The Art of Negotiating

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An overview of Negotiation skills in business environment

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The Art of Negotiating

  1. 1. 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
  2. 2. Mastery Skill Knowledge Awareness The Art of Negotiating Advesh Consultancy Services 06/07/09
  3. 3. BASICS OF NEGOTIATION The Art of Negotiating Advesh Consultancy Services 06/07/09
  4. 4. <ul><ul><li>We all negotiate, all the time- at home, with friends, at office, in public </li></ul></ul><ul><ul><li>These negotiations can be about anything </li></ul></ul><ul><ul><li>Negotiation is the most effective way of resolving conflicts and securing agreement </li></ul></ul><ul><ul><li>A two way discussion to agree terms </li></ul></ul><ul><ul><li>Conferring for the purpose of mutual agreement </li></ul></ul><ul><ul><li>A process of discussion aimed at reaching agreement </li></ul></ul><ul><ul><li>Establishing consensus amongst two or more parties </li></ul></ul>The Art of Negotiating Advesh Consultancy Services 06/07/09
  5. 5. Negotiation Is <ul><li>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. </li></ul><ul><li>A communication process between two or more people in which they consider alternatives to arrive at mutually agreeable solutions or mutually satisfactory objectives </li></ul>The Art of Negotiating Advesh Consultancy Services 06/07/09
  6. 6. <ul><li>Setting Goals </li></ul><ul><li>Balancing Outcome and Relationships </li></ul>The Art of Negotiating Advesh Consultancy Services 06/07/09
  7. 7. SETTING GOALS <ul><li>BATNA </li></ul><ul><li>RESERVATION PRICE </li></ul><ul><li>ZOPA </li></ul>The Art of Negotiating Advesh Consultancy Services 06/07/09
  8. 8. BATNA <ul><li>B est </li></ul><ul><li>A lternative </li></ul><ul><li>T o a </li></ul><ul><li>N egotiated </li></ul><ul><li>A greement </li></ul>The Art of Negotiating Advesh Consultancy Services 06/07/09
  9. 9. WHAT IS BATNA? <ul><li>How do the proposals match your realistic alternative if you cannot come to a deal? </li></ul><ul><li>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. </li></ul>The Art of Negotiating Advesh Consultancy Services 06/07/09
  10. 10. BATNA <ul><li>Retain the existing supplier </li></ul><ul><li>Go to another supplier </li></ul><ul><li>Strike/Lockout </li></ul><ul><li>Not an immediate requirement </li></ul>The Art of Negotiating Advesh Consultancy Services 06/07/09
  11. 11. DEVELOPING BATNA <ul><li>List what you would do if you fail to reach an agreement </li></ul><ul><li>Convert the most promising options into practical choices. </li></ul><ul><li>Select the single best option; that is your BATNA </li></ul><ul><li>Compare your BATNA to all proposals </li></ul><ul><li>If an offer is better than your BATNA,consider improving or accepting it </li></ul><ul><li>If an offer is worse than your BATNA, consider rejecting it </li></ul><ul><li>If they will not improve their offer consider exercising your BATNA </li></ul>The Art of Negotiating Advesh Consultancy Services 06/07/09
  12. 12. BATNA <ul><ul><li>Know your BATNA </li></ul></ul><ul><ul><li>Work with all the BATNAs </li></ul></ul><ul><ul><li>Be ready to walk </li></ul></ul>The Art of Negotiating Advesh Consultancy Services 06/07/09
  13. 13. BATNA <ul><li>Developed </li></ul><ul><li>by </li></ul><ul><li>Roger Fisher </li></ul><ul><li>and </li></ul><ul><li>William Ury </li></ul>The Art of Negotiating Advesh Consultancy Services 06/07/09
  14. 14. RESERVATION PRICE <ul><li>Reservation Price </li></ul><ul><li>is </li></ul><ul><li>the least favourable point </li></ul><ul><li>at which </li></ul><ul><li>one will accept </li></ul><ul><li>a deal </li></ul>The Art of Negotiating Advesh Consultancy Services 06/07/09
  15. 15. ZOPA ZONE OF POSSIBLE AGREEMENT <ul><li>ZOPA is the area or range in which a deal that satisfies both parties can take place. </li></ul><ul><li>It is the set of agreements that potentially satisfy both parties. </li></ul>The Art of Negotiating Advesh Consultancy Services 06/07/09
  16. 16. EXAMPLE Sellers Expectation Buyers Expectation The Art of Negotiating Advesh Consultancy Services 06/07/09
