Real Negotiation experince report
ETRO1
classfiles.zipSession 1_Course Intro & Distributive Nego F15.pdf
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Welcome to… Mastering Management (MGMT 4330)
Professor See
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Student Info Sheet (use form on Canvas, due next class)
FirstName LastName
Hometown
Year in School, Major, Minor
Current career interests or goals:
Your photo
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Mgmt 4330, Professor See 3
Today’s agenda
• Quick course overview
• Prepare for Rare Book exercise
• Negotiate Rare Book
• Turn in results
• Break
• Debrief Rare Book
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Mastering Management
• This is a course where learn by doing – Every class we will do a simulation / role-playing exercise (starting
today!) – Applied/experiential learning
• We will use a ‘negotiations lens’ to develop and practice critical management skills: – Bargaining – Conflict management – Interpersonal communication; giving/receiving feedback – Managing group dynamics and decisions – Consensus building
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What is a negotiation lens?
“Negotiation is a decision making process by which two or more parties try resolve disputes, agree upon courses of action, bargain for individual or collective advantage, allocate scarce resources, and/or attempt to craft outcomes which serve their mutual interests.”
• Parties are interdependent; none has complete power to choose
• Decision making involve persuasion/influence, but not a contest of wills
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Negotiations are ubiquitous
• We negotiate frequently across many life domains – Dynamic and networked nature of workplace makes it
increasingly common – Commonly arises in many interpersonal contexts
• Occasions to “negotiate”
• Occasions when “you need something from someone else and they need something from you”
• Outside Firm: Sales, Mergers & Acquisitions, Supply chain • Inside Firm: Resource allocation, Personnel decisions • Personal: Parents/Family, Friends, SOs
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How do you feel about negotiating?
• People often think they are not good negotiators and/or that negotiation is unpleasant – World is full of failed negotiations (wars, divorce, etc) – Human behavior is hard to predict, i.e., emotions and differing
personalities can make it difficult – Bargaining related to ideologies/values extremely difficult – Tend to associate negotiation with conflict
• Reality is that most of us haven’t had a chance to learn basic principles or obtain relevant and diagnostic feedback – Whether you love or hate the idea of negotiating, this course is for
you!
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Some common psychological traps
• Believing that “everyone is like me” (false consensus effect)
• Making a deal that leaves money on the table
• Walking away from the table when there is a deal to be made (hubris)
• Staying at the table when there is no (acceptable) deal to be made, i.e., settling for terms that are worse than your current situation (agreement bias)
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Debunking Preconceptions & Myths
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Preconception: I can only negotiate in environments in which it is explicitly “allowed” (e.g. car, house, job).
• Reality: People often miss opportunities to negotiate.
Preconception: To be successful, I must negotiate “tough” and try to intimidate the other side. I might have to behave unethically.
• Reality: Believe it or not, you will do better in the long run if you are likeable, flexible, and fair.
Preconception: Negotiation skills only apply to business/commerce situations. • Reality: These skills can be applied to all relationships!
Preconception: I don’t have what it takes to be a good negotiator. • Reality: Everyone can improve their skills with training and practice.
Preconception: Good negotiators rely on intuition. • Reality: Preparation explains the majority of successful deals.
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Course objectives and format
• Learning the ‘art and science’ of negotiation
• The art – Learn to improve skills by doing simulations: general strategies and tactics;
ability to diagnose contexts and situations; figure out your own particular tendencies, strengths, and weaknesses
• The science – Learn to develop a framework for preparing for and analyzing negotiations,
disputes, and group decision making; learn fundamental principles and tactics based on research in the area
• Experiential learning that generalizes to all negotiation situations – Safe environment for experimentation – Clear, immediate, and helpful feedback – “Return on Mistakes” (ROM)
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Important course details
• Each class session there will be a simulation exercise and debrief, with a reading for *after* class to reinforce concepts
• Handout fee for propriety cases/simulations must be paid ASAP ($32 check/money order payable to Kelly See, or cash)
• Attendance policy – It’s not for me, it’s for your classmates
• Might find a calculator helpful (optional) – Although this course will not involve complex calculations, for many
of the exercises you might find it convenient to have a calculator to quickly tabulate various options of agreement and how those options affect you
Mgmt 4330, Professor See
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Assignments & Grading (see Syllabus)
Class Participation 30% – Class discussion (10%) – Planning documents (10%) – Scores on 3/11 of the exercises, with lowest dropped (5%) – Reputation ratings (5%)
Exam/Test (mid-course) 25%
Writing Assignments 50% – Real world negotiation report (15%) – Final paper (30%)
Late policy: Written assignments due in class & uploaded to Canvas – Grades deducted by 2% every 6 hours late, so…4% if up to 12 hours late,
8% if up to 24 hours late, etc.
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Rules of Engagement
• Show up prepared to every class and fully engage in the simulations
• Firm timetable – If not on time, I have to re-assign your role so exercise can begin – Return results on time (I will give you a deadline for each case)
• Instructions for exercises: – You can choose to selectively share some information verbally, but
do not physically show your confidential role information to your negotiating partner
– Don’t talk to each other about the negotiation afterward – Don’t discuss the case details with other students outside the class
• Public results – Some or all results will be posted during the debrief and discussed
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• Prep 20 minutes – Read your role materials & fill out planning document
• Negotiate 25 minutes – Record process of negotiating using the “agreement sheet”
attached to seller role sheet – Only negotiate ONE issue: PRICE
• Finish negotiation and return agreement sheet by ___
• Do not discuss the exercise with each other afterwards
• 15 minute break, return to class at ___
Rare Book Exercise
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• How did it go?
• What worked? What did you do that was successful?
