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Negotiation for Fun and Profit: A Practical Guide
 

Negotiation for Fun and Profit: A Practical Guide

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Speaker: Michael Erdle, managing partner of Deeth Williams Wall LLP...

Speaker: Michael Erdle, managing partner of Deeth Williams Wall LLP

The art of negotiation touches every aspect of our lives -- we routinely negotiate with our spouses, our children, our landlord, our employer, and so on. It is equally important in business -- we negotiate with our customers, our suppliers and our investors.

Case studies focus on issues situations most entrepreneurs will face: research projects, starting a business venture, obtaining investors and licensing a product or invention.

Part of the MaRS CIBC Presents Entrepeneurship 101 lecture series: http://www.marsdd.com/ent101

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    Negotiation for Fun and Profit: A Practical Guide Negotiation for Fun and Profit: A Practical Guide Presentation Transcript

    • Follow or Tweet:#ent101
    • Michael Erdle Managing Partner © 2009, Michael Erdle
    •  Negotiation Problems  Negotiation Skills  Dispute Resolution In theory there is no difference between theory and practice. In practice, there is. -- Jan van de Snepscheut
    •  Everything can be negotiated.   Business Relationships •  “I want a raise.” •  “I thought we were partners!”   Personal Relationships •  “What movie to you want to see?” •  “Can I borrow the car?”
    •  Distributing Value vs. Creating Value   Opportunistic   Problem-solving  Identify Issues   What does each side want and need?  Consider Interests   Mutual   Complementary   Conflicting
    •  Interests vs. Positions   “Needs” vs. “wants”  “Separate the People from the Problem.”   Soft on the person   Hard on the problem  Consider other Options
    •  Use Objective Alternatives  Determine BATNA and WATNA   Best Alternative to Negotiated Agreement   Worst Alternative to Negotiated Agreement  Look for a “win-win” solution
    •  Successful relationships are built on communication and trust.  Lack of trust leads to “win-lose” or “lose-lose” result.  Negotiation is one way of creating trust – or deciding whether trust is justified.   Example: “The Prisoner’s Dilemma” a classic risk strategy game
    • Scenario:   Bob and Alice are arrested near the scene of a robbery where victim was badly injured.  Both are carrying stolen property.  They are questioned separately by the police.  There is enough evidence to convict both of theft, but not enough to convict either one of assault.  Each has to choose whether to confess and implicate the other.
    •  Simple dilemma: confess or don't confess.   If neither one confesses, both will serve one year (possession of stolen property).   If each confesses and implicates the other, both will go to prison for 10 years.   But, if one confesses and implicates the other, and the other does not confess, the collaborator will go free, and the other will go to prison for 20 years.  The penalties are shown in the following "payoff table”.
    • Payoff table for the Prisoners' Dilemma: Alice confess silent confess 10 10 0 20 Bob silent 20 0 11
    •  Lack of trust is fatal – neither can trust the other to remain silent.  So the only rational action is to confess.  That produces the best result no matter what the other person does.
    •  This is true for a “winner take all” game.  Life is rarely like that.  Most negotiations are based on a continuing relationship.  What happens if there’s a series of games?
    • Series Player 2 Player 2 Payoff Matrix cooperates retaliates Player 1 cooperates 3, 3 0, 5 Player 1 retaliates 5, 0 -1, -1
    •  “Tit-for-Tat” strategy is most successful.  Four key conditions:   Nice   Retaliate   Forgiving   Generous
    • 1.  The player will always cooperate, unless provoked. 2.  The player will retaliate, if provoked. 3.  The player is quick to forgive. 4.  The game must continue long enough for the ‘retaliation and forgiveness’ pattern to affect opponent’s behaviour.
    •  Assertiveness vs. Empathy  Three common negotiation styles   Competitive   Accommodating   Avoidance  Effective negotiator is assertive and empathetic
    •  Communication is the key to effective negotiation.  What you say is often less important than how you say it.   Tone   Body language
    •  Understanding and recognition do not mean compromise and concession.   “I understand” vs. “I agree”.  Your own emotions and subconscious brain can hinder your ability to negotiate effectively.
    •  The automatic processing of words interferes with the task of naming the colors.  Selecting an appropriate response involves conflict between the right and left halves of the brain.  This conflict is involved in a wide range of thought processes and emotional responses.   Source: PBS Online http://www.pbs.org/wgbh/nova/everest/exposure/stroopdesc.html
    •  Listening   Develop “active listening”.  Understanding   Acknowledge the other person’s perspective.  Flexibility   Be open to other options.  Pragmatism   Be ready to accept the best available option.
    •  Classic “Hard Bargaining” Ploys   Extreme claims, small concessions   “Take or leave it.”   Unreciprocated offers   Threats and warnings   Attacking the alternatives   Good cop, bad cop
    •  Extreme claims, small concessions   Tit for Tat – make equally small concessions  “Take or leave it.”   Make a counter offer   Offer an alternative   Don’t be afraid to walk away.
    •  Unreciprocated offers   Don’t negotiate against yourself.   Wait for a counter offer.  Threats and warnings   Don’t make a counter-treat.   Challenge the underlying assumptions .
    •  Attacking the alternatives   Askfor an explanation.   “Why do you have a problem with…?”  Good cop, bad cop   Negotiate with the boss.   Use the “good cop” to your advantage.
    •  Negotiation  Mediation  Arbitration  Litigation
    • Litigation Arbitration Mediation Negotiation
    •  Interest-based Mediation   Mediator is a facilitator   Focus on interests, not legal rights or obligations   Options for creative solutions  Evaluative Mediation   Neutralevaluation   Based on legal rights & obligations
    •  Qualities of a successful mediator:   Subject area knowledge   Negotiation & mediation process skills   Lets parties make key decisions   Creative approach to the problem   Patience
    •  Effective alternative to a law suit, especially for commercial disputes   Quicker   Less expensive   Private  Especially good for international disputes   Avoid uncertain court systems   Easier to enforce an award
    •  Cohen: You Can Negotiate Anything, Bantam, 1980  Fischer, Ury and Patton: Getting to Yes, Penguin, 1991  Ury: Getting Past No, Bantam, 1993  Mnookin, Peppet and Tulumello: Beyond Winning, Harvard University Press, 2000