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This is a one-day negotiation training that I recently presented to Qwest Communications in Denver, over a two-day period (50 people is the maximum number that exercise-based negotiation training can be effective)
Citation preview
Negotiation and the
Anatomy of Conflict
with a word on gender and negotiation and negotiation ethics
May 11-12, 2009Victoria Pynchon, J.D., LL.M
ADR Services, Inc. Century City, California
• Why we negotiate• The field of conflict in which
we negotiate• How disputes arise• 3 ways we negotiate disputes• 3 types of agreements• How our cognitive biases affect
our ability to negotiate the best deal
• How to remedy those biases
• A short detour to talk about male and female negotiation styles
• Distributive (divide the pie) and Interest-based (enlarge the pie) bargaining
• 3 primary strategies for dealing with difficult people
• 3-D Negotiation Strategy & Tactics
• What you need to know about negotiation ethics
Why Do We Negotiate?
Scarcity
Power
Values
Identity
Community
Autonomy
Pride
Self Expression
Relative Benefits v. Absolute Numbers
Conflict is a
Perceived divergence of interests or the belief that the current aspirations of
the parties cannot be simultaneously met
Relative deprivation
Injurious Event
Perceptions
Self interest/desire
Other interest/desire
Conflict’s Source
ResourcesValues
Dispute = Immediate Manifestation of
Conflict
NamingBlamingClaiming
Tactics
YieldingAvoiding
Contending
Problem Solving
Tit for TatStart nice
Be Provokable
Be Forgiving
Persuasion Exercise
• Object of the game– Get your partner to come
over to your side of the line
– The winners will each will $1.00
Optimal Negotiated Outcome• Identify Value = precedent,
relationships, reputation, political appearance, fairness, profit, future opportunities, survival, praise, fulfillment (personal or corporate)
• Create value by locating and identifying all of your own and your bargaining partner’s interests (preferences, priorities, needs, desires, fears)
• Claim value by making a case for your entitlements, trading differences, finding commonalities
• Reap value by crafting durable agreements
Remedy the perceived divergence of interests or the belief that the current aspirations of the parties cannot be
met
Deprivation
• Perceived• Relative• All parties’
interests cannot be met at the same time
Dispute Erupts
• Injurious event• Name• Blame• Claim
http://www.break.com/index/fight_over_parking_spot.html
Bay City News ServicePosted: 04/28/2009 07:14:29 AM PDTUpdated: 04/28/2009 07:14:29 AM PDT
Two men have been arrested for their alleged involvement in a fight over a parking space in South San Francisco early Sunday that left one person injured, police said Monday.
Officers responded around 3:15 a.m. Sunday to a report of a fight in progress on Susie Way and found four assault victims, according to police.
One of the victims had been struck in the back of the head with a beer bottle and had a serious head laceration, police said. The victim was taken to a local hospital for treatment and is reportedly in stable condition.
Authorities learned the suspects and victims were arguing about a parking space when the assault ensued.
Tactics
Yielding/AvoidingNegative for yielder
Nothing changes for other
in a blind approach for landing through clouds where the first officer is
convinced that the plane is heading against solid mountain rock all he says is “I am not sure if we have established
our gliding path with necessary precision”.
Malcolm Gladwell, Outliers
Contentious TacticsIngratiation & gamesmanshipThreat, promises & arguments
ShamingCoercive Commitments
Physical Violence
Win-loseResolution unstable
Problem SolvingSatisfies some of both
parties’ interestsResolution is stable
Malcolm Gladwell, Outliers
• Agreement possible• Better than walking away• BATNA• Achieved through compromise
• “Win win”• Meets interests of both parties better
than compromise would• Achieved through identifying interests,
identifying and/or creating value
• Pareto-optimal• Best possible negotiated outcome for
both
Thompson & Leonardelli “Why Negotiation if the Most Popular Business School Course”
Scarce Resources• Contending
• Shirley Jackson’s “Lottery”• Logan’s Run• Strong survive/weak die
• Problem solving– Hunting/gathering to
agriculture/husbandry– Farming/hunting to
industry– Industry to technology– Material (steel, cars,
trains, planes) to Immaterial (knowledge)
“Innovate, don’t litigate (contend)” Jonathan Schwartz,
CEO Sun Microsystems
theory of mind
26© Victoria Pynchon ‘07
Our ability to reason arose from our need to understand one another’s intentions and motivations, allowing us to coordinate within a group
we developed certain
tendencies of thought called
cognitive biases
universal ways of thinking about what motivates other people
But we never learned to read one another’s minds
Suspicion followed
What do we most want to know
What the HECK are they THINKING?
and will it be harmful
TO ME?
