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This course text is part of the learning content for this Edinburgh Business School course. In addition to this printed course text, you should also have access to the course website in this subject, which will provide you with more learning content, the Profiler software and past examination questions and answers. The content of this course text is updated from time to time, and all changes are reflected in the version of the text that appears on the accompanying website at http://coursewebsites.ebsglobal.net/. Most updates are minor, and examination questions will avoid any new or significantly altered material for two years following publication of the relevant material on the website. You can check the version of the course text via the version release number to be found on the front page of the text, and compare this to the version number of the latest PDF version of the text on the website. If you are studying this course as part of a tutored programme, you should contact your Centre for further information on any changes. Full terms and conditions that apply to students on any of the Edinburgh Business School courses are available on the website www.ebsglobal.net, and should have been notified to you either by Edinburgh Business School or by the centre or regional partner through whom you purchased your course. If this is not the case, please contact Edinburgh Business School at the address below: Edinburgh Business School Heriot-Watt University Edinburgh EH14 4AS United Kingdom Tel + 44 (0) 131 451 3090 Fax + 44 (0) 131 451 3002 Email enquiries@ebs.hw.ac.uk Website www.ebsglobal.net The courses are updated on a regular basis to take account of errors, omissions and recent developments. If you'd like to suggest a change to this course, please contact us: comments@ebs.hw.ac.uk.
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Negotiation The Negotiation Programme is written by Professor Gavin Kennedy BA MSc PhD FCInstM, Managing Director of Negotiate Ltd and a Professor at Edinburgh Business School, Heriot-Watt University, Edinburgh, Scotland. Professor Kennedy taught at the University of Strathclyde Business School for 11 years and was a Professor in the Department of Accountancy and Finance, Heriot-Watt University, Edinburgh from 1984– 8. He ran his first Negotiating Workshop at Brunel University, London in May 1972. His books on Negotiating include: Managing Negotiations (co-author), 1980 (3rd edition, 1987), Business Books Ltd; Everything is Negotiable, 1983 (3rd edition, 1997), Arrow Books; Negotiate Anywhere, 1985, Arrow Books; Superdeal: How to Negotiate Anything, 1986, Hutchinson; The Economist Pocket Negotiator, 1988, (2nd edition, 1997), Profile and the Economist Publications; Kennedy’s Simulations for Negotiation Training, 1993 (2nd edition, 1996), Gower; Kennedy on Negotiation, 1997, Gower and The New Negotiating Edge, 1998, Nicholas Brealey. His books have been translated into Dutch, German, Swedish, Spanish, Chinese, Japanese and Portuguese. He is a co-author of the Negotiating Skills Portfolio, 1986, Scotwork, and The Art of Negotiation, a Longmans Training film, 1983, which is also available in the interactive format. He is also author of the video packages: Everything is Negotiable, 1987 and Do We Have a Deal?, 1992, both from Gower. Professor Kennedy is a Fellow of the Chartered Institute of Marketing. The following are some of the companies he has consulted with: Allied Irish Bank Group; British Petroleum; CWS; IBM; Motorola; Royal Bank of Scotland; United Distillers.
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First Published in Great Britain in 1991. © Gavin Kennedy 1991, 1998, 2001, 2002 The rights of Professor Gavin Kennedy to be identified as Author of this Work has been asserted in accordance with the Copyright, Designs and Patents Act 1988. All rights reserved; no part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise without the prior written permission of the Publishers. This book may not be lent, resold, hired out or otherwise disposed of by way of trade in any form of binding or cover other than that in which it is published, without the prior consent of the Publishers.
