DR. AMANALLAH KHAN NEGOTIATION - 2013 Negotiation Heriot Watt Edinburgh Business School ‘Nothing is agreed until everything is agreed’ Issue: August 2013 From: Book release NE-A3-engb 1/2008 (1021) By: Dr. Amanallah Ali Khan Based on the notes of Mark John Zaaijer, Marcia, Günter Herfort & Rami. 1 | P a g e
DR. AMANALLAH KHAN NEGOTIATION - 2013 Module 1 What is Negotiation? Alternative Methods of Making Decisions 1. Say “No” It is appropriate when you cannot endure the offer but you can endure the consequences. 2. Persuasion The Selling Approach: Sales people persuade people to make decisions in their favor by selling benefits. Inability to persuade, however, leads to conflict. This approach can persuade someone to say ‘yes’. The advice to sell benefits not features. Persuasion is usually the first method we want something. When persuasion works is a fine method, but when it does not work, it often leads to tension and conflict. 3. Problem-Solve Requires trust between parties and recognition that the problem is mutual. But candor could be used against you. 4. Chance Decide by tossing a coin. 5. Negotiate Mutual dependence of each decision maker on the other, and involves voluntary exchange of something you want for something they want. This option includes conditions as mutual dependence of each decision-maker on the other. It usually involves getting something, tangible or intangible, in return for your consent 6. Arbitrate when decision-makers cannot agree, third party involvement can be contemplated. The arbitrator should be acceptable to both parties and the decision must be accepted. 7. Coercion Involves the application of pressure by informing the other party of the consequences of saying ‘no’, either with a friendly face or by blatant intimidation. Leads to retaliation. Various degrees of coercion are common in many conflict situations. Threats lie on a continuum from a gentle reminder that you have an option through to a declared intention to use violent intimidation to get your own way 8. Postpone Buys time for emotions to settle, but may also be seen as a blocking move to refuse any agreement. Common practice of countless organizations. countless organizations attempt to resolve internal disputes and isolate the traumas of disagreement by forming ‘working parties’ or ‘subcommittees’, which effectively postpone the decision long enough to secure agreement, or long enough for the parties to forget about it. In some situations, an attempt to postpone a decision could be interpreted as a form of coercion, or as an underhand refusal to agree 9. Instruct This is the appropriate choice when the person instructed is obliged and certain to carry out the instruction. The efficacy of instruction rests entirely on the probability of the instruction being obeyed. If it is unlikely to be obeyed a switch to another method is needed. Managers do not normally expect subordinates to question their instructions when their instructions are within the terms of their relationship. 10. Give in This is what we do when we accept an instruction, because it is a fair instruction or to argue would be fruitless or need too much time. Giving in is not as weak an option as it sometimes seems. Every time you buy an item at the seller's asking price (take it or leaving), you are giving in. 2 | P a g e
DR. AMANALLAH KHAN NEGOTIATION - 2013 What is negotiation? Negotiation as a decision-making technique is appropriate when: People voluntarily want to exchange things that they have for things that they want, creating wealth in the process. Each party needs the consent of the other party and thereby effectively has veto-power. Because parties cannot simply take what they want, each party must accommodate the other party as well. Negotiation has developed as the process through which the activity of trading and exchanging tangible or intangible things between people is conducted. “Give me some of what I want and I will give you some of what you want”. Negotiation differs from instruction and coercion, in the way that it employs the principle of voluntary exchange between two parties who cannot, either take what they want, or get what they want, unless they accommodate in some way to the wishes and desires of each other. Negotiation is about finding out if there are terms for co-operation that are acceptable to both parties. Advising Negotiators (Approaches to negotiation) - Description - prescription - prediction Are different, yet overlapping, approaches and, by recognizing which is being used in discussions about negotiation, we can assess the relative credibility of contributions to the pool of advice. Description Describing events that have relevance to the negotiation is useful. Should not go beyond stating facts, even though it is those facts that may lead to disagreement about what is and what is not. Description is: - About what actually happened in a specific negotiation. - “to narrate” is subject to people’s interpretation, based on beliefs and experiences. - Neutral and does not go beyond stating what happened, but in practice, it is often controversial. - Does not preclude analysis. - The views of what ought to happen are usually subjective and they often depend entirely on the interests of the advisor. - A question as to “why” an advisor feels that something ought to happen will indicate whether his belief is based on personal prejudices or credible evidence or experience. - When we move from description to prescription we move from describing what actually happens to what, in our view, ought to happen. - Minutes and transcripts of negotiations and the personal accounts and memoirs of negotiators (to eliminate personal bias) provide much evidence ‘Before we can prescribe, or predict, a minimum amount of description is normally required’ Prescription - Prescribing is what is done when think about what ought to happen. - Asking for advice is asking for a prescription. - An example of a prescription is: o To avoid interrupting other people because experience taught us that it blocks fruitful negotiation. o You must reject his offer and wait until he improves it - Prescription can be based on objective analysis or opinion. - Prescription is the view of what you ought to do. - Prescription is advice what I think you should do. It does not have subject. - Prescription is closely related to prediction. - usually subjective views and they often depend on the interests of the advisor - prescriptions could be influenced of belief, personal prejudices, founded on any credible evidence or experience 3 | P a g e
