Negotiation: Theory and Practice

Negotiation: Theory and Practice (N101) 2 of 44 Negotiation Quiz Please check off on this sheet which of these situations represents a negotiation. (You may wish first to answer all those you find easy and then go back to the others.) • Buying a rug in a West African market • Soliciting a new source of venture capital • Trying to capture/kill a warlord in a regional war • Trying to injure or ruin a competitor • Writing back and forth with someone you do not know on the Internet • Meeting your potential in-laws for the first time • Giving or receiving commendation and criticism • Deciding how the dishes will get done • Borrowing a wonderful piece of clothing from a family member • Deciding whether to stay late at work to finish up a project • Making up, or rebuilding a relationship with someone you love • Picking a successor for the CEO of a company where you are on the board • Getting a child to go to bed • Getting into a class or training program with limited enrollment • Courting your Life’s Companion • Laying off or firing someone • Discussing the outsourcing of a business function with the manager of the function • Deciding with a family member where to invest a small joint inheritance • Soliciting a major gift from a major donor • Soliciting bids for the new advertising campaign for your company • Talking with your parent(s) this weekend • Saying good-by to someone you will not see for a long time • Finding an advisor, or a mentor, or a counselor, or a new dentist • Discussing with a recruiter the salary and benefits you feel you deserve • Trying to get back to sleep when something is worrying you • Trying to shake off a stranger on the street who keeps walking with you • Getting an extension on a paper or a project • Apologizing to someone whose property you unknowingly damaged • Seeing someone you dislike and turning away at a party • Interviewing a potential baby-sitter • Accepting a bribe • Turning down a bribe • Getting another country to lower a trade barrier • Talking anonymously about an unsafe workplace condition with a Hot Line person • Meeting a new teammate for the first time • Struggling to stay on a diet or exercise plan or give up smoking 3 of 44 A Butterfly's View of 15.667-Negotiations and Conflict Management (see which questions you can answer?) Is there one especially "rational way" to divide $2 with a stranger? (If you think there is not, what determines the family of "rational choices"?) Do you think that most business decisions are made rationally? Is there usually one optimum decision? You are facing a specified conflict or negotiation with someone about whom you know only demographics, style and job description. You have only an hour. What might you do to prepare? In real life, in a super important case, how and when should you choose which strategies and tactics you will use in a negotiation? On what factors ought this choice to depend? How can one try to prevent a "bad attitude death spiral" in a negotiation with someone you do or do not know well? Where does a desire for revenge come from? Which of the ways of building trust appeal to you the most? What is the difference between manipulating people and inspiring them (as a leader)? If you or someone else has gotten painted into a corner, through a commitment that should never have been made, what could be done? Can you tell when someone is lying to you? How might you figure out the strategy and depth of strategy the Other is using in a negotiation? Within a close team or a couple, if you have no time in each negotiation to pursue the best win-win solutions, where both sides gain simultaneously, how can A and B behave so that both are actually gaining, in the aggregate, over time? How would you define effectiveness in a negotiation'? Are you effective? Who do you know that is effective? Is it the choice of negotiating strategy that determines effectiveness? If so-which strategy is most effective? 4 of 44 If not-which tasks and skills most fundamentally determine the effectiveness of a negotiator? What proportions of all your negotiations and conflicts are "mixed motive"? What proportion is purely collaborative? and what proportion is purely competitive? After you take the Thomas Kilmann Questionnaire, assess the strengths, in the five basic strategies, that you bring to your negotiations. Are your skills in balance with the requirements of the negotiations you are engaged in? (Which of the tactics on the Tactics sheets in Negotiation 101 do you want to practice?) Imagine you are assembling a team to start a project or a company. What would you look for, in the people you would choose for your team, with respect to the five sets of strategic strengths in negotiation? Given that most people think they are ethical, and that people are not at all the same with respect to ethical standards, would you want to give your future employees or partners an Ethics test? :-) See if what they actually do is what they