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Transcript of Negotiation excerpt
42 hrs Negotiation Course Excerpt
Agabio Consultants
The dominance of NegotiationAll aspects of our life practically go through some kind of negotiation.Children are the best negotiators
The parties involved have different degrees of power, but never absolute power over the other (total control vs. partial control).
There are always people who have a different point of view from ours.Since everyone demands the right to have a personal opinion, we must find ways to respond to the mutual right to dissent.
This is the reason for negotiation.
Alternatives to the Negotiations:1. A party may dictate their decisions to the other.2. Joint Troubleshooting3. Arbitration
Conditions for NegotiationIn case of conflict parties can
4. ignore the issue and agreed to continue to disagree5. accept the "agree to disagree“ approach6. resolve the conflict
Drivers of Negotiating7. own convenience (business or personal)8. a penalty to force change9. an incentive to encourage to make a change10.high costs in the absence of agreement (history,
time) vs. cost minimization agreement
Negotiation is possible only when the parties are willing to abandon their initial positions and when this will shall be expressed in one or several points of contact.
Negotiation is impossible due to• immovable stance• circumstances precluding one of the parties
Negotiation is an ongoing process based on the interaction of the parties. The first estimates may be revised or confirmed (including SWOT analysis).
Negotiation is a process of resolving a conflict between two or more parties whereby both or all parties modify their demands to reach a compromise acceptable to all.
Negotiation is…
Negotiation is a process of setting up an achievable result, the views of both parties on what constitutes the ideal result.
At any time you can decide whether to negotiate (/continue to negotiate) or not to negotiate (/suspend negotiation) based on considerations of convenience (advantages vs. disadvantages).
There is always the possibility of waiving the agreement
Types of conflicts:1. Conflicts of interest: agreeing the terms of a
transaction or a contract (or re-negotiate)2. Conflicts of rights: difference in interpretation when
there is an agreement between the parties
You have to note that:1. The word "conflict" does not mean rupture, schism,
dispute, fight, quarrel, violence...2. A conflict of rights or interests has to be, for a good
negotiator, a precondition for resolution.3. The negotiation of the conflict is a victory of ideology over
experience.
Conflicts
Negotiation has to resolve conflicts without jeopardizing the whole of the relations between the parties.
Relations
Even ongoing relationships presentcommon interest
andconstraints between the parties
Common interest doesnot mean that any
conditions areacceptable
Acceptable conditioninvolves a conflict betweenthe parties, until they agree
to conditions that are allacceptable
Each party has the veto toany outcome that is
proposed by the other part:avoid the answer "no"
Remember that: Negotiated agreements are voluntary agreements.
A
Bdistance betweentwo opposite sides
A
B
A B
The negotiation is to reduce the distance between two opposite sides…
…until they reach a mutually acceptable position
Signals of willingness to move closer (from a syndicalist):"I see both sides walking toward each other.My objective is making the business side walking fasterand giving workers greater benefits than the steps theyactually made."
The "approach" word brings up the concept of distance:"The distance that separates them from us on this subject …""We have come very close."
We move from one place and we go to another placeWe move from our present position with the aim to reach a point ofagreement acceptable and, better, from a systemic point of view, thanthe initial one.
The "approach“ word means moving closer to the other party.
Our opponent does the same thing.
BAA
B
Reciprocity distance
The rangeoffered underthe negotiator islocated betweenthe MFP and itsbreaking pointor limit
At any point ofthe overlappinginterval (called"field ofexchange") ispossible theagreement
In practice how does it work the Process Approach?
A
B
A
BMFP MFP
breaking pointor limit
The two segmentsoverlap
Limit
Limit
A
B
A
B
MFP
MFPBP
MFP
BPMFP
BP
A
BParty A'sAspiration Range
Party A'sAspiration Range
ZOPA
ZOPA:Zone OfPossibleAgreement
Party A's...
Party B's...
