Coffee Contract Role of seller

Anderson Coffee Role of buyer

Statler Hotel, Cornell University 10 minutes to read materials 20 minutes to negotiate

Slicing the Pie How do you get the biggest piece? Preparation

Offers Alternatives Concessions

Offers Folklore says to let the other party

make the first offer Is that a good idea?

Anchoring People tend to focus heavily on the

first offer First offer correlates .85 with the final

price

Offers (continued) What if the other party makes the

first offer? Immediate counteroffer Take away the psychic hold of the 1st

offer

Offers (continued) How do you feel when the other

party accepts your first offer? I should have asked for more Maybe I just got into a bad deal Less satisfaction

Do not accept first offers They are just that – an opener Expectation to negotiate

BATNA Best Alternative to a Negotiated

Agreement The lowest acceptable value to an individual

for a negotiated agreement Develop alternatives so you know at

what point to stop negotiating Gives you the POWER to walk away

If we cannot receive an offer of X-amount for the house, then what will you do?

Rent it out?

What’s your bottom line? “Tell me the bare minimum you

would accept and I’ll try and throw in something extra”

“Why don’t you tell me the very maximum you are willing to pay, and I’ll try and I’ll see if I can shave off a bit”

Concessions Need some cushion (Target price versus

reservation price) Make the first concession

Why? Norm of reciprocity Positive feelings

Magnitude of concessions Less and less to signal you are reaching the

end

Now What….. I want the last remaining orange

and so do you

Principled Negotiation Getting to Yes: Negotiating

Agreement Without Giving In Fisher & Ury

Principled Negotiation Strategies Integrative negotiations

MIND-SET

Mythical Fixed-Pie: Piece 1 Assume there can only be one

winner and one loser (distributive bargaining approach) Fail to find mutually agreeable trade-

offs

“Let’s Compromise” The middle ground

“Let’s split the difference” Seems like a good strategy: Isn’t it better

than no deal at all? However, the middle ground results in

incomplete satisfaction for both parties

“Leaving money on the table”

However, only a small percentage of organizational negotiations are purely distributive, involving just one resource or just one issue

Consider: Price, delivery date, financing,

service, relationships Salary, bonuses, flexible scheduling,

location, vacation, moving expenses

Negotiation Approaches

Distributive IntegrativeIntegrativeCharacteristics Bargaining Bargaining

Available resources:

Primary MINDSET:

Primary interests:

View of relationships:

Fixed amount ofresources to be divided

I win, you lose

Opposed to each other

Short term

Variable amount ofresources to be divided

I win, you win

Convergentwith each other

Long term

Integrative Negotiation Process and Preparation BATNA Determining & Valuing Interests Objective Criteria Sitting down at the negotiation table

Convey your interests effectively Emotional Strategy

Where do you start?

Focus on interests, not positions:

How do interests differ from positions? Behind opposed positions lie shared and/or

compatible interests Each side likely has multiple interests that

may be valued differently by each party

Complete satisfaction for both parties There may be only one way to satisfy a position, but

there are multiple ways to satisfy interests

Preparation: Interests, not positions Do you know your interests?

Identify and value your interests

Ranking process is one way to start Consult with team to help valuation

process

Logrolling Approach Trade-off on issues that are valued

differently Concessions

Concede on issue that is valued lowest to you – it may be of higher value to the other

Salary versus moving expenses

Mythical Fixed-Pie: Piece 2 The interests of the other party

conflict with ours “What’s good for them must be

bad for us” Our theories and assumptions

about negotiation and conflict strongly impact our approaches and behaviors

SALT (U.S. & Russia) “I have had a philosophy for some

time in regard to SALT, and it goes like this: the Russians will not accept a SALT treaty that is not in their best interest, and it seems to me that if it is in their best interest, it can’t be in our best interest” Floyd Spence, U.S. Congress

Finding Compatible Interests Can Be Difficult Pairs were presented with a negotiation

involving multiple issues regarding a job offer. On two of these issues, the opposing sides

had completely compatible interests (similar to an interest in the orange peel versus an interest in the fruit)

What percentage of the time did the negotiators make the trade-offs?

50% Left money of the table ½ the time

Ways to find out the other party’s interests and related values

Ask questions Listen to the response!

Contingent concessions I can give here if you can give on

something Make multiple offers

simultaneously Each is different, yet results in the

same level of profitability for you

Neutral Party Two students in a library, one wants the

window open, the other wants it closed. A loud argument breaks out.

How might this be resolved? Fixed-pie assumptions Anger closes our minds to alternative solutions

Not wanting to “give in” There may be just ONE way to satisfy a

position, but there are MULTIPLE ways to satisfy interests. Inventing options for mutual gain

Sitting down at the table Perceive yourself working side by

side with the other party to resolve the issue Separate the people from the

problem Resist the temptation to “attack” people

Typically sit across from the other

The Same Side Try sitting on the same side of

the table Together we can attack this

problem

Presentation Approaches Option 1: “I want that orange because I

am interested in baking an orange cake and I need the peel”

Option 2: “I am interested in baking an orange cake and I need the peel, that’s why I want that orange” How are these options different? Which one better ensures the other

knows your interests?

Approaching the Issues:Where do we start?

A. Start with the easy issues first!B. Start with the most difficult ones

first!C. Either A or B: It dependsD. Start with all of the issues at once

Emotional Strategy Poker face Positive Tough: Negative, Angry &

Forceful

For Integrative Bargaining… Positive is best

More creative, more ideas Found most trade-offs for joint gain

Highest level of value

Detriments of anger Found fewest trade-offs Least value

Expressing positive emotion “Put on a happy face” Your smile is often reciprocated

by the other side in terms of: Positive feelings and behaviors

Finding trade-offs Offering concessions

Policy “It’s company policy – there is

nothing I can do” Two volunteers to read an

example?

Insist on objective criteria Search for a standard such as

market value, expert opinion, law This way, neither party is “giving

in” to the other and a fair agreement is possible

We are asking for $200,000 in fees How did you arrive at that figure?

Conclusions Most negotiations leave money

on the table Too quick to compromise Fixed-pie assumptions are

prevalent Assume it is all or nothing Assume our interests conflict with

the other side

Reaching agreement without giving in To maximize value for you and the

other party adopt an integrative mindset Interests, not positions Develop your BATNA Adopt a problem-solving approach

Short & Long TermLong Term Benefits A collaborative approach may

seem counter-intuitive, but it is often more effective

Consider joint gains and positive word of mouth

Better over the long run