say they should do, when ethical questions arise? Just see if they do what they agree to do, in negotiations with you? Suppose they think different standards should apply to them than to "most people"'? What is the likely effect of having an observer when you negotiate? In complex negotiations what are some of the reasons for sidebar discussions with someone on the Other's team? Are there any reasons not to have sidebar discussions? If you wanted to win over a ten-person decision-making group about a certain proposal, what are some of the ways you might do this successfully? Please think of one or two negotiations that are truly vital to you-these could either be negotiations with yourself or negotiations with Others. What is it that is being negotiated? Think for example, about money, time, status and prestige, trust, space, family status, future growth possibilities, etc. Is money the most important subject? Name some ways you could find out how effective you are in this real-life negotiation that really matters to you. The Last Task in a negotiation is: that all parties must come to see the outcome as the best possible under the circumstances. When is the last time you have seen the failure of the Last Task in a negotiation? Why did this happen? Under what circumstances would you make the first offer in a competitive negotiation? Under what circumstances would you lay out all your relevant real interests in a negotiation? Professor Mary R MIT 5 of 44 Name some elements of process you would want to think about, if you were going to negotiate for your side on a two-person team. In a setting with coalitions, would you prefer to be a "pivot'' person, o r the person with the most tangible resources, if those are not the same? Some of the options for dealing with complaints are: listening, referring people to other resources, just giving or receiving needed information, helping people help themselves through developing choices and coaching, shuttle diplomacy, formal mediation, factfinding, arbitration or adjudication (and managerial decision-making), systems change, generic approaches, agency complaints, lawsuits, going to the newspapers. Which of these are more likely to be collaborative? Which are more likely to be competitive? Which will likely be "mixed motive"? Some sources of power in negotiations include: legitimate authority, rewards, sanctions, force, information, expertise, elegant solutions, commitment, moral authority, BATNA, relationships. Which of these sources of power do you need for each of the options above, for dealing with complaints? Who should decide which complaint option or conflict management option is chosen? The manager? The complainant? Which is the most cost-effective complaint handling option'? W h a t does a person in a n organization think about first when he or she wants to raise a concern or make a complaint? Is it possible to go outside the organization with a complaint and still have a normal work life thereafter within the organization? What does your answer mean for conflict management system design? What is the first question to ask yourself when you face a dispute or a complaint as a manager? Which sources of power do people turn to when they feel powerless? What is the effect? Is there such a thing as a "frivolous" complaint? What would you want to try, if someone kept blaming problems on other people? Under what circumstances is a Difficult Person not "difficult"? Which sources of power are likely help the most, in dealing with a very Difficult Person? 6 of 44 38) How do you manage your own emotions in conflict situations? (Do you consciously manage your emotions at all, or do you simply react?) What do you do if you start to feel yourself getting upset? 39) Do you try to affect the emotions of others in a conflict situation? How? For what purpose? 7 of 44 Negotiation Styles/Strategies Competition (A) Compromise Avoidance Adapted from the work of Kenneth W. Thomas: Conflict and Conflict Management. in The Handbook of Industrial and Organizational Psychology. Edited by Marvin Dunnette. Chicago, IL: Rand McNally, 1976. Accommodation (A) 8 of 44 Negotiation Styles/Strategies Competition (A) Collaboration Compromise Avoidance Adapted from the work of Kenneth W. Thomas: Conflict and Conflict Management. in The Handbook of Industrial and Organizational Psychology. Edited by Marvin Dunnette. Chicago, IL: Rand McNally, 1976. Accommodation (A) 9 of 44 10 of 44 Negotiation Styles/Strategies Competition (A) Revenge (A) Compromise Avoid ance Accommodation (A) Revenge and Self-Injury Revenge (B) 11 of 44 Interests vs. Positions 12 of 44 ‹ Interests ‹ Rights ‹ Power 13 of 44 Negotiation Strategies: Definitions Distributive Strategy: Claiming all the profit or the maximum share for oneself winning it all. Integrative Strategy: Creating value (expanding the pie) and finding solutions that best fit the needs of all or most parties -especially over time. Mixed-Motive Strategy: Expanding the pie and meeting the needs of all or most parties as much as possible while claiming an appropriate share. 