The Art of Negotiating

The Art of Negotiating T. Sivasankaran Advesh Consultancy Services Chennai India [email_address] Mobile: 09790971951 The Art of Negotiating Advesh Consultancy Services 06/07/09

Mastery Skill Knowledge Awareness The Art of Negotiating Advesh Consultancy Services 06/07/09

BASICS OF NEGOTIATION The Art of Negotiating Advesh Consultancy Services 06/07/09

We all negotiate, all the time- at home, with friends, at office, in public

These negotiations can be about anything

Negotiation is the most effective way of resolving conflicts and securing agreement

A two way discussion to agree terms

Conferring for the purpose of mutual agreement

A process of discussion aimed at reaching agreement

Establishing consensus amongst two or more parties

The Art of Negotiating Advesh Consultancy Services 06/07/09

Negotiation Is

A dialogue between two or more parties , with the intent of coming to a mutually agreed solution , because each party has something the other wants.

A communication process between two or more people in which they consider alternatives to arrive at mutually agreeable solutions or mutually satisfactory objectives

Setting Goals

Balancing Outcome and Relationships

SETTING GOALS

BATNA

RESERVATION PRICE

ZOPA

BATNA

B est

A lternative

T o a

N egotiated

A greement

WHAT IS BATNA?

How do the proposals match your realistic alternative if you cannot come to a deal?

The more attractive your BATNA is compared with the proposals you receive, the more POWER you have; the less attractive your BATNA is compared to the deal on offer, the less power you have.

BATNA

Retain the existing supplier

Go to another supplier

Strike/Lockout

Not an immediate requirement

DEVELOPING BATNA

List what you would do if you fail to reach an agreement

Convert the most promising options into practical choices.

Select the single best option; that is your BATNA

Compare your BATNA to all proposals

If an offer is better than your BATNA,consider improving or accepting it

If an offer is worse than your BATNA, consider rejecting it

If they will not improve their offer consider exercising your BATNA

BATNA

Know your BATNA

Work with all the BATNAs

Be ready to walk

BATNA

Developed

by

Roger Fisher

and

William Ury

RESERVATION PRICE

Reservation Price

is

the least favourable point

at which

one will accept

a deal

ZOPA ZONE OF POSSIBLE AGREEMENT

ZOPA is the area or range in which a deal that satisfies both parties can take place.

It is the set of agreements that potentially satisfy both parties.

EXAMPLE Sellers Expectation Buyers Expectation The Art of Negotiating Advesh Consultancy Services 06/07/09

BATNA Exercise 1

You have a good motor cycle which is 4 years old. It gives good mileage. However you want to replace it with a new one.

You have Rs 30000 cash in hand You want the balance to be arranged thru loan

You have 12% interest in your mind.

The financier is asking for 15%

What is your BATNA?

BATNA EXERCISE 3

You are attending an interview for change of job. You are in salary negotiation stage. You are concerned about your child’s education. Currently you are on a transferable job.You are demanding 30% increase. The new company is offering the same salary.

What is your BATNA?

BALANCING OUTCOME AND RELATIONSHIPS

DISTRIBUTIVE NEGOTIATION

INTEGRATIVE NEGOTIATION

Distributive Negotiation

A negotiation in which the parties compete over the distribution of a fixed sum of value.

Key question here is “Who will claim the most value?”

A gain by one party is at the expense of the other.

Win-lose situation

Integrative Negotiation

A negotiation in which the parties cooperate to achieve the maximum benefits by integrating their interests into an agreement.

These deals are about creating value and claiming it.

Win-win situation.

STAGES OF NEGOTIATION

Phase 1: Preparation

Phase 2: Interacting

Phase 3: Agreement

Negotiation Process The Art of Negotiating Advesh Consultancy Services 06/07/09 Opening Closing Bargaining Preparation

PREPARATION The Art of Negotiating Advesh Consultancy Services 06/07/09

PREPARATION

Understanding

one’s own position

and

interests of the other party or parties

the issues at stake,

and

alternative solutions.

PREPARATION

Consider What a good outcome would be for you and the other side.

Identify potential value creation opportunities

Identify your BATNA and Reservation Price and do the same for the other side.

Shore up your BATNA

PREPARATION

Anticipate the Authority Issue

Learn All you can About the Other Side

Prepare for Flexibility in the Process

Gather External Standards and Criteria Relevant to Fairness

Alter the process in your favour

CRITICAL ELEMENTS/DIMENSIONS OF NEGOTIATION

Knowledge or information

Time or Deadline Pressure

Strength or Power

All the above are inter-twined

INFORMATION

More information you have, the better you will be able to negotiate

Information and facts help you to generate alternatives, strategies and convince the other party

Information about the other party, market information, trends, technologies

Published Standards, guidelines, data equip you to put your points effectively

TIME

Time plays a critical role in Negotiation

Pareto’s Law 80/20

80% of results are generally agreed upon in the last 20% of the time

Time / Deadline pressure weakens you / builds tension

POWER / STRENGTH

The ability to influence / control the group and the events

Besides the authority of your position, knowledge is your strength

The balance of power keeps shifting from one side to the other during the negotiation process

Negotiation will end when -The balance of power shifts totally to one side – a Win-Lose situation

When the balance of power is shared equally – a Win-Win situation

INTERACTING The Art of Negotiating Advesh Consultancy Services 06/07/09

INTERACTING

Getting the other side to the Table

Getting off to a good start

Power of Anchoring

Using Concessionary moves

Tactics for Distributive negotiation

General Tactics

Getting the other side to the Table

Offer incentives

Put a price for on the status-quo

Mobilise Support

Getting off to a good start

Express respect for the other side’s experience and expertise

Frame the task positively, as a joint endeavour

Emphasise your openness to the other side’s interests and concerns.

