Collaboration, Conflict & Negotiation

Class 4: Claiming Value

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Key Elements of a Negotiation

Structure

Social context Differences in interests

Outcomes
Economic Created value Value division Social Trust Respect Fairness

Process
Preparation Bargaining

Negotiation Types
Perceived Conflict Over Stakes

Perceived Importance of Future Relationships

Balanced

Relationship

Transaction

Tacit

Agenda

Claiming Value/Distributive Negotiations Virtual Victorian Debrief

Transactional/Distributive Communication Mode Effects

Characteristics of an Effective Negotiation

Virtual Victorian Debrief

Why different from prior negotiations?
2-party, claiming value exercise Harder to communicate

E-mail less rich; no visuals/body language Phone-tag effect Bluffing is easier? Buyers agent wants the deal too

Three vs. one

More parties & more issues Poorly defined BATNA

Virtual Victorian

Seller

Aspiration ($270K) BATNA (Wait? $260K, lose new house) Reservation price ($240K) Commission agreement (6%) Additional reference points

Original purchase price ($215K) Original listing price ($280K) Remaining mortgage Comparables

Buyer

Aspiration ($235K-$255K)

Advantages

E-Mail Communication

Dont have to be there

Disadv

E-Mail Communication

antages

How do

E-Mail Communication

you

Negotiating via Agents

Advantages

Expertise & access Tactical flexibility Decreased workload Emotional detachment Scapegoating Bad Cop

Disadvantages

Slower Shrinks bargaining zone More expensive Decreased control

Using an Agent: Advice

Shop around Know BATNA before you meet Dont reveal your Reservation Price (RP) Try to get agent to focus on other partys RP Try to align interests Define info sharing & ratification latitude

Distributive Bargaining Steps

1. 2. 3.

(one more time) it Know your BATNA; strengthen

Set reservation price (dont reveal) Research other partys BATNA/reservation price to understand ZOPA Define & focus on your aspiration level Choose basic strategy Make 1st offer or re-anchor quickly Manage impressions Use concessions strategically

4. 5. 6. 7. 8.

Now We Negotiate.

Value Creating Tactics

Relationship:

Emphasize mutuality & shared interests Be honest about what you are trying to accomplish Agree to focus on exchanging information first Pay attention to relational currencies

Value Creating Tactics

Information exchange:

Ask questions about interests & listen carefully Rephrase Selectively share information Defend interests, not positions Summarize progress Bundle issues & discuss multiple offers at same time Focus on incremental value, not absolute numbers

Value Creating Tactics Harder when:

Relationship doesnt matter Trust is low Time pressure is high Constituencies are important Negotiations are public

Learning Going Forward.

Choose a personal focus for todays negotiations:

Be the first to share information Restate what other party says Summarize progress Discuss multiple offers at the same time

5 Negotiating Styles
Accomodating Strengths: Creates goodwill Demonstrates cooperativeness Avoids damage to relationship Weaknesses: Reduces influence Reduces value creation May be perceived as weak May resent other party

Avoiding Strengths: Time to reflect may reduce tension Buys time to search for alternatives,
make leverage position credible Can create sense of urgency May reduce effectiveness of more aggressive strategies

5 Negotiating Styles

Weaknesses: Frustrates those ready to engage Can damage relationship Deal may not happen

5 Negotiating Styles
Collaborating Strengths: Increases joint value Improves relationships Builds commitment Weaknesses: Slow May distract from more important
issues Weakens ability to claim value May not be reciprocated

5 Negotiating Styles
Competing Strengths: Protects interests Asserts dominance Takes responsibility Weaknesses: Reduces communication & trust Reduces creativity & value creation May damage relationship

5 Negotiating Styles
Compromising Strengths: Meets some of everyones interests Fast Seems fair Weaknesses: Promotes gaming Reduces value creation Does not deepen relationship

Managing Agreement
Five Negotiating Styles

ACCOMMODATING (Relationships)
Importance of Relationship (cooperativeness)

COLLABORATING (Balanced)

COMPROMISING

AVOIDING (Tacit Coordination)

COMPETING (Transactions)

Importance of Stakes (assertiveness)

4 Major Negotiation Pitfalls

1. Leaving money on the table

2. 3. 4.

Settling for too little Walking away Not walking away

Lets Watch A Negotiation

Element Bars

http://www.youtube.com/watch?v=BJ-zSDjJsPQ

Element Bars

What do you see?

What tactics did Jonathan use? What tactics did the Sharks use?

Element Bars

Was this negotiation effective?