Target PointResistance
Point
ResistancePoint
Target Point
More FavorablePosition
Limit,Borderline
Limit,Borderline
More FavorablePosition
Real base Aspiration Base
Aspiration Base Real base
Buyer
Seller
A
B
Target Point
ResistancePoint
Party A's...
ResistancePoint
Target Point
Party B's...
Buyer
Seller
Pressure
Pressure
BATNA is the Best Alternative to a Negotiated AgreementBATNA
WATNA is the Worst Alternative to a Negotiated Agreement
Example.Purchasing a car:
• my BATNA might be to accept the best deal I can get at a different dealer
• my WATNA might be to accept a car with fewer of the features I would like
60004000 5000 7000
seller
8000 €
buyer
ZOPA
5800
seller'sBATNA
5100
I'm the buyerI want to by a carCeteris paribus all the alternativesare illustrated in the table on the right
alt. 1 8000alt. 2 6050alt. 3 5800alt. 4 6500alt. 5 6800
this is myBATNA
BATNA is the bestwe can hope for ifnegotiations don't
succeedWATNA is theworst we can
realistically fear
Q. What decides the location of the point of agreement and the distance we have to travel to reach it?
A. The relative power of the parties and their ability.The skill of the negotiator is to travel the minimum consistent distance with obtaining the agreement.
A
B
MFPA
PBA
MFPBPBB
In this case, the rangegoes beyond the limit
PMFB
€
If B discovers this, in thecourse of negotiations, it will
be able to reach an agreementin the interval MFPB-PBA or
revise its initial position
If B doesn't discover this,it may reach an agreement
on inferior conditions tothose which would have
had to accept.
new PBB
because
A
B
MFPA
MFPBPBB
€
PBA
In this case, the rangegoes beyond the limit
PMFBIf B discovers this, in the
course of negotiations, it willbe able to reach an agreement
in the interval MFPB-PBA orrevise its initial position
because
If B doesn't discover this,it may reach an agreement
on inferior conditions tothose which would have
had to accept.
Simple negotiation process: • The negotiator has to reach the field of
trade-off• Once in it, the negotiator has to find an
agreement• When the negotiator discovers the
possibility of an agreement, he has to secure it at minimum cost and to agree on its execution
More detailed negotiation process
A negotiation can be considered as a more or less ordered sequence of different phases that can be modeled in our mind in a relatevily simple and credible way
ph1 ph2 ph3 ph4 ph5 ph6 ph7 ph8
We call it: The "method of the eight phases."It is a model and like all the models does not imply that it is a rule to be followed by all and in very religious way.
I will illustrate a specific process proposal due to the common experience, that every practitioner can use during a negotiation...
...but if you will find the concepts, that I will expose to you, useful, you can apply them (I hope) with success in the future; if you will find the same concepts useless or not completely useful, you have to abandon them immediately or modify them until you can find a formula that perfectly suits your needs.
Orthodox behavior vs. unorthodox behavior
• The method of eight phases: it focuses on the ability to negotiate (conflict is a fact and not an obstacle).
• The method of psychological school: it is mainly based on ideological ("neuro") schemes of the negotiators
• The method of necessity theory: it implies that the negotiator is independent of the interests because take in account the necessity of both parties
• The method of transactional analysis: "I am a person trustworthy and worthy of respect in myself and in the other."
• The method of approach to probability: it leaves much to be desired
• The method of game theory: it is explanatory, but very limited in practice
The most common methods of negotiation
Our approach is based on what the negotiators do, not on what they should do.
The success of a method doesn't depend on he fact that both negotiating parties use the same method.
The method of the eight phases
For now we will face the study of the negotiation without taking into account the levels of thought, that will be discussed later.
For now we will breakdown the development of the negotiation in eight phases that runs through every negotiation, which aim is to reach an agreement, taking in account that every phase • it doesn't necessarily proceed in a rigid order• it doesn’t need the same dedication and
attention
The differences among the phases are the different skills and the different techniques which are suitable in each case.
The eight phases constitute a map of the environment in which the negotiation takes place.
