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Negotiation skills - Key concepts when planning a negotiation
This document provides an overview of key concepts for negotiating skills. It defines negotiation as formal discussions to reach an agreement when there are conflicting interests between parties. Preparing for negotiation involves identifying objectives, issues, positions, roles of those involved, interests and needs of parties. Other important concepts covered include gathering relevant information, setting ground rules, understanding best and worst alternatives to an agreement (BATNA and WATNA), leverage, and ensuring any agreement reached is properly implemented. The overall summary is that effective negotiation requires understanding all perspectives and having clear objectives, while also considering backup plans if an agreement cannot be reached.
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Negotiation skills - Key concepts when planning a negotiation
- 1. Negotiating skills Patricia MaguetLevy February – May 2014
- 2. What does negotiatemean? Cambridge Dictionary of American English Negotiate (DISCUSS) to have formal discussions with someone in order to reach an agreement Harvard Business Essentials: The means by which people deal with their differences
- 3. Negotiation situations There issome conflict of interest between two or more parties The parties wish to create something new that can’t be done on his or her own They prefer to search for agreement rather: fight openly give in break off contact. Harvard Business Essentials
- 4. What is notnegotiation? When your boss gives you an order and your only choice is to do what he or she says. If an outsider is brought in to make a decision between parties using arbitration, the parties are legally bound to follow the arbitrator’s decision. When parties are not working together to reach an agreement, negotiation does not take place.
- 5. What is notnegotiation?
- 6. Am I anegotiator? We are inborn negotiators: “if you let me stay out until midnight then I’ll tidy my bedroom”. We negotiate all the time. To get a pay rise To get promoted at work To buy a car, a house For business
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- 8. KEY CONCEPT Objectives andGoals Why do you want to negotiate? Identify everything that can be negotiated and think about the goals you want to obtain for each item.
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- 10. KEY CONCEPT Issues - Whatis the negotiation about? -What are we going to discuss? -Will you create an agenda? . You will need to agree on the issues to be discussed with all the parties involved
- 11. KEY CONCEPT Position What doyou want? - It tells the other side what you want - It can eventually produce the terms of an acceptable agreement You don’t need to reveal your position at the beginning of the negotiation process
- 12. KEY CONCEPT The roles -Whois involved in the negotiation process? -Will you negotiate as an individual or with a team? -And your counterpart? -Is it a multi-party negotiation?
- 13. KEY CONCEPT Interests, needs,wants, motivations Why do you want it? Looking at the interests of the parties, is the best way to a negotiated agreement.
- 14. KEY CONCEPT Interest: needs,wants and goals When looking for interests we are looking for NEEDS. All NEEDS are not equal, we need to PRIORITIZE. Explicit needs can be very different from Implicit needs. You need to identify your implicit needs and specially those of the counterparts. WHY?
- 15. KEY CONCEPT Useful questions -Askwhat their interests / objections are -What are you most concerned about… -What problems do you foresee? -Is there anything else we need to do to… Don’t forget you must listen attentively
- 16. KEY CONCEPT Maslow hierarchyof Needs
- 17. KEY CONCEPT Maslow hierarchyof Needs
- 18. “Negotiating is notlistening to what they say, but finding out what they want“ Reinhard Selten. Economics Nobel Prize.
- 19. KEY CONCEPT Interest: needs,wants, motivation
- 20. KEY CONCEPT Information critical facts objectivecriteria can make the difference in the middle of a negotiation process. Gather all the relevant facts!
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- 22. KEY CONCEPT Set groundrules Control the setting Where? When? Who? How often? …
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- 24. KEY CONCEPT BOTTOM LINE RESERVATIONPRICE The worst acceptable outcome Your walk-away The least favorable point at which you would accept a deal
- 25. KEY CONCEPT BOTTOM LINE BENEFIT: It will help you in resisting pressure and temptations and from making a decision you could later regret (siren song “Let’s agree and put an end to this” ) DISADVANTAGES: - it’s too rigid - it inhibits imagination - is likely to be set too high / too low
- 26. KEY CONCEPT ZONE OFPOSSIBLE AGREEMENT The difference between the Seller’s Reservation Price and the Buyer’s Reservation Price 250$ Seller’s Reservation Price 275$ ZOPA Buyer’s Reservation Price
- 27. KEY CONCEPT Power -Who hasmore power, you or your counterpart?