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Contents Preface xi Acknowledgements xiii Introduction xiv Module 1 What is Negotiation? 1/1 Prologue 1/1 1.1 Introduction 1/1 Dialogue 1/3 1.2 Alternative Methods of Making Decisions 1/3 1.3 What is Negotiation? 1/8 1.4 Advising Negotiators 1/11 Epilogue 1/15 Module 2 Distributive Bargaining 2/1 Prologue 2/1 2.1 Introduction 2/1 Dialogue 2/3 2.2 A Simple Diagram of the Buyer/Seller Dilemma 2/3 2.3 The Negotiators’ Surplus 2/8 Epilogue 2/12 Module 3 Preparation for Negotiation 3/1 Prologue 3/1 3.1 Introduction 3/1 Dialogue 3/4 3.2 What Do We Need to Do First? 3/4 3.3 What Are We Negotiating About? 3/7 3.4 How Important is Each Tradable? 3/11 3.5 What are the Negotiable Ranges for Each Tradable? 3/21 Epilogue 3/23 Review Questions 3/24 Negotiation Edinburgh Business School vii
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Contents Module 4 Debate in Negotiation 4/1 Prologue 4/1 4.1 Introduction 4/1 Dialogue 4/4 4.2 What is Debate? 4/4 4.3 Rackham on Effective Behaviour 4/5 4.4 Types of Debate: Destructive Argument 4/8 4.5 Types of Debate: Constructive Debate 4/15 4.6 How Not to Disagree 4/20 4.7 Signalling 4/28 Epilogue 4/32 Review Questions 4/34 Module 5 A Proposal is Not a Bargain 5/1 Prologue 5/1 5.1 Introduction 5/1 Dialogue 5/3 5.2 What is a Proposal? 5/3 5.3 How to Make Proposals 5/7 5.4 How to Receive a Proposal 5/12 5.5 Summarising Tradables 5/16 Epilogue 5/18 Review Questions 5/20 Module 6 Bargaining for an Agreement 6/1 Prologue 6/1 6.1 Introduction 6/1 Dialogue 6/3 6.2 From Proposals to Bargaining 6/3 6.3 Linked Trading 6/6 6.4 Bargaining to Close the Deal 6/12 6.5 The Agreement 6/15 Epilogue 6/17 Module 7 Styles of Negotiation 7/1 Prologue 7/1 7.1 Introduction 7/1 Dialogue 7/4 viii Edinburgh Business School Negotiation
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Contents 7.2 Trust in Time 7/4 7.3 Negotiator’s Dilemma 7/8 7.4 Red, Blue and Purple Styles of Negotiation 7/12 7.5 The Difficult Negotiator 7/18 7.6 Making Progress with a Purple style in a Red Negotiation 7/25 Epilogue 7/32 Module 8 Rational Bargaining? 8/1 Prologue 8/1 8.1 Bill and Jack 8/1 Dialogue 8/3 8.2 Nash and the Bargaining Problem 8/3 8.3 The Benefits of Bargaining 8/8 8.4 The Real Bargaining Problem 8/11 8.5 Rationality and Irrationality 8/12 8.6 Deductive Rationality 8/17 8.7 Fisher and Ury on Principled Negotiation 8/18 8.8 Fisher and Ury’s Prescriptions 8/21 8.9 BATNA 8/30 8.10 The Negotiator as Mediator 8/31 Epilogue 8/33 Module 9 Streetwise Manipulation 9/1 Prologue 9/1 9.1 Fait Accompli 9/1 Dialogue 9/2 9.2 Learning about Ploys 9/2 9.3 Power and Ploys 9/3 9.4 Three Types of Ploy 9/5 9.5 Dominance Ploys 9/7 9.6 Shaping Ploys 9/9 9.7 Closing Ploys 9/15 Epilogue 9/17 Module 10 Personality and Power in Negotiation? 10/1 Prologue 10/1 10.1 A Divorce Negotiation 10/1 Negotiation Edinburgh Business School ix
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Contents 10.2 How Important is Personality in Negotiating? 10/2 10.3 The Personality Styles of Negotiators 10/3 10.4 A Trainer on Personalities 10/6 10.5 Power in Negotiation 10/10 Epilogue 10/12 Module 11 Culture and Negotiation 11/1 Prologue 11/1 11.1 A (negotiating) Tale of Two Cities 11/1 Dialogue 11/2 11.2 Cultural Relativism 11/2 11.3 Do People Negotiate in Different Processes? 11/4 11.4 What is Culture? 11/5 11.5 The Cultural Relativists’ Challenge 11/8 11.6 Chinese Negotiations 11/19 11.7 Unique Negotiations in India? 11/20 Epilogue 11/22 Review Questions 11/24 Module 12 Retrospection 12/1 Appendix 1 Practice Final Examinations A1/1 Practice Final Examination 1 1/2 Practice Final Examination 2 1/6 Appendix 2 Answers to Review Questions A2/1 Module 1 2/1 Module 2 2/2 Module 3 2/3 Module 4 2/5 Module 5 2/6 Module 6 2/8 Module 7 2/9 Module 8 2/10 Module 9 2/11 Module 10 2/12 Module 11 2/14 Index I/1 x Edinburgh Business School Negotiation
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Preface Hardly a word was changed in the many reprintings of the 1991 edition, but for a year or more I have been conscious of the need to update various pieces of the material and to expand the text into some important areas of negotiation work that have been produced over recent years. Hence, I have taken the opportunity of this new edition to make some changes to the original text and to add some new materials to the original Module 8 (Alterna- tive Approaches to Negotiation). This module has now been expanded into three new modules: Rational Bargaining?, Streetwise manipulation?, and Personality and Power in Negotiation? I have also taken this opportunity to review other parts of the original text where some students have indicated by their attempted answers that some clarification of certain concepts would be useful. Overall, the MBA examinations results have been most encouraging, with a few lapses when students have clearly not understood the question or where they have ignored what they were asked. For instance, a question that asks the student to identify the main objective of a negotiator in a case study question prompts answers from a minority of students who contrive to identify several objectives, rather than one, presumably in the hope that one of the objectives will qualify as an answer! Or, a case study question is sometimes answered by five pages of text, all this for a maximum of