupted frequently because of numerous change orders

1 . Preparation and planning skill
2. Knowledge of the subject
3. Ability to think clearly and rapidly under pressure and uncertainty
4. Ability to express thoughts verbally
5. Listening skill
6. Judgement and general intelligence
7. Integrity
8. Ability to persuade others
34 Characteristics of an Effective Negotiator Art & Science of Negotiation - RAIFFA

9. Patience
10. Decisiveness
11. Ability to win respect and confidence of opponent
12. General problem-solving and analytical skills
13. Self-control, especially of emotions and their visibility
14. Insight into others’ feelings
15. Persistence and determination
16. Ability to perceive and exploit available power to achieve objective

17. Insight into hidden needs and reactions of own and opponent’s organization
18. Ability to lead and control members of own team or group
19. Previous negotiating experience
20. Personal sense of security
21. Open-mindedness (tolerance of other viewpoints)
22. Competitiveness (desire to compete and win)
23 . Skill in communicating and co-ordinating various objectives within own organisation

24. Debating ability (skill in parrying questions and answers across the table)
25. Willingness to risk being disliked
26. Ability to act out skilfully a variety of negotiating roles or postures
27. Status or rank in organisation
28. Tolerance to ambiguity and uncertainty
Skill in communicating by signs, gestures and silence (non-verbal language)

30. Compromising temperament
31. Attractive personality and sense of humour (degree to which people enjoy being with the person)
32. Trusting temperament
33. Willingness to take somewhat above-average business or career risks
34. Willingness to employ force, threat or bluff

Negotiation Key Concepts
BATNA
Reservation Price
ZOPA
Value Creation through Trades

Know your BATNA!
Best Alternative to a Negotiated Agreement (BATNA)
Typical example: negotiate or go to court
Improving your situation
Improve your BATNA
Identify the other side’s BATNA
Weaken the other party’s BATNA

Reservation Price
The least favorable point at which one will accept a deal
The “walk-away”
Example: you are looking for larger office space. You set your BATNA at $20/SF and your Reservation Price at $30/SF
If owner won’t budge from $35, you walk away and take advantage of your BATNA

ZOPA
Zone of Possible Agreement (ZOPA)
The difference between the Seller’s Reservation Price and the Buyer’s Reservation Price
What happens if positions below are reversed?
ZOPA $275k $250k Seller’s Reservation Price Buyer’s Reservation Price

Value Creation through Trades
Trade things you value less to the other party
Examples:
For a supplier the greater value may be not price but an extended delivery time
For a customer, extended warranty versus price
For an employee, working at home versus salary

Summary of Negotiation concept
Zone of agreement exists
Simultaneously overlapping acceptable outcomes for the parties
Reservation price
Seller’s
The minimum will accept
Below s is worse than not reaching agreement
x > s , seller surplus
Buyer’s
The maximum will pay
x above b is worse than no agreement
x < b , buyer surplus
If s < b / than a zone of agreement exist = bargaining

The Zone of Agreement Seller’s surplus Buyer’s surplus Zone of agreement s x b Seller’s reservation price (seller wants s or more) Seller wants to move x to the right Final Contract Buyer’s reservation price (buyer wants b or less) buyer wants to move x to the left Money ($)

Negotiating is about WHY , not WHAT The purpose of negotiating is seeing if you can get your interests met through and agreement, versus an alternative. Positions are WHAT we want Interests are WHY we want something Negotiate the WHY ….not the WHAT

Negotiating Behaviour
Gavin Kennedy (The New Negotiating Edge) describes 3 types of behaviour that we can display and encounter when in a negotiating situation
RED BLUE PURPLE
7

RED Behaviour
Manipulation
Aggressive
Intimidation
Exploitation
Always seeking the best for you
No concern for person you are negotiating with
Taking
People behave in this manner when they fear exploitation by the other party, but by behaving this way to protect themselves, they provoke the behaviour they are trying to avoid. 8

