Negotiation Section 01: Negotiation Fundamentals

Strategy versus Tactics A major difference between strategy and tactics is that of scale, perspective, or immediacy.
Tactics are short-term, adaptive moves designed to enact strategies.
Tactics are subordinate to strategy.
A unilateral choice is made without active involvement of the other party.
Here, a dual concerns model asks two questions of a negotiator’s unilateral choice of strategy.
How much concern does the negotiator have for achieving the substantive outcomes at stake in this negotiation?
How much concern does the negotiator have for the current and future quality of the relationship with the other party? 4<br>

Figure 4.2: The Dual Concerns Model Jump to slide containing descriptive text. Source: Adapted from Newsom, Walter B., “The Dual Concerns Model,” The Academy of Management Executive. Briarcliff Manor, NY: Academy of Management, 1989. 5<br>

Alternative Situational Strategies There are at least four different types of strategies.
A strong interest in only substantive outcomes supports a competitive (distributive) strategy.
A strong interest in only the relationship goals suggests and accommodation strategy.
If both substance and relationship are important, pursue a collaborative (integrative) strategy.
If neither outcomes is important, consider avoiding negotiation.
Each approach has implications for negotiation planning and preparation. 6<br>

The Nonengagement Strategy: Avoidance There are reasons to choose not to negotiate.
If you can meet your own needs, avoid negotiating.
It may not be worth the time and effort.
Attractive alternatives provide a reason to avoid negotiation.
A negotiator with strong alternatives has considerable power.
It can influence the decision about whether to avoid negotiation, strictly on efficiency grounds.
But having a weak alternative may also suggest avoiding negotiation.
Negotiators may accept poor outcomes when the alternative is poor. 7<br>

Active-Engagement Strategies Accommodation is as much a win-lose strategy as competition.
Its imbalance is the other direction – I lose, you win.
Used to build relationships.
Each of the three active-engagement strategies – accommodation, competition, and collaboration – have drawbacks.
Distributive strategies distort the other side’s contributions, motives, needs, and position.
Integrative strategies without regard to reciprocity, allows other’s to manipulate and exploit the collaborator, and take advantage.
Accommodative strategies may generate a pattern of giving in to keep the other happy or avoid a fight. 8<br>

The Flow of Negotiation: Stages and Phases Research studies the flow of negotiation through stages or phases.
One model relevant to integrative negotiation suggests seven key steps to an ideal negotiation process.
Preparation.
Relationship building.
Information gathering.
Information using.
Bidding.
Closing the deal.
Implementing the agreement.
Negotiator’s actions typically deviate from this prescriptive model. 9<br>

The Planning Process Defining the negotiating goal.
Defining the major issues related to achieving that goal.
Assembling the issues, ranking their importance, and defining the bargaining mix.
Defining the interest.
Knowing your alternatives (BATNAs). Knowing your limits, including resistance points.
Analyzing and understanding the other party’s goals, issues, and resistance points.
Setting your own targets and opening bids.
Assessing the social context of negotiation.
Presenting the issues to the other party: substance and process. 10<br>

Defining the Negotiating Goal Remember that goals can be:
Substantive or tangible.
Psychological or intangible.
Procedural or how to get to an agreement.
Goals can have both direct and indirect effects on the choice of strategy.
Knowing your own goals is the first and most important step in developing a strategy and executing a negotiation. 11<br>

Defining the Major Issue for Achieving the Goal Single-issue negotiations tend to end in distributive negotiations.
Multiple-issue negotiations tend to be more integrative.
The choice between a claiming-value or creating-value strategy is described as the “negotiator’s dilemma.”
While the number of issues affects strategy, it does not mean single-issue negotiations cannot be made integrative, or that multiple-issue negotiations will remain distributive.
A list of issues is best derived from these sources.
An analysis of all possible issues that need to be decided.
Previous experience in similar negotiations.
Research conducted to gather information.
Consultation with experts in that industry. 12<br>

Figure 4.4: How Issues Affect the Choice between Distributive and Integrative Strategy Jump to slide containing descriptive text. Sources: Lax, David, and Sebenius, James, Manager as Negotiator. New York, NY: Simon & Schuster, 1986; Watkins, Michael, Breakthrough Business Negotiation: A Toolbox for Managers. New York, NY: John Wiley & Sons, Inc., 2002. 13<br>

Issue Importance and the Bargaining Mix Assemble all the issues into a comprehensive list and combine the lists from both sides to determine the bargaining mix.
Prioritize the issues in three steps.
Determine which issues are most important and less important.
Rank-order, group, or assign points in proportion to importance.
Intangibles are difficult to prioritize, but try.
Determine whether the issues are linked or separate.
Separate issues are easily added or subtracted.
Concessions on connected issues tie into other issues.
Be willing to use “carrots” and “sticks.”
Create incentives to motivate the other toward your high-priority issues and disincentives to motivate them away from your low-priority issues. 14<br>

