Summary on the Essentials of Negotiation

Essentials of Negotiation


CHAPTER 1: Nature of Negotiation

Definition and Overview (should not be in the map): Negotiation is an activity, usually in form of a dialogue with the aim of resolving differences in interests between or among existing parties.

Negotiation is what we do in works of life ranging from domestic, business, social and political relationships. Strong negotiations skills will enhance your chances of succeeding in your relationships

Its purpose is to enable individual parties reach an agreement that is acceptable to them.

N1 – Characteristics of negotiation

1) Involves two or more parties: a) individuals, b) Groups, c) Organizations, etc

2) Conflict of needs and desires – parties have disagreed on a common interest

3) Parties choose to negotiate or not – subject to the likelihood of getting a better deal

4) A “give and/or take scenario exists – either party is ready to make a sacrifice for a reward

5) Parties prefer to resolve differences

6) Existence of negotiating factors

a. Tangible factors – crucial and would be managed (price, terms of agreement)

b. Intangible factors – underlying psychological motivations that could influence outcome negotiations

i. Need to win the other party

ii. Need to look good, competent and tough

iii. Need to defend an important principle – eg moral, social beliefs

iv. Need to appear fair and honourable

N2 – When not to negotiate… Do not negotiate when,

1) You could lose everything

2) You are sold out – running out of capacity in business

3) Demands are unethical (avoid the wrath of the law)

4) You don’t have time (time constraints exist)

5) Your counterparty acts in bad faith (you can’t trust the other party)

6) Waiting would improve your position (delays might make you benefit from technological or policy changes)

7) You are not prepared (adequate preparation pays in negotiations)

N3 – Interdependence of goals (needing each other to achieve the desired outcome. Interdependence occurs in three conditions

1) Distributive (mutually exclusive with only one winner) now loosing prominence

2) Integrative situation (mutually inclusive as in a “Win-Win” negotiation) focus is now centered on this as a plausible goal of negotiations: eg a singer and an instrumentalist can make a great music band

3) Existence of BATNA (Best Alternative To a Negotiated Agreement) – refers to the state, manner and extent of interdependence between parties

N4 – Common Differences in Negotiators (they impact the negotiators attitude)

1) Interests – objectives or goals may be in disagreement

2) Judgment about the future (general understanding of opportunities around)

3) Risk tolerance – while one party may love risks, the other may not

4) Time preferences – desired time to seal the deal or receive consideration may differ

N5 – Conflict in Negotiations (conflict is a perceived divergence of interest) we look at conflict under the following heads

1) Levels of conflict

a. Intrapersonal or intrapsychic – lies within an individual in form of ideas, thoughts, emotions, values etc

b. Interpersonal – between individuals (workers, spouses, siblings)

c. Intragroup – within a group. Eg; team – like Group one, family, organizations, political parties

d. Intergroup – between groups, organizations etc



2) Demerits of Conflicts

a. Breeds unhealthy competition

b. Distorts perception

c. Breeds emotionality – could arouse anger of pity

d. Reduces quality of communication

e. Likelihood of rigid commitments

f. Increases level of differences



3) Conflict Management Strategies– these are coordinated measures and efforts directed at minimizing or resolving differences in a negotiation

a. Contending – having little concern for the other party

b. Yielding – caring less about own objectives or outcomes

c. Inaction – indifference about whose goals are paramount

d. Problem solving – aimed at maximizing overall outcomes in a negotiation

e. Compromising – Moderate efforts towards ensuring neither party loses



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Chapter 2_Strategy and Tactics of Distributive Bargaining

Distributive bargaining is used to describe a competitive situation. It is also known as a “win-lose” bargaining.

Here, the goals of one party is often fundamental and directly conflicts with the goals of the other party

Reasons why a negotiator should be familiar with distributive bargaining

a. They face interdependent situations

b. Distributive bargaining strategies are often used by people

c. Crucial for the “claiming value” stage of a negotiation

Fundamental choices in negotiations

a. Reach a deal with the other party

b. Reach no agreement at all

Important considerations in negotiations

• Determine a settlement point

• Have a bargaining mix

• Discover the other party’s resistance point

• Influence the other party’s resistance point

Tactical tasks in negotiation

1. Assess the other party’s target, resistance point, cost of terminating negotiations through;

a. Indirect assessments

b. Direct assessments

2. Manage the other party’s impressions through;

a. Screening activities

b. Direct action to alter impressions

3. Modify the other party’s perceptions

4. Manipulate the actual costs of delay or termination through;

a. Disruptive action

b. Alliance with outsiders

c. Schedule manipulation

Positions taken during negotiations

a. Opening offers

b. Opening stance

c. Initial concessions

d. Role of concessions

e. Pattern of concession making

f. Final offers

Closing the deal

a. Provide alternatives

b. Assume the close

c. Split the difference

d. Exploding offers

e. Sweeteners

Hardball tactics: designed to force the other party to do what he/she would not have done under normal conditions