BLUE Behaviour
Win win approach
Cooperation
Trusting
Pacifying
Relational
Giving
Kennedy talks of a ‘behavioural dilemma’, do you cooperate ( blue ) or defect ( red )? Can you trust the other person? And to what extent? Trusting someone involves risk, on the one hand being too trusting is naïve and on the other, not trusting at all can create deceitful behaviour. The answer is to merge blue and red behaviour into purple . 9

PURPLE Behaviour
Give me some of what I want ( red )
I’ll give you some of what you want ( blue )
Deal with people as they are not how you think they are
Good intentions
Two way exchange
Purple behaviour incites purple behaviour
Tit for tat strategies
Open
People know where they stand
Determination to solve problems by both sets of criteria of the merits of the case and/or the terms of a negotiated exchange
To the red behaviourist the message is loud and clear, ‘You will get nothing from me unless and until I get something from you’. 10

Formulating a Negotiation Strategy
Strategic plan
Commitment to an overall approach that has a good chance of achieving the negotiator’s objectives
Soft : avoid conflict, make concessions; often end up exploited and feeling bitter
Hard : sees any situation as a contest of wills. Exhausts people and resources and harms relationships
Other strategies are between hard and soft, but each involves a trade off
Making good tactical decisions

Starting Point
A successful negotiation must have a basic framework
The alternative to negotiation
The minimum threshold for a negotiated deal
How flexible a party is willing to be, and what tradeoffs it is willing to make

Principled Negotiation :The Method
Separate the people From the problem
Focus on interests , Not positions
Invent options For mutual gain
Use objective criteria
Modified from material obtained from the Harvard Negotiation Project

Separate the people from the problem
Relationship Issues:
Emotion/reason
Understanding
Communication
Reliability
Coercion/persuasion
Acceptance/respect
Substantive Issues:
Money
Terms
Conditions
Concessions
Promises
Dates/numbers

Problem
Participants are friends
The goal is agreement
Make concessions to cultivate the relationship
Be soft on the people and the problem
Trust others
Change your position easily
Make offers
Disclose your bottom line
Accept one-sided losses to reach agreement
Search for the single answer: the one they will accept
Insist on agreement
Try to avoid a contest of wills
Yield to pressure
Participants are adversaries
The goal is victory
Demand concessions as a condition of the relationship
Be hard on the problem and the people
Distrust others
Dig in to your position
Make threats
Mislead as to your bottom line
Demand one-sided gains as the price of agreement
Search for the single answer: the one you will accept
Insist on your position
Try to win a contest of wills
Apply pressure
SOFT HARD Positional Which game should you play “ Getting to Yes” - Professor R. Fisher & W. Ury

Focus on Interests not Positions
Interests = desires and concerns that underlie positions
Prepare for negotiation:
Clarify interests
Understand the interests of the other side
Focus the negotiation discussion on:
Interests – not positions

Invent Options for Mutual Gain
To invent creative options:
Separate inventing from judging.
Broaden the options on the table, rather than look for a single answer.
Search for mutual gains.
Invent ways to make their decision easy.

Insist on using Objective Criteria
Frame each issue as a joint search for objective criteria
Reason and be open to reason as to which standards are most appropriate and how they should be applied
Never yield to pressure, only to principle.

Negotiation Styles Source: Rollin & Christine Glaser ACCOMODATE Build friendly relationship Characteristics: Promote harmony Avoid substantive differences Give into pressure to save relationship Place relationship above fairness of the outcomes CONCERN FOR RELATIONSHIP CONCERN FOR SUBSTANCE LOW HIGH COLLABORATE Problem solved creatively, aiming for win-win Characteristics: Search for common interests Problem-solving behaviours Recognising both parties’ needs Synergistic solutions Win-win becomes the main purpose of the negotiator HIGH AVOID Take whatever you can get/Inaction Characteristics: Feeling of powerlessness Indifference to the result Resignation, surrender Take what the other party is willing to concede Withdraw & remove = behaviour of negotiator DEFEAT Be a winner at any cost/Competitive Characteristics: Win-Lose competition Pressure/Intimidation Adversarial relationships Defeating the other becomes a goal for the negotiator COMPROMISE Split the difference Characteristics: Meeting half way Look for trade offs Accept half-way measures Aims to reduce conflict rather than problem solve synergistically