As in the case of a map• there is a relationship between the relative
position of its parts.• we don't need to start from a predefined point
The purpose of the map is to help us identify our surroundings,...
...so we can get going in the right direction to reach our destination,...
...which in the case of negotiation is to reach an agreement.
Metafora visiva della negoziazione
In the method of the eight phases there are four outstanding phases:
Preparation
1
Discussion
2
Proposal
3
Exchange
4
Among these main steps there are other minor.
Preparation ExchangeProposalDiscussion
1 2 3 4
Signals Package Closing Agreement
1
Preparation
2
Discussion
3
Signals
4
Proposal
5
Package
6
Exchange
7
Closing
8
Agreement
Here there are all the eight phases.
In any negotiation four of the eight stages are crucial:
The method is dynamic and develops continuously (no semantic apnea) in real-time:
• Preparation• Discussion • Proposal• Exchange
• what it is happening at every moment of the negotiation• the next position to which you want to reach• what you have to do to get it
1 2 3 4 5 6 7 8
There are no predefined sequential schemes
An adequate prep is the necessary condition for a successful negotiation
PREPARATION
The sine qua non of an adequate prep is • not having to find us in the negotiating table in the
condition to improvise• not having to take note that we should have had to
prepare ourselves better• not having to take note that the counterparty has
become aware of our lack of preparation, becoming more confident in itself and increasing its demands
The negotiator's attitude should be aimed at a continuous process in order to know
On the contrary the negotiator needs to know• what to get and• how to get it
• his behavior• what he want in the short and long term• why he want to get it• the aspirations and the circumstances of his opponent
The key issues of the preparation are:1. Objectives with their order of priority2. Information3. Concessions4. Strategy (Behavior)5. Tasks
Main objective:to maintain the status quo
Prep
arat
ion
No!
The order ofthe objectivescan bealtered in thecourse of thenegotiation
No!
Assigninga priority
to theobjectives Pr
iorit
y Objective 1
Objective 2
Objective 3
Objective 4
Objective 5
Prio
rityObjective...
Objective...
Objective...
Objective...
Objective...
We mustestimate ...
... the order ofpriority ...
Objective 1
Objective 2
Objective 3
Objective 4
Objective 5
difficult to determineduring negotiations
Our opponent will try tohide their preferences convincing us that allare equally important
The negotiatoralso practices
this type of bluff
60004000 5000 7000
B
€
A
ZOPA
Limit
MFP
There isan overallobjective:
to obtain the largest possiblepart of our objectives staying
as close as we can to ourMore Favorable Position
(MFP)
Obj
ectiv
e 1
Obj
ectiv
e 2
Obj
ectiv
e 3
Obj
ectiv
e 4
Obj
ectiv
e 5
The gap MFP-Limit meanssome goals less important than otherswe have fallback positions
...of theobjectives of the
opponents,
Negotiators with a lack of confidence in themselves or in theirproposals or that are intimidated by their opponent, even before
meeting him, are oriented to choose "soft" targets
Objective 1
Objective 2
Objective 3
Objective 4
Objective 5
Questioning realism.
Little is gained bypretending the
impossible.
S
A
M
T
R
Specific
Measurable
Achievable
Realistic
Timed
detail exactly what needs to be done
achievement or progress can be measured
objective is accepted by those responsiblefor achieving it
objective is possible to attain (important formotivation effect
Time period for achievement is clearly stated
Objectivesmust be...
Us and us only we can decide what areour objectives in negotiations.
When we are fixing them we aredefining the "success" or "failure" criteriachoosing the most probable level ofresistance of the opponent to our proposals
time
Prep Neg
There will beprevious circumstances,
or arising in the course of negotiations,preventing to achieve some or all of
the most favorable targets.
Experience and detailed planning will help choosing realistic goals.
