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1. The Negotiation Process:The Negotiation Process:
Four StagesFour Stages

2. A Key Concept for AllA Key Concept for All
NegotiationsNegotiations
Negotiator and mediator Theodore KheelNegotiator and mediator Theodore Kheel
summarized a critical concept:summarized a critical concept:22
 ““Negotiations are about changing theNegotiations are about changing the
status quo. Unless both parties canstatus quo. Unless both parties can
receive something more than what thereceive something more than what the
status quo provides, there is nothing forstatus quo provides, there is nothing for
them to negotiate.”them to negotiate.”
 Why? If not, they will choose the statusWhy? If not, they will choose the status
quo and walk away.quo and walk away.
22 Theodore W. Kheel,Theodore W. Kheel, The Keys to Conflict ResolutionThe Keys to Conflict Resolution (New York, NY: Focus Walls Eight Windows, 1999).(New York, NY: Focus Walls Eight Windows, 1999).
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3. Five Negotiation SkillsFive Negotiation Skills
 Skill 2.1:Skill 2.1: PreparationPreparation before entering abefore entering a
negotiation includes deciding anegotiation includes deciding a BATNABATNA
 Skill 2.2: Consider appropriateSkill 2.2: Consider appropriate ground rulesground rules
 Skill 2.3: Develop anSkill 2.3: Develop an initial offerinitial offer
 Skill 2.4:Skill 2.4: AnticipateAnticipate posturingposturing
 Skill 2.5Skill 2.5:: Decide if the negotiation is aDecide if the negotiation is a singlesingle
issue or multiple issuesissue or multiple issues and if it includesand if it includes twotwo
or more partiesor more parties and the appropriate strategy.and the appropriate strategy.
Also decide if anAlso decide if an impasseimpasse occurs how itoccurs how it
should be resolvedshould be resolved
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4. The Four Stages:The Four Stages:
 Stage 1: PreparationStage 1: Preparation
 Stage 2: OpeningStage 2: Opening
StatementsStatements
 Stage 3: BargainingStage 3: Bargaining
 Stage 4: SettlementStage 4: Settlement
Opening Statements
Bargaining
Preparation
Settlement
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5. Historical Development of theHistorical Development of the
Negotiation ProcessNegotiation Process
 1930s-50s: “Hard bargaining,” threats,1930s-50s: “Hard bargaining,” threats,
bluffs, little flexibilitybluffs, little flexibility
 1980s:1980s: Getting to YesGetting to Yes introduced “win-introduced “win-
win” strategywin” strategy
 1980s: Game Theory, Howard Raiffa’s1980s: Game Theory, Howard Raiffa’s
The Art and Science of NegotiationThe Art and Science of Negotiation
 1990s: Interest-based bargaining (IBB)1990s: Interest-based bargaining (IBB)
problem-solving focusproblem-solving focus
 Today: All these views have merged toToday: All these views have merged to
produce a new understanding of theproduce a new understanding of the
negotiation processnegotiation process
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6. Chapter Case: The BudgetChapter Case: The Budget
PresentationPresentation
 Francis, a newly appointed dept. head, askedFrancis, a newly appointed dept. head, asked
the head of another department to describe thethe head of another department to describe the
budget process. She told him “it’s a vicious,budget process. She told him “it’s a vicious,
competitive process…we all know that we arecompetitive process…we all know that we are
fighting for a share of a fixed pool of funds”fighting for a share of a fixed pool of funds”
 After the meeting you sit down with the CEO andAfter the meeting you sit down with the CEO and
try to get the most you can for your department,try to get the most you can for your department,
keeping in mind the presentation by the otherkeeping in mind the presentation by the other
dept. headsdept. heads
 How does Francis prepare? Negotiate with theHow does Francis prepare? Negotiate with the
CEO?CEO?
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7. Stage 1: PreparationStage 1: Preparation
 Decide your BATNA -Decide your BATNA - always start with a clearlyalways start with a clearly
defined BATNA and stick to itdefined BATNA and stick to it
 List all key issuesList all key issues either party will want decided.either party will want decided.
Include tangibles, intangibles, throwaways…the moreInclude tangibles, intangibles, throwaways…the more
the better!the better!
 Set prioritiesSet priorities for the key issues by either: 1.for the key issues by either: 1.