DR. AMANALLAH KHAN NEGOTIATION - 2013 Prediction Predictions are statements about what we think will happen. - This is the crucial one in negotiations because it is our predictions that we act upon and they either turn out to be true or they are proven false. - Prediction involves claiming that a certain event will happen in the future. - Not all prediction is based on hard evidence. - Prediction is closely related to prescription. Example difference prescription or prediction: When Rodney continued to press for a tough line (prescription), He claimed that he knew Pascoe would crumble if they were pushed hard enough (prediction). o Prediction, which can be tested. scientific prediction the predicted event either occurs as predicted or it does not Example: In this negotiation with the buyer, I will achieve at least a price of 2 million ECUs for the license. -> Could be tested with the achieved price o • Prediction, which can’t be tested. - Unscientific prediction (opinions) Example: I could have got a better price than the one you agreed to in that negotiation. 4 | P a g e
DR. AMANALLAH KHAN NEGOTIATION - 2013 Module 2 Distributive bargaining Mary wants to buy a used car. John is offering to sell his used car, for which he is asking £7000. Mary does not want to pay as much as £7000 but she is prepared to go as high as £6550. Though John has asked for £7000 Mary assumes he is prepared to sell the car for something less, but ‘by how much less?’ she wonders. From this description of the situation, would you advise Mary to: o Open close to her highest price of ￡6550 o Open much lower at around, say, ￡5550 Consider the answer you believe most appropriate on the information you have above before reading on. o Open close to her highest price of $6550 She appears too close to her highest price. She risks paying more than she needs to as she would encourage John to compare her offer with his undisclosed lowest price and thus he would know that he could do much better and try to test her resolve. She would provoke John into being more resolute in defense of his opening price or even motivate him to increase it. As a result, she takes her business elsewhere! o Open much lower at around, say, $5550 If Marry opens too far below her highest price. Her bold low opening offer tactic risks antagonizing seller into a deadlock! Best strategy Determine other parties range before making an offer. Not likely, but if no other issues exist (single- issue negotiation), then there is no obvious solution. Both negotiators strive hard to make the other do the moving towards to your price to win the contest. o In these contests there is a ‘winner’ and a ‘loser’ and people do not like losing. o lose–lose outcome: Both negotiators could end up unhappy with the outcome. • Mary’s best strategy is to persuade John to disclose how little he is prepared to accept, without her disclosing how much she is prepared to pay. • John’s best strategy is the reverse: to persuade Mary to disclose how much she is prepared to pay without his having to disclose how little he is prepared to accept. The buyer/seller dilemma A negotiator opens with his entry price. This is the price he prefers if he can get it. Motivations for the entry price could be: to cover a mark-up over his costs or from a ‘gut feeling’ he has for or some detailed knowledge of, what the market will bear or from a consideration of tactics The total negotiating range is the gap between the entry prices of each negotiator. Negotiation range implies distance and the need to come together implies movement. But there is some limit beyond which they do not intend to go in the current circumstances. This point is called the exit price. It normally lies somewhere in the negotiating range between the entry prices of the negotiators. Hence, do not open with your final price and give yourselves negotiating room. ENTRY PRICES 5 | P a g e
DR. AMANALLAH KHAN NEGOTIATION - 2013 The exit price is the limit beyond which a negotiator does not intend to go in the current circumstances. FIGURE 2: GAP BETWEEN THE NEGOTIATORS’ EXIT PRICES The gap is any area between the two exit prices that does not overlap with one another. FIGURE 3: THE NEGOTIATORS’ EXIT PRICES MEET The essential condition for a single-issue negotiation to be successful is for the exit prices of each negotiator at least to meet. The settlement range is the single point 120. FIGURE 4: THE NEGOTIATORS’ EXIT PRICES OVERLAP The settlement rangeis the overlap between the exit prices of each negotiator, because within this range a settlement is possible, though, as always, it is not assured Negotiator(s) might accept an offer in the settlement range or: keep trying to improve the price and see just how far he will go delaying a settlement might fall foul of the other’s impatience after a generous offer he waits that the next move should come from the seller and not from him such misunderstandings can stimulate a lot of aggravation FIGURE 5: NEGOTIATORS’ WITH OVERLAPPING ENTRY PRICES When a negotiator discloses his entry price he also implies something about his exit price. If buyers offer (entry price) is higher than sellers entry price, the seller will immediately revise his negotiating range and will increase (≥ buyer’s entry) the exit price to match the buyers entry. 6 | P a g e