The Four Phases of Negotiation PLAN DEBATE PROPOSE BARGAIN 11

Step One - Prepare
Research
LIST your objectives and their objectives
Those you INTEND to get
Those you MUST get

Step Two - Debate
Listen carefully
Ask questions
Clarify
Summarise
Don’t argue, interrupt or assume
...BUT

Step Three - Propose
Make proposals
State conditions
Express concerns
Search for common interests
Use positive body language
AND

Step Four - Bargain
Key words are IF and THEN
Start making concession:
Every concession should have a condition (IF you … THEN I will … )
Conserve your concessions - don’t give everything away too soon
You don’t have to share every piece of information with the opposing side!
Don’t be afraid to say no

Classic Bargaining Tactics
Acting Crazy
Big Pot
Get a Prestigious Ally
The Well is Dry
Limited Authority
Whipsaw / Auction
Divide and Conquer
Get Lost / Stall for Time
We Noodle
Be Patient
Let’s Split the Difference
Trial Balloon
Surprises

Acting Crazy
Put on good show
Visibly demonstrating your emotional commitment to your position
Increase credibility
Give opponent a justification to settle on your terms
Big Pot
Leave your self a lot of room to negotiate
Make high demand at the beginning
After making concessions, you’ll still end up with a larger payoff
Get a Prestigious Ally
Try to get opponent to accept less

The Well is Dry
Take a stand and tell the opponent you have no more concessions to make
Limited Authority
Negotiate in good faith
If you ready to sign the deal, say I have to check with my boss
Whipsaw / Auction
Several competitors know you are negotiating in the same time
Schedule competitors with you for the same time and keep them all waiting to see you

Divide and Conquer
Negotiation with opponent team
Sell one member to help you sell the other members of the team
Get Lost / Stall for Time
Leave the negotiation completely for a while
Come back when things are getting better and try to renegotiate
Time period can be long or short
We Noodle
Give no emotional or verbal response
Don’t response to his or her force or pressure
Be Patient
If you can afford to outwait
You will probably win big

Let’s Split the Difference
The person who first suggest this has the least to lose
Trial Balloon
Release your possible / contemplated decision through a so-called reliable source before the decision is actually made
To test reactions to your decisions
Surprises
Keep the opponent off balance by
Drastic
Dramatic
Sudden shift
Never be predictable
Keep the opponent from anticipating your move

Step Five - Agree
Usually final concession : “IF you do that, THEN we have a deal!”
Gain commitment
Record and agree results
Leave satisfied

Think about your influencing style Inspirational Logical Personal Forceful

7 Deadly Sins of Negotiating
Pride - Be prepared to compromise
Gluttony - Don’t bite off more than you can chew
Anger - Handle objections calmly
Covetousness - Prioritise needs/wants
Envy - Know competitors strengths & weaknesses… AND your own
Sloth - Do your homework
Lust - Don’t look desperate to settle

An Unconditionally Constructive Strategy
Do only those things that are both good for the relationship and good for us - whether or not they reciprocate
"Getting Together" Fisher RATIONALITY Even if they are acting emotionally, balance emotions with reason UNDERSTANDING Even if they misunderstand us, try to understand them COMMUNICATION Even if they are not listening, consult them before deciding on matters that affect them RELIABILITY Even if they are trying to deceive us, neither trust them nor deceive them: be reliable NON-COERCIVE MODES OF INFLUENCES Even if they are trying to coerce us, neither yield to that coercion nor try to coerce them, be open to persuasion and try to persuade them ACCEPTANCE Even if they reject us and our concerns as unworthy of their consideration, accept them as worthy of consideration, care about them and be open to learning from them