only eight marks, with the same students’ essay questions then squeezed for time and barely containing enough material to fill a page, thus putting at risk a chance of gaining a maximum of 20 marks. Clearly, these students exhibit poor examination technique, not to mention failing to grasp the precepts of marginal analysis in the Economics text! Another common error is for a student to rote learn pages of this text and to hope that, by reproducing them as answers, whatever the question is about, they will gain a pass. This is easily spotted by an examiner and in practice it does not attract marks. The text is not suitable for rote learning, nor is this behaviour a short cut to a pass. However, the overwhelming majority of students who have taken the MBA ex- aminations have avoided these errors and have written good to excellent answers and have thoroughly deserved the pass marks they have been awarded. Those students who discuss their own negotiating experiences, or their interpretations of negotiating experiences reported in the media, always do better in their examina- tions. The examiners are looking for evidence of a student’s understanding of the concepts from the text combined with evidence of their correct application to the real world. Current and personal examples, if they are relevant, of negotiation activities are a good source for this type of evidence. Gavin Kennedy Edinburgh Business School. Negotiation Edinburgh Business School xi
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Acknowledgements No work of this type could be attempted, let alone completed, by a single person and I am happy to acknowledge the contributions of several people to the develop- ment of the Four Phase/Two Styles approach to negotiation outlined in this text. In particular, John Benson, was instrumental in the discovery and development of the original 8-Step approach in the early 1970s and has continued over the years to anchor our approach in the real world of negotiation practice. Among his then colleagues at Scottish & Newcastle Breweries (S & N), Gordon Stevens (now at Bass Inns), the late Ken Stuart and Ian Kilgour contributed in guinea pig roles in testing and revising the 8-Step approach as it applied both to the training of negotiators and to their own practice in commercial and industrial relations. Peter Curran, formerly of S & N, made significant contributions to the presentation of the Preparation phase. Colin Rose, of Rose & Barton, Victoria, Australia, introduced me to the Red and Blue styles model of negotiating behaviour, which is now integrated into our own workshops with his permission. This simple device has been a great success with managers wrestling with the contradictory competitive and co-operative styles of negotiation and neatly completes the Four Phase approach. The material used in this text has come from many sources, some through con- sultancy work with clients and some through the thousands of men and women who have attended the workshops over the years. Contact with, and influence by, the people who conduct negotiations is the key to understanding what negotiation is about and to improving performance, and I am no less convinced now than I was in 1972, from my experiences at Shell-Haven, that this constant and regular contact with real-world negotiators has been of fundamental benefit in developing the concepts presented in this text. Their contribution is gratefully acknowledged and, I hope, repaid with interest in the relevance they have brought to my work. Lastly, a word of thanks to the Edinburgh Business School at Heriot-Watt Uni- versity, which over the years has provided stimulus for my work on negotiation. Professor Keith Lumsden generously extended my contact with negotiators through his own extensive work in Scandinavia and the United States. His invitation to write this text for the Heriot-Watt University MBA open learning programme was much appreciated, as are the patient efforts of Charles Ritchie to sort out the wheat from the chaff in the manuscript. Gavin Kennedy Edinburgh Negotiation Edinburgh Business School xiii
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Introduction In the case of negotiation education and training in the UK there is a direct link between the approach adopted in this text and some autobiographical data about how the author became interested in the subject. In 1969, shortly after graduating in economics and while teaching young manag- ers on the part-time Diploma in Management Studies programme in a polytechnic near London, I was invited to visit the Shell-Haven Refinery on the Thames Estuary for a briefing on Shell’s innovative attempts to secure a productivity deal with several unions representing the skilled maintenance workforce. These were the years of the then Labour government’s (ultimately futile) laws that allowed pay rises only for productivity improvements. Managements across the UK at the time were accumulating experience on how to improve on the minimum standards set by the government’s productivity criteria, and unions were similarly learning how to maximise their opportunities for pay increases. The Shell-Haven negotiations had only just restarted after a lapse of many months because of a procedural dispute between the management and the unions: briefly, the management had insisted on establishing the extent