14 of 44 Negotiation Styles – Typology #1: Definitions Competitive Style: To try to do better than all others. Cooperative Style: To try to be sure that the feelings of all are properly dealt with. Independent Style: To try to find the best possible outcome regardless of the achievements and feelings of others. 15 of 44 Negotiation Styles Typology #2: Definitions Competitive Style: Accommodative Style: Avoiding Style: Compromising Style: Collaborative Style: Revengeful Style: Self-Injurious Style: Revengeful and Self-Injurious Style: To try to gain all there is to gain. To be willing to yield all there is to yield. To try to stay out of negotiation. To try to split the difference or find an intermediate point according to some principle. To try to find the maximum possible gain for both parties - by careful exploration of the interests of all parties - and often by enlarging the pie. To try to injure the other. To act so as to injure oneself. To try to injure the other and also act so as to injure oneself. 16 of 44 Team Building Interests ‹ interests rather than positions ‹ collaborative, cooperative learning styles ‹ integrative and mixed motive strategies ‹ informal problem solving rather than “justice” Rights & Power ‹ positions rather than interests ‹ competitive (or avoiding) style ‹ distributive strategy ‹ justice orientation rather than problem-solving 17 of 44 ‹ Tangibles ‹ Intangibles 18 of 44 Bargaining Range Zone of Possible Agreement Seller’s Reservation Point Buyer’s Reservation Point 19 of 44 MORE TERMS IN NEGOTIATION Reservation Point: the point at which the Best Alternative to a Negotiated Agreement (the BATNA) becomes preferable to starting or continuing a negotiation. In a sale—or in any negotiation—this is the point beyond which a party will not go. Bargaining Range: The distance between the reservation points of the parties. This range can be positive or negative. If it is negative there will be no settlement unless one or both parties changes reservation points. BUYING A HOUSE Bargaining range -0--------/\/\/\-------|------------------------------------------------------------------|---------| | Seller’s reservation point Buyer’s reservation point Expanding the pie: The process of adding elements to a negotiation which help one or both sides to gain more—a basic task in making negotiations more integrative. These are usually elements which are valued differently by each party and often they have the characteristic that one side will gain a little, give up nothing or suffer only a small loss in return for great gain to the other. These elements can usually be added to almost any negotiation no matter how distributive the negotiation at first appears to be. As examples: the seller of a house may not care about taking the curtains or the lawn furniture. The buyer may greatly value these amenities because they will save a lot of time in moving in. The buyer might agree to a postponed moving date which does not affect him or her very much—in order to accommodate the seller’s staying until the end of a school year. In return, the seller may not mind if the buyer sends loads of books that will be stored in the garage months before transfer takes place. Both buyer and seller may enjoy introducing the buyer to the neighbors. Both may greatly value respectful and honorable treatment from the other—which usually costs nothing. Positions vs. Interests: A position is what you say you want or must have. Positional bargaining is usually distributive—and may be inefficient in the sense that value may be left on the table at the time of settlement because each party did not know what the other really wanted—but it may help one party gain more short-term profit. An interest is why you want what you want. Interest-based bargaining adds integrative potential. 20 of 44 Strategy and Style Str ate gy Style Competitive Cooperative Distributive Integrative Mixed Motive 21 of 44 Ineffective Competitives ‹ Obnoxious, complaining, rude ‹ Unsure of the values at hand ‹ Not realistic, perceptive, astute 22 of 44 Ineffective Cooperatives ‹ Unsure of self and interests ‹ Not creative or perceptive ‹ Not realistic or astute 23 of 44 Effective Negotiators (both strategies) ‹ Ethical, trustworthy ‹ Appropriately courteous ‹ Prepared ‹ Creative, realistic ‹ Perceptive, self-controlled 24 of 44 Bargaining Tactics1 for Distributive, Integrative and Mixed Motive Strategies Classic Distributive Classic Integrative Maintain an inscrutable (or hostile) demeanor; bargain on your own turf and do not be hospitable. Or, alternatively, be very charming. Be as professional and as pleasant as possible to deal with, whatever the substance of discussion; seek neutral turf. If you cannot be pleasant, be scrupulously civil and respectful. Sacrifice relationship to gains. Build trust for a longterm relationship. Argue ad hominen. Discuss issues