Description
A process of securing an agreement between parties with different needs and goals, but each having something to offer to the other, and each benefitting from establishing an agreement, though the balance of power can be dependent upon whether one party's needs are significantly greater than the other
Negotiation Skills
Objectives
To understand:
? Types of Negotiation
? Principles and concepts of Negotiation
? How to brighten chances of winning a proposal –
communication and persuasion
? Strategy and tactics
? Barriers to negotiation
? Nuances of International negotiation
Negotiation?
‘A process of securing an agreement between parties with
different needs and goals, but each having something to
offer to the other, and each benefitting from establishing an
agreement, though the balance of power can be dependent
upon whether one party’s needs are significantly greater
than the other’
Or
It is a process by which the involved parties or group resolve
matters of dispute by holding discussions and coming to an
agreement which can be mutually agreed by concerned
parties
Essence
? A process by which people deal with differences
? These differences may involve sale, purchase,
merger, contract etc
? Resolutions sought through negotiations
? To seek mutual agreement through dialogue
Types of Negotiations
? Distributive Negotiation
? Integrative Negotiation
Or
? Multi-phase
? Multi-party
Most negotiations combine elements of both
types.
Distributive Negotiation
? Parties compete over distribution of a fixed sumof value.
? Key question , ‘Who will claimthe most value?’
? Gain by one at the expense of the other. Also known as a
zero-sumnegotiation.
? Often, there is only one issue in distributive
negotiation: money.
? It is impossible to make trade-offs based on differing
preferences.
? Relationship and reputation are irrelevant; not willing to
trade value for value in their relationship.
EXAMPLE SALE OF CAR
Integrative Negotiation
? Parties cooperate to achieve maximum benefits by
integrating their interests into an agreement.
? Also known as win-win negotiation.
………Contd
? In business, integrative negotiations tend to occur at these
times:
? During the structuring of complex, long term partnerships or other
collaborations
? When the deal involves many financial and non-financial terms
? Between professional colleagues, or superiors and direct
subordinates whose long term interests benefit from the other’s
satisfaction
(…Contd ) Integrative Negotiation
? The goal of each side is to create as much value for each
other
? Each side makes trade-offs to get the things it values most,
giving upother less critical factors.
? When parties’ interests differ, your ability to claim what
you want from the deal does not necessarily detract from
the other party’s ability toclaimwhat it wants.
? Bothparties’ interests and preferences may be satisfied.
Distributive versus Integrative Negotiation
Characteristics Distributive Integrative
Outcome Win-lose Win-win
Motivation Individual gain Joint and individual gain
Interests Opposed Different but not always positive
Relationship Short term Long term or short term
Issues involved Single Multiple
Ability to make trade-offs Not flexible Flexible
Solution Not creative Creative
The Negotiator’s Dilemma
? Most business negotiations neither purely distributive nor purely
integrative; rather, competitive and cooperative elements are
entwined.
? Resulting tension / negotiator’s dilemma, requires difficult
strategic choices.
? Negotiators must balance competitive strategies, which make it
hard to cooperate and create value effectively, with cooperative
strategies, which make it hard to compete and claim value
effectively.
? At the core of the negotiator’s art is knowing whether to compete
where interests conflict --- claiming more instead of less ---- or to
create value by exchanging the information that leads to mutually
advantageous options.
Multi-phase
and
Multi-party
Negotiations
Multi-phase and Multi-party Negotiations
• Most people envision a negotiation as two people or teams sitting
opposite each other at the bargaining table; individual parties
eventually come to an agreement or walk away.
• It is fairly accurate for one-on-one negotiations that can be
handled in a single meeting, such as:
• The purchase of a car, or
• A discussion between a supervisor and a subordinate about job
performance or compensation.
• Few negotiations are so simple.
• Most involve more than two parties, and they sometimes take
place in phases, with each phase devoted to unique issues
Multi-phase Negotiations
Multiphase negotiations - implemented over time
in different phases.
?As parties proceed through phases, each
upholding its respective promises, future
dealings ensue.
?It allows parties to negotiate based on follow-
through and continuing communication.
Multi-phase Negotiations
Examples:
? The buy-out of an inventory based business, in
which the parties set a price for the business and
then agree to modify it later, based on the value of
the inventory on a specific date.
? An Architectural design contract in which the
architect and client agree on a price for the design
phase of a project, and then use the design to agree
on a price for the completion of construction
drawings.
Multi-phase Negotiations
Tips
? Become familiar with other party’s communication
and negotiation style.
? Build trust
? Monitor the other party
? Walk away from disconcerting negotiations.
Multi-phase Negotiations
Guidelines
? Ensure that the final phase is not the most significant in
money or impact, nor the most difficult.
? This practice will help protect you when incentives to
breach are the greatest.
? Most parties will not risk great injury to reputation by
failing to performan insignificant item.
? Pay attention to early warnings.
? Create enforcement mechanisms against non-
performance, or
? Create enforcement mechanisms against other
breaches of trust
Multi-party Negotiations
? Coalitions or alliances can form among the
parties and influence the process and
outcome.
? Coalitions have more power than any
individual party involved in the negotiation.
Multiparty Negotiations
Coalitions:
? A coalition is a temporary alliance of separate entities or
individuals who join together to seek a common purpose.
? A coalition can strengthen your negotiating position.
? Coalition-building can also extend a manager’s influence within
an organization.
There are two types of coalitions:
Natural Coalitions:
? These form between allies that share a broad range of
common interests.
Single-issue coalitions:
? These form when parties that differ on other issues unite to
support or block a single issue, often for different reasons.
Multi-party Negotiations
Guidelines:
? To be successful in multi-party negotiations, you
must:
? Determine your party’s interests and goals at the
negotiation table as well those of the coalitions you are
dealing with.
? Thenforma strategy.
? If your party is relatively weak, consider forming a
coalition with others to improve your bargaining
power:
? If your party is up against a coalition, you might
ways to break apart the coalition.
Stages of Negotiation
?Preparatory
?Exploratory
?Bidding
?Bargaining
?Settling and evaluation
?Ratification
?Dissemination
THANKS
Negotiation Principles
And
Key Concepts
-Value Driven-
-– Identify Opportunities –
- Be Flexible –
- Establish Trust -
Details of Basic Principles
? Negotiation is a voluntary activity any party
can break away or refuse to enter into
discussion
? Negotiation starts when one party wants to
change status quo
? Negotiation is incomplete if no mutually
acceptable decision is arrived at.
? Timing is an important component
? There is no winning
? Win-win situation – basic requirement
General Mistakes Committed
• Not knowing your power
• Believing other party knows your powers
• Getting intimidated by other ‘Big shot, Little
shot syndrome’
• Getting intimidated by statistics, precedents,
regulations etc. Question them
• Not realizing that other party needs
agreement as much as you do
Contd …..
• Preset mindset
• Not knowing who the final authority is
• Seeking only general goal
• Failing to offer proper arguments
• Discussing insignificant issues
• Poor communication
• Ignoring timing and location
• Giving up when deadlock reached.
• Not knowing right time to close
Key Concepts:
The Fundamental Framework
Four Key Concepts: Fundamental Framework
? People negotiate when they do not have the power to force a
certain outcome.
? They negotiate only when they believe it is to their advantage.
? A negotiated solution is advantageous only when a better option
is not available.
? Any successful negotiation must have a fundamental framework
based on knowledge of three things:
? The best alternative to negotiation
? The minimumthreshold for a negotiated deal
? How flexible a party is willing to be and what trade-off it is willing
to make
Four Key Concepts
? BATNA (Best Alternative To a Negotiated Agreement):
? Your options if you fail to reach agreement during a negotiation.
? Reservation Price:
? The least favourable point at which you’ll accept a negotiated deal;
the “walk-away“ price.