DR. AMANALLAH KHAN NEGOTIATION - 2013 The Run Down Bar Example: Seller believes selling a run down bar and sets their price accordingly. Buyer is being something else, which is to them much more valuable (real estate), but did not disclose their intentions. Sellers sold at their asking price. Buyers flipped the property for 15x profit. Moral: Know what the value may be, even if not obvious. The Negotiators’ Surplus The settlement price (designate as P*), is any price in the overlap between the exit prices (settlement range) where the negotiators meet. The seller’s surplus: The difference between any settlement price P* and the seller’s exit price (which I shall designate as S) Seller’s Surplus = P* (Settlement Price) – S (Exit Price Seller) The buyer’s surplus: Any settlement price P* that is less than the buyer’s exit price (which I shall designate as B) Buyer’s Surplus = B (Exit Price Buyer) – P* (Settlement Price) The negotiators’ surplus: Together the buyer’s and seller’s surpluses constitute Negotiators’ Surplus = Seller’s Surplus + Buyer’s Surplus The entire settlement range is the negotiators’ surplus that has to be distributed between them. The difference between the exit price of either negotiator and the settlement price, which is somewhere in the settlement range, is the sellers’ surplus/ buyers’ surplus: FIGURE 5: NEGOTIATORS’ WITH OVERLAPPING ENTRY PRICES • Any proposal from the buyer to settle at a price less than 115 would be unacceptable to the seller. • Any proposal from the seller to settle at a price above 120 would be unacceptable to the buyer. These are just the principles. Neither negotiator knows exactly how large the settlement range is. The further away negotiators move from their entry positions, the harder they often fight to protect their positions. It is entirely possible that there is a settlement range between negotiators, but they still end up in deadlock because of this. How the Negotiators’ Surplus helps form a strategy There is no way of knowing for sure that any particular offer is as far as (exit price) the other negotiator will go. Assume that the first offer is never an exit offer. It follows that all offers should be treated as if there is another, last or exit, offer in reserve. The broad strategy is to move the price to the others exit price. Sharing the surplus, knowing the other’s exit price, but it gives an advantage to other negotiator, unless it discloses a false one. To be sure that other disclose his correct exit price built trust with repeated deals or eg. a money back guarantee if buyer is not satisfied. Mediation could be defined as a method of discovering if there is an available surplus for the negotiators to distribute without jeopardizing their longer term interests. 7 | P a g e
DR. AMANALLAH KHAN NEGOTIATION - 2013 If you believe the other negotiator is pretending that his current offer is his exit price, you could express your doubts about the offer with statements like: ‘I know you can do better than that’. ‘Nobody can realistically expect to offer so little with the profit levels you have attained this year’. ‘Are you kidding?’ ‘Can you be serious?’ ‘Do you think I am stupid?’ Should the last offer be close to, or at, his exit point, and you are pushing him to move but he cannot. The situation for him is analogous to that of the innocent prisoner interrogated as a suspected member of a conspiracy. The more the negotiator protests that his current price is his exit price, the more he convinces a negotiator who is predisposed to assume that he is lying that his suspicions of duplicity are justified. Frustration leads to anger and in negotiation it leads to deadlock (in interrogation, unhappily, it can lead to violence) You have no way of knowing for sure that any particular offer is as far as the other negotiator will go. Always assume that the first offer is never an exit offer, refrain from treating a first offer as if it were. All offers should be treated as if there is another, last or exit, offer in reverse. Negotiating situations where both negotiators know each other’s exit price, or where they can make a good guess at it: partners negotiating the distribution of a know commission, sharing a known prize in a lottery. Fairness as a distribution principle operates most effectively where there are no asymmetries in the claims of the negotiators for their share of the sum available. To prevent these asymmetries being overlooked by a one-sided manipulation of the negotiating process, we should arrange for each negotiator to declare their price in some honest manner at the start of the negotiation rather than leave it to be inferred, and perhaps misjudged, or even misrepresented, during the negotiation. The strategic problem of uncertainty about the values and interests of the other negotiator can be addressed by looking for clues as to what determines where, and why, the other negotiator is likely to place his entry and exit points. People do not set their goals arbitrarily, and searching for the basis of their goals is essential if we are to prepare for what they might look for when they attempt to do business with us. Do not underestimate the powerful background effect of the notion of equity in the distribution of a surplus between the negotiators. It pervades a great deal of the thinking people have about what is, and is not, a good deal for them. Find a distribution of the equity that met both negotiators’ objectives Licence Negotiaton How to estimate the other parties range: o Know your own direct and indirect costs relating to the project: Licensee’s costs (buyer) Supplying costs the product in the market, selling costs and marketing costs (to find potential customers, acquisition costs, training costs, opportunity costs) . Licencor’s costs (seller) Developing (work time, material…) and research costs, experienced costs (time, travel and accommodation) in prospecting for potential licensees, transfer costs (train the employees and implement the marketing plans…) and opportunity costs o Estimate the other parties cost and the total revenue to be derived. This allows an estimate of net income. o The net income of the project should indicate the other parties exit price. 8 | P a g e
DR. AMANALLAH KHAN NEGOTIATION - 2013 TABLE 1: THE NEGOTIATION RANGE IN A LICENCE AGREEMENT Problems with Estimating: • Each party likely to pad their own costs and discount to the other parties. - You believe other parties costs are lower than they think - Other party believes your costs are lower than you think. • Anticipated total revenue available may be different from each parties perspective. Licencor should also consider: • Protection of his intellectual property rights, including patents, in the product and future derivatives. • Protection of his technology. • Specifying strictly and exactly what he is licensing to avoid doubts about future developments • Specifying the conditions under which the licence can be terminated • Specifying how much of the development costs Satran can recover from the license. • Specifying what share of the costs are the responsibility of each party 9 | P a g e