- 28. KEY CONCEPT Sources ofPower? -Authority -Knowledge -Punishing or rewarding -Scarcity -Contacts or connections -Location -Need -Investment -Urgency -Personality
- 29. KEY CONCEPT BATNA BEST ALTERNATIVETO A NEGOTIATED AGREEMENT MAAN MEJOR ALTERNATIVA A UN ACUERDO NEGOCIADO Always know your BATNA before entering any negotiation
- 30. KEY CONCEPT BATNA The reasonto negotiate is to produce something better than the results you can obtain without negotiating. Your BATNA will be the standard against which any proposed agreement should be measured.
- 31. Developing your BATNA Inany negotiation there are realities that are hard to change no matter how good a negotiator you are. To protect yourself and to make the most of your assets you can use BATNA
- 32. Developing your BATNA Generatingpossible BATNAs requires three distinct operations: Inventing a list of actions you might take if no agreement is reached Improving some of the more promising ideas and converting them into practical alternatives Selecting the one realistic option that seems the best.
- 33. Developing your BATNA Examplefor a family wanting to sell a house What will we do if we don’t sell after 6 months? Will we keep it on the market indefinitely? Will we rent it? Will we turn the land into a parking? Will we let someone live in it rent-free if they paint it? How those alternatives compare with the best offer we received for the house?
- 34. KEY CONCEPT MLATNA MOST LIKELYALTERNATIVE TO A NEGOTIATED AGREEMENT MPAAN ALTERNATIVA MÁS PROBABLE A UN ACUERDO NEGOCIADO Always know your MLATNA before entering any negotiation
- 35. KEY CONCEPT WATNA WORST ALTERNATIVETO A NEGOTIATED AGREEMENT PAAN PEOR ALTERNATIVA A UN ACUERDO NEGOCIADO Always know your WATNA before entering any negotiation
- 36. Developing your BATNA Don’tforget to consider the other side’s BATNA, WATNA, MLATNA
- 37. Developing your BATNA BENEFIT: It’s flexible enough It forces you to think of all the alternatives before you accept an agreement It prevents you from being too optimistic ( for example to see your alternatives in the aggregate)
- 38. LEVERAGE = Counterpart’s need level –Your need Level + Your BATNA - Counterpart’s BATNA
- 39. ASSESS YOUR LEVERAGE NEEDSCORE HIGH NEED 1 AVERAGE NEED 0 LOW NEED -1 BATNA SCORE GOOD ALTERNATIVE 1 AVERAGE ALTERNATIVE 0 BAD ALTERNATIVE -1
- 40. KEY CONCEPT The agreement -Howwill agreement be implemented -Who is responsible? -Do we need a written / oral / formal agreement? -Do we need feedback from others??
- 41.
Editor's Notes
- #5 When you ask your parent to study abroad and they accept, this is neither a negotiation process.
- #7 Negotiation is always present in our lives, both at home and in our jobs. It can be formal or informal.
- #8 To set realistic objectives there are some key terms we’ve already been talking about
- #9 Research shows that you increase your likelihood of achieving your goals if you start systematically setting them. Brainstorming Helps. Think about Long Term and Short Term goals.
- #10 Research shows that you increase your likelihood of achieving your goals if you start systematically setting them. Brainstorming Helps. Think about Long Term and Short Term goals.