Ranking; 2. Weights (%); 3. Assign each issue to oneRanking; 2. Weights (%); 3. Assign each issue to one
of four priority levels—Essential, Important,of four priority levels—Essential, Important,
Desirable, ThrowawayDesirable, Throwaway
 Develop support argumentsDevelop support arguments based onbased on
information, facts, logicinformation, facts, logic
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8. What IsWhat Is BATNABATNA??
 BATNA = theBATNA = the BBestest AAlternativelternative TToo
aa NNegotiatedegotiated AAgreementgreement
 Always decide your BATNAAlways decide your BATNA
before entering any negotiation!before entering any negotiation!
 BATNA = the value or point atBATNA = the value or point at
which you will choose nowhich you will choose no
agreement over a settlementagreement over a settlement
 BATNA is similar to the “walk-BATNA is similar to the “walk-
away” value or pointaway” value or point
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9. How to Determine YourHow to Determine Your
BATNA!BATNA!
(Answer the following questions)(Answer the following questions)
 If the other party withdrew from negotiationsIf the other party withdrew from negotiations
today, what are your alternatives?today, what are your alternatives?
 Can you list and place an estimated value on allCan you list and place an estimated value on all
the economic variables such as price, timing,the economic variables such as price, timing,
warranty, options, etc.?warranty, options, etc.?
 How important is your long-term relationship withHow important is your long-term relationship with
the other party? Can you assign a dollar value tothe other party? Can you assign a dollar value to
it? Does it override other factors?it? Does it override other factors?
 Can you improve your BATNA by seeking newCan you improve your BATNA by seeking new
alternatives to no agreement?alternatives to no agreement?
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10. Preparation IncludesPreparation Includes
DevelopingDeveloping SupportSupport
ArgumentsArguments
 FactsFacts
 InformationInformation
 LogicLogic
 PersuasionPersuasion
 Why? You attempt to “level the playingWhy? You attempt to “level the playing
field” or perception of power/leveragefield” or perception of power/leverage
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11. The Basic Stages of
Negotiation

12. Stage 2: Opening SessionStage 2: Opening Session
 Ground Rules:Ground Rules: Consider the “5 Ws”Consider the “5 Ws”
 Initial offersInitial offers on each issue ofon each issue of
importance to either side are presentedimportance to either side are presented
 PosturingPosturing to state one’s case, blow offto state one’s case, blow off
steam, etc., may include presentingsteam, etc., may include presenting
conflicting views, concealing objectives,conflicting views, concealing objectives,
caucusing, inflexibility, unwillingness tocaucusing, inflexibility, unwillingness to
compromisecompromise
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13. Items Identified for Negotiations by a Husband
and Wife Building a New Home with a Limited
Upgrades Budget

14. Ground Rules: Consider “The 5Ground Rules: Consider “The 5
Ws”Ws”
 WWHOHO speaks for each party, is authorized tospeaks for each party, is authorized to
make/reject offers, and how many people will bemake/reject offers, and how many people will be
on each team?on each team?
 WWHEREHERE will negotiation take place, and whatwill negotiation take place, and what
will be the seating arrangement?will be the seating arrangement?
 WWHENHEN will negotiations begin, and how longwill negotiations begin, and how long
will sessions last?will sessions last?
 HOHOWW will offers be made, issues included in thewill offers be made, issues included in the
discussion?discussion?
 WWHATHAT formform of final agreement is acceptableof final agreement is acceptable
(handshake, verbal, written, notarized)?(handshake, verbal, written, notarized)?