DR. AMANALLAH KHAN NEGOTIATION - 2013 Module 3 Preparation for negotiation Farmer Jones What is the point of trading a sack of potatoes for a sack of potatoes? Determine what is available for trade for your goods/service. Analyze the market to determine what is suitable to trade for. Advertise what you are prepared to trade, for acceptable goods/services and terms. new markets even for better deals. The activity of preparation reduces wasted effort and time, identifies gaps in the information needed to make decisions by trading, and establishes the criteria for judging the merits of possible traded solutions. Much of time spent in face-to-face negotiation is prolonged because of no preparation. The Negotek Preparation Method (Negotiation Ldt.) supports you in your preparation. What Do We Need to Do First? The first task of a preparation session is to identify the data relevant to the negotiation and, before doing anything else, to arrange, collect and analyze it. The first task in a (difficult) negotiation before taking any course of action: o Collect and analyze data o Data is more persuasive than unsubstantiated opinions o Seek evidences that supports credibility of data useful o Keep emotions out of picture • Good causes have been foiled by lack of data, or the sloppy collection and analysis of data, and even by the total incomprehension of the data. • Negotiation is a means of making decisions on the basis of data. Identify the Tradable Items Having collected the data, you would have to prepare a workable proposal and be ready to respond to one that might come from the other negotiator. Decide what you wanted to happen, and given the information you have to hand and the working assumptions you can make, you must decide what you can negotiate about to achieve what you wanted An important part of every preparation is to collect data. The collection of data and its analysis support your proposals. The negotiators are guided to their wants by identifying their interests (motivators) and from their interests selecting the issues that will achieve those interests, and for all issues they would need to decide their positions, or preferably the range of positions that they will aim to achieve. Interests are the motivations (fears, hopes, concerns) of a party that show “why” one solution is preferred to another. They encompass the overriding goals of the party. Interests are most conveniently found by asking ‘why?’ you want something to happen. Wants are what you want, interests are why you want them. The negotiable issues and the positions achieved within the range of possible solutions deliver the negotiator's interests. • Negotiators have interests because they are motivated to prefer some outcomes to others. It is the preference for a particular outcome that suggests the presence of a negotiator’s interest. 10 | P a g e
DR. AMANALLAH KHAN NEGOTIATION - 2013 Accept changes in positions or a switching of issues to meet our interests, and it is through this flexibility that we both seek to influence each other expectations Types of interest: - Common interests are interests, which achieved benefits both negotiators. - Competing interests are interests which if achieved benefit one negotiator but not the other. - The dispute is a disagreement on the solution to a certain subject where both parties have interests. An issue is a decision for negotiation, which must be agreed by both parties. Negotiators prioritize issues, as it is by trading among the issues that the negotiator finds the solution. The negotiable issues constitute the agenda. - Negotiable issues, if agreed, deliver the negotiator’s interests. A position is a point in a negotiation range. There is a range of positions on each issue. The negotiator's entry and exit points are positions, as are all points between them. - Positions, if agreed, deliver the negotiable issues, which deliver the interests. Negotiation is a means of making decisions on the basis of data. ‘What issues and positions will deliver our interest(s)?’ A tradable is anything (issues and positions) that a negotiator trades, or can trade. In short, the single word tradable replaces the two words issues and positions. - The trades they agree to on each issue and position are the output of the negotiation. Examples of tradable: price maintenance trade-in value delivery financing $ (e.g. amount of loan) when paid interest rate how paid (cash or credit note) down-payment rate of penalty training amount of incentive warranty period minimum acceptable uptime of a machine software The trades negotiators agree to (or not) on each issue and position are the output of the negotiation. Royale Project Team & Duval Case Mustafa Computer deal Case FACULTY BOARD, MOD 7, Styles of negotiation Why do you want to sell your house? Interest is why you want to sell it – e.g., you need to move to better location; larger family (kids, in laws). Issue: selling the house. Nothing more. No mention of the amount at all. Candidates in the negotiation exam who mention a quantity when identifying issues ALWAYS fail such questions. Positions: negotiators think in ranges of positions from the most/least they ask for (Entry) to the least/most they will accept (Exit), as things stand (they might vary the range of positions depending on what they can trade for it). Hence: your interest is to move location; the issue is to sell the house; the position: is the price between 500,000 and whatever. Issues are not positions. We often identify an agenda item: sell the house, before we identify a position, and as our exit price is also a position, which we do not disclose, it does not appear on the common agenda! To say ‘we want to sell the house for 500,000’ is to state a position in our range of acceptable positions, undisclosed between our entry and our exit prices. Yes, any price in our range (as things stand) is acceptable, though it may not be acceptable in practice if the conditions placed on that price in our range by the buyer is unacceptable. 11 | P a g e