- #11 Break down the issues t o be worked out into separate items ahead of time, and ask the other party to add to the list. Once you both agree on the list of things to be negotiated, you should each put together a “package” of several items on the list and work out a win–win agreement for these things. This strategy can build trust in the negotiation process itself. Example 1 Shari, a sixteen-year-old who lives with her parents and three younger sisters, has asked her mother for a $10/week increase in her allowance. Mother: That’s a large increase—and we just raised it last year! Shari: Well, I need more money for clothes and CDs, and for going out with my friends. Mother: But your allowance is based on what you earn in your weekly chores, not on what you want to spend. Shari: Well, what else can I do, besides washing the dishes every night and cleaning my room? Mother: You could cook dinners, baby-sit your sisters, cut the grass, wash the cars, clean the whole house—should I continue? Shari: Whoa! I want to stay out longer—past my curfew of 10:00—not work more! Mother: Well, if I give you an increase, your little sisters will want equal treatment. It will cost me more than $10—about $35 per week. Shari: I’m four years older than the next-oldest. You can’t treat me the same! Mother: Well—so we’re talking about several issues, not just an allowance increase! There is: (1) a $10 increase; (2) a later curfew; (3) more chores; and (4) different treatment from your sisters! Shari: Right! Mother: So … I suggest no allowance increase, but unlike your sisters, I’ll pay you $10 to babysit every Wednesday night, while your Dad and I go out. And if you clean the whole house on Saturday, you get to stay out an hour later that night. Shari: (pause) I like it! Conclusion Shari’s mother helped negotiations along by listing all of the items being discussed. Then a “win-win” solution could be determined. Shari got the $10 she wanted and a later curfew, while the mother won a Saturday house-cleaning and a night out each week. An allowance increase, which the other children would have requested as well, was avoided.
- #12 What will be your first offer? Think of your experiences in renting cars. Automobile rental companies have thought of all the answers; they ask you to sign and initial the front of the contract in several places. The actual contract is on the back of the paper you sign, generally printed in very small letters in extremely light ink. If you want a rental car, you can’t negotiate the contract. The rental company has adopted a position from which they will not budge. There is no clearer example of the “my way or the highway” approach. It can be okay to start with a position in a negotiation, but unless you understand the interests behind your position and are open to alternative approaches, you are likely to find yourself stuck in a corner you cannot escape without losing face.
- #14 It is important that the answer explains the interests of the parties instead of being a justification for a position (“because it is in the company’s best interest”)
- #21 If you want to buy a car and before starting a negotiation process with the seller you have visited other sellers, reviewed the prices of the car in different magazines, you know all the details of the car and so on you are more likely to improve the power you have and thus it will be easier for you to reach your desired outcome. Example 1 When Larry’s cousin offered to help Larry finish the renovation on his bathroom, Larry was thrilled. After all, Will is a licensed plumber, and he and Larry have always gotten along. Things turned sour, though, when Will presented Larry with his bill. Larry had expected to pay him for his time, but was shocked at the amount of the bill. It was twice as high as the estimates Larry received from other plumbers before they started the project. This uncomfortable negotiation followed: Larry: Will, about your bill. I was kind of surprised at how high it was. Will: Larry, I gave you my “family” rate. Believe me, I would have charged anyone else much more. Larry: But Will, I did get some estimates from plumbers, and they were much lower than this. Larry: Just make sure you’re comparing apples to apples. When you first told me about your project, I anticipated much less work. When we got into it, it became clear that all of those pipes had to be pulled and new ones put in. Larry: Well, these plumbers certainly acted like they understood the work when they gave me their estimates! Will: Tell you what. Let’s get the guys back in who gave you estimates, and show them the actual work that got done. If they tell us that they either disagree on the need for that work or that they would have done it for less, I’ll revise my bill to meet the lowest estimate you get. Larry: That sounds fair. Conclusion When the other plumbers looked at the work, they had to agree that their early estimates were low. Had they actually prepared bids on the work, they said, they would have had to revise the figures. The estimates would have been higher than what cousin Will charged. Settling on the right objective criteria upon which to base a negotiation requires that both parties think through their options. Comparing the estimates to Will’s actual costs would have been counterproductive, because (as Will pointed out) it wasn’t an apples-to-apples comparison. Video George Clooney que no se prepara