• What didn’t work? What would you like to have done differently?
• Who had more power?
Rare Book Discussion
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• Average selling price = $6325 – Low $4000 – High $10,950
• Average buyer satisfaction = 9.1 • Average seller satisfaction = 9.0
• Should you make the first offer? – In general,
• Advantages & disadvantages to opening • Postpone discussion until we see more
Class results (11:00 am)
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• Average selling price = $5562 – Low $4200 – High $8750
• Average buyer satisfaction = 8.8 • Average seller satisfaction = 8.8
• Should you make the first offer? – In general,
• Advantages & disadvantages to opening • Postpone discussion until we see more
Class results (2:00 pm)
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Distributive Negotiation
• Typically involves a single issue/dimension (i.e., price, quantity, etc) – Simplest form of negotiation
• Goals of one party often directly conflict with goals of other party – Fixed-sum, Win-lose bargaining
• Simply dividing the “pie” by – Guarding own information – Getting other’s information
• Common in single-shot negotiations – Low concern for relationship – High concern for outcome
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Key negotiation terms/principles
• Impasse – Failure to reach an agreement
• BATNA – “Best Alternative to a Negotiated Agreement” – i.e., your best alternative if no agreement is reached
• Reservation point/price – Maximum willing to pay / minimum willing to accept
• Bargaining zone (“ZOPA”)
• Aspiration level / goal
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BATNA: Your greatest source of leverage
• The case of job negotiations
And also:
How many candidates got the start date they wanted?
50% of those with strong BATNAs
10% of those with weak BATNAs
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BATNA Tips
• Know your BATNA – In very specific, not abstract, terms
• Work to improve your BATNA before you negotiate
• You want your counterpart to think you have a good BATNA
• Try to ascertain what your counterpart’s BATNA is
• Reveal your BATNA only when: – Last ditch effort to avoid an impasse – You have a strong BATNA
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Reservation point/price
• Your RP is your bottom line – The point above/below which you would prefer no agreement
• Reservation price is largely determined by BATNA (+/- things that make you want or not want the deal) – e.g., opportunity costs, switching costs, ego, miscellaneous
preferences
• Always know/define your reservation price before negotiation – And stick to it – don’t settle for a deal below your RP
• Try to ascertain what your counterpart’s RP is
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Keeping Quiet
• Never reveal your reservation price!
• Do not state ranges
– One of the crucial pieces of information in any negotiation is each party’s reservation point
– Once known to the other party, it becomes an anchor point, not a bottom line
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Zone of potential agreement (ZOPA)
• The points between the buyer’s reservation price and seller’s reservation price sets the bargaining range / settlement range
• Initial offers often fall outside bargaining zone
• Expect final agreement to fall within ZOPA
Buyer Offer $5K
B.R.P. $10K
S.R.P. $4K
+ ZOPA
Seller Offer $12K
Buyer goal
Seller goal
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Positive ZOPA – Seller reservation price < Buyer reservation price – In Rare Book, the ZOPA is about +$6000
Negative ZOPA – Seller reservation price > Buyer reservation price (no overlap) – Usually impasse (or reevaluation of reservation points)
ZOPA cont.
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Goal / Aspiration Level
• Before negotiation, set a goal / target – Goals increase performance through greater motivation and
concentration – Goals should be specific/measurable and challenging yet attainable
• Your goal should not be the same as BATNA or RP – Reservation price = minimum acceptable – BATNA = best alternative if no agreement is reached – Goal = highest legitimate expectation
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Distributive Tactics
• Talk less, listen more, ask questions, or use silence explicitly
• Change partner’s perceptions of their own reservation price (devaluation, contrary data/standards)
• Influence partner’s perception of your own reservation price – Misrepresentation / acting as if you are at your limit – Claiming counterpart is “tough opponent” – Conveying that you don’t ‘need’ a deal (expressing willingness to
walk)
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Opening Offers
• First offer and counter-offer sets the initial bargaining range (bracketing effect) – Can’t go more extreme
• When ZOPA is large, opening bid can have anchoring effect
• Exaggerated initial offers lead to higher outcomes than modest initial offers – Advantages of exaggerated offers
• More room to move • Changes impression of other party • Anchors negotiation
– Disadvantages of extreme offers • May be summarily rejected • May offend other party, harm relationship
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First Offer Tips
• How high/low should the first offer be? – As extreme as you can go “without embarrassing yourself in front of
a respected 3rd party” (Fisher & Ury, 1991) – Can only do this well by learning the market
• Let the other party make the first offer when you have no information
• Immediately re-anchor when your counterpart makes the first offer
• Do not immediately accept the first offer
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Concessions
• People expect concessions – make room for them – Don’t go in with a “first and final offer” – Strong norm of reciprocity: concessions should not be unilateral – People are very sensitive to your willingness to make concessions – People are more sensitive to the rate of concessions than they are
to the magnitude of those concessions
• Asking for concessions will not only get you a more advantageous outcome but your opponent will be MORE satisfied with the negotiation
• Flexibility on your part makes agreement appear possible – Take-it-or-leave-it stances are more likely to be rejected than same
offer reached through concession
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What determines negotiation success?