rather than personalities. Use humor at the expense of others. Use self-deprecating humor. Avoid discussions of the principles that should influence the decisions to be made. Seek agreement on the principles that should determine the decisions to be made. Conceal your own interests (appear to ignore the other's interests) while doing your best to discover the reservation point of the other. Describe your interests; seek to understand the other's interests — listen actively. Conceal all other relevant information as much as possible. Share information; it may help to expand the pie or discover joint gains. (Dissemble, mislead, lie if necessary.) Be truthful. Be unexpected, (retract former agreements or points of agreement without notice; rattle the other side). Be consistent, reliable. Bargain in terms of position, (your position). Talk about your rights. Bargain in terms of interests and principles. Talk about problem-solving. Take extreme positions. Seek reasonable possibilities. Hold these positions tenaciously. Make reasonable accommodation. 1These descriptions of tactics are not meant as endorsements of all of these tactics. In particular, this paper is not meant as a recommendation of unethical tactics, nor does the author believe that unethical tactics are necessary. (It is perfectly possible to be a principled, distributive bargainer, who uses some but not all of these tactics—just as it is possible to be an unethical integrative negotiator.) It is however important for all negotiators to be aware of the strategies and tactics that may be used by others; please therefore study carefully the tactics in brackets, so that you may recognize them if used against you, and take appropriate action. 25 of 44 Give in only a little, and only if forced. Offer accommodation on occasion; make larger concessions if warranted. Widen the agenda so you will have bargaining chips you do not care about, to give up. Narrow the agenda to what's important, or seek other possible gains for the other side, as well as your own, by expanding the pie and/or constructing a "package". Set deadlines; create tension; repeat demands; (push decisions through before the other side can assess the implications; conceal negative consequences of the decision for the other side). Take as much time as you need; take time out; be sure the other side really understands the consequences of the decision and accepts them. Don't let anyone else in on anything if possible, except as below. Brainstorm with as many wise heads as possible. Generate more options. Refer all final decisions to another unknown, or higher authority, (who may even renege if necessary). Let the real decision-maker bargain directly. Tactics Common to All Strategies Forestall commitment by the other side to the other's initial position. Help the other side save face, if they do not or can not attain a position they've taken, and especially if they move their position. Help both sides to come to feel that whatever settlement is reached, that it is the best possible one under the circumstances. Mixed Motive Strategies In almost all negotiating situations you will have "mixed motives," where you wish both to create value with your Other, and then to claim your share. In these situations you may use tactics common to both strategies, or switch at least a little from one strategy to the other. For example one would show respect at all times, be cautiously forthcoming about one's interests, share information as trust grows, be truthful and consistent, seek common ground and agreement on principle, generate as many options as possible, and in general pursue the integrative path as long as possible, while explicitly safeguarding your own interests. In many situations you will be able to expand the pie before having to divide it. These ideas are drawn from the experience of the author and from Walton & McKersie, A Behavioral Theory of Labor Negotiations, McGraw-Hill, 1965. They also owe much to the work of Roger Fisher and of William Ury. 26 of 44 BASIC NEGOTIATION AND MEDIATION TASKS Basic Tasks for a Pure Distributive Strategy l. Figure out your own interests and reservation point as well as you can. Keep reviewing these points while you negotiate. 2. Figure out the interests and reservation point of the Other (the other party or parties). Be alert to new data while you negotiate. 3. Seek to move the reservation point of the Other to widen the bargaining range especially if there is a negative range. (This process is often begun by “sowing doubt.”) However, if necessary for a settlement that you must achieve, move your own reservation point. 4. Seek a settlement as close as possible to the reservation point of the Other so that you win the maximum profit. 5. Do what you can to see that both you and the Other come to see this settlement as the best possible one under the circumstances. Basic Tasks for an Integrative or Mixed Motive Strategy l. Figure out your own interests and reservation point as well as you can. Keep reviewing these points while you negotiate. 