Problem 6: Negotiation Flashcards
When do we negotiate?
When two or more parties need to reach a joint decision but have different preferences
decision-analytic approach to negotiations
focuses on how “erring folks like you and me actually behave”
Assessments on three key sets of information:
1. each party’s alternative to a negotiated agreement
2. each party’s set of interests
3. the relative importance of each party’s interests
BATNA
Best Alternative To a Negotiated Agreement
–> what we will do if we fail to reach an agreement
–> the minimum outcome we require of a negotiated agreement
reservation point
the point at which the negotiator is indifferent between a negotiated agreement and an impasse
–> below it, the negotiator would prefer impasse to settlement
–> determined by the BATNA
Claiming Value
slicing the pie or individual gains
positive bargaining zone
a set of resolutions that both parties would prefer over an impasse (overlapping reservation points)
negative bargaining zone
the reservation points of the two parties do not overlap
Creating Value
expanding the pie or joint gain
–> through the process of identifying and adding issues
–> skill differences between parties collaborating on a project often contribute to the partnership’s success
–> complementary skills create the opportunity to make trades in work allocation, to the benefit of both parties
Creating Value through Bets
Four ways in which contingent contracts/bets can improve the outcomes of negotiations:
1. bets build on differences to create joint value
2. bets help manage biases
3. bets diagnose disingenuous parties
4. bets establish incentives for performance
Tools of Value Creation
Build trust and share information
Ask questions
–> by asking questions you increase the likelihood of learning critical information that will allow you to find wise trades
Strategically disclose information
–> share information incrementally, back and forth
–> behaviors in negotiation are often reciprocated
Negotiate multiple issues
–> the relative importance of each issue to each party only becomes apparent when the issues are discussed simultaneously
–> packages of issues
Make multiple offers simultaneously
–> allows you to come across as a flexible negotiator
–> signals that you are willing to be accommodating and that you are interested in understanding the other party’s preferences
Search for post-settlement settlements
Best Practices in Negotiations:
1 - Be Prepared
advantages: understanding own interests and BATNA, evaluating other party’s offers more effectively/efficiently, understanding the nuances of the concession-making processes, achieving negotiation goals
Best Practices in Negotiations:
2 - Diagnose the fundamental structure of the negotiaton
negotiators should make a conscious assessment about whether they are facing a fundamentally distributive negotiation, and integrative negotiation, or a blend of the two, and choose their strategies accordingly
Best Practices in Negotiation:
3 - Identify and work the BATNA
–> have a strong BATNA
–> be aware of the other negotiator’s BATNA
Best Practices in Negotiation:
4 - Be willing to walk away
be willing to walk away from a negotiation when no agreement is better than a poor agreement or when the process is so offensive that the deal isn’t worth the work, or you don’t trust the other party to follow through
Best Practices in Negotiation:
5 - Mastering the key paradoxes of negotiation
paradoxes - seemingly contradictory elements that actually occur together
–> strive for balance in these situations
Claiming Value vs. Creating Value
Sticking by your principle vs. Being resilient enough to go with the flow
Sticking with your strategy vs. Opportunistically pursuing new options
Being too honest and open vs. Being too closed and opaque
Being too trusting vs. Being too distrusting
Best Practices in Negotiation:
6 - Remembering the intangibles
intangibles –> deep psychological factors that motivate negotiators such as winning, avoiding loss, looking tough or strong to others, not looking weak, being fair, standing by my principles…
–> look for changes in the other negotiator’s behavior to identify intangibles
–> surface the other party’s intangibles by asking open questions
–> surface the other party’s intangibles by taking an observer or listener with you to the negotiation
Best Practices in Negotiation:
7 - Actively manage coalitions
Negotiators should recognize three types of coalitions and their potential benefits:
(1) coalitions against you
(2) coalitions that support you
(3) loose, undefined coalitions that may materialize either for or against you
Best Practices in Negotiation:
8 - Savor and protect your reputation
a positive reputation gives you a significant competitive advantage
shape the reputation and enhance it
Best Practices in Negotiation:
9 - Remember that rationality and fairness are relative
negotiators need to be aware of the tendency that people tend to see the world in a self-serving manner –> in themselves and the other party
Best Practices in Negotiation:
10 - Continue to learn from your experience
no two negotiations are identical
analyze each negotiation after it has concluded to review what happened and what could be learned
reflection time
negotiation coaching
diary on strengths and weaknesses
integrative style
behaviors that convey information about parties’ interests and priorities
–> value creation –> tools of value creation
distributive style
behaviors that try to influence the counterpart to make concessions
–> value claiming
–> focus on the other party’s BATNA and reservation point
–> extreme first offers
–> avoid unliteral concessions
–> be comfortable with silence
–> label confessions
–> make contingent concessions
Perceived gender differences in negotiation
women dislike negotiating
women are less likely to initiate negotiations
women report greater anxiety than men about negotiating and are less likely to perceive situations as negotiable
Explanations for perceived gender differences in negotiation
backlash –> it might actually be optimal for women to avoid negotiations in situations in which men might benefit from tough negotiation tactics
preferences –> women might simply like to negotiate less aggressively than men or do not know when negotiating is appropriate
cultural precursors –> women and men are raised differently as a result, their preferences are shaped differently
evolutionary basis –> differences in aggressiveness that are not unique to humans
Findings of a study about gender differences in negotiation
–> women do not have an inherent, natural disadvantage in bargaining
–> bargaining outcomes across gender can be crucially culture-dependent
–> women have a better understanding of the nature of a negotiation, and they tend to have higher risk aversion
–> giving women more experience in bargaining or related monetary decisions might be quite conductive to enhancing outcomes
Culture and Negotiation
–> Eastern and Middle Eastern cultures will place a heavier emphasis on relational outcomes than Western cultures
–> negotiators’ trust and goals influence their strategies, with high trust and cooperative goals promoting information exchange, and low trust and competitive goals promoting persuasion and offers
‘culture-by-context’ perspective
–> culture inclines negotiators to deal with the same type of contextual influences differently
–> reaching any agreement is more difficult in intercultural than intracultural negotiations
- less joint value
- worse economic outcomes
–> cultural intelligence, social goals, and deep multicultural experience appear to facilitate value creation in intercultural negotiations