A
LimitMFP
B
Limit MFP
Objective B
Objective A
Objective B
B
A
C
like to getlow priority
B
A
C
B
must gethigh priority
important to getmedium priority
B
C
A
important to getmedium priority
must gethigh priority
A
B
A
C
like to getlow priority
We have to make a list of our objectives, including:
• those we want to achieve• those that are implicit and• those we already enjoy
We have to take into account that:• in any negotiations all the points can
be discussed again and againand
• we may lose some points that we had previously considered as earned
Full list = more favorable position, i.e. what we would like to get.
A
MFP Limit
B
A
C
B
C A
like to getlow priority
important to getmedium priority
must gethigh priority
B
Limit MFP
B
A B A
like to getlow priority
important to getmedium priority
must gethigh priority
1
1
A
MFP Limit
B
A
C
B
C A
like to getlow priority
important to getmedium priority
must gethigh priority
B
Limit MFP
B
A B A
like to getlow priority
important to getmedium priority
must gethigh priority
2
2
3
3A
MFP Limit
B
Limit MFP
B
A
C
like to getlow priority
B
must gethigh priority
B
C
important to getmedium priority
A
important to getmedium priority B
A
like to getlow priority
A
MFP Limit
B
A
C
B
C A
like to getlow priority
important to getmedium priority
must gethigh priority
B
Limit MFP
B
A B A
like to getlow priority
important to getmedium priority
must gethigh priority
2
2
A
must gethigh priority
ZOPA 4
E
like to getlow priority
important to getmedium priority
must gethigh priority
B
A
C
B
C AD
E
A B A
like to getlow priority
important to getmedium priority
must gethigh priority
D C
B&A ask A1
B ask B + C
2
& DA ask A
3
A
MFP
LimitLimit
B
Limit MFP
Limit
ZOPA 1
ZOPA 3
ZOPA 2
A
B
A
B
A
B
Si:• todos nuestros objetivos son vitales (segun nosotros)• todos los objetivos de nuestro opositor son vitales (segun
ellos) • esperamos que sea el otro a moverse
el resultado serà• un punto muerto (ninguna de las partes quiere moverse)• una larga sesión (tendremos que prepararnos mejor)
A
LimitMFP
B
Limit MFP
Uno de los dos tendrá que hacer algún movimiento......para empezar el baile y motivar la otra parte a moversetambien y buscar conjuntamente soluciones sostenibles.
Como obtener un ZOPA?
Therefore, during the preparation, we have to train ourselves to make the first move, if necessary, and how to handle any countermoves
Preparation Discussion
Starting thesessions
between theparties
We have to prepareourselves before the
negotiation
Preparing ourselves inthe course of the
negotiation is the worstthat can be done
(objectives andintentions of the
opponent could act as aPattern Interruption)
must provideinformation onour opponent
we can verify informationthroughout the negotiating
sessions
Starting thesessions
between theparties
If our interlocutor tells us:"that, unless I get this and that"...
How do you know if it's true?For the way she says it?Because she seems irritated or sincere?
Maybe, but this is a veryunreliable way
It is better to start byinquiryaccurate study of thecontext
Preparation Discussion
we can verify informationthroughout the negotiating
sessions
But...
Can our opponent manipulate theinformation we receive before thenegotiation?
Is it about• a genuine discomfort?• an "environment adjustment" ritual?
Preparation isan ongoing
activity
Does the opponent come to the negotiation with a fully homogenized interests and objectives?
In the group of the opposition do not exist differences of opinion, of priority criteria, of sensitivities, of aspirations, of "position"?
Must get
Must getImportant to get
Must getImportant to getLike to get
Beginning withthe leastimportantpoints that
we'd like to get
Example
Contract: CDelivery (days): DDiscount: d
C: 100%D: 90d: -
C: 100%D: 60d: -
After identifying theminor objectives, wehave to define the
objectives that we mustto achieve.
C: 100%D: 70d: 15%
C: 75%D: 60d: 12%
C: 50%D: 40d: -
equallyacceptable
options
bottom linefallback position
limit position
Sometimes is verydifficult to identifywith precision this
point
objectives withoutwhich it would bebetter not to reach
any agreement.
best notto closethe deal
C: 41.5%D: 50d: 18%
At what point weshould leave the
negotiation withoutachieving anagreement?