Away-from-the-table preparation (70%)
At-the-table information exchange (20%)
Bargaining (10%)
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Key points from today
– Opportunities to negotiate are everywhere! – Prepare for negotiations by knowing your RP and BATNA (try to
strengthen it) – Try to anticipate your counterpart’s RP and BATNA – Set a goal or aspiration that is optimistic but not absurd – Plan your opening bid to be significantly better than your RP (leaving room
for concessions) but not so extreme that you offend or lose credibility – If they make the first offer, immediately re-anchor – Use objective rationale to support your argument (learn the market)
– Expect process of alternating concessions – The offer ‘dance’ (bracketing effect of first 2 offers sets deal range) – Use the norm of reciprocity to your advantage
– Be patient, ask lots of questions – Never reveal your RP
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For next time…
• Before you go: 3 minute feedback memo
• Case copyright fee: $32 cash or check/money order to Kelly See • Can hand in to me now • Can bring to next class • Can come to my office hours Tuesday 12-1:30
• Reading for tonight: Shell, Chapters 1-3
Mgmt 4330, Professor See
__MACOSX/._Session 1_Course Intro & Distributive Nego F15.pdf
Session 2_Integrative Nego Intro F15.pdf
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Negotiation, Session 2
Professor See Department of Management & Organizations
Today…
• Admin – Turn in: Handout fee – Turn in: Student info sheet – Pick up: Real World Negotiation Report Instructions (due 11/4)
• Prepare for Texoil exercise (15-20 minutes)
• Negotiate Texoil (30-35 minutes)
• Short break
• Review results / Debrief Texoil / Lecture
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Quick recap of terms
• BATNA – “Best Alternative to a Negotiated Agreement” – i.e., your best alternative if no agreement is reached
• Reservation price – Your bottom line – Maximum willing to pay / minimum willing to accept
• Aspiration level / goal / target – Highest legitimate expectation for outcome
Texoil Exercise
An independent service station in the Port of Los Angeles is for sale by owner (married couple)
Texoil, a large petroleum refining company is a potential buyer (Texoil representative)
Parties will meet to discuss Texoil’s potential purchase of the service station
Negotiations, Professor See
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Class Results (11:00)
• What were the possible outcomes? – 1 impasses – 9 Cash only deals ($377-$385) – 3 Cash agreements plus other terms (ranged from $300-575K)
• What happened? – Reasons for impasse – Solutions for making agreements
Negotiations, Professor See
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Class Results (2:00)
• What were the possible outcomes? – 3 impasses – 2 Cash only deals ($50K-$400K) – 3 Cash agreements plus other terms (ranged from $150-600K)
• What happened? – Reasons for impasse – Solutions for making agreements
Negotiations, Professor See
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Texoil debrief
Impasses?
• What kind of information did you share?
• Why did the negotiations break down?
• Did anyone misrepresent their BATNA – what happened?
• Station owners – what are you going to do instead?
Negotiations, Professor See
Texoil: Can we reach an agreement?
No Bargaining Zone exists?
Texoil Buyer initial offer
Station Owner initial offer
$460,000 Station Owner reservation pt
$400,000 reservation pt
max offer acceptable
Negotiations, Professor See
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Texoil debrief, cont.
Who made a deal? – Cash only deals? – Other agreements?
What kind of information did you share? How did you find out necessary information?
What was the key to finding agreement for you? – At what point did you realize there were options aside
from impasse or just cash?
Negotiations, Professor See
Sample agreement terms
• Texoil gives a job worth $75,000 to owner after trip; 8 hour work day (vs 18 previous) – VP of ops needs to hire a manager anyway so no extra cost to
them – Owner lowers price by at least $75,000, gets value and job
security
• Texoil hires owner as 2-year consultant initially during trip at $75K. 3rd
year 40 hours/wk at $90K. 4th year 40 hours/wk at $95K. – Seller must be available by cell while away for emergencies/questions (will
assist with transition, hiring, planning before leaving)
Negotiations, Professor See
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An alternative approach: Include job offer upon return
Texoil Buyer initial offer
Station Owner initial offer
$____ Station Owner reservation pt
$400,000 Texoil reservation pt
max offer acceptable
Job offer
Negotiations, Professor See
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Interests vs. Positions (“Getting to Yes”)
• Your position is something you have decided on – Position: “I have to get $460 million for this station”
• Your interests are what caused you to so decide – Interests: paying off boat loan; living expenses for 2 years; job after
returning, etc. – Interests define the problem!
• For every possible interest there usually exist several possible positions that could satisfy it
– So when you look behind opposed positions for the underlying interests, you can often find an alternative position which meets not only your interests but theirs as well
CCN/Negotiations, Professor See
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Why Do Impasses Occur?
Common mistakes that can lead to impasse:
• Bargaining on positions – Stopping at RP, never uncovering underlying reasons for RP
• ‘Mythical fixed pie’ bias – Assuming the other party’s interests are always directly opposite to yours
• Emotions in swing
• Truly no positive zone of agreement, even once you know underlying interests
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Are there ever good reasons for impasse?
Today it was possible to reach agreement if you got to underlying interests, but there might be other times when the best deal you can make is no deal at all
• When one or both parties cannot back down on deal-breaker issues
• When the relationship is damaged, or counterpart acts in bad faith
• When you’d have to compromise your ethics to make a deal
• When you’re not prepared or need additional information
• When one or both parties will not be better off from deal
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Integrative Negotiation
• More than a single issue – And therefore it’s not zero-sum / win-lose
• Goal is discovering / “creating” value – Contrast with Rare Book distributive negotiation where the goal
was “claiming” value on a single issue
• Advantages to integrative agreements – Makes impasses less likely – Improves material outcomes for both parties – Creates a more stable agreement – Strengthens relationship
Negotiations, Professor See
Distributive Integrative
Complexity Single Issue Multi-Issue
Objective • Claiming Value • Slicing the pie
• Creating Value • Expand pie (then slice)
Style Competitive Cooperative
Focus Individual Gain Joint Gain
Strategy Position-Based Interests-Based
Relationship Short -Term Long –Term
Distributive vs. Integrative bargaining
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From distributive to integrative
• Almost any simple distributive (single issue) negotiation can be made integrative by adding in issues – “Expanding the pie”
• Add in the “right” issues by focusing on underlying interests not stated positions
• Understand the degree to which each party values each issue, then capitalize on differences
Negotiations, Professor See
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Finding Integrative Solutions
• Build rapport to create trust, cooperativeness
• Information exchange – Reciprocity: Take turns discussing interests – Ask questions about counterpart’s interests & listen carefully – Rephrase what other has said
• Create a sense of fair procedure • Ask questions rather than dictating terms • Let them take the lead on some points • Collaborate in drafting possible contracts • Show respect for the other person
Skilled negotiators spend almost 40% of their time during negotiations asking questions, testing for understanding, and summarizing vs. 18% for average negotiators (Rackham & Carlisle, English labor and contract negotiators, in Bargaining for Advantage, p. 145).