DR. AMANALLAH KHAN NEGOTIATION - 2013 How important is each tradable? For many negotiations, the main tradables can be identified fairly easily. Even though identifying the tradables is easy and quickly completed, it is worth the effort because it is very easy to miss minor tradables rushing to settle what appear to be the most important tradables, only to find out that minor tradables later appear in importance. Negotiators often concentrate on the obviously important tradable of the price of something and neglect to cover themselves on seemingly unimportant tradables - Ex: warranty Typical sort into High, Mid and Low value tradable items (also in Negotek): High value: - Need to be obtained if there is to be an agreement at all (must criteria, “walk away” criteria). - The highs could become, ultimately, the ‘walkway’ issues that make agreement impossible. Thus, be careful about what you designate as of high importance and of high priority. - Inexperienced negotiators tend to make almost everything of high importance, which increases the risk to an otherwise acceptable agreement. - Too many high priority tradables leads to overvaluing certain issues, which increases the risk to an acceptable agreement. Your false sense of priority gets in the way of movement - The fewer, the better. Medium value: - Those tradables you expect to achieve your positions but which would not cause you to walk away from an agreement. - How well you do in negotiating the tradables you prioritise as of medium importance is a personal measure of your negotiating skills. - Effective and well-prepared negotiators would want to have more tradables prioritized as of medium rather than of high importance. Low value: • Low is for all those tradables that are available in the negotiation but which, while you prefer to reach your positions in each one of them, you are willing to trade them close to – or even beyond – your exit points, to enable achieving positions with the tradables you have designated as medium or high. • Lows are not ‘giveaways’ i.e do not give them up unilaterally to the other negotiator because you place a relatively low value upon them (in negotiation, nothing is given away –it is always traded). • If you give away lows you throw the whole burden of trading onto your medium and high tradables and in consequence you may have to go further towards your exit positions on important tradables Recognize that your low or mid value items may be of high value to the other party, therefore do not part with them cheaply. Try to identify the valuations of the other party on each tradable to identify what may be easily exchanged. Comparative valuations 1 The differences in valuation make trading across tradables a possibility. We could trade our high for their medium, our medium for their low and our low for their high. Residual is debatable. 12 | P a g e
DR. AMANALLAH KHAN NEGOTIATION - 2013 Comparative valuations 2 The identical valuations do not make negotiation easier (could lead to long debate) but they are not such an impassable barrier as they seem: • If there is an overlap in the ranges (entry and exit points) for each of the tradables, we can trade across the overlaps. • Is it possible that movement on one or two of the identically valued tradables would ensure movement by the negotiators on a third tradable? If yes, we can trade compensatory movement in one or more tradables for movement in one or more of the remainder. Comparative valuations 3 It is more representative of the real world – valuations tend to be mixed. Here we could trade movement between our medium and their low and their medium and our low for compensatory movement between our high and their identical high. What are the Negotiable Ranges for Each Tradable? For each tradable, it should be determined an entry and an exit point. The Negotek Planner sometimes called the PREP Planner is a layout design for the useful and necessary information for preparing a negotiation. At a glance you can see the relative importance of issues, ranges, and potential tradables in the negotiation. EXAMPLE OF A VALUATION (NEGOTEK FORMAT) Our Valuation Their Valuation Priority of Entry Exit (Exit?) Entry Priority of Tradables Tradables High High 1 89% 70 ? 70 1 4 High Low ? High 3 Individual 5 Medium Medium 2 Annual Quarterly ? Monthly 2 4(a) £10 000 £2 000 ? High 3 4(b) 1 Points 5 Point ? £10 000 3(a) 4(c) Monthly Quarterly ? 1 Point 3(b) ? Monthly 3(c) Low Low 3 Low Self-financing ? Low 4 3(a) £2 000 £4 000 ? £1 000 4(a) 3(b) 5 Points 1 Point ? 5 Points 4(b) 3(c) 6 Monthly Quarterly ? 6 Monthly 4(c) 5 All Individual Very difficult to speculate as to other parties ranges (entry and exit points) and their priorities on each tradable. 13 | P a g e
DR. AMANALLAH KHAN NEGOTIATION - 2013 • Negotiators prefer to give themselves a range of positions in which to settle rather than attempt to secure a fixed position. The latter almost always requires the other side to give in and this alone is difficult to carry through in the context of a negotiation. • If they must give in to our position, why are we bothering to negotiate? Moreover, if it is a negotiation why do we expect them to give in to our fixed position? Preparation • Negotiators who concentrate on developing a traded solution are going to waste less time in posturing than those who switch in and out of intimidation and surrender in an attempt to get what they want. • Preparation: Enables the negotiator to formulate a solution based on his real wants, rather than prejudices to the other party. - To discover real wants we must begin with the data and analyze what will meet our best interests, given that our best interests are often constrained by the need to secure others consent. - Decide whether a negotiated solution is possible, and, if it is not, you will have to secure your interests by some means other than negotiation, or through negotiation with some other person, or revise your interests and your positions on the issues. • Preparation, rather than reaction, forces the negotiator to consider solutions that are best for each party. It turns attention from the limited benefits of competing with the person you are negotiating with, to the far more fruitful benefits of engaging them in cooperation. • It is hopeless to attempt to negotiate without any preliminary collection and study of the data – perhaps the problem is not what is happening but what we think is happening. • Our thoughts must turn to two areas: what is negotiable in the situation (identify the tradables) and what we