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15. Bargaining Styles: HowardBargaining Styles: Howard
Raiffa’s FOTE & POTERaiffa’s FOTE & POTE
 FOTE = Full, Open, Truthful Exchange, whichFOTE = Full, Open, Truthful Exchange, which
includes a completely open, honest, and truthfulincludes a completely open, honest, and truthful
exchange of interests. FOTE is primarily only usedexchange of interests. FOTE is primarily only used
by family, friends, long-time business associates,by family, friends, long-time business associates,
studentsstudents
 POTE = Partial, Open, Truthful Exchange whichPOTE = Partial, Open, Truthful Exchange which
includes the concealment of real interests,includes the concealment of real interests,
posturing, bluffing, etc., and causes the parties toposturing, bluffing, etc., and causes the parties to
practice “the negotiation dance.” POTE is used bypractice “the negotiation dance.” POTE is used by
most negotiatorsmost negotiators
 Why is POTE used more? The parties lack the trustWhy is POTE used more? The parties lack the trust
required to engage in FOTErequired to engage in FOTE
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16. ““Saving Face”Saving Face”
 Both parties need to “save face” or avoidBoth parties need to “save face” or avoid
embarrassment during and at the end ofembarrassment during and at the end of
negotiationnegotiation
 Both parties need some “gains” to tout, if notBoth parties need some “gains” to tout, if not
why would they settle?why would they settle?
 Neither party presents the final deal as a “win-Neither party presents the final deal as a “win-
lose” and could potentially cause hardship forlose” and could potentially cause hardship for
the other partythe other party
 Why? Payback can be a powerful motivator!Why? Payback can be a powerful motivator!
Keep in mind future encountersKeep in mind future encounters
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17. Stage 3: BargainingStage 3: Bargaining
 Two critical variables shape the negotiation:Two critical variables shape the negotiation:
number of parties, number of issuesnumber of parties, number of issues
 Two-party and single issue = “zero-sum”Two-party and single issue = “zero-sum”
(assuming no long-term relationship)(assuming no long-term relationship)
 Two party and multiple issues = trades toTwo party and multiple issues = trades to
achieve an efficient settlementachieve an efficient settlement
 Three parties and one issue = auctionThree parties and one issue = auction
processprocess
 Three parties and multiple issues =Three parties and multiple issues =
consensus by all on some or all issuesconsensus by all on some or all issues
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18. Common Bargaining TacticsCommon Bargaining Tactics
to Prepare Forto Prepare For
 Extreme (high or low) opening offersExtreme (high or low) opening offers
 Claiming limited authorityClaiming limited authority
 Emotional outburstsEmotional outbursts
 Offering few concessionsOffering few concessions
 Resisting deadlinesResisting deadlines
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19. Possible Negotiation SituationsPossible Negotiation Situations
Number of Issues Two Three or More
One Zero-sum
Outcome
Auction Process
Multiple Efficient
Outcomes
Consensus by all
parties on all
issues, or only some
issues resolved by
some parties
following their
BATNAs
Number of Parties Involved
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20. Stage 4: SettlementStage 4: Settlement
 Negotiations result in either a settlement or anNegotiations result in either a settlement or an
impasse (stalemate)impasse (stalemate)
 Impasse = both parties still seek an agreementImpasse = both parties still seek an agreement
but negotiations have stalledbut negotiations have stalled
 Why do parties declare an impasse even thoughWhy do parties declare an impasse even though
they both still seek a settlement? Commonthey both still seek a settlement? Common
reasons: (1) noncommunication of interests; (2)reasons: (1) noncommunication of interests; (2)
excessive emotional involvement; (3) failure ofexcessive emotional involvement; (3) failure of
one or both to realize the interests of the otherone or both to realize the interests of the other
party and thus offer a settlement which exceedsparty and thus offer a settlement which exceeds
their BATNAtheir BATNA
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21. Beyond Impasse: Third-PartyBeyond Impasse: Third-Party
InterventionsInterventions
 FacilitationFacilitation --- known friend or family member--- known friend or family member
is trusted to provide assistance by meetingis trusted to provide assistance by meeting
separately with both parties and suggesting aseparately with both parties and suggesting a
settlementsettlement
 MediationMediation --- third party assists the parties in--- third party assists the parties in
the development of a mutually acceptablethe development of a mutually acceptable
settlementsettlement
 ArbitrationArbitration --- third party is empowered to--- third party is empowered to
make a “final and binding” decision on allmake a “final and binding” decision on all
unresolved issuesunresolved issues
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23. The ClosingThe Closing
 With a verbal agreement (if betweenWith a verbal agreement (if between
family members or friends); a handshake;family members or friends); a handshake;
or a written, signed, and dated documentor a written, signed, and dated document
the negotiation endsthe negotiation ends
 Both sides realize gains beyond theirBoth sides realize gains beyond their
walk-away point (BATNA)walk-away point (BATNA)
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