C: 42%D: 50d: 18%
Not all our objectives have a chance of being achieved
It is very likely that, while the negotiation progresses, we have to leave • some objectives• a part of them
Must get
Must getImportant to get
Must getImportant to getLike to get
Must
Must Important
Must Important Like
€
€
Is crucial to spend toomuch time to definethe limit position of
the opponent?
Having an idea, a trace?
Yes
Spending too much time?
No
The objectives must wait until theright time to fix them definitely.
the circumstances,people and the power they hold,time,information
The objectives depend on, e.g.:
It is essential to checkthem continuously
the opponent
Beyond the goals wewant to achieve are
the objectives that wewould get.
It is even moreambitious targets,
we could get in the mostoptimistic circumstances
that if they had to besacrificed in the course
of negotiations, thenegotiator would not feel
too upset or guilty.
the opponent
It's important to take into consideration therelationship of forces with the opposing party.
Obviously it is a subjective exercise andwe have to avoid overestimating or
underestimating
our ownstrengths andweaknesses
opponent'sstrengths andweaknesses
• "irrationally" prefers a worse deal than whatis offered, or• "irrationally" decides apply a penalty to harmyou more than it's worth the concession can get
Comparative analysis to define • strengths and weaknesses • relative priority • realism of objectivesof both sides
n°Xx
weakness
strength
priority
unrealistic
realistic
objective
objective A
B
"A"'s situationevaluated by "A"
7a
8h 3d
9i
6g 5b 1f
2c4e
likeimportant must
"B"'s situationevaluated by "B"
1A 8D6F5G2E
3H 4B7C
likeimportantmust
"B"'s situationevaluated by "A" 5G'2E'
3A'1B' 4D' 8C'
7H'
6F'
likeimportantmust
"A"'s situationevaluated by "B"1b'
7d'8
8g'
2e'4a'
3c'
9h'
6f' 5d'
like important must
The parties must also thinkabout the list of their opponents.
A
7a
8h 3d9i
6g 5b 1f
2c4e
likeimportant must
"A"'s situationevaluated by "A"
n°Xx
weakness
strength
priority
unrealistic
realistic
objective
objective
A
7a
8h 3d9i
6g 5b 1f
2c4e
likeimportant must
"A"'s situationevaluated by "A"
Before the start of negotiations the parties must leave the unrealistic (or lessrealistic) and weakest objectives, concentrating themselves in the objectiveswith higher priorities, with more strengths and more realistic outlooks.
…will be filtered in the following way
E.g.: the “A's” objectives…
Prep Action in NegoMore time to think Less time to think
a part of this information willbe known in advance, during
the early stages of negotiation,especially during prep
alt alt2
alt
alt
ali alt1
alt
alt
alt5
altalt
alt
altn
alt3
alt
alt
alt4
The definition ofobjectives requires aconsiderable amount
of information.
INFORMATION
t
obj1 obj2 objn
At the beginning, generally, wehave the opportunity to correcthypotheses and assumptions
declared assumptions generatereaction from the opponent
We assume the existence of order and regularity
reaction
hypotheses try to evaluatereaction based on their
objectives
our part opponentourassumptions
about opponentmost likely targets
on the likelyreactions of theopponent to our
requests
setting the natureof opponent targets
ourtarget
opponenttarget
we assumes that ourrequests generate reactions
our requests
we hypothesize theevaluation of thekind of reaction
opponent reactionsopponent requests
setting the nature ofopponent tasks
setting the nature ofour tasks
Hypotheses Assumptionsvs.
An hypothesis is atheory that needsverification and
investigation
An assumption isany statement thatis believed to be
true
assumptionaccepted
hypothesis
hypothesis lapsed
lapsed
hypothesis verified
t
Prep
firstassumptions
info known inadvance
first hypothesesestablished
infocorrected
first hypotheseschanged
continuous updating of infos and of hypothesesespecially in the first stage of negotiation
assumptionsassumptions assumptions
Without testing opponent hypotheses we can • deny something that our counterpart does not demand us,
or• require something that our counterpart is not denying us.
t0 t1
Only beyond t1 wecan meet opponenthypotheses, i.e.after thepreparation phase...
