Negotiation Versatility Part 1 Strategy and Tactics of Distributive Bargaining

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Negotiation Versatility Part 1-Strategy and
Tactics of Distributive Bargaining

• Negotiation Conflict Management
• Class 3
• John D. Blair, PhD
• Georgie G. William B. Snyder Professor in
  Management

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Outline

• Approaches to Negotiation
• Distributive negotiation
• Integrative negotiation
• Dangers of Assumptions
• Importance of sensemaking
• Identifying rules of engagement
• Use of Questions
• Awareness of the Environment
• Importance of Language
• Identifying Moves of Interaction

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Negotiation Continuum
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Which approach is best?

• Those using cooperative strategies achieve high
  mutual gain
• Those relying on competitive strategies achieve
  less
• Thus, negotiators should focus mainly on
  establishing cooperation

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Which approach is best?

• Negotiators who believe they have influence,
  assume a position of strength and hold firm on
  issues of importance
• Those who believe they have little influence are
  more likely to make greater concessions
• Thus, a cooperative, win-win approach is
  generally useful but a negotiator must also
  identify how much they are willing to concede in
  order to achieve the win-win

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The Versatile Negotiator

• Adopt a flexible negotiating approach moving
  toward an integrative or distributive stance when
  necessary
• Prioritizes goals in order to protect the most
  important points but make appropriate concessions
• Not committed to a win-win or win-lose
• Win-win is preferable but sometimes will engage
  in a win-lose in order to achieve goals
• Does not measure their progress in comparison to
  some endpoint but stay focused in their next move
  and how it will affect each subsequent move

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Avoid Assumptions

• Be careful in making faulty assumptions
• Myth of commonality
• We assume people are like us
• Myth of disparity
• We assume others are different from us
• Skilled negotiator is a detective skeptical of
  easy generalizations alert to limitations of
  assumptions

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Sensemaking

• Balance between observation and action
• Staying in touch with context
• Sensemakers act their way into an understanding
  of where they are, who they are and what they are
  doing.

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Rules of Engagement

• Knowledge of ones expectations guiding choices
• Negotiations make sense when the dialogue is
  bounded by what is expected
• Failure to meet expectations may lead to
  perceptions of irrelevance or offensiveness

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Identifying Expectations

• Use of Questions
• Critical in identifying assumptions
  expectations
• Assist in ensuring understanding possible
  discrepancy between what was said and what was
  heard
• Useful in testing the progression of negotiations
• Involves the other party more in the discussion

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SPIN Questioning
Adapted from SPIN Selling by Neil Rackham
If we guaranteed next day delivery on specific
products, would you be interested in learning
more about our capabilities?
How have you been affected by their inability to
meet your emergency inventory levels?
NEED
IMPLICATION
How satisfied have you been with your suppliers
ability to meet your needs for emergency
shipments?
PROBLEM
What supplier are you currently using?
SITUATION
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Negotiation as a Learning Process

• Importance of a learning perspective
• Enables negotiator to understand the other party

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Versatility in Actions

• Repertoire of verbal and non-verbal responses
• Communication in negotiations like a game of
  chess
• More skillful players influence the other player
  to make a desired move
• Amateurs are easily led and react to the moves of
  others leading to greater chances for
  concessions
• Knowledge of scripts

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Direction of Interaction

• One-up moves
• When both use one-up statements, the interaction
  is competitive
• One-down moves
• When both use one-down statements, very little
  progression is achieved
• Sidestep moves or one-across moves
• Useful in negotiations because they buy you time
  and give you a chance to think about how to
  proceed (e.g. silence, I see)

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Versatility Summary

• Best negotiators less concerned with whos right
• Butconcerned about who thinks what and why
• They mold perception and are masters of
  discernment
• Do not use firm statements of positions but
  questions designed to understand assumptions

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Distributive Bargaining

• Goals of one party are in fundamental,direct
  conflict to another party
• Resources are fixed and limited
• Maximizing ones own share of resources is the
  goal

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The Distributive Bargaining Situation

• Preparationset a
• Target point, aspiration point
• Walkaway, resistance point
• Asking price, initial offer

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The Distributive Bargaining Situation Cont

Party A - Seller
Walkaway Point Target Point
Asking Price
Initial Offer Target
Point Walkaway Point
Party B - Buyer
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BATNA