of the productivity gains likely to be achieved before committing Shell to a specific increase in pay, while the unions insisted on knowing what pay increase was likely to be offered before committing themselves to detailed measures to improve productivity. A typical deadlock ensued, until a typical formula was found to meet both sides’ reservations about ‘buying a pig in a poke’. The briefing was conducted by the refinery’s Maintenance Superintendent and, over the excellent lunch Shell provided, I must have shown my relative ignorance of the way economic decisions were made in the real world as opposed to how they are made in theory, for he invited me to leave my classroom as often as I liked and observe the way real people fought over the price of labour and the quantity of output in real negotiations. Two years later the productivity negotiations were concluded, with the manage- ment achieving some, but by no means all, of the productivity changes they wanted (the unions adamantly refused to abolish craft distinctions and become refinery mechanics) and with the unions achieving the largest pay increase in Shell’s history at, for them, the high price of the abolition of paid overtime working. Both sides were happy with the deal, which to my mind is the best definition of a good deal. Over the two years I had sat through hours of meetings, and not just with the management. The union negotiators agreed to talk to me about their views on what was happening and, as mutual trust developed (they realised that I was only an academic and not a management ‘spy’), they revealed more of their perceptions of what they felt they deserved and what they thought they were likely to achieve. Likewise, on the management side, I attended meetings, some while they prepared their next moves and some while they discussed what had gone right or wrong in previous sessions with the unions. I was also able to attend the negotiating sessions, where the negotiators were working for real, where their ‘best laid schemes’ were Negotiation Edinburgh Business School xiv
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Introduction severely tested and where the outcome of a session had a direct effect on the men the unions represented and/or on the costs the management were concerned about. Shortly before the successful conclusion of the Shell-Haven productivity negotia- tions, in 1972, I had begun teaching economics to undergraduates at Brunel University in West London. Brunel had recently established a management pro- gramme, and I volunteered with a colleague, Peter Seglow from the Sociology Department, to present a seminar on ‘Workplace Negotiations’. The first seminar was run in May 1972 and was attended by 18 managers from a wide cross-section of business activity. Over five days the participants listened to academics from eco- nomics and sociology, interspersed with role-playing sessions negotiating cases that drew upon the relatively limited experience of Seglow and myself of real-world industrial relations. The participants of those early seminars appeared to consider that what we were offering was of some use to them, if only because they sent many of their colleagues to subsequent seminars. This did not prevent me from being unhappy about how we were teaching negotiation to practical people, whose needs were different from those of academic students. The student establishes his competence by how well he applies his intelligence to his chosen theoretical discipline (including his ability to refute discredited theories and to solve theoretical problems); the manager establish- es his competence by how well he applies his intelligence to solving practical problems. Blatantly mixing the two approaches in our seminar left me uneasy that we were not doing enough for our participants. We had no model of how to run a negotiation workshop because there were no well-established negotiating skills courses running in the UK in 1972 – I know, because we drew a blank when we searched for them (though we did become aware, in 1973, of the work in behavioural studies of Neil Rackham and John Carlisle of the Huthwaite Research Group in Sheffield, and later, in 1974, of seminars run by Dr Gottschalk at the London Business School, which were heavily influenced by a psychological approach to the problems of negotiation). This raised the interesting question: if nobody teaches negotiating skills in the UK and yet everybody negoti- ates, and had been doing so for millenia without the advantage of training in what they were doing, what justification (apart from enhancing the university’s income) was there in running a negotiation workshop? The situation, as ever, was different in the United States. There, a veritable indus- try of private consultants (among them Messrs Chester Karrass, Henry Calero, Herb Cohen and Gerard Nierenberg) were successfully marketing various negotiation improvement courses for managers. Negotiation had also begun to attract academic attention following the publication of Richard Walton and Robert McKersie’s A Behavioural Theory of Labour Negotiations (1965), McGraw-Hill and Thomas Schelling’s earlier work, The Strategy of Conflict (1960), Harvard University Press. Both books, from different perspectives, have since become classics in the field. But nothing like this level of activity was happening in the UK, though there was a potential demand for it. Some academic work had been done on the issues raised by current negotia- tions, mainly labour disputes and international conflicts, but these studies seldom strayed beyond tackling policy questions, such as why unions opposed redundancies Negotiation Edinburgh Business School xv