CCN/Negotiations, Professor See
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The negotiator’s dilemma
• Many tactics that claim value in distributive negotiations can impede value creation in an integrative negotiation • Excessively hiding / bluffing information about your interests
• Creates confusion, affects proposals offered to you • Being inflexible / not making any concessions on your high
priority issues
• At the same time, approaches to creating value are vulnerable to claiming tactics • Disclosing information unilaterally could be taken advantage of by
other side
Negotiations, Professor See
Resolving the dilemma
Prepare for both integrative and distributive opportunities
• Use tactics that don’t interfere with value creation • Know your BATNA, RP
• Create impression of highly favorable BATNA • Prepare objective arguments to justify limiting your overall concessions • Analyze own and others’ interests; avoid fixed-pie perceptions • Create and open with proposals highly favorable to you
• Share information to facilitate value creation, but be cautiously cooperative
• Build trust: don’t jump in trusting immediately, but be open to a trustworthy interaction
• Keep BATNA and RP info to your self, but share interests and priorities watch out for unilateral information exchange
• Insist on reciprocation of information and concessions (watch out for unilateral information exchange)
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A few take-aways
Two types of negotiation – Distributive bargaining: Single issue (usually monetary), claiming value – Integrative bargaining: Multiple issues, creating value – Many negotiations that appear distributive can be made integrative by adding
in issues (never assume the pie is fixed!)
Negotiations are particularly difficult when there is – Small or imperceptible zone of agreement – Negative emotions; or lack of trust
An agreement might still be possible by – Improving accuracy of communication – Probing underlying interests: then bargain on interests, not positions
• Learn to ask the question “why” to find out interests underneath stated positions • FYI: It’s tough to move beyond positions if you’re concealing or bluffing a lot!
Negotiations, Professor See
Before you go…
• Handout on real world negotiation report (also on Canvas)
• Readings about today’s class – Shell, Chapter 5 – Fisher & Ury, Chapters 1-3
• Pick up role information for our next class – You will prepare alone *before* our next class – Use planning document on Canvas to prepare – bring two copies with you
(one to turn in at the beginning of class, one to keep with you while negotiating)
– We will start negotiating at the beginning of the next class, so must arrive on time or your partner will be reassigned
• 3 minute feedback memo before you go – don’t forget to hand it in!
Negotiations, Professor See
__MACOSX/._Session 2_Integrative Nego Intro F15.pdf
Session 3_Multi-issue Nego, Fraud, Relationships F15.pdf
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Session 3
Professor See Management 4330
Today
• Admin – Turn in: Your completed planning document for today’s negotiation – Remaining student info sheets? Course handout fees? – Questions about external negotiation assignment? – Office hours all semester: Tuesdays 12-1:30 or by appt (I am
around regularly)
• Exercise
• Break
• Review results / Debrief
2 Negotiations, Professor See
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Union-Management guidelines
• Your first explicitly multi-issue (integrative) negotiation
• To keep things simple/comparable, make deals based on the issues clearly listed in the case, though you can be creative about it
• Company/Management has the agreement sheet
Negotiations, Professor See
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Union-Management Debrief
Issues on the table: • Wages per Hour • Vacation Plan • Health Plan • Commitment to hire only union workers
How did you approach negotiating on multiple issues? Process?
How did “commitment to hire union” issue come into play?
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How to approach multi-issue negotiations
With multiple issues, you are in integrative bargaining mode
• Multiple issues lead to more complexity, but also more options – Prioritize your issues ahead of time / identify tradeoffs you can make – Withhold final approval until all issues have been thoroughly discussed
• Parties often have differing relative preferences on some issues – What is most important to you might not be most important to the other party
• Therefore, discover and trade on these differences! – Ask diagnostic questions to get to interests:
• Why are you asking for X? Which is more important to you? – “Log roll:” yield on low priority issues to gain concessions on high priority issues – Trust and reciprocal information exchange are essential to make this happen
Negotiations, Professor See
Legal vs illegal deception in negotiation
Is it OK for the Company rep to mislead the Union with respect to its hiring plans?
What is the line between “bluffing” and deception that is ethically and/or legally problematic?
Negotiations, Professor See
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The Law and Lying
The minimum standard of ethics is codified in law
• Fraud: When a speaker makes a knowing misrepresentation of a material fact on which the victim reasonably relies and which causes damage
-- Shell, Chapter 11
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Unpacking “Fraud”
Knowing – Must be aware is not true (but “intentional ignorance” is also fraud)
Misrepresentation – Silence is safe (see Shell for exceptions) – As soon as you start talking, be careful
Material Fact – Priorities and reservation prices are not material
• “Estimates of price or value placed on the subject of a transaction and a party’s intentions as to an acceptable settlement of a claim” are not material facts for purposes of the rule prohibiting lawyers from making false statements to a third person. (Model Rules of Professional Conduct for US Legal Profession)
– Lies supporting demands for stated price points may be material • Depends on access to information and balance of power – things the other party
should know on their own are not material – “Opinions” flatly contradicted by facts can be deemed fraud
Reasonably Relies – “should have known better” depends on power balance – verbal is enough unless specifically reversed in writing – “and which causes damages”
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“Material” facts that must be revealed by home sellers: • Leaks in the roof or foundation walls • Damage from wood destroying insects • The amount of property taxes paid per year • The existence of a buried oil tank
Not considered “material” facts: • Seller’s reason for moving • Personal facts about seller
“Material” in some states • A homicide occurred in the home • The home is considered to be haunted (!)