- #23 Setting ground rules mean deciding where you are going to meet, when you are going to meet, who will be present, how often the negotiation sessions will occur and some other relevant rules. For example when negotiating with someone in your family you may agree that you will stop the talks as soon as anyone raises his / her voice or makes a threatening comment. If you succeed in making the other parties come to your ground, you will feel more comfortable, you will have access to all the information you need, you can control environmental factors and so on. Example 2 Two five-person negotiating teams had been trying to work out a deal for over a month. The firm deadline was only four days away. Both sides desperately needed to settle a property dispute. The chief negotiator for Team A publicly challenged Team B to “negotiate non-stop, around the clock, until we have a settlement.” The chief negotiator for Team B agreed, as long as they met in the boardroom of Team B. Team A agreed to change the meeting place. About thirty-six hours later, Team A was whipped physically and emotionally. Team B, having set up beds, meals, and other conveniences in the adjoining room, was still going strong. After forty hours of negotiating, Team A agreed to a settlement almost identical to the one rejected days before. Team B had clearly used its home turf to gain a substantial advantage. When negotiations resumed in two months over another piece of property, not one member of Team A was chosen to return to the table. They had all been replaced after their decision to negotiate “around the clock” in Team B’s boardroom became known. They were blamed for accepting the same deal that had been rejected only days earlier. Conclusion Team A did not realize the practical advantage they gave Team B when they agreed to negotiate in B’s boardroom. The physical and emotional demands of 24-hour, non-stop negotiations wore down the members of Team A, while members of Team B were able to stay fresh, in their own familiar setting.
- #24 Example 2 It was Sunday, December 31st, and a twelve-member board of a large non-profit organization was holding a special meeting to decide whether or not to enter into a multi-million dollar capital project with a partner organization. The partner organization, for tax reasons, had issued a deadline of December 31st, beyond which the project would have to be abandoned. The board members had met twice before, and the vote was a 6-6 tie each time. A majority was needed to pass the partnership agreement; if a seventh vote could not be found by the pro-agreement side, the proposal would die at midnight. A third vote at 3:00 p.m. resulted in another 6-6 deadlock. Both sides caucused: The leaders on each side met to negotiate a compromise. That effort failed. Then, during an hour break in the meeting, the leader of the pro- partnership side heard someone say that the meeting needed to end by 5:30 p.m., because one member of the anti-partnership side had to leave at that time to attend a church service he had not missed in 27 years. When the meeting resumed at 4:00 p.m., the pro-project leader told his members to filibuster until he gave a signal and called for another vote. At 5:30 p.m., as predicted, a member of the anti-project group left the room. A member of the pro-project group quickly called for a vote after the leader gave a signal. The measure passed 6–5 at 5:45 p.m., and the meeting was adjourned. Conclusion The leader of the pro-project group recognized that they might have a unique timing advantage. He planned for it accordingly, and it worked. For weeks, the project had been stalled by 6–6 votes; in the end, timing was everything.
- #25 For example, if you want to buy a car to commute to work, focusing on finding a model that will get good gas mileage and that will be easy to park may be a lot more important as an interest than whether the radio has four or six speakers. People who take the positional approach and make every element on their list of wants equally important will find it more difficult to find what they’re looking for or to figure out on which things they might be able to compromise.
- #30 Example 1 Harvey Huff bought a new 1956 Chevrolet from a local dealer. After forty years, he finally decided to sell the car he had loved and carefully maintained in original condition. Harvey did not need the money, but he intended to move three thousand miles away, to a condo in Arizona. The ad he placed in the local newspaper produced only one potential buyer: Patrick Knight. Harvey: Well, now that you’ve checked it out, how do you like it? Mr. Knight: It’s in great condition, just as you described it. Harvey: Any questions? Mr. Knight: Will you take less? Harvey: No. It’s easily worth at least $20,000. That’s the price. Mr. Knight: $18,000, tops! Harvey: No thanks. Mr. Knight: Okay. $20,000. I need it for a new restaurant. Harvey: Restaurant? Mr. Knight: Yes. We cut off the top of the vehicle and people sit in it and get served their meals in our “oldies dream car!” Harvey: Never mind, I’ll keep it. I haven’t maintained it for all these years just so you can destroy it. Harvey’s best alternative—his BATNA—was simply to hold on to the car for the moment, and either move it with him to Arizona or find another classic car collector who might buy it (perhaps for less) and preserve it, as Harvey had for many years. In this case, his BATNA was not to hold out for more money, but rather what the buyer planned to do with the car.
