Negotiations & Persuasion

Question 1

2 common issues in organisations where negotiation and persuasion can help:

Answer 1

Conflict over goals. In this situation, we need to bargain with someone, so that we can meet some of their goals and some of our own

Uncertainty over methods of assessing the decision, or the value of the idea or opinion. When this occurs, we need to persuade others that our opinion is correct.

Question 2

distributive vs. integrative negotiations

Answer 2

DISTRIBUTIVE Negotiations

• about dividing the pie
• involves only one issue
• the negotiators goal is to claim as much value for him or herself as possible
• fixed-sum games — one person’s gain is another person’s loss
• almost directly conflicting interests — each party is attempting to maximise his/her share of the fixed-sum payoff
• sum sometimes unknown
  
  • therefore, you need to prepare by assessing:
    
    • BATNA
    • Reservation Price
    • Bargaining Zone
    • Transaction cost
    • Goals or Aspirations – Target poin

INTEGRATIVE Negotiations

• about enlarging the pie
• the negotiators goal is to create as much value as possible
• always involves a distributive component
• can involve a win-win
• methods
  
  • ​negotiate multiple issues
  • uncover interests
  • capitalizing on differences
  • share information
  • etc.

Question 3

distributive vs. integrative negotiations - which comes first

Answer 3

1. First attempt to integrate (generate maximum value)
2. Then attempt to distribute (split it up)

Question 4

Reservation Price in Negotiations

Answer 4

The “bottom line”, or the point at which you are indifferent to whether you achieve a negotiated agreement or walk away. Anything below and you walk away.

Reservation price = BATNA +/- transaction costs to enact BATNA

• Never reveal your reservation price to opponents.

Question 5

Reservation point should never change unless:

Answer 5

• Your BATNA changes
• The terms of the deal change

Question 6

Bargaining Zone

Answer 6

the zone of possible agreement

The space between the buyer’s reservation price (BR) and the seller’s reservation price (SR) that is, the zone of possible agreement

There are positive and negative bargaining zones:

Question 7

opening offer vs. concessionary behaviour

in negotiations

Answer 7

The opening offer is more influencial towards the final agreement than concessionary behaviour (framing/anchoring).

BUT, if you make the first offer, you run the risk of undercutting the bargaining zone, potentially leaving yourself with little room to make concessions (compromises).

Question 8

Under what conditions are concessions effective?

Answer 8

1. Allow yourself room to make concessions, but every new concession should be smaller than the previous concession you have made.
2. Each concession must be justified.
3. Make concessions only after getting the full list of demands from your partner.
4. Offer concessions only if your previous concession was reciprocated (responded to).

Question 9

The Pareto Efficient Agreement (Frontier)

Answer 9

An agreement is defined as pareto efficient when there is no other agreement that would make any party better off without decreasing the outcomes to any other party.

Pareto efficiency does not imply equality or fairness.

In an inefficient pareto agreement, there exists an alternative that would benefit at least one party without injuring any party.

So What?

• Most negotiations involve multiple issues (e.g. salary, benefits, working hours, etc.)
• Not all parties will care equally about all issues, hence potential for increased efficiency
• Negotiators take positions on each issue, but these are based on underlying interests
  
  • Positions could represent different interests
  • There are often many interests behind any one position

Question 10

The negotiator’s dilemma:

Why integrative negotiations are difficult

Answer 10

Non-separability of integrative and distributive negotiation

• Once value has been created, parties must determine how to divide it up

Value-_claiming_ tactics hinder value-_creation_

• The f__ixed-pie bias creates assumption that there is always a winner and a loser
• People tend to feel like they have ‘lost’ if they come out of a negotiation worse off than the other person (don’t get an equal share) even if the outcome is above their BATNA
• But creating value requires sharing information and cooperating which are hard to achieve under fixed-pie biases.

Question 11

Capitalising on differences in parties’ preferences:

differences can be good…

Answer 11

differences in priorities

• both parties can be satisfied: e.g. work at home—>more office space

differences in risk preferences

• e.g. higher base salary vs lower base + variable pay

differences in assessing the probability of future events

• E.g. Forecasting that house prices will go up and ready to pay the price the seller is asking vs forecasting that house prices will go down and eager to sell.

differences in time preferences

• E.g. Car dealers might be interested to give concessions if you buy a car on 31st December because they are interested to increase their annual sales.