? ZOPA (Zone Of Possible Agreement):
? The range in which a potential deal can take place; defined by the
overlap between the parties’ reservation prices.
? Value creation through trades:
? The trading of goods or services that have only modest value to their
holders but exceptional value to the other party.
BATNA
Best Alternative To a Negotiated Agreement
? Your BATNA is your preferred course of action in the
absence of a deal.
? Knowing your BATNA means knowing what you’ll do or
what will happen if you do not reach agreement.
? Therefore, it is critical to know your BATNA before
entering into any negotiation.
The Reservation Price
? Your reservation price, is also referred to your walk-away
point.
? This is the least favourable point at which you accept a deal.
? Your reservation price should be derived fromyour BATNA
but is not necessarily the same thing.
? The reservation price and BATNA will be similar if the deal
is only about money and a credible monetary offer is the
BATNA.
ZOPA
? Zone Of Possible Agreement
?The ZOPA is the range in which a deal can take place. Each party’s
reservation price determines one end of the ZOPA. The ZOPA itself
exists, if at all, in the overlap between the parties’ reservation price.
Example:
?A buyer has set a reservation price of Rs. 275,000 for the purchase of
a commercial warehouse and would like to pay as little as possible.
The seller has set a reservation price of Rs. 250,000 and would like
to obtain as much as possible. The ZOPA, therefore, is the range
between Rs. 250,000 and Rs. 275,000.
Zone Of Possible Agreement
Seller’s
reservation
price
Buyer’s
reservation
price
2,75,000
2,5o,000
Zone of possible agreement
Somewhere between 250,000 and 275,000
If the numbers are reversed there would be no ZOPA, no overlap in
the range in which they would agree. No agreement is possible, no
matter how skilled negotiators, unless there were other elements
value to be considered ---- or one or both sides’ reservation prices
changed.
THANKS
Preparatory and Opening Stage
Preparatory and Opening Stage
Preparatory Phase
? Assessing relative strength of two parties.
? Set negotiating objectives – ask, ‘What are real
issues?’ ‘Which parties should be involved?’.
? It saves you from surprise and unexpected when other
party introduces unexpected facts and figures.
? Plan the best way to argue your case.
? Assess your and other parties bargaining power.
First Impression – The First Reaction
? Significance of this period
? What should we aim to achieve
? Methodology to achieve the aim
? Who leads
? High level of concentration and energy
? The choice of opening topic sets
precedence
? Once established it becomes a norm
? Attitude identified – aggressive/
defensive/argumentative/counter
aggressive
? ‘Pecking order’ is established
?A business like approach
?A meeting of minds
?Early establishment of co-operation between parties
?A shared understanding of sequence of activities
?Imp of continuity and development of brisk pace
Need to distinguish three different
dimensions of negotiating:
oThe content
oThe procedures
oThe personal interaction
Content
The range of topics to be settled
Oil Contract
• Quality of oil
• Quantity
• Delivery
• Terms
• Discounts
Banking Loan
• Money
• Rate of interest
• Period
• Security
• Repayment
oPlanning
oAgenda formulation
oControl of meeting
oPreparations – physical setting and topics
oPreliminaries between parties
oPacing/schedule
oMethod/manner of interaction
oMethod of resolving conflicts
oAuthority to take decision
oHandling of ‘Influences’
oPurpose
oPlan
oPace
oPersonalities
“ Can we first agree on procedure?. I would like to check with you on
what we are hoping to achieve this afternoon, and how we should go
about it. Is it agreeable to you?”
AGREE
“Yes I agree”
“Well, we see the purpose of this meeting is purely exploratory – just to
exchange information on our respective positions. Is that how you too
see the purpose?’
“We would like to exchange information and get one step further. We
would like to have some discussion about the area in which we might do
business together.”
“Yes, we’d be glad to do if there is time. I assume it will take about an
hour. Is that agreeable.”
“Yes I agree”
“So, lets start.”
“OK then, we have agreed on the purpose of this
meeting, and the pace at which we must work, and the
we are going to tackle it.”
Lets introduce ourselves. Would you like me to start?”
? Sensitivity
? Matters at stake:
a) Who is going to speak first
b) Who is going to lead in forming agenda
c) How is time distributed in two parties
? Make use of powerful moment
? Cover the process issues:
a) Why we are here
b) What we are going to do
c) How long
d) Follow four Ps
? Emphasis be on ‘Agree’
? Defuse sensitive issues like ‘Pecking order’
? Use ‘Process approach’ as a routine; and continue to
use it.
THANKS
‘
Bidding and Bargaining
‘Satisfaction is not absolute, it
depends on the way people value
things’
Bargaining to our advantage, we are
concerned to make a fair deal in which
both parties will be equally satisfied
Or equally dissatisfied – in that case
we must bargain in such a way that the
dissatisfaction will be equally shared
between us.
Bargaining
1. The moves we must make at the
outset
2. The way to influence deal
3. Making concessions
4. Breaking an impasse
5. Towards a settlement
Framework -Considerations
1. What is he bidding already.
2. Don’t worry why is he bidding like
that but slowly establish ‘why’
3. Fringe interests, which he can
easily give in
4. Find out his flexibility band
5. Don’t speculate his opinion
6. Avoid deep diving, reserve your
comments, just register
ASSESS OVER ALL SITUATION
At the outset…
•A. Imaginary ? Because of
communication barriers
B. Invented ? - Part of
bluff/counter-bluff
C. Real ?
Differences between Parties
•A. Imaginary ? Because of
communication barriers
B. Invented ? - Part of
bluff/counter-bluff
C. Real ?
OPTIONS TO HANDLE DIFFERENCES
1. Accept
2. Reject
3. Negotiate
Differences between Parties
A. Imaginary ? Because of communication
barriers
B. Invented ? - Part of bluff/counter-bluff
C. Real ?
OPTIONS TO HANDLE DIFFERENCES
1. Accept
2. Reject
3. Negotiate
- Offer new offer
- Seek new offer
- Change shape of deal
(quantity/quality)
- Give and take
Differences between Parties
1. Influence the negotiator
or
2. Influence the situation
- Offer different deal
- Similar deal but better
conditions for him
- Readiness to offer better
conditions to him when he offers
- Different ways of valuing things
- A different plan to settlement
- Package plus package
- A new opportunity ( May be we can
offer free service for one year)
- Bluff and brinkmanship
Influence the deal
1. Concession by one party to match
other party’s concessions.
2. Pace of giving concessions must
match with that of the other
3. Trade our concessions to our
advantage
4. Help him to see each of our
concessions as being significant
5. Aspire high
6. Move at measured pace
Concessions - Pattern
. At the outset find out other party’s
needs and interests
. Assess situation and decide how to
handle
. Prepare for each successive round
of bargaining
. Influence other negotiator or
situation
. Bluff and adopt brinkmanship
. Measured pace – a must
. Pay attention to non-verbal clues
. Avoid impasse
. Recognize imminent settlement –
make symbolic closure
In a Nutshell
THANKS
Negotiation Tactics
Negotiation Tactics
?Negotiation decoy – later negotiate with
other party
?Extreme offers – Non-verbal bewilderment
/surprise
?The negotiation nibble - Last moment,
“Transportation and insurance is included,
isn’t it?? “If you are willing to pay the extra 3%
we will include these two items.”
?Cherry-picking – “This is what other
companies are offering., so you will need to at
least match those.”
…….Cont
?Negotiation flinch – physical reaction like
gasping for air, surprise, bewilderment,
laughter etc. “I notice you look surprised, what
were you expecting?”
?Mutt and Jeff / hawk and dove / Good
cop/bad cop. “You remind me of that classic
case of police interrogation.”
? Mandated authority – “Oh! That will not be
acceptable to the Chairman.”