2. Figure out the interests and reservation point of the Other. Be alert to new data while you negotiate. 3. Through judiciously shared information and brainstorming, seek to expand the pie so that each side may get as much as possible of what it would like. Explore moving the reservation points of each side. 4. Decide on fair principles to determine how to divide the pie. 5. Do what you can to see that both you and the Other come to see this settlement as the best possible one under the circumstances. Basic Tasks for Mediation l. Figure out the real interests — not the “positions” — and reservation point for each side as well as you can. Privately review your understanding of these points with each side. If appropriate, keep reviewing these points during the mediation. Stay alert for new data. 2. Through acquiring information and brainstorming, seek to expand the pie so that each side might get as much as possible of what it would like. Explore moving the reservation points of each side. 3. Help the parties decide on fair principles to determine how to decide the issues at hand. 4. Do you what you can to see that all parties come to see the settlement — if any — as the best possible one under the circumstances. Sources of Power in Negotiations 27 of 44 ‹ Positional Power or the Power of Legitimate Authority z “You do what I say because I’m the boss that’s why!” z “Like it or not - that’s the law.” Sources of Power in Negotiations 28 of 44 ‹ Rewards z “He bought his way in...” z “Do whatever he says - you’ll be glad you did.” Sources of Power in Negotiations 29 of 44 ‹ Sanctions z “She said she would just sue me...” z “If you continue to make these mistakes - at very least it means a demotion.” Sources of Power in Negotiations 30 of 44 ‹ Force z “I will get you…and your children, if you continue…” z “This assignment isn’t safe for a woman - we can’t send you there.” Sources of Power in Negotiations 31 of 44 ‹ Information z “He was able to get us the information we needed about what our competition is planning for the next year.” z “You think you’re being paid fairly? Let me tell you what others are making.” Sources of Power in Negotiations 32 of 44 ‹ Expertise z “She is the most important employee here - she is the only person who really knows how the data system works.” z “I don’t care if there’s a hiring freeze. Get me someone who knows about interoperability.” Sources of Power in Negotiations 33 of 44 ‹ An Elegant Solution z “We were completely stymied. He walked in here with a magic wand - he fit together all the pieces of the puzzle and found us a workable answer that helps everyone at least a little and saves face for everyone.” Sources of Power in Negotiations 34 of 44 ‹ Charisma - referent authority - moral authority z “People would just stop what they were doing and watch him and listen to him and do their best to support whatever he wanted done.” z “It was scary. But I got to my feet and said, ‘You must stop this.’ And he did.” Sources of Power in Negotiations 35 of 44 ‹ Commitment z “She just never gave up. She camped outside his office night and day until finally he had to listen.” z “We will go to the mat on this one - let there be no mistake. It’s this or a strike.” Sources of Power in Negotiations 36 of 44 ‹ Relationship - power gained or power lost z “Friends come and go - enemies accumulate forever.” z “I know her and she is the only person I will deal with on this matter.” Sources of Power in Negotiations 37 of 44 ‹ BATNA - the best alternative to a negotiated agreement z “They had all the time in the world and lots of other customers - they did not need us.” z “The worst that can happen is that I will just go back where I came from. I might even like that.” 38 of 44 39 of 44 Preparing for a Negotiation Questions to address before and during negotiation 1. Whose interests are at stake? 2. What are their interests? 3. What are the sources of power for each person whose interests are at stake? 4. What are all the possible options? 5. What strategy do I wish to adopt? 40 of 44 Dealing with Difficult Tactics 1. Play the aggressive strategy right back. 2. Ignore the aggressive strategy. Lead a change in the game by proposing objective criteria and principles that should be considered. 3. Ignore the aggressive strategy. Lead a change in the game by concentrating first on the interests of the Other and then on your interests. 4. “Name” the aggressive strategy of the Other and try to negotiate a change in the game by generating options, and concentrating on objective criteria and interest of all parties. 5. Propose a change in negotiators. 6. Go to your fallback position (your BATNA). 7. Go to your “micro-BATNA”. 