Source: Janet Wickell, Realtor, http://homebuying.about.com/cs/disclosures/a/material_facts.htm
Fraud Example: Home Buying
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How to Avoid Committing Fraud
Learn to deflect direct questions (an art) • Examples – selling a used car
– Answer another question • “You know, I’ve taken many trips with this car...”
– Over-answer the question • “I may have other buyers. I may have one buyer. I may have no
buyers...” – Answer with another question
• “Are you looking at any other cars?” – Rule person’s question out of bounds
• “I don’t feel comfortable discussing other offers/buyers” – Ignore question
• Silence, or transition to new topic – Flattery
• I like you. I’d really like to sell the car to you if we can do a deal” – There are other good examples in Shell’s book p. 229
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Varying Views on Deception in Negotiation
Is it ethical? – Kant & deontology: lying is wrong, even if results are good – Consequentialist: Lying can be justified, e.g., lying to terrorists
Some question commonly used negotiation tactics on ethical grounds
– Misrepresentation of interests and alternatives – Not revealing knowledge that would benefit counterpart (omission,
nondisclosure)
Using questionable tactics is risky (a “high variance” strategy) – Might sometimes observe deception leading to better outcomes – Can also blow the deal using such tactics – Longer-term: can damage relationships or reputations
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What should you do?
• Don’t commit fraud – When possible, consider in advance potential ethical conflicts (as part of
preparing for negotiation)
• Figure out your own ethical framework ahead of time, and understand that you might encounter others with a different view
– Shell’s three schools of personalized ethics • Poker school • Pragmatist school • Idealist school
• Ambiguity of ethical dilemmas: when in doubt, you can ask yourself – Are only selfish interests promoted? – How would you feel if the NYT reported your action? – What if you did the action 100 times? – How would you feel if this happened to you? – What is your gut feeling?
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How to detect lying
Conventional beliefs/popular wisdom: – “look into their eyes” – notion that lying is somehow observable behavior
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Semi-reliable cues to deception
• Vocabulary Cues – “to tell the truth” – “let me be honest with you”
• Verbal Cues – irrelevant information – fewer words in response to questions – lack of spontaneity – more speech errors, grammatical errors, slips of the tongue
• Vocal Cues – speech hesitations – changes (usually elevation) in pitch – reduced rate of speech – longer response time to questions, increased use of pause fillers
(e.g. uh, ummm )
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Other cues to deception
Psychological research on scientifically valid cues to deception: – increased blinking – increased use of self-adapters (nervous habits e.g. scratching, twiddling) – pupil dilation – flushing or blanching of the skin – increased sweating – changes in respiration – false or masked smiles: asymmetrical, no movement around the eyes and
forehead – conflicts between emblems (e.g. head nod) and verbal statements – changes in voice pitch
These are almost undetectable in real world situations (Ekman et al., 1999) – CIA agents – 73% – Federal judges – 62% – General law enforcement – 51%
Negotiations, Professor See
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Uncovering deception
• Check the other party’s reputation • Ask direct questions (look for deflection)
• Ask questions to which you know the answer, and see how they respond
• Seek contradictions: Ask several questions and listen for consistency
• Check your assumptions - ask that they be verified • Frame the relationship as long-term (build incentives not to lie) • Self-disclosure (using reciprocity norm ) • If admit a small lie, push for bigger confession • Demonstrate concern (appeal to guilt) • Trust your instincts
Negotiations, Professor See
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Satisfaction vs. Outcome (11am class - Rare Book case)
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Satisfaction vs. Outcome (2pm class - Rare Book case)
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Satisfaction vs. Outcome (pooled past classes)
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$5,000 $6,500 $8,000 $9,500
Buyer
Seller
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What drives negotiator satisfaction?
• Your counterpart’s cooperation during negotiation and satisfaction with the deal relies on both – whether the objective terms satisfy his or her interests – emotional reactions to the process of negotiating with you
• People care strongly about fairness – It’s a big driver of satisfaction with the deal – “Procedural fairness:” characteristics of the negotiation process itself
• Having ‘voice’ (opportunity to describe your views) • Conformity to norms (e.g., reciprocity) • Reasonable explanations for arguments, requests, demands • Social /interpersonal treatment during negotiation (dignity, respect)
Negotiations, Professor See
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‘Fair Process’ Effect
People are more satisfied with the outcomes they receive if
the process used to determine the outcomes is fair.
Fair procedures make unfavorable outcomes, in
particular, more acceptable.