?“Take it or leave it”
…..Cont
?Negotiation deadline - ‘My flight is leaving in
two hours.”., or “ We love your product and
organization, but can’t afford to pay more than
X.” “What will happen if you don’t meet this
demand of yours? Print outs – price lists to
convince and impress
?Moral appeal – ‘It will help the workers / society
?Name dropping / picture / sudden appearance
?Recessing –’ Let us have a break”
?Full disclosure – To win the confidence
… Cont
? Negotiation planted information – Media, sources,
common friends etc
? Negotiation deliberate mistake – In the final
documents. Notice and inform them. Don’t allow
them to be morally on a higher platform
? All I have is only 60 % - to bargain
? Lubrication – smooth talk, flattery and so on.
? Golf Club, dinner meeting etc
THANKS
Barriers To Agreement
Barriers To Agreement
Communication Problems
Communication is the medium of negotiation and often breakdown is
attributed to the lack of it.
Communication
Steps for handling:
? Ask for a break: Take some time to clear your head, refocus and
regain objectivity.
? Look for a pattern: Mentally replay what has been communicated,
and by whom.
? After the break, raise the issue in a non-accusatory way: Offer
to listen while the other side explains its perspective on the issue.
? Switch spokespeople: Have someone else act as the negotiator.
Ask the other party to do so if its representative irritates your team.
? Jointly document progress as it is made: This is important for
multiphase negotiations.
Barriers To Agreement
Die-hard Bargainers
These are the negotiators for whomevery deal is a battle.
Tips for handling:
? Know their game : Don’t let them intimidate you. Anticipate unreasonable offers,
grudging concessions and posturing.
? Be guarded in the information you disclose: Disclose only the information that
cannot be used against you.
? Suggest alternative packages or options when they are unwilling to share
information: When you present options and packages, the other side tends to ask
questions to clarify and compare offers. This will help you to understand the other
side’s interests and concerns.
? Indicate your willingness to walk away: If the other party sees that its difficult
behaviour may result in your walking away, it may back down and become more
cooperative.
Barriers To Agreement
Lack of Trust
You suspect that the other side is lying or bluffing. It may have no intention
of following through on its promises.
How should you respond?
? Emphasize the need for integrity: Stress that a deal is predicated on
its accuracy and truthful representations.
? Request documentation: Insist on documentation, and make the
terms of the deal contingent on the accuracy of that documentation.
? Insist on enforcement mechanisms: Add contingencies to the deal,
such as security deposit, an escrow arrangement, or penalties for non-
compliance (or perhaps positive incentives for early performance).
Barriers To Agreement
Potential Saboteurs
Whenever the other party perceives it the loser in the outcome of a
negotiation, expect resistance and possible sabotage.
Tips for handling:
? Identify potential Saboteurs:
? Consider augmenting the deal:
? Communicate potential benefits to resisters:
? Help resisters to find new roles:
? Think about the issue of control:
? Build a coalition with sufficient strength to overpower the saboteurs
Barriers To Agreement
Potential Saboteurs
? Whenever the other party perceives it the loser in the outcome of a
negotiation, expect resistance and possible sabotage.
Tips for handling
? Identify potential Saboteurs: Map out the stakeholders, their respective
interests, and their power to affect the agreement and its implementation.
? Consider augmenting the deal: Include something in the deal to benefit
the stakeholders who would otherwise have the incentive to sabotage.
? Communicate potential benefits to resisters: Those benefits might be
greater future job security, higher pay, and so on. There is no guarantee
that the benefits will exceed the losses to these individuals. But, explaining
the benefits will help shift the saboteurs’ fromnegatives to positives.
…..Contd
?Help resisters to find new roles: Those new roles should represent
genuine contributions and mitigate their losses.
?Think about the issue of control: Resistance to change may be out
of fear of losing control over the resisters’ own lives. You can return
some of it by making them active partners in the negotiation process or
in your change program.
?Build a coalition with sufficient strength to overpower the
saboteurs: A coalition may shift the balance of negotiating power in
your favour.
:
Barriers To Agreement
Differences in Gender and Culture
Negotiations often breakdown due to perceived differences in culture and
gender.
Guidelines for handling
? Look for a pattern to diagnose the problem: What kinds of issues create
difficulties? What types of misunderstandings have you had?
? Consider what assumptions each party has brought to the table: Are they
valid? Are any related specifically to the negotiation at hand or to the particular
company, and to differences in culture?
? Research possible areas of difference: Review any available literature about
the other party’s culture and howit compares with yours.
? Use what you have learnt to establish more comfortable communication:
Adjust your communication style, or articulate the differing norms or
assumptions you believe to have been the source of the problem.
? When you are prepared to reach final
agreement
? Quicker the better
? May need maneuvering
? Not to early, not leisurely (he may think of
objections)
? Read situation carefully before closing
? “Are you ready to close?”
? “Are we in agreement?”
? “I want to find out an agreement”
? “ You want to find an agreement, don’t you?”
? “I am willing to do X, You do Y.”
? Before that handle objections
? Close be smooth and seamless
? Identify objections quickly
? Remove these
? Bargain
? Persuasion
? Compromise small issues first, don’t dilute
major issue
? Give reasonable assurance – after sale service
? Button up issues
? Legal aspects
? Check, recheck, ………..
? If need be follow up
? If still objections, allow him to call off, cool
off
? No threat
? Leave the door open
? Issue surprises – new demands, new packages, backing
of concessions etc
? Time surprises – dead lines, pace, all night etc
? Move surprises – walk out recesses, delays, emotional
out bursts, interruptions
? Information surprises – introduce new rules, policies,
new data, tough questions
? Ego surprises – abusive, distrustful, one up man ship,
attack on integrity
? People surprises
? Authority surprises – decision maker missing/changed
? Venue surprises
STAY COOL, RECSESS, LISTEN,
THANKS
Skills of Effective Negotiators
Skills of Effective Negotiators
To increase effectiveness as a negotiator, focus on the following
skills:
? Align negotiating goals with organizational goals
? Be thoroughly prepared
? Determine the other side’s BATNA and reservation price
? Identify the interests of both sides, and develop value-
creating opportunities
Skills of Effective Negotiators
? To increase effectiveness as a negotiator, focus on the
following skills:
? Separate personal issues from negotiating issues
? Recognize potential barriers to agreement
? Know how to form coalitions
? Develop a reputation for reliability and trustworthiness
? Recognize relationship value
Skills of Effective Negotiators
? Align negotiating goals with organizational goals
? Effective negotiators operate within a framework that
supports the strategic goals of their organizations.
? Be thoroughly prepared
? An effective negotiator collects as much information s
possible in advance of deliberations,
? Is organized for all meetings, and
? Uses each negotiating phase to prepare for the next
Skills of Effective Negotiators
? Determine the other side’s BATNA and reservation price
? An astute negotiator uses dialogue with the other party and away-
from-the-table detective work (competitive intelligence)to
ascertain the other side’s BATNA and reservation price
? Identify the interests of both sides, and develop value
creating options:
? A sharp negotiator can help the other side to see the value of
sharing information and expanding value opportunities
Skills of Effective Negotiators
? Separate personal issues fromnegotiating issues:
? Accomplished negotiators know that the issues being discussed
are not about them – or even about the individuals sitting across
the table.
? Instead, accomplished negotiators operate with objective
detachment and focus on producing the best possible outcome.
? Recognize potential barriers to agreement
? Barriers are not always obvious.
? A skillful negotiator finds and neutralizes these barriers.
Skills of Effective Negotiators
? Knowhow to formcoalitions
? Not every negotiator is dealt a winning hand.
? The other side often has greater poser.
? A good negotiator, however, knows that a coalition of several weak players can
often counter that power.
? A skilled negotiator knows how to build such a coalition on a foundation of
shared interests
? Develop a reputation for reliability and trustworthiness
? The most effective negotiations are built on trust.
? Trust formed through one phase of negotiation pays dividends in the next.