Dealing with hardball tactics

a. Ignore them

b. Discuss them

c. Respond in kind

d. Co-Opt the other party

Typical hardball tactics

a. Good cop/bad cop

b. Lowball/highball

c. Bogey

d. The Nibble

e. Chicken

f. Intimidation

g. Aggressive behavior

h. Snow job

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Chapter 3_Strategy and Tactics of Integrative Negotiation

A situation whereby all parties to the negotiation can gain. This is a “win-win” case

Common elements in an integrative negotiation

a. Focus is on similarities rather than differences

b. Attempts to address needs and interest, not positions

c. Endeavour to meeting the needs of all involved parties

d. Sharing information and ideas

e. Create options for mutual gain

f. Use an objective criteria for assessing performance

Features of an integrative bargaining

a. Honesty and integrity

b. Abundance mentality

c. Maturity

d. Systems orientation

e. Superior listening skills

An integrative negotiation process

• Creating a free flow of information

• Attempting to understand the other party’s needs and objectives

•

Here, the goals of one party is often fundamental and directly conflicts with the goals of the other party

Reasons why a negotiator should be familiar with distributive bargaining

d. They face interdependent situations

e. Distributive bargaining strategies are often used by people

f. Crucial for the “claiming value” stage of a negotiation

Fundamental choices in negotiations

c. Reach a deal with the other party

d. Reach no agreement at all

Important considerations in negotiations

• Determine a settlement point

• Have a bargaining mix

• Discover the other party’s resistance point

• Influence the other party’s resistance point

Tactical tasks in negotiation

5. Assess the other party’s target, resistance point, cost of terminating negotiations through;

a. Indirect assessments

b. Direct assessments

6. Manage the other party’s impressions through;

a. Screening activities

b. Direct action to alter impressions

7. Modify the other party’s perceptions

8. Manipulate the actual costs of delay or termination through;

a. Disruptive action

b. Alliance with outsiders

c. Schedule manipulation

Positions taken during negotiations

g. Opening offers

h. Opening stance

i. Initial concessions

j. Role of concessions

k. Pattern of concession making

l. Final offers

Closing the deal

f. Provide alternatives

g. Assume the close

h. Split the difference

i. Exploding offers

j. Sweeteners

Hardball tactics: designed to force the other party to do what he/she would not have done under normal conditions

Dealing with hardball tactics

e. Ignore them

f. Discuss them

g. Respond in kind

h. Co-Opt the other party

Typical hardball tactics

i. Good cop/bad cop

j. Lowball/highball

k. Bogey

l. The Nibble

m. Chicken

n. Intimidation

o. Aggressive behavior

p. Snow job

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CHAPTER 4

NEGOTIATION STRATEGY AND PLANNING

The focus that drives a negotiation strategy

Direct effects of goal on choice strategy

• Wishes are not goals, especially in negotiation

• Goals are often linked to the other party’s goals

• There are boundaries or limits to what goals can be

• Effective goals must be concrete, specific and measurable

Indirect effects of goals on choice strategy

Strategy – The overall plan to achieve one’s goal

Strategy is defined as the pattern or that integrates an organisation’s major targets, policies and action sequences into a cohesive whole. When applied to negotiations, strategy refers to the overall plan to accomplish one’s goal in a negotiation and the actions sequences that will lead to the accomplishment of those goals.

• Strategy versus tactics

• Unilateral versus bilateral Approach to strategy

• The dual concerns model as a vehicle for describing negotiation strategies.



Understanding the flow of negotiations: Stages and phases

• Preparation

• Relationship building

• Information gathering

• Information using

• Bidding

• Closing the deal

• Implementing the agreement



Defining the issues

• Assembling issues and defining the bargaining mix

• Defining interest

• Defining limits and alternatives

• Defining one’s own objectives (target) and opening bids (where to start)

• Assessing constituents and the social context in which the negotiation will occur.



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CHAPTER 5

PERCEPTION, COGNITION AND EMOTION

Perception is a process by which individuals connect to their environment.



PERCEPTUAL PROCESS

Stimulus, Attention, Recognition, Transaction, Behaviour



PERCEPTUAL DISTORTION

Stereotyping

Halo effects

Selective perception

Projection



FRAME

A frame is a way of labelling these different individual interpretations of the situation.