want most to happen if we are to secure our objectives (prioritize what we value into high, medium and low). Benefits of Preparation 1. less emotional, more factual 2. to save wasted time and effort in the debate phase 3. to identify information gaps as an agenda for information seeking in the debate phase 4. to establish criteria for evaluating solutions and help to decide if a negotiated solution is possible 5. to identify and sort out the issues and positions (tradables) – knowing the differences in the positions 6. gives command of the data 7. knowing the differences in the positions identifies what are the possible solutions that would be mutually acceptable 8. to identify potentials for trade (between tradables, within tradables ranges) Steps for preparation Step 1: Collect and analyze data. To be sure that we know what we are negotiating about, not to negotiate about impression, feelings and assumptions. Step 2: Identify the interests and the tradables (NEGOTEK Prep. Planner). Identify the interests of both parties and the tradables which affect the interests of the parties. Step 3: Prioritize the tradables in HML (NEGOTEK Prep. Planner). Use a simple High (‘H’); Medium (‘M’); Low (‘L’) approach where H are walk-away issues, M are issues you want to achieve and L are issues you are willing to trade (but not give away). Step 4: Set out the tradables in HML order (NEGOTEK Prep. Planner). Step 5: Add the entry and exit points (NEGOTEK Prep. Planner). Add the entry and exit points for each tradable. At this point we have addressed all of the objectives of preparation listed earlier and are in a position to make a first-cut proposal. Step 6: Anticipate as much as we can about the other party: the character of the negotiator (Red or Blue stylist) past negotiation experiences with this negotiator reputation 14 | P a g e
DR. AMANALLAH KHAN NEGOTIATION - 2013 Module 4 Debate in negotiation Debate is the act of two-way communication. We send and receive messages and confirm or revise our perceptions of the other party. The most effective debate is possible when we display debating behavior intended to keep the relations good and to get information on the other’s positions. Debate sets the tone for negotiation. It removes or creates obstacles to agreement. It conditions the expectations of the negotiators. It confirms their prejudices or overthrows them. It reveals or camouflages what the negotiators wants. Debate determines if there can be agreement, but not what the agreement exactly looks like. Debate takes up the greater part of the face-to-face interaction of negotiators. On the basis of observation of many negotiations I estimate that the activity of proposing takes up about 10 per cent, and bargaining less than 5 per cent, of the time spent in direct contact between negotiators. Debate takes up the rest (over 80 per cent) and covers all aspects of interaction that are not specifically those of proposing and bargaining: whenever we ask or answer a question, we are engaged in debate. Debate takes up > 80% of all time spent negotiation. (Proposal ~10% , Bargain ~5%) In the debate phase, you should aim to discover the other negotiator’s interests and inhibitions, as the negotiator requires information, particularly about the other negotiator’s interests and inhibitions. No proposal can sensibly be made without some preliminary exploratory questioning and listening. Rackham & Carlisle on effective behaviors • Neil Rackham and John Carlisle and their associates at The Huthwaite Research Group sought new training methods to improve negotiating skills in the early 1970s. They recoiled from ‘people [who] stopped behaving in a civilized way and try to cheat and deceive each other without scruple’. • Their solution came from research into what negotiators did in practice. They used behavior models from the social sciences to analyze what happened. • Neil Rackham and John Carlisle also did research on ‘effective’ and ‘average’ negotiators. The absence of research into what happens when people negotiate struck them as challenging. One reason for this was lack of opportunity (my own research at Shell Haven was extremely unusual in this respect) and another reason was the lack of a research methodology. • The proposition was simple: ‘find some successful negotiators and watch them during actual negotiation to find out how they do it’. • Rackham and Carlisle selected negotiators for close observation who met three criteria: 1. They were rated as effective by both sides. 2. They had a track record of significant success. 3. They had a low incidence of implementation failures. • Broad findings that skilled negotiators show marked differences in their use of the specified behavior categories compared with average negotiators. Though all negotiators draw upon all of the behavior categories, skilled negotiators use certain types of behavior more frequently and in those relative frequencies lies to key to effective negotiation. • The hypothesis that follows from this research by Rackham and Carlisle is that if you train negotiators to replicate the proven identified skills of successful negotiators, then they can replicate their relative successes. • First, a set of behavioral categories was determined (questioning, blocking, testing for understanding, and so on) and then the relative incidence of specific behaviors was related to how effective the negotiators concerned were judged to be by their peers. • If effective negotiators used an identified set of behaviors, then negotiating training could concentrate on first introducing the trainees to the effective and ineffective categories of behavior, and then, 15 | P a g e