? A negotiator earns trust by practicing ethical behaviour and by following
through all promises.
Implementation Phase
• Ratification in writing
• Spell out implementation plan – who, when
and how.
• Matters left undefined may become a subject
of disagreement later.
• Every person concerned be told about
agreement, its implementation and actions
to follow.
Negotiation Strategy – Discussion Stage
• Do not state whole case in beginning, but
proceed as discussion proceeds.
• Listen to other person’s views. Do not
interrupt.
• Notice tone not only words nervous,
confident, evasive, irritated, cool etc.
• Put searching questions – dates , facts,
figures and so on.
• DO NOT SAY “YOU ARE WRONG”
Negotiation Strategy – Discussion Stage (contd)
• Avoid confrontation tone instead encourage
discussion.
• Use impersonal terminology and not
personal criticism.
• Use adjournment to get a chance to consider
new points before committing,
• Change mood of discussion
• Use concession and compromise at correct
time.
• Use conditional compromise.
Negotiation Strategy – Discussion Stage (contd)
• Other party should not feel that they are
losing by accepting your concession /
compromise.
• Compromise and concessions must be in
context.
• Praise other person for good suggestion.
• Do not allow discussion to linger on
Agreement
? After long discussion FINAL should be taken
as FINAL without any further discussion.
? Be tactful and persuasive to let other party
that final outcome is as beneficial to them as
to you.
? Appreciate other party’s cooperation and
suggestions.
? Put every thing in writing.
? Obtain signatures.
In Case of Deadlock
? Point out that no further concession can be
made those would not be beneficial to either
party.
? Explain the consequences of deadlock – refer
to higher ups and arbitrator.
? Use ethical aspect – benefits to workers,
repute etc.
? Remain positive till end – keep trying.
Considerations
? Whether commercial or non-commercial
? Far reaching effect on industry, economy, and social
culture
? Involvement of:
a) Host country
b) Host country’s partners
c) Govt and its policy
d) Collaborators
e) Political parties
f) Bureaucracy
g) DRDO
h) Media
i) Public
Impact on the Host Country
?Country’s reputation
?Liberalization
?Give and take
?Foreign trade –foreign exchange earning, import
subsidies
?Govt’s interest
a) Promote local Ownership
b) Job opportunities
c) Internal development – Collaboration PSOs
and Pvt companies
d) Balance of power Transfer of technology
The Context of Negotiation
? Political Context
? Economic Context
? Social Context
? Cultural Context – Culture can impact:
a) Communication
b) Language
c) Dress
d) Food and feeding habits
e) Sense of self-respect and space
f) Learning process
g) Values and norms
h) Attitude
Culture
Negotiate to Improve
---- Negotiate to Succeed
Nine Steps To A Deal
PART 4: Nine Steps To A Deal
? Step 1: Determine satisfactory outcomes
? Step 2: Identify opportunities to create value
? Step 3: Identify your BATNA and reservation price
? Step 4: Improve your BATNA
? Step 5: Determine who has authority
? Step 6: Study the other side
? Step 7: Prepare for flexibility in the process
? Step 8: Gather objective criteria to establish fairness
? Step 9: Alter the process in your favour
Step 1: Determine satisfactory outcomes
? Try to uncover interests by asking questions that help you
to ascertain the other party’s priorities, concerns and
perspective.
? Determine the other side’s interests, however, can be
difficult – especially in distributive negotiations.
? A negotiation’s success is judged by its outcome.
? Thus, it’s best to be clear about what constitutes a good
outcome for you and for the other side before the
negotiation begins.
? Satisfactory outcomes typically addresses the interests
Step 2: Identify opportunities to create value
Once you understand what a good outcome
would look like for you and the other party,
you can identify areas of common ground and
opportunities for favourable trades.
Step 3:Identify your BATNA and reservation price
?It is critical to know your BATNA and reservation price
before a negotiation.
?It’s also prudent to estimate the other party's BATNA and
reservation price.
?If you know this information ahead of time, you will be
able to recognize when you have reached a favourable deal,
and you will have a better sense of when to hold firm or
make concessions.
?Never accept a deal that is worse than your BATNA.
Step 4: Improve your BATNA
?Your BATNA determines the point at which you can say no
to an unfavourable proposal. If you have a strong BATNA,
you can afford to negotiate for more favourable terms.
?Therefore, it’s wise to try to improve your BATNA before
and during deliberations with the other party.
Step 5: Determine who has authority
? It is best to negotiate with the person who has the decision
making authority.
? It reduces the chance of misunderstanding.
? Ask, search and identify the real decision maker.
? If you cannot meet this person, ascertain the level of
authority of the person negotiating with you.
? Plan accordingly and build the situation to reach the
decision maker.
Step 6: Study the other side
? Know about the organization
? Through their web site
? By talking to the vendors and customers
? Do pre-negotiation research on
? The organization – their culture, goal and values.
? The persons in the department
? The background and authority of the negotiator on the other side
Step 7: Prepare for flexibility in the process
?Be flexible and patient.
?Do not assume that a pre-determined path will be
followed.
?Be prepared to deal with new persons and unexpected
developments.
?Treat change as the opportunity for learning and creativity.
Step 8: Gather objective criteria to establish fairness
? To establish what is fair and reasonable, use external,
objective criteria.
? Be prepared to explain why the example in your favour is
more relevant in your case under negotiation.
? If the other party can be convinced that your criteria is fair
and reasonable then it will find hard to reject your
proposal.
? It will then more likely to feel satisfied with the final deal.
Step 9: Alter the process in your favour
?Ask for the agenda you are comfortable with.
?Heed your feelings if you suspect the meeting is rigged.
?Address the logistical factors such as place, time, persons
attending and the sequence in the agenda.
?Work behind the scene to educate others about your idea.
?Reposition the issue so that others view it from a different
perspective.
Preparation
Evaluation
Negotiation
Outcomes and
Information
Rounds of Negotiation
Value Creation Through Trades
?Negotiating parties can improve their positions by trading
the values at their disposal.
?Value creation through trades occurs in the context of
integrated negotiations.
?In this situation each party usually gets something it wants
in return for something it values much less.
Tips for Managing Relationship Value
? Recognize relationshipvalue
? Some negotiation, usually the integrative type, involve parties
that have important relationship they hope to retain.
? Managers want to maintain positive relationships with their
direct subordinates, manufacturers with their key suppliers, and
so on.
? An effective negotiator recognizes the importance of long-term
relationships and knows howto retain themby
? Creating trust,
? Communicating openly,
? Admitting to and addressing mistakes, and
? Asking for feedback.
Tips for Managing Relationship Value
?Create Trust
?Trust is created when people see tangible evidence that
your words and actions are in harmony.
?So, avoid making commitments you may not be able to
honour, and always do what you have committed to do.
?Communicate
?Negotiating parties should communicate their interests,
capabilities and concerns to each other.
Tips for Managing Relationship Value
?Never try to hide mistakes
?Mistakes are bound to happen, and acknowledging
them and addressing them – quickly – is always the
best course of action.
?Ask for feedback
?If everything appears to be going as planned, do not
assume that the other side sees it the same way.
?Be proactive in uncovering problems and the other
side will respect you for this.
Determining Your Reservation Price
1. Explore the variables that affect your reservation, or "walk-away', position
• What is the value of your deal on the table?
• How does this compare to the value of your BATNA?
• What other values need to be considered?
• If there is a monetary number involved in the negotiation, what is the lowest
amount you would consider?
• What are the minimum non-monetary terms that you would consider?
2. Evaluate the trade-offs between your issues and interests.
• Which issues or terms do you care most about?
• Are any of these issues or terms linked?
• How much of what you want on one issue or term would you trade off against
another?
• Are there different package deals that would be equivalent in value to you?