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Managing relationships
• People are often self-interested, but the degree to which your counterpart is self-interested depends on the connection you can cultivate in the time you are negotiating – Positive relationship: they’ll be concerned with your welfare – Negative relationship: they’ll be more willing to exploit you
• Negotiations in business context often occur between long-term partners – Relationship concerns can often outweigh immediate outcome
concerns – The durability of the deal/agreement matters – Negotiation history matters (affects relationships, reputations) – Trust violations harm more than trusting actions help – Treat your reputation as a fair and effective negotiator as one of
your most important professional assets (protect it)
Negotiations, Professor See
12
Feedback on today’s negotiation
• Take 5 minutes to give your partner from today’s negotiation some feedback
– What worked, what didn’t – How you perceived each other
Negotiations, Professor See
Before you go…
• No class on 9/9: this time is allocated for your real world negotiation assignment/report
• Pick up your role information for 9/16 class – Use planning document on Canvas to prepare – bring two copies with you
(one to turn in at the beginning of class, one to keep with you while negotiating)
– FYI: Many issues on the table, so 1. won’t be able to prep on the fly 2. bring a calculator!
• 3 minute memos
• Readings about today’s class – Shell, Chapter 4 & 11 – Fisher & Ury, pp. 151-156
Negotiations, Professor See
__MACOSX/._Session 3_Multi-issue Nego, Fraud, Relationships F15.pdf
Session 4_Advanced Integrative (Multi-Issue) Nego F15 (11 am).pdf
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Session 4
Professor See Management 4330
Today • Admin
– Hand in: completed planning document for today’s negotiation – Pick up: Final paper instructions
• Work individually, or in group (n < 3) • Topic and partner notification due via email by 11/11 • Paper due 12/2
– Try using the campus Writing Center for help with your draft: http://www.ucdenver.edu/academics/colleges/CLAS/Centers/writing/Pages/ TheWritingCenter.aspx
– Trends memos from last time • Yes, I do post the slides after every class on Canvas • ‘Did I commit fraud?’
– Bluffing in negotiation is always risky and poses ethical issues, but it’s not always fraudulent/illegal
– All pieces of fraud definition need to be present (including ‘damages’) – Shell reading assigned after last class very helpful with examples!
• Negotiate • Break • Review results / Debrief
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3
Guidelines for today’s case
• Stick to the issues and discrete levels explicitly provided in case – Don’t introduce outside issues as part of your agreement – Stick to discrete levels of issues on the agreement sheet
• Do not discuss your payoffs/points as you negotiate – use the information the case provides you to make persuasive arguments
• If you finish early, return to class so I can start entering results
• To get credit for the exercise, must be done by 12:15 / 3:15 sharp
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Class Results (11:00)
• Producer – High / Low: 10,025 / 3000 – Average: 5772
• Director – High / Low: 5850 / 350 – Average: 3453
• Reservation Price/Point: 3000 points (given in case)
Mgmt 4330, Professor See
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0
2000
4000
6000
8000
10000
12000
Producer points
Director points
0
2000
4000
6000
8000
10000
12000
A bd
ul la
A l-N
& W
ill /J
es si
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H az
aa
V iv
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y
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s- Ka
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A bd
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h- A
bd ul
az iz
A l-
M K el
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-A bd
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A l-K
N aw
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B ro
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Sa ra
h
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ny /K
ev in
To ta
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nt s
Pair
Class results (11:00)
Producer points
Director points
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7
Kinds of Issues in a Multi-Issue Negotiation
Congruent Distributive Integrative
Outcome
Issue Preferences
Approach
win/win
aligned
cooperate
win/lose
opposing
claim or compromise
win/win
compatible
trade!
Difference in preferences and
priorities Opposing goals Aligned goals
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Classifying issues in today’s negotiation
• Compatible/Congruent issues – Child star (common value) – Prod asst (common value)
• Distributive issues (opposing preferences) – Director Salary – Pre-Production Budget – ~Personal Location Budget
• Integrative issues (differing preferences) – Post-prod schedule (director preference) – Male / Female lead (director / producer preference) – ~Location (producer preference) – ~NA Editorial control (director preference) – Dir bonus (producer preference)
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9
Levels of Joint Gain
• All negotiated agreements are "Win-Win" – You are winning as long as you make a deal that is better than your RP and
at least as good as your best alternative!
• However, it is possible to distinguish among different levels of successfully exploiting potential joint gains
Level 1. A mutually beneficial trade. That is, a positive ZOPA existed, and both parties found terms that benefited them beyond their BATNA or RP
Level 2. Parties found terms that increased the surplus but that were not fully optimal
Level 3. Pareto efficiency (all value has been extracted by the agreement)
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Pareto Efficiency / Optimality
• An agreement/solution is pareto efficient if there exists no alternative outcome which would make one party strictly better off without damaging the other party – No more room to ‘expand the pie’
• A pareto improvement is a change where one or more parties can gain without any other parties losing
• The pareto frontier is the set of all feasible pareto efficient solutions
• Note: pareto efficiency only pertains to total gains not to the individual party’s outcomes – i.e., pareto efficient outcomes can be highly skewed
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11
Pareto efficiency in a 2-party integrative negotiation
C at
he rin
e’ s s
co re
/v al
ue
Pete’s score/value
In a 2-party graph, a solution is pareto efficient if no other solutions are in the North-East quadrant of that solution
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Pareto efficiency in a 2-party integrative negotiation
The two (bracketed) green solutions are pareto inefficient.
C at
he rin
e’ s s
co re
/v al
ue
Pete’s score/value
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13
Pareto efficiency in a 2-party integrative negotiation
The three (bracketed) pink solutions are pareto efficient and represent the pareto frontier.
C at
he rin
e’ s s
co re
/v al
ue
Pete’s score/value
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Pareto efficiency in a 2-party integrative negotiation
If Catherine and Pete recognize a new solution (dashed-yellow), they can make a pareto improvement
C at
he rin
e’ s s
co re
/v al
ue
Pete’s score/value
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3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000
D ire
ct or
's P
oi nt
s
Producer's Points
Pareto
11:00 class
Characteristics of a Good Agreement
• Maximize your share of the surplus – “put money in your pocket” by claiming value
• Find and exploit potential joint gains – don't “leave money on the table”
• Build trust, and ask diagnostic questions to uncover interests – Why are you asking for X? – Which is more important to you?