  17. 17. BATNA Exercise 1 <ul><li>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. </li></ul><ul><li>You have Rs 30000 cash in hand You want the balance to be arranged thru loan </li></ul><ul><li>You have 12% interest in your mind. </li></ul><ul><li>The financier is asking for 15% </li></ul><ul><li>What is your BATNA? </li></ul>The Art of Negotiating Advesh Consultancy Services 06/07/09
  18. 18. BATNA EXERCISE 3 <ul><li>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. </li></ul><ul><li>What is your BATNA? </li></ul>The Art of Negotiating Advesh Consultancy Services 06/07/09
  19. 19. BALANCING OUTCOME AND RELATIONSHIPS <ul><li>DISTRIBUTIVE NEGOTIATION </li></ul><ul><li>INTEGRATIVE NEGOTIATION </li></ul>The Art of Negotiating Advesh Consultancy Services 06/07/09
  20. 20. Distributive Negotiation <ul><li>A negotiation in which the parties compete over the distribution of a fixed sum of value. </li></ul><ul><li>Key question here is “Who will claim the most value?” </li></ul><ul><li>A gain by one party is at the expense of the other. </li></ul><ul><li>Win-lose situation </li></ul>The Art of Negotiating Advesh Consultancy Services 06/07/09
  21. 21. Integrative Negotiation <ul><li>A negotiation in which the parties cooperate to achieve the maximum benefits by integrating their interests into an agreement. </li></ul><ul><li>These deals are about creating value and claiming it. </li></ul><ul><li>Win-win situation. </li></ul>The Art of Negotiating Advesh Consultancy Services 06/07/09
  22. 22. STAGES OF NEGOTIATION <ul><li>Phase 1: Preparation </li></ul><ul><li>Phase 2: Interacting </li></ul><ul><li>Phase 3: Agreement </li></ul>The Art of Negotiating Advesh Consultancy Services 06/07/09
  23. 23. Negotiation Process The Art of Negotiating Advesh Consultancy Services 06/07/09 Opening Closing Bargaining Preparation
  24. 24. PREPARATION The Art of Negotiating Advesh Consultancy Services 06/07/09
  25. 25. PREPARATION <ul><li>Understanding </li></ul><ul><li>one’s own position </li></ul><ul><li>and </li></ul><ul><li>interests of the other party or parties </li></ul><ul><li>the issues at stake, </li></ul><ul><li>and </li></ul><ul><li>alternative solutions. </li></ul>The Art of Negotiating Advesh Consultancy Services 06/07/09
  26. 26. PREPARATION <ul><li>Consider What a good outcome would be for you and the other side. </li></ul><ul><li>Identify potential value creation opportunities </li></ul><ul><li>Identify your BATNA and Reservation Price and do the same for the other side. </li></ul><ul><li>Shore up your BATNA </li></ul>The Art of Negotiating Advesh Consultancy Services 06/07/09
  27. 27. PREPARATION <ul><li>Anticipate the Authority Issue </li></ul><ul><li>Learn All you can About the Other Side </li></ul><ul><li>Prepare for Flexibility in the Process </li></ul><ul><li>Gather External Standards and Criteria Relevant to Fairness </li></ul><ul><li>Alter the process in your favour </li></ul>The Art of Negotiating Advesh Consultancy Services 06/07/09
  28. 28. CRITICAL ELEMENTS/DIMENSIONS OF NEGOTIATION <ul><li>Knowledge or information </li></ul><ul><li>Time or Deadline Pressure </li></ul><ul><li>Strength or Power </li></ul><ul><li>All the above are inter-twined </li></ul>The Art of Negotiating Advesh Consultancy Services 06/07/09
  29. 29. INFORMATION <ul><li>More information you have, the better you will be able to negotiate </li></ul><ul><li>Information and facts help you to generate alternatives, strategies and convince the other party </li></ul><ul><li>Information about the other party, market information, trends, technologies </li></ul><ul><li>Published Standards, guidelines, data equip you to put your points effectively </li></ul>The Art of Negotiating Advesh Consultancy Services 06/07/09
  30. 30. TIME <ul><li>Time plays a critical role in Negotiation </li></ul><ul><li>Pareto’s Law 80/20 </li></ul><ul><li>80% of results are generally agreed upon in the last 20% of the time </li></ul><ul><li>Time / Deadline pressure weakens you / builds tension </li></ul>The Art of Negotiating Advesh Consultancy Services 06/07/09
  31. 31. POWER / STRENGTH <ul><li>The ability to influence / control the group and the events </li></ul><ul><li>Besides the authority of your position, knowledge is your strength </li></ul><ul><li>The balance of power keeps shifting from one side to the other during the negotiation process </li></ul><ul><li>Negotiation will end when -The balance of power shifts totally to one side – a Win-Lose situation </li></ul><ul><li>When the balance of power is shared equally – a Win-Win situation </li></ul>The Art of Negotiating Advesh Consultancy Services 06/07/09