3. Articulate the parameters of your reservation price (The resulting terms or price
create the context for you to evaluate alternative approach)
doc_593947381.pdf
A process of securing an agreement between parties with different needs and goals, but each having something to offer to the other, and each benefitting from establishing an agreement, though the balance of power can be dependent upon whether one party's needs are significantly greater than the other
Negotiation Skills
Objectives
To understand:
? Types of Negotiation
? Principles and concepts of Negotiation
? How to brighten chances of winning a proposal –
communication and persuasion
? Strategy and tactics
? Barriers to negotiation
? Nuances of International negotiation
Negotiation?
‘A process of securing an agreement between parties with
different needs and goals, but each having something to
offer to the other, and each benefitting from establishing an
agreement, though the balance of power can be dependent
upon whether one party’s needs are significantly greater
than the other’
Or
It is a process by which the involved parties or group resolve
matters of dispute by holding discussions and coming to an
agreement which can be mutually agreed by concerned
parties
Essence
? A process by which people deal with differences
? These differences may involve sale, purchase,
merger, contract etc
? Resolutions sought through negotiations
? To seek mutual agreement through dialogue
Types of Negotiations
? Distributive Negotiation
? Integrative Negotiation
Or
? Multi-phase
? Multi-party
Most negotiations combine elements of both
types.
Distributive Negotiation
? Parties compete over distribution of a fixed sumof value.
? Key question , ‘Who will claimthe most value?’
? Gain by one at the expense of the other. Also known as a
zero-sumnegotiation.
? Often, there is only one issue in distributive
negotiation: money.
? It is impossible to make trade-offs based on differing
preferences.
? Relationship and reputation are irrelevant; not willing to
trade value for value in their relationship.
EXAMPLE SALE OF CAR
Integrative Negotiation
? Parties cooperate to achieve maximum benefits by
integrating their interests into an agreement.
? Also known as win-win negotiation.
………Contd
? In business, integrative negotiations tend to occur at these
times:
? During the structuring of complex, long term partnerships or other
collaborations
? When the deal involves many financial and non-financial terms
? Between professional colleagues, or superiors and direct
subordinates whose long term interests benefit from the other’s
satisfaction
(…Contd ) Integrative Negotiation
? The goal of each side is to create as much value for each
other
? Each side makes trade-offs to get the things it values most,
giving upother less critical factors.
? When parties’ interests differ, your ability to claim what
you want from the deal does not necessarily detract from
the other party’s ability toclaimwhat it wants.
? Bothparties’ interests and preferences may be satisfied.
Distributive versus Integrative Negotiation
Characteristics Distributive Integrative
Outcome Win-lose Win-win
Motivation Individual gain Joint and individual gain
Interests Opposed Different but not always positive
Relationship Short term Long term or short term
Issues involved Single Multiple
Ability to make trade-offs Not flexible Flexible
Solution Not creative Creative
The Negotiator’s Dilemma
? Most business negotiations neither purely distributive nor purely
integrative; rather, competitive and cooperative elements are
entwined.
? Resulting tension / negotiator’s dilemma, requires difficult
strategic choices.
? Negotiators must balance competitive strategies, which make it
hard to cooperate and create value effectively, with cooperative
strategies, which make it hard to compete and claim value
effectively.
? At the core of the negotiator’s art is knowing whether to compete
where interests conflict --- claiming more instead of less ---- or to
create value by exchanging the information that leads to mutually
advantageous options.
Multi-phase
and
Multi-party
Negotiations
Multi-phase and Multi-party Negotiations
• Most people envision a negotiation as two people or teams sitting
opposite each other at the bargaining table; individual parties
eventually come to an agreement or walk away.
• It is fairly accurate for one-on-one negotiations that can be
handled in a single meeting, such as:
• The purchase of a car, or
• A discussion between a supervisor and a subordinate about job
performance or compensation.
• Few negotiations are so simple.
• Most involve more than two parties, and they sometimes take
place in phases, with each phase devoted to unique issues
Multi-phase Negotiations
Multiphase negotiations - implemented over time
in different phases.
?As parties proceed through phases, each
upholding its respective promises, future
dealings ensue.
?It allows parties to negotiate based on follow-
through and continuing communication.
Multi-phase Negotiations
Examples:
? The buy-out of an inventory based business, in
which the parties set a price for the business and
then agree to modify it later, based on the value of
the inventory on a specific date.
? An Architectural design contract in which the
architect and client agree on a price for the design
phase of a project, and then use the design to agree
on a price for the completion of construction
drawings.
Multi-phase Negotiations
Tips
? Become familiar with other party’s communication
and negotiation style.
? Build trust
? Monitor the other party
? Walk away from disconcerting negotiations.
Multi-phase Negotiations
Guidelines
? Ensure that the final phase is not the most significant in
money or impact, nor the most difficult.
? This practice will help protect you when incentives to
breach are the greatest.
? Most parties will not risk great injury to reputation by
failing to performan insignificant item.
? Pay attention to early warnings.
? Create enforcement mechanisms against non-
performance, or
? Create enforcement mechanisms against other
breaches of trust
Multi-party Negotiations
? Coalitions or alliances can form among the
parties and influence the process and
outcome.
? Coalitions have more power than any
individual party involved in the negotiation.
Multiparty Negotiations
Coalitions:
? A coalition is a temporary alliance of separate entities or
individuals who join together to seek a common purpose.
? A coalition can strengthen your negotiating position.
? Coalition-building can also extend a manager’s influence within
an organization.
There are two types of coalitions:
Natural Coalitions:
? These form between allies that share a broad range of
common interests.
Single-issue coalitions:
? These form when parties that differ on other issues unite to
support or block a single issue, often for different reasons.
Multi-party Negotiations
Guidelines:
? To be successful in multi-party negotiations, you
must:
? Determine your party’s interests and goals at the
negotiation table as well those of the coalitions you are
dealing with.
? Thenforma strategy.
? If your party is relatively weak, consider forming a
coalition with others to improve your bargaining
power:
? If your party is up against a coalition, you might
ways to break apart the coalition.
Stages of Negotiation
?Preparatory
?Exploratory
?Bidding
?Bargaining
?Settling and evaluation
?Ratification
?Dissemination
THANKS
Negotiation Principles
And
Key Concepts
-Value Driven-
-– Identify Opportunities –
- Be Flexible –
- Establish Trust -
Details of Basic Principles
? Negotiation is a voluntary activity any party
can break away or refuse to enter into
discussion
? Negotiation starts when one party wants to
change status quo
? Negotiation is incomplete if no mutually
acceptable decision is arrived at.
? Timing is an important component
? There is no winning
? Win-win situation – basic requirement
General Mistakes Committed
• Not knowing your power
• Believing other party knows your powers
• Getting intimidated by other ‘Big shot, Little
shot syndrome’
• Getting intimidated by statistics, precedents,
regulations etc. Question them
• Not realizing that other party needs
agreement as much as you do
Contd …..
• Preset mindset
• Not knowing who the final authority is
• Seeking only general goal
• Failing to offer proper arguments
• Discussing insignificant issues
• Poor communication
• Ignoring timing and location
• Giving up when deadlock reached.
• Not knowing right time to close
Key Concepts:
The Fundamental Framework
Four Key Concepts: Fundamental Framework
? People negotiate when they do not have the power to force a
certain outcome.
? They negotiate only when they believe it is to their advantage.
? A negotiated solution is advantageous only when a better option
is not available.
? Any successful negotiation must have a fundamental framework
based on knowledge of three things:
? The best alternative to negotiation
? The minimumthreshold for a negotiated deal
? How flexible a party is willing to be and what trade-off it is willing
to make
Four Key Concepts
? BATNA (Best Alternative To a Negotiated Agreement):
? Your options if you fail to reach agreement during a negotiation.
? Reservation Price:
? The least favourable point at which you’ll accept a negotiated deal;
the “walk-away“ price.