Start with the agenda

Getting off to a good start Some tips

“Breaking Bread” Have coffee, snacks or light drinks available.

Use small talk to dispel tension

If the other side is very formal, don’t speak casually. If the other side is decidedly informal, speak in a more casual way.

ACCOMMODATE Build friendly relationship Characteristics: Promote harmony Avoid substantive differences Give into pressure to save relationship Place relationship above fairness of the outcomes 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 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 LOW HIGH CONCERN FOR RELATIONSHIP CONCERN FOR SUBSTANCE HIGH The Art of Negotiating Advesh Consultancy Services 06/07/09

Distributive Negotiations

Win-Lose Negotiations

Anchoring is an attempt to establish a reference point around which negotiations will make adjustments.

When should you anchor

Counter anchoring

Be prepared for concessionary moves

Integrative Negotiations

Slower and more explorative opening

Don’t start with numbers.

Making a good start is critical

Ask open ended questions Probe the other side’s willingness to trade off one thing for the other.

Inquire about the other party’s underlying interests

Listen closely

Be an active listener

Express empathy

Work to create a two-way exchange of information

Continue relationship building efforts

Refrain from personal attacks.

Maintain a sense of humour

The Art of Listening The Art of Negotiating Advesh Consultancy Services 06/07/09

NONVERBAL BEHAVIOUR

What is going on

in the inside

shows

on the outside

06/07/09 The Art of Negotiating Advesh Consultancy Services

Face and Head

Broken Eye Contact(Hide)

Looking pat you(Bored)

Piercing(Angry)

Steady(Honest)

Head Turned slightly(Evaluating you)

Tilted Head(Uncertain about what you said)

Nodding(In agreement)

Smiling(Confident)

Arms and Hands

Arms folded tightly(not receptive)

Arm over the back of the chair(need for dominance or negative reaction)

Open palms(Positive)

Hands clasped behind head(Need for dominance)

Steeling of the fingers(Need to control negotiation)

Hand wringling(Nervousness)

Self touching(General nervousness)

Legs

Crossing your legs has a devastating effect

Out of 2000 videotaped sales meetings, not one sale was made by people who had their legs crossed

Source How to Read a Person like a Book by Gerard I. Nirenberg and Henry H. Calero

Dominance/Power

Making piercing eye contact

Putting hands behind head or neck

Placing hands on hips

Standing while counterpart is seated

Steepling

Submission/Nervousness

Fidgetting

Making minimum eye contact

Touching hands to face , hair etc

Using briefcase to “guard” body

Clearing throat

Disagreement/Anger

Getting red

Pointing a finger

Squinting

Turning body away

Crossing arms or legs

Boredom and Lack of Interest

Failing to make eye contact

Playing with objects

Staring blankly

Picking at clothes

Looking at watch/door

Uncertainty/Indecision

Cleaning glasses

Looking puzzled

Putting fingers to mouth

Biting lip

Tilting head

Suspicion/Dishonesty

Touching nose while speaking

Covering mouth

Avoiding eye contact

Crossing arms/legs

Moving body away

Evaluation

Nodding

Maintaining good eye contact

Tilting head slightly

Stroking chin

Touching index finger to lips

Confidence, Cooperation and Honesty

Leaning forward

Keeping arms and palms open

Maintaining great eye contact

Placing feet flat on floor

Sitting with legs uncrossed

Smiling

Challenges & Obstacles The Art of Negotiating Advesh Consultancy Services 06/07/09

TACTICS REGARDING PRICE

Should I ever state my acceptable range?

Should I ever tell the other side my bottom line?

Suppose that the other side opens with an incredibly unreasonable number, should I counter with an equally unreasonable number, or decline to counter at all?

TACTICS REGARDING PROCESS

Is it acceptable to make two moves at a time?

Is it smart or fair to bluff?

In a complex deal, is it better to reach agreement issue by issue or wait until the end?

Is it better to deal with difficult or easy issues first?

TACTICS REGARDING PEOPLE

Collaborative negotiator vs. positional hard bargainer?

How should I react if the other side seeks to change something in its offer after a deal has been reached?

What should I do when the negotiator on the other side has a temper tantrum?

I don’t believe in what the other side says.

Is it essential to negotiate face to face?

How should I react when the other side challenges my credentials, status or authority to make a deal?

CLOSURE 06/07/09 The Art of Negotiating Advesh Consultancy Services

Closing Be Prepared to Concede Begin with those of Low Priority and seek High Priority Items Never Concede on More than possible by your Brief Use your Concessions Wisely Don’t just give these away expect and receive something in return The Art of Negotiating Advesh Consultancy Services 06/07/09