Defining the Interests After defining the issues, negotiators proceed to define the underlying interests and needs.
Positions are what a negotiator wants.
Interests are why they want them.
Like goals, interests fall into three groups.
Substantive – directly related to the focal issues under negotiation.
Process-based – how the negotiators behave as they negotiate.
Relationship-based – tied to the current or future relationship.
Interests may also be based on the intangibles of negotiation. 15<br>

Knowing Your Alternatives – BATNAs Good preparation requires you establish two clear points.
Your alternatives if this deal cannot be successfully completed.
Your limits – the least acceptable offer you will sign.
BATNAs are other agreements negotiators could achieve and still meet their needs.
Alternatives are important in both distributive and integrative processes as they define whether the current outcome is best.
The better the alternatives, the more power you have as you can walk away from the current deal and still meet your needs and interests. 16<br>

Know Your Limits, Including a Resistance Point A resistance point is the place you should stop negotiations.
Any settlement beyond this point is not minimally acceptable.
Setting resistance points is a critical part of planning.
Clear resistance points help keep people from agreeing to deals that they later realize where not very smart. 17<br>

The Other’s Goals, Issues, and Resistance Points Gathering information about the other party is a critical step.
The goal is to understand how the other party is approaching the negotiation and what they are likely to want.
If impossible before deliberations, collect information during the opening stages.
Try to understand if the other party has the same goals as you.
Get a sense of their issues and bargaining mix using business history, financial data, and inventories –visit, or ask questions of others.
Uncovering their interests and needs may require a meeting.
Understanding the other’s limits and alternatives gives you information on how far you can “push” them. 18<br>

Setting Your Targets and Opening Bids When setting targets, keep these principles in mind.
Targets should be specific, difficult but achievable, and verifiable.
Target setting requires proactive thinking about your own objectives.
Consider how to package several issues and objectives.
Understand trade-offs and throwaways.
An opening bid may be the best possible outcome, an ideal solution, or something even better than achieved last time.
Beware over confidence – do not set an opening that is so unrealistic the other party gets angry, or walks away before responding. 19<br>

Assessing the Social Context of Negotiation When people negotiation in a professional context, there may be more than two parties.
A “field analysis” can be used to assess all the key parties.
Who is, or should be, on your team or on your side of the field?’
Who is on the other side of the field?
Who is on the sidelines and can affect the play of the game?
Who is in the stands?
What is going on in the broader environment in which the negotiation takes place?
A number of other context issues can affect negotiation.
Such as the history of the “game” relationship between parties and what relationship they desire in the future, deadlines, or even rules. 20<br>

Presenting Issues: Substance and Process Presenting and framing the issues.
Consider how to present your case to the other negotiator, providing facts and counterarguments to refute their anticipated arguments.
Planning the process and structuring the context by which information is presented – consider these elements.
What agenda should we follow?
Where should we negotiate?
How should we begin?
What is the time period of the negotiation?
How will we keep track of what is agreed to?
Have we created a mechanism for modifying the deal if necessary? 21<br>

End of Chapter 04. © 2019 McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education.<br>

Accessibility Content: Text Alternatives for Images 23<br>

Appendix: Figure 4.2 Return to parent-slide containing image. This graph shows four types of strategies depending on what is important to the negotiator. If relational outcome is important and substantive outcome is also important, collaboration is called for.
If relational outcome is important but substantive outcome is not important, then accommodation is called for.
If relational outcome is not important but substantive outcome is important, then competition is called for.
If neither relational outcome nor substantive outcome is important, then avoidance may be a strategy. Return to parent-slide containing image. 24<br>

Appendix: Figure 4.4 Return to parent-slide containing image. This simple ninety degree radiating line chart shows the increasing value to either the buyer or seller and the arcing line which joins these two, representing the claiming value process with the space leading up to the claiming value line is all part of creating value.
The vertical axis represents increasingly valuable outcomes for the buyer, and the horizontal axis represents increasingly valuable payoffs to the seller.
If the buyer dominates, they will receive an outcome high on the buyer’s axis, not advantageous to the seller – point A here, which is high on the vertical axis.
If the seller dominates, they will receive an outcome high on the seller’s axis, not advantageous to the buyer – point B here, far along on the horizontal axis.
If they are equally strong, the best they can do is some point along a line between points A and B – point C, which falls in the middle, in the creating value space.
Any point along the A-C-B line represents a possible solution to the single-issue negotiation. Return to parent-slide containing image. 25<br>