1) All issues identified 2) Value maximized (i.e. pie size) 3) Each party receives BATNA or better 4) Relationship as good or better 5) Stable and Enforceable

Distributive Bargaining

Distributive Bargaining Steps

1. Know your BATNA; strengthen it 2. Set reservation price (dont reveal) 3. Research other partys BATNA/reservation price to understand ZOPA 4. Define & focus on your aspiration level 5. Choose basic strategy 6. Make 1st offer or re-anchor quickly 7. Manage impressions 8. Use concessions strategically

Now We Negotiate.

Antique Carousel Horse

15 minutes to prepare 20 minutes to negotiate price

Keep track of offers & counter-offers

15 minute break

Practice your best hard negotiating skills!

Carousel Horse Roles & Groups

6150 4500 6050 Impasse 6200 5900 6000 5500 5500 5800 Jih Lee Jeremy Brownstein Judy Kuan James White Ilya Kostyukovsky Priancka Bhatnagar Daniel Goldenberg Shaji Bhaskaran Michael Sweetman Deirdre DeSteno Kevin Purcell Gabriel Bitol Kelly Caprio Rinita Bhadra Puloma Mukherjee Ziauddin Mansoor Kristen Zhang Dipen Desai Nicolas Onofrey Divya Singh

Two-Party Price Negotiation

Buyers Opening Offer Sellers Opening Offer

Whats talked about:

Whats really going on:

Sellers RP Buyers Aspiration Buyers RP Sellers Aspiration

Bargaining Zone

Distributive Bargaining Steps 1. Know your BATNA; strengthen it.

2. Set reservation price (dont reveal). 3. Research other partys BATNA/reservation price to understand ZOPA. 4. Define & focus on your aspiration level. 5. Choose basic strategy. 6. Make 1st offer or re-anchor quickly. 7. Manage impressions. 8. Use concessions strategically.

1. Know your BATNA

What is your best alternative?

Buyer: Seller:

2. Set your reservation price

What is it? What matters in calculating it?

Value of BATNA What else?

3. Understand the ZOPA

Positive Bargaining Zone
Sellers Reservation Price Buyers Aspiration Buyers Reservation Price

Sellers Aspiration

Zone of Possible Agreement (ZOPA) or Bargaining Zone

3. Understand the ZOPA:

Negative Bargaining Zone
Sellers Reservation Price Buyers Aspiration Buyers Reservation Price Sellers Aspiration

Negative Bargaining Zone

Why is Your Aspiration Important?

Sellers Reservation Price Buyers Aspiration Buyers Reservation Price

Sellers Aspiration

Zone of Possible Agreement (ZOPA) or Bargaining Zone

4. Focus on aspiration level

Final Price

B uyer focused on B ATNA B uyer focused on aspiration level

B uyer's F ocus

5. Choose basic strategy

Stakes vs. Relationship
ACCOMMODATIN G (Relationships)
Importance of Relationship (cooperativeness)

COLLABORATING (Balanced)

COMPROMISING

TABLING/AVOIDI NG (Tacit Importance of Stakes Coordination) (assertiveness)

COMPETING (Transactions)

6. Make first offer (or re-anchor)

Effect of 1st offer Choosing your opening offer

Room for movement Signals accuracy & bargaining style May be rejected

Negotiation range
zone)

(initial offer

Symmetry Size

Negotiation Range Symmetry & Size

Sellers RP Buyers Aspiration Sellers Asp

C
Bargaining Zone
Sellers RP

Buyers RP

C
Buyers RP

Sellers Aspiration

Buyers Aspiration

O
Bargaining Zone

= initial offer zone

7. Manage impressions

Dont talk too much Reveal information selectively Influence reference points & introduce new ones Focus on standards of fairness Use affect & body language to signal Appear unable to concede

Never, EVER purr during the negotiating process, Derwood!

8. Use concessions strategically

Never accept first offer Size is signal Make/expect bilateral concessions Ask for one more thing (the nibble) Beware of escalating commitment

Whats Next.

Whats Next..

Monday

Virtual Victorian Federated Science Harborco

Tuesday

Multiparty Team Negotiation

Harborco Roles

Harborco Phillip A. Anastos

Federal Government William R. Rose

Unions

Environmental League Anthony M. Cellante

Other Ports Oladele O. Ogunsuyi

Governor

Erin C. Neumann

Deepak Thomas

Click Ritu Jethani Sanjay U. Parimi Vikas Paul D. Lafferty to edit Master subtitle style Kolte
Ann M. Cedrone David T. Perlman Olenna G. Tysiak Kelley D. Litzner Brendan C. Nangle

Brian J. Adrianse

Sandra M. Kort

Sunil Gangwani Marissa A. Vetrone Brian M. O'Malley Arvind G. Padmanabhan

Clare M. Conlin

Ryan G. Pape

Jason A. Kim

See you on Monday!