TYPES OF FRAME

Substantive Outcome Aspiration Process identity Characterization Loss- gain



How frames work in negotiation

Negotiator can use more than one frame.

Mismatches in frames between parties are sources of conflicts.

Particular types of frames may lead to particular types of agreements

Specific frames may likely to used with certain types of issues

Parties are likely to assume w particular frame because of various factors



Another approach to frames – Interest, Right and Power



COGNITIVE BIASES IN NEGOTIATION

Irrational Escalation of commitment

Mythical Fixed – Pie beliefs

Anchoring and Adjustment

Issue framing and Risk

Availability of information

The winner’s cure

Overconfidence

The law of small numbers

Self – serving biases

Endowment effect Ignoring others cognitions

Reactive devaluation



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Chapter 8_Ethics in Negotiation

Ethics are applied social standards for what is right or wrong in a particular situation or a process for setting those standards.

Purpose of ethics

a. To define the nature of the world we live in

b. Prescribe the rules or norms for living together

Approaches to ethical reasoning

a. End-result ethics – the anticipated consequences determine the rightness of an action

b. Duty ethics – an obligation to apply universally acceptable standards determine the rightness of an action

c. Social contract ethics – the customs and norms of a community determines the rightness of an action or otherwise

d. Personalistic ethics – an individual’s conscience makes the judgment.

Ethically ambiguous negotiation tactics: these are legitimate ways individuals and corporations maximize their self interest in a negotiation

• Bluffing

• Exaggeration

• Concealment of information

• Manipulation of information

• Traditional competitive bargaining

• Intimidation

• silence

Motives of deceptive tactics

• Stronger negotiating power

• Orientation of the negotiator

• Cultural differences

• Negotiator’s perception of the other party’s level of competitiveness

Consequences of deceptive tactics: consequences may be positive or negative based on

a. Effectiveness of the tactic

b. Reactions of the other party

c. Self reactions

Explanations and justifications – expedient to rationalize, explain, or excuse the behavior towards verbalizing some good and legitimate reason why the tactic was necessary

Explanations/justifications shown by research include

a. Where the tactic was unavoidable

b. Where the tactic was harmless

c. Where the tactic will help avoid negative consequences

d. Where the tactic will produce good consequences

e. Where the tactic is fair or appropriate to the situation

How negotiators can deal with other party’s use of deception

• Ask probing questions

• Force the other party to lie or back off

• Call the tactic – tell him you know he is using a tactic (lying, bluffing etc)

• Respond in kind

• Ignore the tactic



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Chapter 9_Relationship in Negotiation

Negotiation occurs in a rich and complex social context that significantly affects how parties interact and how the process evolves. This is because people have past, present and future relationships.

Research has studied negotiation from two perspectives

a. Primary/Live negotiation. Eg: Labour negotiation

b. Secondary negotiation. Simulating case studies in labs by depicting them in games and plays. This approach has gained prominence over the years.

Problems of secondary research on negotiation

• It involves the mere use of sample data – it is not fully representative

• It serves descriptive purposes mainly

• It does not capture the real art of negotiation

Why nature and level of relationship could influence relationship (Sheppard & Tuchinsky’s case)

• Negotiation within relationships take place over time

• Negotiation is often a way to learn about the other party and increase interdependence

• Resolution of simple distributive issues has implications for the future

• Distributive issues within relationships can be emotionally motivated

• Negotiation within relationships may never end

• The other party’s behavior is often the focal problem in many negotiations

• Preserving relationships is the ultimate goal in some negotiations

Rules for negotiating in a relationship

• Obtain sufficient information about the other party before hand

• Recognize that negotiation continues in a long term business deal

• A third party may be brought in to monitor and enforce compliance with agreed terms

Dimensions in relationships – the nature, quality and sensitivity of feelings one negotiating party has for the other. They affect negotiating tactics and strategy

Four key dimensions of relationships

a. Attraction – this is the first level. Refers to the likeness for and interest in one another

b. Rapport – second level. Trust, integrity, and empathy is displayed here

c. Bonding – third level. Where parties form an alliance and look out for the mutual benefits of the relationship

d. Breadth – fourth level. When relationship has developed in scope and parties settle for the long haul

Balancing enquiry with advocacy: This is a tension that normally occurs in negotiation, where a party sacrifices its own preference just to maintain an existing relationship