- #31 Example 2 Shari and Jim Jaggers own a successful West Coast pottery company. The $56 million dollar business took them 30 years to grow, and it now employs 230 craftsmen. For the past two months, labor contract negotiations between the Jaggers and a local labor union representing the pottery’s craftsmen have stalled. The union is demanding wage and benefit increases, which the Jaggers believe will cause them to increase prices to the point where they will no longer be competitive with other West Coast firms. With only two weeks remaining before a threatened strike, the Jaggers decided to seek buyers for their land, inventory, and equipment. They learned that their assets would be easy to sell and were worth more than originally estimated. The Jaggers gave the union their “last, best, and final offer,” which was refused. They told the union that their age and the fact that they had no heirs to carry on the business was leading them to seriously consider selling out and permanently closing the doors. The union negotiators thought the Jaggers were bluffing. The owners, as a last resort, notified all the employees of their intentions. The union negotiators convinced the employees that this too, was a power play. The threatened strike became a reality, and the Jaggers decided once and for all to sell their business assets and invest the proceeds conservatively, providing them with a very good income for life. Conclusion Selling their business was the Jaggers’ BATNA. When negotiations with the union became hopeless, selling became an attractive alternative to a strike or prolonged battle.
- #33 Take care about the illusion of having multiple options, some of them might not be realistic. What will happen if I don’t get the pay rise I’m asking for: I will leave my job and look for another one – is it possible? I will travel around the world for a year – do you have money enough?
- #35 Example 1 Harvey Huff bought a new 1956 Chevrolet from a local dealer. After forty years, he finally decided to sell the car he had loved and carefully maintained in original condition. Harvey did not need the money, but he intended to move three thousand miles away, to a condo in Arizona. The ad he placed in the local newspaper produced only one potential buyer: Patrick Knight. Harvey: Well, now that you’ve checked it out, how do you like it? Mr. Knight: It’s in great condition, just as you described it. Harvey: Any questions? Mr. Knight: Will you take less? Harvey: No. It’s easily worth at least $20,000. That’s the price. Mr. Knight: $18,000, tops! Harvey: No thanks. Mr. Knight: Okay. $20,000. I need it for a new restaurant. Harvey: Restaurant? Mr. Knight: Yes. We cut off the top of the vehicle and people sit in it and get served their meals in our “oldies dream car!” Harvey: Never mind, I’ll keep it. I haven’t maintained it for all these years just so you can destroy it. Harvey’s best alternative—his BATNA—was simply to hold on to the car for the moment, and either move it with him to Arizona or find another classic car collector who might buy it (perhaps for less) and preserve it, as Harvey had for many years. In this case, his BATNA was not to hold out for more money, but rather what the buyer planned to do with the car.
- #36 Example 1 Harvey Huff bought a new 1956 Chevrolet from a local dealer. After forty years, he finally decided to sell the car he had loved and carefully maintained in original condition. Harvey did not need the money, but he intended to move three thousand miles away, to a condo in Arizona. The ad he placed in the local newspaper produced only one potential buyer: Patrick Knight. Harvey: Well, now that you’ve checked it out, how do you like it? Mr. Knight: It’s in great condition, just as you described it. Harvey: Any questions? Mr. Knight: Will you take less? Harvey: No. It’s easily worth at least $20,000. That’s the price. Mr. Knight: $18,000, tops! Harvey: No thanks. Mr. Knight: Okay. $20,000. I need it for a new restaurant. Harvey: Restaurant? Mr. Knight: Yes. We cut off the top of the vehicle and people sit in it and get served their meals in our “oldies dream car!” Harvey: Never mind, I’ll keep it. I haven’t maintained it for all these years just so you can destroy it. Harvey’s best alternative—his BATNA—was simply to hold on to the car for the moment, and either move it with him to Arizona or find another classic car collector who might buy it (perhaps for less) and preserve it, as Harvey had for many years. In this case, his BATNA was not to hold out for more money, but rather what the buyer planned to do with the car.