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Introduction or what had happened in a steel strike, and rarely, if ever, asked questions about the mechanics of negotiation, such as why a negotiator would play this tactic as against another, or how negotiators signalled their willingness to move. My doubts throughout 1972–3 centred on the question: how can we develop from scratch a workshop to educate and train managers to improve their negotiating skills? This led to other questions: should I follow my Shell-Haven experience and devote time and resources to the academic study of real labour negotiations in the UK, as Walton and McKersie had done in the USA, or should I follow Schelling and take up the academic study of conflict? Meanwhile, should we confine the content of our quarterly seminar on negotiation to a purely practical or a purely theoretical approach? But a purely practical approach to training is limited to anecdote and the memory of similar circumstances. Collections of anecdotes that relate how others dealt with similar or analogous problems could be offered as a training tool but would not be enough if that were all that was offered. A purely anecdotal approach to practical problems is limited in three ways: the manager might forget the appropriate anec- dote to guide him in his current circumstances; he might apply an inappropriate anecdote to his problem; he might never have covered the appropriate anecdote in his training and be at a loss as to what to do. What the Shell electricians did to protect the unskilled components of their work might, or might not, help a manager negotiating a price reduction with an established supplier, but even if there were analogies at one level there were bound to be profound differences at another. An inability to take the profound differences into account, as seen by the busy manager, compromises the credibility of the anecdote. Alternatively, a purely theoretical approach in the seminars would suffer immedi- ately from a fall off in the size of the constituency of potential clients. Practical people usually recoil from too heavy a dose of abstract reasoning. ‘Assume that your opponent is rational…’, says the theorist, and risks being interrupted by the manager with: ‘How does that help me with the militant leader of an unofficial strike over alleged insults to his religion?’. Plainly it cannot help him without a great deal of additional work, inclusive of patience on both sides, for which time is often not available to busy managers. Theoretical analysis, however, can clarify a complex situation and provide effec- tive guidance for practical action. There is, of course, no case for believing that theory is of no use to practical people: the theory of geometry helped people improve on round mud huts by enabling them to design and build structures from different regular and stable shapes. But to make any theory useful we must be selective. Theorists too can learn from practical examples by analysing data on the patterns and unique relationships of real world negotiations and using them to improve their crude models of reality. In negotiating skills education and training, those theoretical models that have practical relevance can help negotiators to clarify, and improve their understanding of, the patterns and relationships of their practical experience. An education and training programme, therefore, built round a selective blend of theory and practice has an important role in helping negotiators to improve their performance. xvi Edinburgh Business School Negotiation
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Introduction From this background, while presenting a series of negotiation skills training workshops to managers at Scottish & Newcastle Breweries in Edinburgh in 1973–4, I took advantage of the opportunity to work with a number of professional negotia- tors to develop, literally from scratch, an entirely original approach to negotiation training. Initially, I kept the workshops to the same format we had developed at Brunel, but gradually I introduced a significant difference. In addition to talks on aspects of negotiation, supported by anecdotal material from business and industrial relations and video evaluations of participants negotiating cases from the real world, I introduced a model of negotiating based on the concept that all negotiations had a common process. The model divided the negotiating process into the distinct steps of Preparation, Argument, Signalling, Proposing, Packaging, Bargaining, Closing and Agreeing. Originally I called it the ‘8-Step approach’, but, through the accident (!) of having to compress the eight steps for a 30-minute training video, it became, and has remained, the ‘Four Phases of Negotiation’ (Prepare, Debate, Propose, Bargain). In addition, I set out, by experiment, observation, practice and the contributions of the managers who attended the workshop, to discover the appropriate behaviours negotiators could use to improve their effectiveness, and these