Day 6

Complex Integrative Negotiations

Complex Integrative Agreements

Make a proposal incorporating all issues Make multiple equivalent offers simultaneously Ask what is wrong with your proposal Ask diagnostic questions and listen; dont argue Build trust and be cooperative share integrative

information (do not disclose your reservation price) Trade off when there are differences in preferences Be firm on interests, but open to options Try post-settlement settlements

Runs & Financing Trade-off

OutcomeWCHI/

Hollyville Price #Runs Financing

A 1.49/0.89 $46,000 625% Y(0)

25% Y(1-3)B 1.5/2.5 $55,000 8 100% Y(0)C 3.0/1.0 $40,000 8 100% Y(0)

Advanced Methods for Uncovering Interests/Positions

MESO Multiple Equivalent Simultaneous Offers

Contingency Contracts

Benefits of Making Multiple Equivalent Simultaneous Offers

Anchor and re-anchor the negotiation Gather information from the other side about

relative priorities Help unskilled negotiators Be aggressive and persistent while signaling

cooperation Test what the other side is telling you Make concessions that are cheap for you Highlight your own value added Control the process of the negotiation

Concerns about MESOs

Giving away information Takes time Becoming attached to your proposals Danger of cherry-picking

Adding Juniors

OutcomeWCHI/

Hollyville Price #Runs Financing Other

A 1.49/0.89 $46,000 625% Y(0)

25% Y(1-3)B 1.5/2.5 $55,000 8 100% Y(0)C 3.0/1.0 $40,000 8 100% Y(0)D 2.0/3.0 $55,000 8 100% Y(0) Juniors ($15K)E 3.5/1.5 $40,000 8 100% Y(0) Juniors ($15K)

Betting on Differences in Expectations

The Problem Different expectations of future ratings

Ratings WCHI HOLLYVILLE2-3 20% 10%3-4 50% 10%4-5 10% 10%5-6 10% 50%6-7 10% 20%

Likelihood

Betting on Differences in Expectations

The Problem Different expectations of future ratings

The Solution Bet on different expectations

If ratings are < 4, WCHI receives $1M rebate from Hollyville If ratings are > 5, WCHI pays $1M surcharge to Hollyville WCHI .7($1M) + .1($0) + .2(-$1M) = $500,000 Hollyville .2($-1M) + .1($0) + .7($1M) = $500,000

Expected Value

Ratings WCHI HOLLYVILLE2-3 20% 10%3-4 50% 10%4-5 10% 10%5-6 10% 50%6-7 10% 20%

Likelihood

Contingency Contracts Build on differences. Dont argue over the

future, bet on it Allow negotiators to spread risk through risk-

sharing Allow negotiators to solve problems of trust

without confrontation Increase the incentive of parties to perform at

or above contractually specified levels Great lie-detection device diagnose honesty

Structural Features of Successful Contingent Contracts

Require continued interaction between parties Require enforceability Require clarity and measurability But, be careful of contingency contracts when

You cant afford to lose Other side has more information than you There is no objective measure of what happened

Capitalizing on Differences in Parties Preferences

Differences in priorities (logrolling) Differences in the assessments of the probability

of future events Differences in risk preferences Differences in time preferences Trade off on differences: when the other side

cares more about something than you do, you want them to have it, but at a price

Negotiation in Teams

Advantages Higher Joint Gains Perceived Power

Disadvantages Coordination loss Risky shift

Types of Intragroup Conflict (Jehn & Benersky)

Type of conflict is based on what it is about, not the level of emotion involved

Task conflicts

Relationship conflicts

Process Conflict

Task Conflict

Increases performance/creativity (at moderate levels) More divergent viewpoints More critical evaluation of alternatives More communication & problem solving More task focus Greater sense of challenge increases effort

Reduces satisfaction and consensus Increases anxiety and tension

Relationship Conflict

Reduces performance/creativity Distraction, misspent time/effort Limits cognition Decreases access to new information Group process focused on resolving or retaliating

Reduces satisfaction and consensus Decreases commitment Decreases cooperation & goodwill

Process Conflict

Sometimes increases performance/creativity Increases evaluation of processes and standards Increases appropriateness of task and resource

assignments

Mostly reduces satisfaction and consensus Increases claim and blame perspective Feelings of personal attack Unfairness and inequity primed

Negotiation in Teams

Key ingredients for success Skill mix Shared understanding/Norms Trust

Techniques for improving team outcomes

Prepare prepare prepare Agree on Substance:

Assure firm agreement interests and priorities that underlie BATNA, RP, & Targets

Agree on information that can/should be revealed and what should not

Determine Roles Skill and ability assessment

Plan the process Use Caucuses or recess strategically

Working as a team can be particularly beneficial in the following situations:

1.The negotiation is complex, requiring a diverse set of knowledge, abilities, or expertise. 2.The negotiation has great potential for creative, integrative solutions. 3.Diverse constituencies and interests must be represented at the table, as in union negotiations.

Working as a team can be particularly beneficial in the following situations:

4. You want to display your strength to the other side, for example, in international contexts where teams are expected.

5. You want to signal to the other side that you take the

negotiation very seriously, as in a merger or acquisition. 6. You trust and respect available team members

7. You have sufficient time to organize and coordinate a team effort.

Negotiator Toolbox: Integrative Negotiation Strategies

Prepare a scoring system Analyze issues, BATNAs, and reservation prices - think about

interests underlying positions Use the negotiations to collect information about integrative

possibilities Make a proposal incorporating all issues Make multiple equivalent offers simultaneously Ask what is wrong with your proposal Ask diagnostic questions and listen; dont argue Build trust and be cooperative share integrative information (do not

disclose your reservation price) Trade off when there are differences in preferences Be firm on interests, but open to options Try post-settlement settlements

Negotiator Toolbox: Integrative Negotiations Strategies Continued

Build on differences Fractionate/Add issues Trade issues with different priorities Use contingent contracts

Test the truth Multiple equivalent offers simultaneously Contingent contracts

Create an atmosphere for problem-solving