• Best available alternative BATNA
  (acronym for Best Alternative to a Negotiated
  Agreement)
• More Discussion of BATNA later in Reardon book

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Your The Other Sides BATNA

• Improve your BATNA
• Develop alternatives, find other negotiating
  partners
• Identify the other sides BATNA
• Ask questions during the negotiation
• Contact sources within the industry
• Check business publications
• Review annual reports public filings
• Asking questions informally of the negotiators
• or other people within the company
• Imagine what your would do in their situation

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The Role of Alternatives to a Negotiated Agreement

• Alternatives give the negotiator power to walk
  away from the negotiation
• If alternatives are attractive, negotiators can
• Set their goals higher
• Make fewer concessions
• If there are no attractive alternatives
• Negotiators have much less bargaining power

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The Distributive Bargaining Situation Visually

Party A - Seller
Walkaway Point Target Point
Asking Price
Alternative
Alternative
Initial Offer Target Point
Walkaway Point
Party B - Buyer
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Fundamental Strategies

• Push for settlement near opponents resistance
  point
• Get the other party to change their resistance
  point
• If settlement range is negative, either
• Get the other side to change their resistance
  point
• Modify your own resistance point
• Convince the other party that the settlement is
  the best possible

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Keys to the Strategies

• The keys to implementing any of the four
  strategies are
• Discovering the other partys resistance point
• Influencing the other partys resistance point

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Tactical Tasks of Negotiators

• Assess outcome values and the costs of
  termination for the other party
• Manage the other partys impressions
• Modify the other partys perceptions
• Manipulate the actual costs of delay or
  termination

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Assess Outcome Values and the Costs of
Termination for the Other Party

• Indirectly
• Determine information opponent used to set
• Target
• Resistance points
• Directly
• Opponent reveals the information

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Manage the Other Partys Impressions

• Screen your behavior
• Say and do as little as possible
• Direct action to alter impressions
• Present facts that enhance ones position

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Modify the Other Partys Perceptions

• Make outcomes appear less attractive
• Make the cost of obtaining goals appear higher
• Make demands and positions appear more or less
  attractive to the other party whichever suits
  your needs

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Manipulate the Actual Costs of Delay or
Termination

• Plan disruptive action
• Raise the costs of delay to the other party
• Form an alliance with outsiders
• Involve (or threaten to involve) other parties
  who can influence the outcome in your favor
• Schedule manipulations
• One party is usually more vulnerable to delaying
  than the other

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Positions Taken During Negotiations

• Opening offer
• Where will you start?
• Opening stance
• What is your attitude?
• Competitive? Moderate?
• Initial concessions
• Should any be made? If so, how large?

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Positions Taken During Negotiations

• The role of concessions
• Without them, there is either capitulation or
  deadlock
• Patterns of concession making
• The pattern contains valuable information
• Final offer (making a commitment)
• This is all I can do

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Commitments Tactical Considerations

• Establishing a commitment
• Three properties
• Finality
• Specificity
• Consequences
• Preventing the other party from committing
  prematurely
• Their commitment reduces your flexibility

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Commitments Tactical Considerations Cont

• Ways to abandon a committed position
• Plan a way out
• Let it die silently
• Restate the commitment in more general terms
• Minimize the damage to the relationship if the
  other backs off

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Closing the Deal

• Provide alternatives (2 or 3 packages)
• Assume the close
• Split the difference
• Exploding offers
• Deal sweeteners

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Dealing with Typical Hardball Tactics

• Four main options
• Ignore them
• Discuss them
• Respond in kind
• Co-opt the other party (befriend them)

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Typical Hardball Tactics

• Good Cop/Bad Cop
• Lowball/Highball
• Bogey (playing up an issue of little importance)
• The Nibble (asking for a number of small
  concessions to)

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Typical Hardball Tactics Cont

• Chicken
• Intimidation
• Aggressive Behavior
• Snow Job (overwhelm the other party with
  information)

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Distributive NegotiationA Summary

• Negotiators need to
• Set a clear target and resistance points
• Understand and work to improve their BATNA--Best
  Alternative to a Negotiated Agreement
• Start with good opening offer
• Make appropriate concessions
• Manage the commitment process