• “Log roll” – look for opportunities to trade on differences in priorities • Create value by adding in congruent issues • Move toward pareto frontier!
• Create a durable agreement by fostering a good reputation and good relationship
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Underutilized integrative tactics
• Prepare multiple (advantageous) equivalent proposals/offers that are around your aspiration point • Then test proposals: Offer proposals to learn about other party’s
interests
• Post-settlement Settlements (PSS)
• Persuasion/influence and signaling tactics
Mgmt 4330, Professor See
Multiple equivalent offers
Package the issues into two or more proposals of equivalent value to you, and present them to the other side simultaneously
Construct packages that are different but of equal value to you and also advantageous to you
As Producer: – $150K salary, Hollywood, AH actress, 2% bonus, equal editorial say – $150K salary, Hollywood, MK actress, 1% bonus, unilateral editorial – $150K salary, Hollywood, MF actress, 0% bonus, limited editorial say
Ask other party to rank order or choose between them – “Which is less despicable to you?”
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Multiple equivalent offers – What they do
• They allow you to be more aggressive and persistent, making multiple offers near your aspiration level
• At the same time, they signal flexibility and cooperation because multiple choices/options are being offered
• They can anchor a multi-issue negotiation if presented early
• They allow you to collect information about the other side’s priorities • An indirect way of eliciting information from a ‘clam’ • Truth serum – a way of testing/verifying information other side gives
Mgmt 4330, Professor See
Post-settlement settlements (PSS)
After an acceptable agreement is reached, a PSS is the consideration of an alternative agreement that would replace the original only on the condition that both parties agree to the change
• Allows for departure from rigid positional bargaining and anchoring – can build on prior deal and try to make it better
• Creates safer environment that allows more communication – can always revert back
• PSS as a process: Both parties ever alert for improving initial agreements as they continue to search for more integrative solutions as more information is obtained and analyzed (put in contract)
• But sometimes better to leave well enough alone
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Persuasion/Influence tactics (Canvas reading)
• Reciprocity • Authority • Consistency • Scarcity • Social Proof/Validation (see reading) • Liking (see reading)
These are based on a simple/basic categorization • But lots of research and data underlying the tactics (see full book by Robert
Cialdini called Influence: Science and Practice) • Problem: the tactics are also open to manipulation
• I will mention a few briefly, but when you do the reading for tonight, think about how all 6 of them can be used in your future negotiations
Mgmt 4330, Professor See
Persuasion/Influence, cont.
Reciprocity: people feel pressure to repay, in kind, what another person has provided us (good or bad) • Unexpected gifts, favors, concessions, information • Rejection-then-retreat a.k.a. “door-in-the-face”
• Make an extreme request that you know will be rejected, then follow up with a more reasonable request to appear as if you have backed down
• When negotiating, leave yourself room to make concessions
Authority: people defer to authority (bosses, experts, uniforms, title) • Determine your own source of power in the negotiation & project it • Leverage the authoritative power of others (e.g., studies, data,
experts, norms/standards) • Select norms/standards that are vague or “suggested” guidelines that
are easier to skew in your favor • e.g., social comparisons, past precedent, fair market value
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23
Persuasion/Influence, cont.
Consistency: people feel pressure to behave consistently with prior choices or commitments • Especially public, voluntary, effortful commitments • But also minimal commitments (foot-in-the-door tactic) • When negotiating, be cautious when asked to endorse a principle
• Try to commit to ideas rather than specific actions
Scarcity: opportunities seem more valuable when they are less available • When negotiating, set your RP in advance • If you have a weak BATNA, try to improve it • If you have a strong BATNA and encounter resistance, let your
counterpart know (politely!) • Be careful using fictional alternatives (risky)
Mgmt 4330, Professor See
Before you go…
• Handout on final paper instructions (also up on Canvas)
• Readings to reinforce today’s material – Shell, Chapters 7-9 – Fisher & Ury, Chapters 4-5 – Canvas readings
• 3 minute memos
• Pick up role information for next class – As always, prepare alone – Note: this negotiation is about a dispute, not a transaction, so you might
have to think a bit longer about the planning document and how those terms apply in this context (allow for ~45-60 minutes to prepare)
– Bring a calculator
Mgmt 4330, Professor See
__MACOSX/._Session 4_Advanced Integrative (Multi-Issue) Nego F15 (11 am).pdf
Session 5_Dispute Resolution F15.pdf
1
Session 5
Professor See Management 4330
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Today’s agenda…
• Turn in Viking planning document • Clarifications from 3 minute memos
1. Planning documents: Assessing other side’s preferences/interests? • Preparing for negotiations requires thinking about your own interests and priorities,
as well as trying to take the perspective of the other side to “predict” what they might want and do in the negotiation, so
– Make your best prediction to formulate an opening strategy – Once in negotiation, ask questions and continually update your assessment of other party – I look through planning documents to see that you’ve thought through the situation, not
whether you’ve “guessed correctly” in advance
2. Questions about pareto frontier • For those who wanted more info, I posted an OPTIONAL reading on Canvas that
walks through another example of the pareto frontier under “readings for 9/16”
• New Module: Conflict Management – Negotiate Viking exercise
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Viking Debrief
• This week’s challenge: Negotiating a dispute, not a transaction – Type of situation where outcomes range from bad to worse – Less likely to find a ‘magic bullet’ in this type of situation
• Let’s go over the facts and both sides’ private info
• How did you open the conversation? How did the process unfold?