DR. AMANALLAH KHAN NEGOTIATION - 2013 through role-playing and simulation they could be trained to use the effective behaviors more frequently and to avoid the ineffective behaviors. • The weakness of the behavioral approach, but it is not a major one, is the (welcome) concentration on the behavior of the negotiators and how they interact to the (unwelcome) neglect of how to read the structure and culture of the negotiation. Ineffective negotiating behaviors are such as jovial remarks*** (thereby irritating), defend/attack spirals (‘it’s not our fault’), immediate counter-proposing (thereby disagreeing), argument dilution with irrelevant material, and labeling disagreement (I disagree, because…). ***It is when 'jovial' remarks become treated as sarcastic that the problems begin. What is funny to you may be treated as offensive to your listener. There are no 'rules' about what is jovial and what is not. You should know the difference from your social experience. To the extent that negotiation is a conversation, you should be aware of circumstances and context. Prof Kennedy Effective behavior is characterized by seeking information by questioning, testing for understanding by summarizing, behavior labeling (‘Can I ask…?’, ‘Can I make a suggestion?’), and stating feelings (‘I feel some doubts’, ‘I'm very worried’, ‘I'm not sure how to react’) rather than expressing opinions, remaining silent. The more you display effective negotiating behavior, the better you can maneuver yourself into a good debating position. 16 | P a g e
DR. AMANALLAH KHAN NEGOTIATION - 2013 Types of debate In debate, we can be either constructive or destructive: • Constructive debate moves us towards a solution or an acceptable decision. • Destructive debate has the opposite effect of moving us away from these desirable outcomes. Thus, debate is characterized by how it serves our intentions and not just, by how it might be assessed by a neutral observer. • Debate is characterized by how it serves our intentions and not just, by how it might conform to some preset criteria. • We are not critical of destructive debate because of the offence it might provoke, or whether it is good or bad mannered to behave in that way (relevant though these factors might be in the normal courtesies of interpersonal interaction), but by whether this or that behavior contributes to the negotiated outcome we seek. Eric and Ron Case The debate between Eric and Ron over the claim for compensation for stockouts during the strike, we can identify several behaviors that commonly would have a destructive impact on the chances of their negotiating a settlement. In so far that Eric might have concluded that he did not want to negotiate with Ron at all, his telephone behavior is understandable but this would merely force the resolution of the problem of compensation for stockouts onto some other method of making a decision, such as litigation, or, through Eric’s intimidation of Ron, to Ron’s giving in on this occasion. One way of highlighting the destructive range of behavior is to monitor what happens in the debate using a simple chart called time sheet: argument behavior. 17 | P a g e
DR. AMANALLAH KHAN NEGOTIATION - 2013 Destructive argument Destructive debate has the effect of moving us away from a solution or an acceptable decision. Where agreement would in principle be possible, the list of progress obstructing behaviors below can result in deadlock, sub-optimal outcomes, expensive legal battles etc. 1. Irritation Irritation generates negative responses. Your idea of a ‘generous’ and ‘reasonable’ offer might not be shared by your counterpart. People you irritate are seldom inclined to assist you in achieving your goals. • Negotiators who are irritated by what you say are put off from exerting them selves positively on your behalf. Your ‘fair and generous offer’ may be totally inadequate in the view of the other negotiator. To assert that your minimal movement towards them is ‘generous’ or ‘reasonable’ serves only to irritate them. • Negotiators, therefore, should avoid irritating each other. It only reduces the chances of our reaching our desired goals. 2. Assertions and assumptions Do not make assertions or assumptions about what drives the other party. You could be wrong. Even when you think you are right and you say so the other party might not admit it, yet display destructive and mistrusting behavior afterwards. • Assertions and assumptions about somebody else’s position or motivation are exceptionally dangerous for negotiators. Not only do they risk being exceedingly irritating for the person listening but they can lead to a great waste of time while they are corrected, or worse, they can destroy the chances of a settlement, if the assertion itself impedes a fruitful debate and leads to a breakdown in communication. • When we make assertions about people’s motivations we are normally less than careful in our suspicions. • Sometimes our anger at suggestions that make us worse off spreads over into our verbalizing our suspicions as to why the proposers are making their suggestions. Our assumptions are likely to be without foundation and prejudiced. 3. Interruption The best way to get informed about the other party’s drives is not to interrupt but to let them finish. Question them and let them demolish their own case. • Informal surveys have shown that people do not like to be interrupted without qualification of circumstance. • In debate, there are ‘my’ facts and ‘your’ facts. Therefore, beware of interrupting in general and particularly when you hear their version of the facts. If they are erecting a case on the basis of spurious facts, there are other, more effective, ways of assisting them in demolishing their own case. • we should be aware as negotiators that we are making it more and more difficult to achieve our objectives by constant interruption of the other negotiator. 4. Blocking Blocking is making subjects not negotiable: blocked off from any debate or agreement. Question them on why they block it. Listening to a view point is not an endorsement of it, for nothing is agreed unless and until we explicitly state our agreement. • To block negotiators is to waste opportunities to assess what they are thinking about. When negotiators express themselves they reveal their case for their positions, often unintentionally. We need information about, and confirmation of, their approach to the problem under debate. Blocking denies them the opportunity to reveal more about themselves to us and denies us the opportunity of learning from their revelations. • By permitting negotiators to elaborate upon a theme they have introduced, we do not necessarily legitimize their suggestions. • Listening to a viewpoint is not an endorsement of it, for nothing is agreed unless and until we explicitly state our agreement. 18 | P a g e