? ZOPA (Zone Of Possible Agreement):
? The range in which a potential deal can take place; defined by the
overlap between the parties’ reservation prices.
? Value creation through trades:
? The trading of goods or services that have only modest value to their
holders but exceptional value to the other party.
BATNA
Best Alternative To a Negotiated Agreement
? Your BATNA is your preferred course of action in the
absence of a deal.
? Knowing your BATNA means knowing what you’ll do or
what will happen if you do not reach agreement.
? Therefore, it is critical to know your BATNA before
entering into any negotiation.
The Reservation Price
? Your reservation price, is also referred to your walk-away
point.
? This is the least favourable point at which you accept a deal.
? Your reservation price should be derived fromyour BATNA
but is not necessarily the same thing.
? The reservation price and BATNA will be similar if the deal
is only about money and a credible monetary offer is the
BATNA.
ZOPA
? Zone Of Possible Agreement
?The ZOPA is the range in which a deal can take place. Each party’s
reservation price determines one end of the ZOPA. The ZOPA itself
exists, if at all, in the overlap between the parties’ reservation price.
Example:
?A buyer has set a reservation price of Rs. 275,000 for the purchase of
a commercial warehouse and would like to pay as little as possible.
The seller has set a reservation price of Rs. 250,000 and would like
to obtain as much as possible. The ZOPA, therefore, is the range
between Rs. 250,000 and Rs. 275,000.
Zone Of Possible Agreement
Seller’s
reservation
price
Buyer’s
reservation
price
2,75,000
2,5o,000
Zone of possible agreement
Somewhere between 250,000 and 275,000
If the numbers are reversed there would be no ZOPA, no overlap in
the range in which they would agree. No agreement is possible, no
matter how skilled negotiators, unless there were other elements
value to be considered ---- or one or both sides’ reservation prices
changed.
THANKS
Preparatory and Opening Stage
Preparatory and Opening Stage
Preparatory Phase
? Assessing relative strength of two parties.
? Set negotiating objectives – ask, ‘What are real
issues?’ ‘Which parties should be involved?’.
? It saves you from surprise and unexpected when other
party introduces unexpected facts and figures.
? Plan the best way to argue your case.
? Assess your and other parties bargaining power.
First Impression – The First Reaction
? Significance of this period
? What should we aim to achieve
? Methodology to achieve the aim
? Who leads
? High level of concentration and energy
? The choice of opening topic sets
precedence
? Once established it becomes a norm
? Attitude identified – aggressive/
defensive/argumentative/counter
aggressive
? ‘Pecking order’ is established
?A business like approach
?A meeting of minds
?Early establishment of co-operation between parties
?A shared understanding of sequence of activities
?Imp of continuity and development of brisk pace
Need to distinguish three different
dimensions of negotiating:
oThe content
oThe procedures
oThe personal interaction
Content
The range of topics to be settled
Oil Contract
• Quality of oil
• Quantity
• Delivery
• Terms
• Discounts
Banking Loan
• Money
• Rate of interest
• Period
• Security
• Repayment
oPlanning
oAgenda formulation
oControl of meeting
oPreparations – physical setting and topics
oPreliminaries between parties
oPacing/schedule
oMethod/manner of interaction
oMethod of resolving conflicts
oAuthority to take decision
oHandling of ‘Influences’
oPurpose
oPlan
oPace
oPersonalities
“ Can we first agree on procedure?. I would like to check with you on
what we are hoping to achieve this afternoon, and how we should go
about it. Is it agreeable to you?”
AGREE
“Yes I agree”
“Well, we see the purpose of this meeting is purely exploratory – just to
exchange information on our respective positions. Is that how you too
see the purpose?’
“We would like to exchange information and get one step further. We
would like to have some discussion about the area in which we might do
business together.”
“Yes, we’d be glad to do if there is time. I assume it will take about an
hour. Is that agreeable.”
“Yes I agree”
“So, lets start.”
“OK then, we have agreed on the purpose of this
meeting, and the pace at which we must work, and the
we are going to tackle it.”
Lets introduce ourselves. Would you like me to start?”
? Sensitivity
? Matters at stake:
a) Who is going to speak first
b) Who is going to lead in forming agenda
c) How is time distributed in two parties
? Make use of powerful moment
? Cover the process issues:
a) Why we are here
b) What we are going to do
c) How long
d) Follow four Ps
? Emphasis be on ‘Agree’
? Defuse sensitive issues like ‘Pecking order’
? Use ‘Process approach’ as a routine; and continue to
use it.
THANKS
‘
Bidding and Bargaining
‘Satisfaction is not absolute, it
depends on the way people value
things’
Bargaining to our advantage, we are
concerned to make a fair deal in which
both parties will be equally satisfied
Or equally dissatisfied – in that case
we must bargain in such a way that the
dissatisfaction will be equally shared
between us.
Bargaining
1. The moves we must make at the
outset
2. The way to influence deal
3. Making concessions
4. Breaking an impasse
5. Towards a settlement
Framework -Considerations
1. What is he bidding already.
2. Don’t worry why is he bidding like
that but slowly establish ‘why’
3. Fringe interests, which he can
easily give in
4. Find out his flexibility band
5. Don’t speculate his opinion
6. Avoid deep diving, reserve your
comments, just register
ASSESS OVER ALL SITUATION
At the outset…
•A. Imaginary ? Because of
communication barriers
B. Invented ? - Part of
bluff/counter-bluff
C. Real ?
Differences between Parties
•A. Imaginary ? Because of
communication barriers
B. Invented ? - Part of
bluff/counter-bluff
C. Real ?
OPTIONS TO HANDLE DIFFERENCES
1. Accept
2. Reject
3. Negotiate
Differences between Parties
A. Imaginary ? Because of communication
barriers
B. Invented ? - Part of bluff/counter-bluff
C. Real ?
OPTIONS TO HANDLE DIFFERENCES
1. Accept
2. Reject
3. Negotiate
- Offer new offer
- Seek new offer
- Change shape of deal
(quantity/quality)
- Give and take
Differences between Parties
1. Influence the negotiator
or
2. Influence the situation
- Offer different deal
- Similar deal but better
conditions for him
- Readiness to offer better
conditions to him when he offers
- Different ways of valuing things
- A different plan to settlement
- Package plus package
- A new opportunity ( May be we can
offer free service for one year)
- Bluff and brinkmanship
Influence the deal
1. Concession by one party to match
other party’s concessions.
2. Pace of giving concessions must
match with that of the other
3. Trade our concessions to our
advantage
4. Help him to see each of our
concessions as being significant
5. Aspire high
6. Move at measured pace
Concessions - Pattern
. At the outset find out other party’s
needs and interests
. Assess situation and decide how to
handle
. Prepare for each successive round
of bargaining
. Influence other negotiator or
situation
. Bluff and adopt brinkmanship
. Measured pace – a must
. Pay attention to non-verbal clues
. Avoid impasse
. Recognize imminent settlement –
make symbolic closure
In a Nutshell
THANKS
Negotiation Tactics
Negotiation Tactics
?Negotiation decoy – later negotiate with
other party
?Extreme offers – Non-verbal bewilderment
/surprise
?The negotiation nibble - Last moment,
“Transportation and insurance is included,
isn’t it?? “If you are willing to pay the extra 3%
we will include these two items.”
?Cherry-picking – “This is what other
companies are offering., so you will need to at
least match those.”
…….Cont
?Negotiation flinch – physical reaction like
gasping for air, surprise, bewilderment,
laughter etc. “I notice you look surprised, what
were you expecting?”
?Mutt and Jeff / hawk and dove / Good
cop/bad cop. “You remind me of that classic
case of police interrogation.”
? Mandated authority – “Oh! That will not be
acceptable to the Chairman.”