  32. 32. INTERACTING The Art of Negotiating Advesh Consultancy Services 06/07/09
  33. 33. INTERACTING <ul><li>Getting the other side to the Table </li></ul><ul><li>Getting off to a good start </li></ul><ul><li>Power of Anchoring </li></ul><ul><li>Using Concessionary moves </li></ul><ul><li>Tactics for Distributive negotiation </li></ul><ul><li>General Tactics </li></ul>The Art of Negotiating Advesh Consultancy Services 06/07/09
  34. 34. Getting the other side to the Table <ul><li>Offer incentives </li></ul><ul><li>Put a price for on the status-quo </li></ul><ul><li>Mobilise Support </li></ul>The Art of Negotiating Advesh Consultancy Services 06/07/09
  35. 35. Getting off to a good start <ul><li>Express respect for the other side’s experience and expertise </li></ul><ul><li>Frame the task positively, as a joint endeavour </li></ul><ul><li>Emphasise your openness to the other side’s interests and concerns. </li></ul><ul><li>Start with the agenda </li></ul>The Art of Negotiating Advesh Consultancy Services 06/07/09
  36. 36. Getting off to a good start Some tips <ul><li>“Breaking Bread” Have coffee, snacks or light drinks available. </li></ul><ul><li>Use small talk to dispel tension </li></ul><ul><li>If the other side is very formal, don’t speak casually. If the other side is decidedly informal, speak in a more casual way. </li></ul>The Art of Negotiating Advesh Consultancy Services 06/07/09
  37. 37. 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
  38. 38. Distributive Negotiations <ul><li>Win-Lose Negotiations </li></ul><ul><li>Anchoring is an attempt to establish a reference point around which negotiations will make adjustments. </li></ul><ul><li>When should you anchor </li></ul><ul><li>Counter anchoring </li></ul><ul><li>Be prepared for concessionary moves </li></ul>The Art of Negotiating Advesh Consultancy Services 06/07/09
  39. 39. Integrative Negotiations <ul><li>Slower and more explorative opening </li></ul><ul><li>Don’t start with numbers. </li></ul><ul><li>Making a good start is critical </li></ul><ul><li>Ask open ended questions Probe the other side’s willingness to trade off one thing for the other. </li></ul><ul><li>Inquire about the other party’s underlying interests </li></ul><ul><li>Listen closely </li></ul><ul><li>Be an active listener </li></ul><ul><li>Express empathy </li></ul><ul><li>Work to create a two-way exchange of information </li></ul><ul><li>Continue relationship building efforts </li></ul><ul><li>Refrain from personal attacks. </li></ul><ul><li>Maintain a sense of humour </li></ul>The Art of Negotiating Advesh Consultancy Services 06/07/09
  40. 40. The Art of Listening The Art of Negotiating Advesh Consultancy Services 06/07/09
  41. 41. NONVERBAL BEHAVIOUR <ul><li>What is going on </li></ul><ul><li>in the inside </li></ul><ul><li>shows </li></ul><ul><li>on the outside </li></ul>06/07/09 The Art of Negotiating Advesh Consultancy Services
  42. 42. Face and Head <ul><li>Broken Eye Contact(Hide) </li></ul><ul><li>Looking pat you(Bored) </li></ul><ul><li>Piercing(Angry) </li></ul><ul><li>Steady(Honest) </li></ul><ul><li>Head Turned slightly(Evaluating you) </li></ul><ul><li>Tilted Head(Uncertain about what you said) </li></ul><ul><li>Nodding(In agreement) </li></ul><ul><li>Smiling(Confident) </li></ul>06/07/09 The Art of Negotiating Advesh Consultancy Services
  43. 43. Arms and Hands <ul><li>Arms folded tightly(not receptive) </li></ul><ul><li>Arm over the back of the chair(need for dominance or negative reaction) </li></ul><ul><li>Open palms(Positive) </li></ul><ul><li>Hands clasped behind head(Need for dominance) </li></ul><ul><li>Steeling of the fingers(Need to control negotiation) </li></ul><ul><li>Hand wringling(Nervousness) </li></ul><ul><li>Self touching(General nervousness) </li></ul>06/07/09 The Art of Negotiating Advesh Consultancy Services
  44. 44. Legs <ul><li>Crossing your legs has a devastating effect </li></ul><ul><li>Out of 2000 videotaped sales meetings, not one sale was made by people who had their legs crossed </li></ul><ul><li>Source How to Read a Person like a Book by Gerard I. Nirenberg and Henry H. Calero </li></ul>06/07/09 The Art of Negotiating Advesh Consultancy Services