materials were introduced throughout the series. By 1976, the 8-Step approach model dominated the entire contents of the workshops for the brewery managers and proved to be a successful device for integrating theoretical ideas about interac- tive behaviour (from social psychology, sociology, anthropology and economics) with information (and some advice) on how negotiators behave in practice. In 1980, the 8-Step model entered the public domain in a book I co-authored, Managing Negotiations (Hutchinson Business Books, 3rd edition, 1988), followed in 1983 with an exposition of the Four Phases version in the video, The Art of Negotiation (Long- man Training), an interactive version of which appeared in 1988. With the 8-Step/Four Phase approach and selections from relevant academic work on negotiation, the blend between theory and practice was achieved, and in the intervening years this approach, in various guises (and a few disguises!) has become the dominant teaching method on negotiation skills courses in the UK. Teaching courses on negotiation are now included in the MBA degrees in many of the major business schools in the USA and Europe. Myriads of short courses for managers now include negotiating skills in their offerings, and books and tapes by the shelf-full have been published since 1980. Where once the notion of a course on negotiation was not taken seriously by senior academics (the reason that I left the polytechnic in 1971), it is now almost a sign of academic integrity to have a negotiat- ing course included in the syllabus. In the USA, negotiation programmes (and their presenters) have achieved considerable eminence. For example, the Harvard University Negotiation Project is a pace-setting management programme, diffusing its graduates and its teaching methods to colleges across the USA (alas there is no equivalent programme yet in Europe). In short, the activity of negotiation is no longer a neglected phenomenon, which everybody experiences but few ask ques- tions about. It is a subject worthy of study in its own right, with worthwhile benefits to theorists and practitioners alike. In preparing my contribution to the Edinburgh Business School MBA pro- gramme, my mind’s eye sees you, the reader, as someone who has achieved Negotiation Edinburgh Business School xvii
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Introduction competence in some specialism, and who, with ambitions to increase your manage- rial responsibilities, now wants, or needs, to acquire education in general management and administration. In order to do so, you need assistance in selecting from the numerous concepts and techniques of analysis. This modular text on Negotiation will help you in much the same way that I was helped by the practical men and women on both sides of the negotiating table at Shell-Haven in 1970–2 and in Edinburgh in 1973–4. They showed me what was relevant in what I knew as an academic and what I needed to know to become competent as a practical negotiator. The style of the text is very much as a conversation between myself as the author and yourself as the reader. It is like the language of a consultant discussing a series of issues and problems with his client, though of necessity, in our unique circum- stances, I shall be forced to interpolate what I think you would be asking me if we were in live contact, and if my statements do not answer your questions or my questions do not have interesting answers for you, I can only hope that this occurs on a minority of occasions. Each Module is structured in the traditional Greek manner into three parts: the Prologue, introduces the theme of the module and sets the scene for the argument that follows, usually in the form of a short scenario of a negotiating problem, and often with an exercise for you to complete; the Dialogue, presents the argument and the imagined discourse through which we work our way together, by way of concept and example drawn from the variety of possible negotiating positions and dealing with the potential difficulties associated with each individual position as they arise; the Epilogue draws together the threads of the argument and summarises the whole. Self-assessment questions are included to test your understanding of the concepts in the module, and my answers allow you to assess your own responses. All of the exercises and self-assessment questions are supported by my suggestions as to what constitutes appropriate answers. You need not agree with my suggestions and you are perfectly entitled to prefer your own. What you are expected to do, however, is to refrain from cheating, either by dodging the exercises and my suggestions altogether or by reading my answers before you attempt your own. Neither cheating strategy will help you improve your own negotiating performance. You will learn more by working your way systematically through the problems and by comparing your answers with mine, and, whatever conclusion you come to, by understanding why we agree or differ. The exercises are part of the learning process and not just a way of filling up space! xviii Edinburgh Business School Negotiation