?“Take it or leave it”
…..Cont
?Negotiation deadline - ‘My flight is leaving in
two hours.”., or “ We love your product and
organization, but can’t afford to pay more than
X.” “What will happen if you don’t meet this
demand of yours? Print outs – price lists to
convince and impress
?Moral appeal – ‘It will help the workers / society
?Name dropping / picture / sudden appearance
?Recessing –’ Let us have a break”
?Full disclosure – To win the confidence
… Cont
? Negotiation planted information – Media, sources,
common friends etc
? Negotiation deliberate mistake – In the final
documents. Notice and inform them. Don’t allow
them to be morally on a higher platform
? All I have is only 60 % - to bargain
? Lubrication – smooth talk, flattery and so on.
? Golf Club, dinner meeting etc
THANKS
Barriers To Agreement
Barriers To Agreement
Communication Problems
Communication is the medium of negotiation and often breakdown is
attributed to the lack of it.
Communication
Steps for handling:
? Ask for a break: Take some time to clear your head, refocus and
regain objectivity.
? Look for a pattern: Mentally replay what has been communicated,
and by whom.
? After the break, raise the issue in a non-accusatory way: Offer
to listen while the other side explains its perspective on the issue.
? Switch spokespeople: Have someone else act as the negotiator.
Ask the other party to do so if its representative irritates your team.
? Jointly document progress as it is made: This is important for
multiphase negotiations.
Barriers To Agreement
Die-hard Bargainers
These are the negotiators for whomevery deal is a battle.
Tips for handling:
? Know their game : Don’t let them intimidate you. Anticipate unreasonable offers,
grudging concessions and posturing.
? Be guarded in the information you disclose: Disclose only the information that
cannot be used against you.
? Suggest alternative packages or options when they are unwilling to share
information: When you present options and packages, the other side tends to ask
questions to clarify and compare offers. This will help you to understand the other
side’s interests and concerns.
? Indicate your willingness to walk away: If the other party sees that its difficult
behaviour may result in your walking away, it may back down and become more
cooperative.
Barriers To Agreement
Lack of Trust
You suspect that the other side is lying or bluffing. It may have no intention
of following through on its promises.
How should you respond?
? Emphasize the need for integrity: Stress that a deal is predicated on
its accuracy and truthful representations.
? Request documentation: Insist on documentation, and make the
terms of the deal contingent on the accuracy of that documentation.
? Insist on enforcement mechanisms: Add contingencies to the deal,
such as security deposit, an escrow arrangement, or penalties for non-
compliance (or perhaps positive incentives for early performance).
Barriers To Agreement
Potential Saboteurs
Whenever the other party perceives it the loser in the outcome of a
negotiation, expect resistance and possible sabotage.
Tips for handling:
? Identify potential Saboteurs:
? Consider augmenting the deal:
? Communicate potential benefits to resisters:
? Help resisters to find new roles:
? Think about the issue of control:
? Build a coalition with sufficient strength to overpower the saboteurs
Barriers To Agreement
Potential Saboteurs
? Whenever the other party perceives it the loser in the outcome of a
negotiation, expect resistance and possible sabotage.
Tips for handling
? Identify potential Saboteurs: Map out the stakeholders, their respective
interests, and their power to affect the agreement and its implementation.
? Consider augmenting the deal: Include something in the deal to benefit
the stakeholders who would otherwise have the incentive to sabotage.
? Communicate potential benefits to resisters: Those benefits might be
greater future job security, higher pay, and so on. There is no guarantee
that the benefits will exceed the losses to these individuals. But, explaining
the benefits will help shift the saboteurs’ fromnegatives to positives.
…..Contd
?Help resisters to find new roles: Those new roles should represent
genuine contributions and mitigate their losses.
?Think about the issue of control: Resistance to change may be out
of fear of losing control over the resisters’ own lives. You can return
some of it by making them active partners in the negotiation process or
in your change program.
?Build a coalition with sufficient strength to overpower the
saboteurs: A coalition may shift the balance of negotiating power in
your favour.
:
Barriers To Agreement
Differences in Gender and Culture
Negotiations often breakdown due to perceived differences in culture and
gender.
Guidelines for handling
? Look for a pattern to diagnose the problem: What kinds of issues create
difficulties? What types of misunderstandings have you had?
? Consider what assumptions each party has brought to the table: Are they
valid? Are any related specifically to the negotiation at hand or to the particular
company, and to differences in culture?
? Research possible areas of difference: Review any available literature about
the other party’s culture and howit compares with yours.
? Use what you have learnt to establish more comfortable communication:
Adjust your communication style, or articulate the differing norms or
assumptions you believe to have been the source of the problem.
? When you are prepared to reach final
agreement
? Quicker the better
? May need maneuvering
? Not to early, not leisurely (he may think of
objections)
? Read situation carefully before closing
? “Are you ready to close?”
? “Are we in agreement?”
? “I want to find out an agreement”
? “ You want to find an agreement, don’t you?”
? “I am willing to do X, You do Y.”
? Before that handle objections
? Close be smooth and seamless
? Identify objections quickly
? Remove these
? Bargain
? Persuasion
? Compromise small issues first, don’t dilute
major issue
? Give reasonable assurance – after sale service
? Button up issues
? Legal aspects
? Check, recheck, ………..
? If need be follow up
? If still objections, allow him to call off, cool
off
? No threat
? Leave the door open
? Issue surprises – new demands, new packages, backing
of concessions etc
? Time surprises – dead lines, pace, all night etc
? Move surprises – walk out recesses, delays, emotional
out bursts, interruptions
? Information surprises – introduce new rules, policies,
new data, tough questions
? Ego surprises – abusive, distrustful, one up man ship,
attack on integrity
? People surprises
? Authority surprises – decision maker missing/changed
? Venue surprises
STAY COOL, RECSESS, LISTEN,
THANKS
Skills of Effective Negotiators
Skills of Effective Negotiators
To increase effectiveness as a negotiator, focus on the following
skills:
? Align negotiating goals with organizational goals
? Be thoroughly prepared
? Determine the other side’s BATNA and reservation price
? Identify the interests of both sides, and develop value-
creating opportunities
Skills of Effective Negotiators
? To increase effectiveness as a negotiator, focus on the
following skills:
? Separate personal issues from negotiating issues
? Recognize potential barriers to agreement
? Know how to form coalitions
? Develop a reputation for reliability and trustworthiness
? Recognize relationship value
Skills of Effective Negotiators
? Align negotiating goals with organizational goals
? Effective negotiators operate within a framework that
supports the strategic goals of their organizations.
? Be thoroughly prepared
? An effective negotiator collects as much information s
possible in advance of deliberations,
? Is organized for all meetings, and
? Uses each negotiating phase to prepare for the next
Skills of Effective Negotiators
? Determine the other side’s BATNA and reservation price
? An astute negotiator uses dialogue with the other party and away-
from-the-table detective work (competitive intelligence)to
ascertain the other side’s BATNA and reservation price
? Identify the interests of both sides, and develop value
creating options:
? A sharp negotiator can help the other side to see the value of
sharing information and expanding value opportunities
Skills of Effective Negotiators
? Separate personal issues fromnegotiating issues:
? Accomplished negotiators know that the issues being discussed
are not about them – or even about the individuals sitting across
the table.
? Instead, accomplished negotiators operate with objective
detachment and focus on producing the best possible outcome.
? Recognize potential barriers to agreement
? Barriers are not always obvious.
? A skillful negotiator finds and neutralizes these barriers.
Skills of Effective Negotiators
? Knowhow to formcoalitions
? Not every negotiator is dealt a winning hand.
? The other side often has greater poser.
? A good negotiator, however, knows that a coalition of several weak players can
often counter that power.
? A skilled negotiator knows how to build such a coalition on a foundation of
shared interests
? Develop a reputation for reliability and trustworthiness
? The most effective negotiations are built on trust.
? Trust formed through one phase of negotiation pays dividends in the next.