DR. AMANALLAH KHAN NEGOTIATION - 2013 5. Point scoring Point scoring at someone else’s expense is self-defeating. Leads to bad atmosphere and the other negotiator will be less inclined to help you achieve your objectives. • Scoring cheap points is a temptation most people find hard to resist. • Point scoring is an all too easy trap to fall into. We do so because we find our quick repartee devilishly funny. We almost cannot help ourselves. We score by wounding the person we are trying to do business with. To put this bluntly, it is clear that point scoring at somebody else’s expense is self defeating. • Point scoring almost inevitably leads to one negotiator attacking or blaming the other. 6. Attacking/blaming Often used to soften up and intimidate the other negotiator, but it usually leads to counter-attack and defense and a movement away from agreement. • If you attack people they are almost certain to defend themselves; if you blame people they will justify themselves. They will also counterattack you, provoking you into defence and justification. Attack and blame spirals seldom remain contained. Before long the entire relationship between the negotiators and its history is a subject of contention. • A relationship may never recover from deeply wounding or offensive personal attacks. But even if the damage done by an attack is not permanent, it is almost certainly obstructive of a negotiated settlement in its immediate aftermath, and anything that obstructs progress towards a settlement is a serious impediment to a negotiator. • Attacks are seldom controllable and even less frequently are they beneficial to your interests. 7. Threats They seldom if ever have the desired effect (namely to get somebody to comply with your wishes) and almost always have the opposite effect (they provoke them to dig in). • In the drift of argument towards deadlock, threats constitute the final step. It follows that to open with threats is one of the crassest of negotiating mistakes. • It always makes a bad situation worse and a worse situation hopeless. • Threats seldom if ever have the desired effect (namely to get somebody to comply with our wishes) and almost always have the opposite effect (they provoke them to dig in). Among the reasons advanced for making threats, the most common is an attempt to make the other side aware of the consequences of its failure to agree with what we are proposing. • Threats produce their own counter, either in the form of a direct counter threat or in the form of some sort of demonstration that we are undeterred by the threat and can joyfully live with the consequences. • However serious or otherwise the threat and its counters are, we are no longer negotiating a solution. • Threats made in anger are doubly destructive. Frustration produces more threats than anything else and often arises because we are stuck in destructive argument. Attacks lead onto threats as water runs downhill. Once committed to a threat we feel the need to go through with it even when its costs exceed its benefits. 19 | P a g e
DR. AMANALLAH KHAN NEGOTIATION - 2013 Constructive debate: SAQSS Constructive debate moves us towards a solution or an acceptable decision. This is characterized by behavior that serves our goal of seeking a solution agreeable to our interest. Solution oriented debate is constructive and disconnected from how the other party behaves. This does not guarantee success, but it provides the best circumstances. • The alternative to destructive argument is constructive debate. • This is characterized by behavior that serves our goal of seeking a solution agreeable to our interests. If it moves the negotiation towards an acceptable solution then we are prepared to engage in constructive debate irrespective of the provocation to do otherwise. 1. Neutral Statements These statements inform the other party of views, opinions, attitudes etc. These cover any statement by one negotiator that informs the other negotiator as to: - His views, opinions, attitudes and approach, - Or is in answer to a question, on whatever is under discussion. Information is the lifeblood of a negotiation. If we do not have accurate and timely information, we cannot make sensible proposals. We make assumptions but must test them with information. By listening, we learn about: - Their priorities and their values. - They also reveal their inhibitions – the factors that motivate them to say ‘no’ to our suggested solutions. Understanding what is inhibiting a solution must be beneficial to our interests because unless and until we remove or meet the inhibition we are unlikely to make progress. • Much of the time spent in debate is in an effort to persuade the other negotiators to see our point of view. We try to influence their perceptions of the possible outcomes and persuade them to modify their expectations. Hence, we make statements to these ends, though not always consciously. We marshall whatever arguments we can think of that present our views in the best possible light and try to counter their arguments that contradict our own. • Careless behavior of the argumentative kind actually works directly contrary to the tactical necessity of persuading them to work towards our objectives. 2. Assurance This behavior assures the other party of your good intentions and positive attitude towards your relationship. Tell them you are in the solution business. • The simplest verbal device can be used to motivate somebody to work towards your objectives. • A category of influencing skills called assurance behaviour. These can be as simple as saying positive things about the relationship between you (past, present or future). • These or similar statements are directed at assuring the other negotiator that you have positive rather than negative – or neutral – feelings about your relationship. • The lesson is that assurance behavior helps negotiators move forwards. • Example for assurances: • ‘I am sure that we can sort this problem out.’ • ‘We value the business we have done so far together and we look forward to continuing to do more business with you in the future.’ • ‘The fact that we let you down causes me even more pain than it evidently caused you.’ • Influences the other negotiator that you have positive feelings about the relationship, an as such the problem can be solved by the terms of the relationship. 20 | P a g e
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