Three Approaches To Resolving Disputes MOVING FROM A DISTRESSED TO AN EFFECTIVE RESOLUTION SYSTEM Distressed System "Dispute Resolution" Goldberg Green Sander Power Rights Interests

Three Approaches To Resolving Disputes Effective System Goldberg MOVING FROM A DISTRESSED TO AN EFFECTIVE RESOLUTION SYSTEM Power Rights Interests

Salary Negotiation: Best Practices
Know what want-prioritize and logroll
Conduct research to understand your worth
how it compares
what you will do if don’t get what you want
Know with whom to negotiate and what can
be negotiated
Find the minimum, midpoint and maximum salary grades for the position
Think total compensation
Consider enlarging the shadow of the future

Salary Best Results
What until you have an offer to negotiate
allow employer to initiate discussion
be prepared to discuss salary at any time
Preserve the relationship
no ultimatums; appear accommodating; be concerned with their interests
ask questions when encountering resistance
Consider long term effects of your plan
Practice
Watch for signals
Get offer in writing

Salary: Things to Avoid
Personal needs or self-serving perks
Gamesmanship: one more thing or hard squeeze
Multi-company leveraging
Appearance of desperation
Lying, exaggeration or misleading
Quick decisions or countering too soon
$$$

Tip #1 Negotiating is not Compromising It is joint problem solving Our goal is to efficiently reach a satisfying agreement for both parties, and to conclude on a positive note. Fisher and Ury define negotiations as “Back and forth communication to reach agreement where some interests are shared and some interests are opposed. “ Getting to Yes”

Tip #2 People Skills Make the Difference
What is your “preferred style” of communicating?
What is the “style” of the other person with whom you will be negotiating?
Are these styles compatible, or are they opposites?

Tip #2A: Listening is the most powerful negotiating skill
It begins with effective communication…understanding your preferred method and learning the method of the other party.
Communicate with them in a way that will be most effective with their style
This helps to eliminate the possibility of misunderstanding, as we communicate in many ways

Listening is your most powerful negotiating tool
But before you can listen, you have to be skilled at asking questions:
Three critical questioning skills
Know where your questions are going
Ask for permission to ask questions
State why you want to ask questions
Purpose-Process-Payoff

Listening is your most powerful negotiating tool If that is the case, why are we such bad listeners? We listen to reply, argue, rebut, make our point, or win. We do not typically listen to understand. As Covey said, “Seek first to understand, then be understood

Tip #3: Have a game plan before beginning to negotiate Few people plan before beginning to negotiate If you cannot walk away from the negotiation at any time, you will lose. Knowing your options outside of the negotiation is a direct function of preparation. Without a plan you risk agreeing to something worse than what you may have done on your own.

Negotiation Check List 42
Interrupting
Attacking
Blaming
Talking too much
Sarcasm
Threats
Taking it personally
Closed body language
Actively listen
Question for clarification
Summarising
Test commitment
Seeking & giving information
Encourage two way conversation
State and plan your proposal – then summarise
Use the ‘if you ….then we’ll’ principle
Avoid Good Practice

Questions

To be continued in the next chapter……… THANK YOU kurniawan_260305@yahoo.com

Communication Stumbling Blocks (1) Centre for Conflict Resolution, Cape Town, South Africa, 1999

http://valoriprimilab.blogspot.com	55
http://www.slideshare.net	19
http://valoriprimilab.blogspot.it	9
http://valoriprimilab.blogspot.com.es	1

Negotiation

by Moch Kurniawan on Feb 08, 2009

Accessibility

Categories

Tags

Upload Details

Usage Rights

4 Embeds 84

Statistics

Negotiation — Presentation Transcript