? A negotiator earns trust by practicing ethical behaviour and by following
through all promises.
Implementation Phase
• Ratification in writing
• Spell out implementation plan – who, when
and how.
• Matters left undefined may become a subject
of disagreement later.
• Every person concerned be told about
agreement, its implementation and actions
to follow.
Negotiation Strategy – Discussion Stage
• Do not state whole case in beginning, but
proceed as discussion proceeds.
• Listen to other person’s views. Do not
interrupt.
• Notice tone not only words nervous,
confident, evasive, irritated, cool etc.
• Put searching questions – dates , facts,
figures and so on.
• DO NOT SAY “YOU ARE WRONG”
Negotiation Strategy – Discussion Stage (contd)
• Avoid confrontation tone instead encourage
discussion.
• Use impersonal terminology and not
personal criticism.
• Use adjournment to get a chance to consider
new points before committing,
• Change mood of discussion
• Use concession and compromise at correct
time.
• Use conditional compromise.
Negotiation Strategy – Discussion Stage (contd)
• Other party should not feel that they are
losing by accepting your concession /
compromise.
• Compromise and concessions must be in
context.
• Praise other person for good suggestion.
• Do not allow discussion to linger on
Agreement
? After long discussion FINAL should be taken
as FINAL without any further discussion.
? Be tactful and persuasive to let other party
that final outcome is as beneficial to them as
to you.
? Appreciate other party’s cooperation and
suggestions.
? Put every thing in writing.
? Obtain signatures.
In Case of Deadlock
? Point out that no further concession can be
made those would not be beneficial to either
party.
? Explain the consequences of deadlock – refer
to higher ups and arbitrator.
? Use ethical aspect – benefits to workers,
repute etc.
? Remain positive till end – keep trying.
Considerations
? Whether commercial or non-commercial
? Far reaching effect on industry, economy, and social
culture
? Involvement of:
a) Host country
b) Host country’s partners
c) Govt and its policy
d) Collaborators
e) Political parties
f) Bureaucracy
g) DRDO
h) Media
i) Public
Impact on the Host Country
?Country’s reputation
?Liberalization
?Give and take
?Foreign trade –foreign exchange earning, import
subsidies
?Govt’s interest
a) Promote local Ownership
b) Job opportunities
c) Internal development – Collaboration PSOs
and Pvt companies
d) Balance of power Transfer of technology
The Context of Negotiation
? Political Context
? Economic Context
? Social Context
? Cultural Context – Culture can impact:
a) Communication
b) Language
c) Dress
d) Food and feeding habits
e) Sense of self-respect and space
f) Learning process
g) Values and norms
h) Attitude
Culture
Negotiate to Improve
---- Negotiate to Succeed
Nine Steps To A Deal
PART 4: Nine Steps To A Deal
? Step 1: Determine satisfactory outcomes
? Step 2: Identify opportunities to create value
? Step 3: Identify your BATNA and reservation price
? Step 4: Improve your BATNA
? Step 5: Determine who has authority
? Step 6: Study the other side
? Step 7: Prepare for flexibility in the process
? Step 8: Gather objective criteria to establish fairness
? Step 9: Alter the process in your favour
Step 1: Determine satisfactory outcomes
? Try to uncover interests by asking questions that help you
to ascertain the other party’s priorities, concerns and
perspective.
? Determine the other side’s interests, however, can be
difficult – especially in distributive negotiations.
? A negotiation’s success is judged by its outcome.
? Thus, it’s best to be clear about what constitutes a good
outcome for you and for the other side before the
negotiation begins.
? Satisfactory outcomes typically addresses the interests
Step 2: Identify opportunities to create value
Once you understand what a good outcome
would look like for you and the other party,
you can identify areas of common ground and
opportunities for favourable trades.
Step 3:Identify your BATNA and reservation price
?It is critical to know your BATNA and reservation price
before a negotiation.
?It’s also prudent to estimate the other party's BATNA and
reservation price.
?If you know this information ahead of time, you will be
able to recognize when you have reached a favourable deal,
and you will have a better sense of when to hold firm or
make concessions.
?Never accept a deal that is worse than your BATNA.
Step 4: Improve your BATNA
?Your BATNA determines the point at which you can say no
to an unfavourable proposal. If you have a strong BATNA,
you can afford to negotiate for more favourable terms.
?Therefore, it’s wise to try to improve your BATNA before
and during deliberations with the other party.
Step 5: Determine who has authority
? It is best to negotiate with the person who has the decision
making authority.
? It reduces the chance of misunderstanding.
? Ask, search and identify the real decision maker.
? If you cannot meet this person, ascertain the level of
authority of the person negotiating with you.
? Plan accordingly and build the situation to reach the
decision maker.
Step 6: Study the other side
? Know about the organization
? Through their web site
? By talking to the vendors and customers
? Do pre-negotiation research on
? The organization – their culture, goal and values.
? The persons in the department
? The background and authority of the negotiator on the other side
Step 7: Prepare for flexibility in the process
?Be flexible and patient.
?Do not assume that a pre-determined path will be
followed.
?Be prepared to deal with new persons and unexpected
developments.
?Treat change as the opportunity for learning and creativity.
Step 8: Gather objective criteria to establish fairness
? To establish what is fair and reasonable, use external,
objective criteria.
? Be prepared to explain why the example in your favour is
more relevant in your case under negotiation.
? If the other party can be convinced that your criteria is fair
and reasonable then it will find hard to reject your
proposal.
? It will then more likely to feel satisfied with the final deal.
Step 9: Alter the process in your favour
?Ask for the agenda you are comfortable with.
?Heed your feelings if you suspect the meeting is rigged.
?Address the logistical factors such as place, time, persons
attending and the sequence in the agenda.
?Work behind the scene to educate others about your idea.
?Reposition the issue so that others view it from a different
perspective.
Preparation
Evaluation
Negotiation
Outcomes and
Information
Rounds of Negotiation
Value Creation Through Trades
?Negotiating parties can improve their positions by trading
the values at their disposal.
?Value creation through trades occurs in the context of
integrated negotiations.
?In this situation each party usually gets something it wants
in return for something it values much less.
Tips for Managing Relationship Value
? Recognize relationshipvalue
? Some negotiation, usually the integrative type, involve parties
that have important relationship they hope to retain.
? Managers want to maintain positive relationships with their
direct subordinates, manufacturers with their key suppliers, and
so on.
? An effective negotiator recognizes the importance of long-term
relationships and knows howto retain themby
? Creating trust,
? Communicating openly,
? Admitting to and addressing mistakes, and
? Asking for feedback.
Tips for Managing Relationship Value
?Create Trust
?Trust is created when people see tangible evidence that
your words and actions are in harmony.
?So, avoid making commitments you may not be able to
honour, and always do what you have committed to do.
?Communicate
?Negotiating parties should communicate their interests,
capabilities and concerns to each other.
Tips for Managing Relationship Value
?Never try to hide mistakes
?Mistakes are bound to happen, and acknowledging
them and addressing them – quickly – is always the
best course of action.
?Ask for feedback
?If everything appears to be going as planned, do not
assume that the other side sees it the same way.
?Be proactive in uncovering problems and the other
side will respect you for this.
Determining Your Reservation Price
1. Explore the variables that affect your reservation, or "walk-away', position
• What is the value of your deal on the table?
• How does this compare to the value of your BATNA?
• What other values need to be considered?
• If there is a monetary number involved in the negotiation, what is the lowest
amount you would consider?
• What are the minimum non-monetary terms that you would consider?
2. Evaluate the trade-offs between your issues and interests.
• Which issues or terms do you care most about?
• Are any of these issues or terms linked?
• How much of what you want on one issue or term would you trade off against
another?
• Are there different package deals that would be equivalent in value to you?
3. Articulate the parameters of your reservation price (The resulting terms or price
create the context for you to evaluate alternative approach)
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