Question 12

Trade-off differences

Answer 12

When the other side cares more about something than you do, you want them to have it, but “at a price”

Question 13

Issue by issue (distributive) & Package deals (integrative)

Answer 13

Issue by issue (distributive)

• Becomes a sequential distributive negotiation
• More contentious/controversial

Package deals (integrative)

• Understanding interests and priorities
• Finding issues to trade off – give them what they want and get what you want in return
• Flexibility (real and perceived)

Question 14

What is a BATNA?

Answer 14

Best Alternative To a Negotiated Agreement

Determines at what point you would walk away from the negotiation without making a deal and what you will do if there’s no deal.

Question 15

Tactics for dealing with conflict over goals: Negotiations

Key tactics for distr**ibutive** negotiations

Answer 15

Key tactics for distr**ibutive** negotiations

• Know your BATNA
  
  • highlight the strength of your BATNA without providing specifics
  • your biggest source of power in a negotiation; strong BATNA means no desperation
• Know the opposition’s BATNA
  
  • never reveal this information to your opposition
  • once revealed, the opposition can make a better offer
• Define your reservation price (but do not reveal)
• Make sure your concessions are responded to
• Consider how to anchor your opposition
  
  • far-away anchors (from what you actually goal) = more room for concessions
  • people tend to adjust insufficiently, they are likely to think that the value you will actually be willing to pay is lower
  • your next offer will seem much better in contrast

Question 16

Getting information for integrative agreements

Answer 16

1) Build trust and share information (but not reservation price)
2) Ask diagnostic questions to understand interests

• Listen to the answers; don’t argue
• Don’t be afraid to rephrase questions and to seek clarifications (ask why? /why not?)
• Generate more options, ask about preferences for different scenarios (What if….)

3) Give away some information about preferencesand priorities

Question 17

2 common opportunities to add value / enlarge the pie during negotiations

Answer 17

People have deeper interests that underlie their ‘superficial’ positions. For instance, in a salary negotiation, people are unlikely to care purely about the monetary aspect of their salary (family, lifestyle, etc.) Negotiators can enlarge the pie if they can uncover these underlying interests and finds to meet the same interest in a different way.

People don’t care about all issues equally. Therefore, there is an opportunity to enlarge the pie by giving one person more on the issue that they care more about and the other person more on the issue that they care more about. The best concessions are those that don’t actually cost you anything (because you don’t care about the issue), but that others value a great deal.

Question 18

Tactics for dealing with conflict over goals: Negotiations

Key tactics for integrative negotiations

Answer 18

Because there are often opportunites to enlarge the pie, it is important for integrative negotiators to:

• Evaluate
  
  1. Issues
  2. BATNAs
  3. reservation points
• Think about
  
  1. underlying issues by building trust and sharing information of your own
  2. capitalising on trade differences
• Negotiate multiple issues at once – package different issues together so that you are able to trade one issue off against the other (don’t discuss issue by issue)
• Ask what is wrong with your proposal
• Ask diagnostic questions and listen; don’t argue
• Trade off when there are differences in preferences
• Be firm on interests, but open to options.
• Generate more options, ask about preferences for different scenarios (What if….)

Question 19

6 tactics for dealing with differences in judgment: Persuasion

Answer 19

Tactics for influencing people’s subjective judgment on issues.

1. Reciprocity:

• we try to repay in kind what others give to us

2. Commitment:

• Once we make a choice or take a stand, we will encounter personal and interpersonal pressures to behave consistently with that commitment
• Commitments are most effective when they are active, public, effortful, and viewed as internally motivated (uncoerced)

3. Authority:

• We tend to defer to (obey) authorities in a mindless fashion
• There is a tendency to respond to the mere symbol of authority rather than to its substance (titles, uniforms)

4. Majority influence:

• The greater the number of people who find any idea correct, the more we will perceive the idea to be correct
• We use others actions to decide on proper behaviours for ourselves when uncertainty reigns and when the others are similar to us

5. Liking people:

• We prefer to say yes to people we know and like.
• We tend to like people who are: Physically attractive, similar to us, compliment us, are associated with positive things.

6. Scarcity:

• We tend to assign more value to opportunities when they are less available
• Scarcity seems to be particularly potent when they are newly scarce and when we compete with others for them
• Limited numbers and time limits

Question 20

Decision Situation Matrix

& what does it tell us?

Answer 20

Different kinds of decision environments require different approaches to convince others of our decisions.

Question 21

guidelines on making the first offer

Answer 21

• Research
• Aggressive/Extreme first offer
• Justify based on your BATNA and goals
• Consider timing and other side’s alternatives
• Talk about your offer as long as possible
• The more complex the negotiation, the greater the anchoring advantage