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Module 1 What is Negotiation? Contents Prologue .............................................................................................................1/1 1.1 Introduction.............................................................................................1/1 Dialogue..............................................................................................................1/3 1.2 Alternative Methods of Making Decisions............................................1/3 1.3 What is Negotiation?..............................................................................1/8 1.4 Advising Negotiators........................................................................... 1/11 Epilogue ........................................................................................................... 1/15 Prologue 1.1 Introduction George, Vice-President (Sales) at Phoenix Enterprises, looked forward to finishing at 5 p.m. and catching the 7 p.m. plane to Bordeaux where he was to join Lucy, his wife, and their three children on their annual holiday. Three days earlier, on Friday, Lucy had gone on ahead with the children to the villa they had rented for three weeks, while George stayed behind to complete a special assignment given to him on Thursday afternoon by Dan O’Reilly, his boss and Chief Executive Officer. Dan had told George to check over their contract with Pascoe Projects, a client company, regarding their proposed joint venture to build a business park on the edge of town. The contract documents were in a total mess, and Dan wanted to have them sorted out and analysed for Tuesday, when he was due to meet Pascoe’s Managing Director and see if he could negotiate amendments to their contract. There was no way that George could check over a contract of this complexity before he went on holiday. There were just too many files and background papers, plus several sets of changed drawings and altered specifications. George apologised to the children for the unscheduled interruption to their holiday and promised a skeptical, and somewhat angry, Lucy that he would work all over the weekend to sort out the problem and would join her on Monday evening at the latest. George was by no means happy that Dan had done this to him and con- sidered it an unsatisfactory situation that work should intrude on his holiday. It was not as if the problem had arisen from one of his own accounts. It properly should have been handled by Fred, Vice-President (Contracts), who was off sick, and who, to cap it all, had been promoted a year ago to Con- Negotiation Edinburgh Business School 1/1
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Module 1 / What is Negotiation? tracts Manager on the strength of winning the Pascoe account. Because Pascoe Projects was an important account, George knew that Dan’s negotia- tions could not be postponed until Fred returned from sick leave and he accepted that somebody had to step in and clear up the mess. His pride in being chosen (once again) to trouble-shoot somebody else’s difficult problem was tempered with his dismay that it would add to his domestic stress (there had been other occasions when he had been compelled to let his family down for work-related reasons). He knew he had no convincing answer to Lucy’s charges that he ‘paid more attention to Dan than to his family’, and he fully expected that his holiday might be ruined by recriminations arising from Dan’s thoughtlessness. Now imagine yourself in George’s position on Thursday afternoon when the boss calls on you to work over the first weekend of your annual leave. How do you feel about that? As annoyed as George? Well, we don’t know what George said or did when he heard Dan’s instructions; we only know that he worked through the weekend. If you had been faced with a similar instruction from your boss, how might you have reacted? What could you do to make yourself happier in this type of situation both at work and domestically? Exercise 1A Write down your answers on a separate sheet of paper, numbering them 1 to 10. My suggestions follow, in no particular order of priority. George could: 1. Tell Dan that his holiday was contractually sacrosanct and refuse the assignment. Question: What would this have done to his career prospects? 2. Suggest to Dan that somebody else should undertake the assignment and use good arguments to support his suggestion (perhaps appealing to Dan’s sense of fair play?). Question: What happens if he fails to persuade Dan to change his mind? 3. Suggest that Dan assign somebody else along with George, with whom George would work until Friday evening, and thereafter the other person would com- plete the task over the weekend by himself. (Perhaps he could offer to work through Thursday night?) Question: What happens if there is nobody else qualified to undertake the work after George leaves? 4. Tell Dan that he did not want to break his holiday in this way but that he was prepared to toss a coin with him to decide whether he should continue with his holiday plans or start work on the problem. Question: What happens if Dan has an aversion to a gamble and anyway sees no reason why he should put himself at a 50 per cent risk of doing without George’s services? 5. Offer to do the work provided that Dan paid his airfare to Bordeaux on Monday and extended his holiday by a week in compensation. Question: What happens if there is no pressure on Dan to negotiate with George? 1/2 Edinburgh Business School Negotiation
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