Mgmt 4330, Professor See
Three Approaches to Resolve Disputes: Interests, Rights, and Power
• Interest-based: Addressing parties’ needs, desires, concerns, fears • Possible procedures outside negotiation: Mediation
• Rights-based: Deciding who is “right” and “wrong” based on independent standards of perceived legitimacy or fairness, or contract, or law • Possible procedures outside negotiation: Court, Arbitration
• Power-based: One side pressuring the other side into conceding • Possible procedures outside negotiation: picketing, war, strikes
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5
Interests, Rights, & Power
PAT SANDY
INTERESTS Continued investments: lakefront property, hotel
Avoid bankruptcy Keep house & team
together
RIGHTS Contract: All changes must be in writing
Fawn’s authority to amend contract based on past practice; acted in Pat’s best interests
POWER Force Sandy into
bankruptcy Future business for
Sandy
Ability to declare bankruptcy, and thus,
not pay Pat
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Using Interests, Rights, & Power in Negotiations
Opening and focusing the negotiation
INTERESTS � Why are we here today? What do you need? � Apology � Focus on Future
RIGHTS � Facts – What happened from “my perspective” � My Rights – either Legal or according to some other “Standard of fairness”
POWER � Threats (= promise to use power, an “if-then”) � Anger
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7
Opening with Interests, Rights, or Power
Opening Advantages Disadvantages
Interests Learn what motivates others so can better address underlying needs
May fear appearing weak; Parties may not wish to share this info when emotions are running high and trust is damaged
Rights
Identify areas of agreement and disagreement of the facts; Learn each other’s interpretation of the contract and how the law applies to the situation
Can deteriorate to “he said/she said” conversation going in circles; Parties cannot agree on how the contract and law applies (biased in their favor – otherwise wouldn’t be so many court cases!); Fairness is subjective
Power Appear strong; Can help claim value
Parties don’t recognize each other’s view of the power distribution, or there would be no dispute in the first place
Mgmt 4330, Professor See
Criteria for Evaluating the Three Approaches
Transaction costs Time, money, emotional effort, etc
Satisfaction with outcomes Were interests met? Was process fair?
Effect on relationship How likely that parties want to interact again?
Recurrence How likely is it that problem will occur again?
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9
Interests Rights Power Transaction costs (Time, money, emotional effort, etc)
Medium Medium/High Medium/High
Satisfaction with outcomes (Were interests met? Was the process fair?)
High Medium Low
Effect on relationship (How likely that parties want to interact again?)
Good Somewhat poor Very poor
Recurrence (How likely is it that problem will occur again?)
Low Medium Somewhat high
How they stack up…
Mgmt 4330, Professor See
How to bring Rights- & Power-Based Negotiators Back to Interests
Don’t get personal when airing grievances
Don’t reciprocate (on the negative stuff, like threats or attacks)
Or do reciprocate, but immediately add an interests-based proposal
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When to Use Rights or Power
• When the other party will not come to the negotiating table – A threat might communicate severity
• When the negotiations are at an impasse and all attempts to focus on interests have been exhausted
– Credible threat plus interest-based solution
• Basically, a subtle threat can often snap people’s attention back to interests (try to avoid having it go back to “he said/she said” rights- or facts-based approach)
Mgmt 4330, Professor See
Emotions in negotiations
• Positive feelings generally aid integrative negotiation – Increased flexibility, creativity, helpfulness – If extreme, can lead poor distributive outcomes but need not
• Negative feelings generally harm negotiation – Increased aggressive behavior, escalation of conflict – Increased punishment / retaliation – But people tend to give more concessions to angry counterparts
–So adopt cooperative approach but “show some teeth”
• Emotions can be used strategically – Key is to manage emotions (not suppress or ignore them)
–Preparation (even rehearsal) is one of the best ways to reduce anxiety!
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Tips for managing negative emotion
Manage your own emotions • Know your own “hot buttons” • Take your time (use silence or breaks if you need to) • Try to recognize tactics used by the other side
Manage your counterpart’s emotions • Make them feel understood • Help them save face
Build a positive, cooperative working relationship • Approach and frame negotiation as a joint problem-solving task
• This helps reduce anxiety, which stems from viewing the process as contentious rather than cooperative
• Accumulate common ground
Mgmt 4330, Professor See
Take-aways on conflict/dispute resolution
{ Dispute = a contested claim
{ BATNAs are often linked in disputes, and goal is often to minimize losses
{ Recognize how and when to use Interests vs Rights vs Power as possible approaches to resolution (and the pros-cons of each) { Interests-based approaches generally more effective, less costly { If stuck on rights and power, bring back to interests
{ Reciprocity is a strong norm, but breaking that cycle can be key in resolving disputes
{ Managing and leveraging emotions Æ knowing your ‘hot buttons’ and taking time to create a non-hostile negotiation process goes a long way
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15
5 minute feedback
• Please give some feedback to your Viking counterpart – What worked, what didn’t? – How did you perceive each other?
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Reminders
• 3 minute memos
• Reading for tonight: Shell, Chapter 10; Fisher & Ury, pp. 157-168
• Test in next class session – Closed book exam – Designed to take 75 minutes – All short answer questions (partial credit possible) – Covers material through today (sessions 1-5 in syllabus) – Tests knowledge of course concepts:
• Knowledge of course concept definitions; ability to recognize/identify concepts in action; and ability to provide examples of how the concepts can be applied in negotiations
• But not tested on obscure facts from the cases/exercises or non-conceptual details from readings
– To prepare, focus on lecture notes on Canvas, and use books/readings to reinforce your understanding of concept definitions and to get examples of how the concepts are used
Mgmt 4330, Professor See