41 of 44 Prof. Mary Rowe—MIT, Cambridge, MA 02139—p1 Options for complaint-handling include problem-solving and formal options: I. Problem-solving options, oriented toward the interests of all parties: A. Negotiation: problem-solving options include A (the complainant) choosing to negotiate directly with B (the apparent offender): • A could choose to learn how to write a civil, factual, private note or letter to B, laying out the facts as A sees them, A's feelings about these facts, and the remedies proposed by A. • A could choose to learn how to go talk directly with B, with or without presentation of the note or letter. Drafting a private letter is usually the most helpful first step for A to take, in deciding what to do next. This is especially true if A is angry and upset, in which case it may take a number of drafts to support A to deal with rage and grief, and come to a polite, factual version. Preparing a private letter, whether or not it is sent, is almost always helpful in choosing an option—and thereafter, in pursuing any option. A private letter may be a good approach for concerns that are in part a matter of perception, like arguments over who should get credit for a successful idea. In a sexual harassment complaint, a letter may also help, later on, to demonstrate that sexualized behavior actually occurred and that it was unwelcome. (Both of these points would be essential in making a finding of sexual harassment if the private approach did not work.) If a supervisor knows that a private approach is being chosen, the supervisor should follow up with the complainant, to be sure that the problem has ended. B. Informal third-party intervention: problem-solving includes having a third party go back and forth between A and B, or bring A and B together, to resolve the complaint. The third party could be a designated staff person, an HRM manager, an impartial line supervisor or department head, or other appropriate person. It is important in these 42 of 44 Prof. Mary Rowe—MIT, Cambridge, MA 02139—p2 approaches that there should be no adverse administrative action without a process which is fair to the offended person, and to the alleged offender. And the third party go-between should follow up to be sure that the problem has stopped. C. Classic Mediation: problem-solving also includes a process of formal mediation in which A and B voluntarily choose to be helped by an impartial person to find their own settlement. These settlements often are put into writing, and may be on or off the record. Classic mediation has been relatively rare in sexual harassment cases but this option is now becoming more common. Mediation may be especially useful where there are differences in perception, and for cases where statements by the parties constitute the only available evidence. D. Generic Approaches: problem-solving also includes generic approaches which are intended to change the system, or to alert possible offenders to inappropriate professional behavior, in such a way that the alleged problem disappears. For example, a department head might choose to distribute and discuss copies of harassment policy, in order to stop a given problem. Or a department head might encourage harassment training, in such a way as to address and prevent inappropriate behavior. Generic approaches may be effective in stopping unprofessional behavior and help to support the effectiveness of individual approaches. Generic approaches may also prevent similar problems. Formal options, oriented toward right and wrong: E. Investigation and Adjudication: a supervisor, department head, human resources manager or other appropriate staff person may investigate and formally dispose of a complaint—or may appoint some other person or committee to do so. This is the option that is oriented toward win/lose—toward assessing "right and wrong." If adverse administrative action may ensue, fairness requires: an investigator who is impartial, notice to the alleged offender, and a reasonable opportunity for the alleged offender to respond to complaints and evidence against him or her. 43 of 44 Changing Behavior 1) Reinforce and reward good behavior which, as it takes place, is inconsistent with, and blocks, the (bad) behavior that you hope will disappear.... 2) Reinforce good behavior (role-modeling from senior people, performance reviews, etc.) 3) Punish bad behavior 4) "Name" what is good behavior and bad behavior 5) Ignore bad behavior (and good behavior) 6) Reward bad behavior 7) Alternately reward and punish bad behavior --- this will cast it in concrete forever 44 of 44 How would you know if vou are an effective Negotiator? Who should decide? Should you decide, or should your supervisor? Your Significant Other? What about the Other? And what about other stakeholders? Is it all about outcome? Or process? Or both? Can you tell right away if you have been effective? Or is it the long run that counts? 7 Do you have "ethical ' and "legal" on your list of required characteristics? When would collaborative and when would competitive or mixed motive strategies be most effective? How "wide" an effect do you want to have as a negotiator? Do well on one negotiation? Or improve a whole system?