Chapter 11: Negotiation (SEMINAR) Flashcards
Negotiation (2 definitions)
= A discussion between two or more parties with the apparent aim of resolving divergent interests.
Negotiation is an “interpersonal decision-making process necessary whenever we cannot achieve our objectives single-handedly”
Why should negotiation be a core management skill?
- Dynamic, mobile nature of business means people must negotiate their existence in organizations throughout their careers.
- Increasing interdependence of people within organizations.
- Increasingly competitive business world.
- Increasingly diverse business world.
7 characteristics of negotiation
- There are two or more parties
- There is a conflict of interest
- Parties negotiate because they think they can get a better deal that by taking what the other side will give them
- Parties prefer to search for an agreement over fighting openly, capitulate, breaking off contract, taking the dispute to a third party (e.g., lawyer)
- Parties expect a give and take situation i.e., they expect that both sides will be willing to modify or give in somewhat on their opening statements, requests or demands.
- Tangibles = the price or the terms of the agreement (e.g., a contract)
- Intangibles = the underlying psychological motivations. In a successful negotiation, both tangibles and intangibles are resolves.
INTERDEPENDENCE
- why there is interdepence in negotiation
- 2 potential consequences (good/bad)
- how to potentially reduce
- In negotiation, both parties need each other
- This mutual dependency is called interdependence. Interdependent goals are an important aspect of negotiation
- One potential consequence of interdependent relationships is value creation (the performance of actions that increase worth)
- The other potential consequence of interdependent relationships is conflict.
How can we potentially reduce interdependence (within an organization)? Create buffers (to loosen coupling, by delaying the effect of one party on the other), use integrators (coordinate activities of multiple work units towards shared project), or combine jobs (job enrichment, to reduce task interdependence).
Distributive bargaining (some definitions)
- target/aspiration point
- resistance point
- bargaining zone/zone of agreement
- BATNA
- Target or aspiration point = what you want out of the negotiation (best case scenario)
- Resistance points or reservation price = you’d still be OK here, but no lower (only higher)
- Bargaining zone or zone of agreement = the area between the buyer’s and seller’s resistance points (the overlap of the two)
- BATNA (Best Alternative to a Negotiated Agreement) = your plan B, allows you to walk if needed
Take for example the missile negotiation done in class!
4 Negotiation contingencies
STYLE
- Friendly vs. confrontational
- Receptive, understanding, serious
PROCESS
- Steady open conversation vs.
- Private deliberation with formal (counter) offers
INFORMATION DISCLOSURE
- Lie, obfuscate, confuse vs.
- Share, demonstrate verify
PERSPECTIVE
- Short term = get the best possible deal now
- Long term = build relationship for future exchange
Anchoring effect
- definition
- experiment of Kahneman and Tversky
The anchoring effect is a cognitive bias that describes the common human tendency to rely too heavily on the first piece of information offered (the “anchor”) when making decisions.
It occurs when individuals use an initial piece of information to make subsequent judgments
Once the anchor is set, other adjustments are made by moving away from the anchor, and there is a bias toward interpreting information always around/in terms of the anchor
–> Kahneman and Tversky (founders of behavioral economics) were the first to study anchoring effects in 1974. They did a study where participants were asked to compute (12345678) vs. (87654321). The first group estimated 512, the second ground estimated 2,250 (while the correct answer is 40,320)!!
When are ANCHORS useful?
o Anchors may be useful in sales (e.g., car sales) or in wage negotiations
o Do NOT anchor if you have less information about the relevant market or industry that the other side does. Do your homework prior to the negotiation, so that you are not forced to let them make the first offer, or so that you do not make a fool of yourself by giving an unreasonable first offer!!!
Negotiation Planning
- definition/importance
- 8 steps
Planning is a very important part of negotiation. Overconfidence can lead to a lack of preparation. A lack of preparation may lead to not knowing what a good agreement is, wrongly assuming the other party is like yourself, and poor evaluation of alternative agreements!
Steps in negotiation planning:
- Identify the ISSUES
- Identify the PRIORITIES (goals)
- Estimate important issues to the counterparty
- Identify your best alternative to a negotiated agreement (BATNA)
- Determine your own: a) TARGET POINTS and b) RESISTANCE POINTS (know your own power!)
- Identify the ZONE OF AGREEMENT (estimate the other party’s target and resistance points) – gather information
- Determine the best way to present your opening offer (or counteroffer). Provide strong rationale for your position - anchoring effect!!
- Prepare for tricks and bargaining tactics.
Distributive vs. Integrative Bargaining
- definitions
- which strategy to use
DISTRIBUTIVE BARGAINING = A negotiation approach in which the goals of the parties are in conflict, and each party seeks to maximize its resources
INTEGRATIVE BARGAINING = A negotiation approach that focuses on the merits of the issue and seeks a win-win situation
The choice of strategy is reflected in the answers to two questions
- How much concern do I have in achieving the outcomes at stake in negotiation?
- How much concern do I have for current and future quality of the relationship with the other party?
Dual Concerns model (OVERVIEW) - 5 types of negotiations
- what is the scale?
- Competitive
- Accommodating
- Avoiding
- Collaborative
- Compromising
HIGH-LOW COOPERATIVENESS (EMPATHY) and ASSERTIVENESS
- Competitive (types of negotiators)
- scale assertiveness/empathy
- description
A “competitive” (forcing) conflict style maximizes assertiveness and minimizes empathy.
Competitive types:
- Enjoy negotiation
- Dominate/control the interaction
- View it as a game/sport with a winner and looser
- They pay less attention to the relationship (since focused on winning)
- Accommodating (types of negotiators)
- scale assertiveness/empathy
- description
An “accommodating” (yielding) conflict style maximizes empathy and minimizes assertiveness.
Accommodating types:
- Satisfaction from meeting the needs of others
- Are perceptive and intuitive about emotional states
- Detect subtle verbal and nonverbal cues and
- Tend to have good relationship building skills
- They tend to deflect or give up in the face of conflict out of the concern for the relationship
- Tend to be vulnerable to competitive types
- Avoiding (types of negotiators)
- scale assertiveness/empathy
- description
An “avoiding” conflict style is low both in assertiveness and in empathy.
Avoiders are:
- Adept at sidestepping pointless conflict
- Able to exercise tact and diplomacy in high-conflict situations
- Artfully increase their own leverage by waiting for others to make the first concession
- They may “leave money on the table” and miss opportunities
- Collaborative (types of negotiators)
- scale assertiveness/empathy
- description
“Collaborative” (problem solving) conflict types are highly assertive and highly empathetic.
They are:
- Concerned about the underlying relationship
- Sensitive to the other person’s needs while simultaneously being committed to having their own needs med
- See conflict as a creative opportunity