  45. 45. Dominance/Power <ul><li>Making piercing eye contact </li></ul><ul><li>Putting hands behind head or neck </li></ul><ul><li>Placing hands on hips </li></ul><ul><li>Standing while counterpart is seated </li></ul><ul><li>Steepling </li></ul>06/07/09 The Art of Negotiating Advesh Consultancy Services
  46. 46. Submission/Nervousness <ul><li>Fidgetting </li></ul><ul><li>Making minimum eye contact </li></ul><ul><li>Touching hands to face , hair etc </li></ul><ul><li>Using briefcase to “guard” body </li></ul><ul><li>Clearing throat </li></ul>06/07/09 The Art of Negotiating Advesh Consultancy Services
  47. 47. Disagreement/Anger <ul><li>Getting red </li></ul><ul><li>Pointing a finger </li></ul><ul><li>Squinting </li></ul><ul><li>Turning body away </li></ul><ul><li>Crossing arms or legs </li></ul>06/07/09 The Art of Negotiating Advesh Consultancy Services
  48. 48. Boredom and Lack of Interest <ul><li>Failing to make eye contact </li></ul><ul><li>Playing with objects </li></ul><ul><li>Staring blankly </li></ul><ul><li>Picking at clothes </li></ul><ul><li>Looking at watch/door </li></ul>06/07/09 The Art of Negotiating Advesh Consultancy Services
  49. 49. Uncertainty/Indecision <ul><li>Cleaning glasses </li></ul><ul><li>Looking puzzled </li></ul><ul><li>Putting fingers to mouth </li></ul><ul><li>Biting lip </li></ul><ul><li>Tilting head </li></ul>06/07/09 The Art of Negotiating Advesh Consultancy Services
  50. 50. Suspicion/Dishonesty <ul><li>Touching nose while speaking </li></ul><ul><li>Covering mouth </li></ul><ul><li>Avoiding eye contact </li></ul><ul><li>Crossing arms/legs </li></ul><ul><li>Moving body away </li></ul>06/07/09 The Art of Negotiating Advesh Consultancy Services
  51. 51. Evaluation <ul><li>Nodding </li></ul><ul><li>Maintaining good eye contact </li></ul><ul><li>Tilting head slightly </li></ul><ul><li>Stroking chin </li></ul><ul><li>Touching index finger to lips </li></ul>06/07/09 The Art of Negotiating Advesh Consultancy Services
  52. 52. Confidence, Cooperation and Honesty <ul><li>Leaning forward </li></ul><ul><li>Keeping arms and palms open </li></ul><ul><li>Maintaining great eye contact </li></ul><ul><li>Placing feet flat on floor </li></ul><ul><li>Sitting with legs uncrossed </li></ul><ul><li>Smiling </li></ul>06/07/09 The Art of Negotiating Advesh Consultancy Services
  53. 53. Challenges & Obstacles The Art of Negotiating Advesh Consultancy Services 06/07/09
  54. 54. TACTICS REGARDING PRICE <ul><li>Should I ever state my acceptable range? </li></ul><ul><li>Should I ever tell the other side my bottom line? </li></ul><ul><li>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? </li></ul>The Art of Negotiating Advesh Consultancy Services 06/07/09
  55. 55. TACTICS REGARDING PROCESS <ul><li>Is it acceptable to make two moves at a time? </li></ul><ul><li>Is it smart or fair to bluff? </li></ul><ul><li>In a complex deal, is it better to reach agreement issue by issue or wait until the end? </li></ul><ul><li>Is it better to deal with difficult or easy issues first? </li></ul>The Art of Negotiating Advesh Consultancy Services 06/07/09
  56. 56. TACTICS REGARDING PEOPLE <ul><li>Collaborative negotiator vs. positional hard bargainer? </li></ul><ul><li>How should I react if the other side seeks to change something in its offer after a deal has been reached? </li></ul><ul><li>What should I do when the negotiator on the other side has a temper tantrum? </li></ul><ul><li>I don’t believe in what the other side says. </li></ul><ul><li>Is it essential to negotiate face to face? </li></ul><ul><li>How should I react when the other side challenges my credentials, status or authority to make a deal? </li></ul>The Art of Negotiating Advesh Consultancy Services 06/07/09
  57. 57. CLOSURE 06/07/09 The Art of Negotiating Advesh Consultancy Services
  58. 58. 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
  59. 59. <ul><li>Being Confident </li></ul><ul><li>Being Prepared </li></ul><ul><li>Being Willing to Walk Away </li></ul>The Art of Negotiating Advesh Consultancy Services 06/07/09
  60. 60. <ul><li>Convince </li></ul><ul><li>Collaborate </li></ul><ul><li>Create </li></ul>The Art of Negotiating Advesh Consultancy Services 06/07/09

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