Three key elements of managing negotiations with relationships

a. Reputation – the lasting impression the one party has about the other. It is a perpetual identity of what people think about us

b. Trust – a crucial element of any relationship. It is a person’s belief in and the willingness to act on the words, actions and decisions of others

c. Justice – this refers to equity and fairness in transactions and relationships

Idiosyncratic deals: flexibility versus fairness. This is the unique way an employer or supervisor may treat or deal with certain employees or subordinates compared to others in the same office or environment. They are increasingly being negotiated in the work place

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CHAPTER 11: INTERNATIONAL AND CROSS-CULTURAL NEGOTIATION
Introduction:

• The frequency of International Negotiation has increased rapidly over the last 20 years

• People travel more often and scope of business is more global

• International negotiation has become a norm for many people and organizations
Factors that distinguish International Negotiations

1. Environmental Factors

2. Immediate Factors
ENVIRONMENTAL FACTORS/CONTEXT
i. Political and Legal Pluralism: The existence different political/legal systems could bring about difference modus operandi

ii. International Economics: Economic factors, particularly differences in the value of currency will impact negotiation outcomes
iii. Foreign Governments and Bureaucracies: extent to which there is government interventions and/regulations vary among countries and will affect negotiation outcomes

iv. Instability: Volatilities in the state and quality of resources/production influence negotiation
v. Ideology: business sense a negotiator has plays a critical role
vi. Culture: Differences in norms and values across territories impact on negotiations
vii. External Stakeholders: The number of interested external parties (shareholders, labour unions, associations) has will influence their negotiation outcomes.
IMMEDIATE CONTEXT

This refers to the more peculiar factors that directly affects the outcomes of negotiations. They include;

i. Relative bargaining power: The unique skills of the negotiating part
ii. Levels of conflict: Level of interdependence and differences in identity
iii. Relationship between Negotiations: The kind of relationship parties have developed over time (if any) has a strong influence on negotiation outcomes
iv. Desired outcomes: The goals and objectives of each party influences his/her expectation and thus the outcome of the process
v. Immediate stakeholder: The skills, abilities, power, ambition and position of the representative plays a key role
CONCEPTUALIZING CULTURE AND NEGOTIATION

Culture cannot be disconnected from negotiation. They go hand in hand

The concept or meaning of culture

• Culture is a group level phenomenon: it is based on shared values, beliefs and behavioural expectations

• Culture is dialectic because these beliefs are learned and passed on to new members of the group
CULTURE AS SHARED VALUES:

We will consider this from two views as opined by Hofstede and Schwartz.
On the one hand, Hofstede opined that there are four dimensions that could be used to describe important differences among culture
i. Individualism/collectivism: extent to which the society is organized around individuals or groups
ii. Power distance: the extent to which less powerful members of organizations and institutions accept and expect that power is unequally distributed
iii. Career success/quality of life: Extent to which members held values that improved their career and quality of life
iv. Uncertainty avoidance: The extent to which a culture programs/makes members feel either comfortable or uncomfortable in unstructured situations


On the other hand, Schwartz highlighted ten fundamental values in identifying the motivational goal underlying cultural values. They are;
i. Power

ii. Security

iii. Tradition

iv. Conformity

v. Benevolence

vi. Universalism

vii. Self direction

viii. Simulation

ix. Hedonism

x. Achievement


CULTURE AS DIALETIC

This infers that culture brings about tensions in the learning process

Ways by which culture influence negotiation

i. Definition of negotiation

ii. Negotiation opportunity

iii. Selection of negotiators

iv. Protocol

v. Communication

vi. Time sensitivity

vii. Risk propensity

viii. Group versus individuals

ix. Nature of agreements

x. Emotionalism
Culturally responsive negotiation strategies

On the one hand, Rubin & Sander suggested that negotiators should focus on three factors namely;
1. Own bias

2. Strengths

3. Weaknesses
On the other hand, Weiss held that culturally responsive strategies may be organized in three groups or based on three conditions:
1. Low familiarity

2. Moderate familiarity

3. High familiarity

WHERE THERE IS LOW FAMILIARITY, negotiators may;

i. Employ agents of advisers (unilateral strategy)

ii. Bring in a moderator (joint strategy)

iii. Induce the other negotiator to use his/her negotiation approach
WHERE THERE IS MODERATE FAMILIARITY, negotiators may;

i. Adapt the other negotiator’s approach

ii. Coordinate adjustments


WHERE THERE IS HIGH FAMILIARITY, negotiators may;

i. Embrace the other negotiator’s approach

ii. Improvise or select an approach based on prevailing circumstances

iii. Create an approach that allows him/her to include aspects of his/her home culture


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