...i.e. during thenext phases
During prep phase it is possible totest in advance only our hypothesis
Among our first tasks: testingopponent hypotheses
Contrasting hypotheses
Information current situationtheir interrelationshipshistory trading stylepersonalitymotivationscultural leveletc.
We OtherPart
What information wehave to give to the
other party?
When and How?
Negotiators are morelikely to hide information,creating:
useless andlengthy
discussions
more need fornegotiation
The moreinformation youcan collect on theother hand, thebetter will be theagreementreached
We rarely have fullinformation (thisis why negotiationsare unpredictable)
Information can leadthe other party to reviseits objectives,
If a party becomes aware of what the opponent thinkit would start from the limit (resistance) point of its opponentit would reject any changes
We should not lose sight of
initial stance
when and how far tomodify the initial stance
future stance
when to stop andsecure positions
stop
tt0
information
helps us to decidewhat to do
when to do
information
helps us to decidewhat to do
when to do
securepositions
information
helps us to decidewhat to do
when to domore information = more power
this does not mean that we have tohide information...
...we have to give a selectedinformation useful to achieve ourobjectives.
where to start from
information of what?
information onwhat is desired andwhat is not desired
information aboutthe intensity ofthe desires
The information required depends on thenegotiating environment
For our own purposes, we candevelop a detailed checklistwith the information that wehave used in the past, anduse as a guide for the future.
pastinformation
checklistuse as a guidefor the future.
We need to define clearly• our position more
favorable• agreed position
more likely• the limit of our
negotiating authority
• concessions we are willing to try
• legal and financial implications of these concessions
• Whether or not the product or service is essential to your business• Value for money• Price• Long Term Costs
e.g.:• After-sales service and maintenance arrangements• Lifetime costs of a product or service
• Quality• Product or Service Specifications• Delivery Date• Payment Terms• Length of Warranty• Warranty Coverage• Legal Jurisdiction• Packaging Requirements and Charges• F.O.B. Terms• Freight Charges and Carrier Used• Order Quantity• Length of Agreement• Cancellation Terms• Patents and Copyrights
Example of “Objectives”
A
B
A
BDuring the preparation phase it is extremely important setting an initial model of strategy, i.e. a meta-strategy, able to reprogram its behavior, during its running, whenever it is necessary.
Strategy concept
A
BDuring the preparation phase it is extremely important setting an initial model of strategy,i.e. a meta-strategy, able to reprogram its behavior, during its running, whenever it is necessary.
Strategy concept
t2t4
t3
The resulting strategy should provide us at all times the best plan of action (variable over time) to achieve the envisaged goals (varying over time).
The main feature of a good strategy is the "simplicity".
t1
A strategy is like a mean of transportation that takes us from a situation "A" to another situation "B"
The path, that the aforementioned "coach" (understood as a transport carriage) runs through, looks like a tree (sometimes we tend to simplify this concept using it as "the decisions tree").
Situation "A"
Situation "B"
A
MaybeYes
*
No
Z*
**B
In this context, negotiation is part of a more complex strategy to move from point A to point B.To do this we must
• make key decisions,• finalize important agreements and• accept assumptions
Very simplified scheme:
AB
B
Scheme a little more complex (but not too much compared to the real world)
Our strategy mustconsider all possible
ways that we cantake to negotiate, ...
... e.g. we choosethis "path"...
...if we see that ittakes an unexpected
direction...
... we must pause ... ... to reconsiderour strategy...
...through arecovery
strategy ...
IntendedStrategyDeliberate
Strategy Process
Unrealized
Strategy
EmergentStrategy Process
RealizedStrategy
The strategy should not be excessively rigid but capable of reacting to events arising in the course of trading