Will they cooperate
or attack ?
How can I make them
do what I want
them to do?
we read signs and symbols
in an effort to control our own destiny
and make common cognitive errors
Over-ascribing intention to our fellows when we are harmed andUnder-ascribing situation and circumstanceFalling prey to fundamental attribution error
in the absence of information, we
make stuff up
We see patterns
where none exist
Clustering Illusion
Cash Register Exercise
we discount everything our
bargaining partners say
reactive devaluation
confirmation bias
we search for and interpret information in a way that confirms our preconceptions
Prevent us from learning Other’s mind
• what do they want/need• what do they have of value• how do they value it• why do they want what they are seeking
Prevent us from accurately assessing •perils •opportunities
Cognitive biases
so how can we reach a mutually beneficial and durable agreement?
By ascertaining their interests, preferences, priorities, needs, desires, constraints, strengths, and weaknesses, as well as our own
•Form groups from as many different internal groups as possible
•List common and adverse interests of each external and internal bargaining party
10 minutes
Let’s start here!
Negotiating Women
May 11-12, 2009Victoria Pynchon, J.D., LL.M
ADR Services, Inc. Century City, California
• In 2000, 76.8 percent of women aged 25 to 54 worked outside the home.
• Women's earnings relative to men's have stagnated at 73.2 percent.
• 2.5 x > more women than said they feel "a great deal of apprehension”
• Men initiate negotiations about four times as often as women.
• will pay as much as $1,353 to avoid negotiating the price of a car
• typically ask for and get less when they do negotiate—on average, 30 percent less than men.
• 20 percent of adult women say they never negotiate at all
• lose more than $500,000 by age 60 if don’t negotiate first salary
• eight times as many male MA’s from Carnegie Mellon negotiated their salaries..
• women who consistently negotiate salary increases earn a $1 million more during their careers than women who don't.
• Women own 40 percent of all businesses in the U.S. but receive only 2.3 percent of the available equity capital. Male-owned companies receive the other 97.7. percent.
• Women report salary expectations between 3 and 32 percent lower than those of men for the same jobs
• men expect to earn 13 percent more than women during their first year of full-time work and 32 percent more at their career peaks.
Male Bargaining Advantages
Feel bargaining advantageFeel entitled to more rewardsLess likely to back downUse more distributive tacticsFeel entitled to informationSeen as stronger speakers than
women Seek more powerIntimidate
Female Bargaining Advantages
• more likely to follow a set of rules or steps to get to a final outcome
• take a broad or 'collective' perspective• view elements in a task as interconnected
and interdependent• see the big picture and come up with a
systematic plan on how to solve it.• work through steps by sharing experiences
while figuring out what both sides can gain to achieve an integrated outcome.
• more concerned about how problems are solved than merely solving the problem itself
• Instead of concentrating on what they want or need to get out of the negotiation women focus on what both sides need and how both parties can get what they want
Distributive and Interest
Based Bargaining
May 11-12, 2009Victoria Pynchon, J.D., LL.M
ADR Services, Inc. Century City, California
Distributive Bargaining
• The process by which the parties distribute between themselves what they believe to be a fixed “pie” of money, goods or services
• A Zero Sum exchange in which whatever one side gains, the other side loses
• Parties move toward resolution through a series of concessions
Grammar of Negotiation
Zone of Potential Agreement (“ZOPA”)
SELLER’S WALK AWAY POSITION $4,500SELLER’S WALK AWAY POSITION $4,500
BUYER’S WALK AWAY POSITION $5,000BUYER’S WALK AWAY POSITION $5,000$0$0
$7,000$7,000
Book Sale Exercise
Why We Don’t Enjoy Negotiating
Well, he never done this before, but seein' as it's
special circumstances and all, he says I can knock one
hunnert off that TruCoat.
Book Sale Exercise
Preparing to Bargain
The Dance The Dance
• Anchor
•Dance ends at Midpoint Between First Two Reasonable Offers
•Each Concession tends to be half the size of the previous concession and takes twice as long to be made
• If you try to short-circuit dance, your bargaining partner may be encouraged to use the mid-point offer to claim more value for himself
•Extreme Offers
•Make them soft
•Monitor response
•Anticipate making concessions
• Reasonable offer
•Demonstrate commitment
•Make only modest concessions
•Stress merit
Competitive BargainingCompetitive Bargaining
• make high initial demands•maintain those high level demands throughout the course of the negotiation •make few (and small) concessions •adhere to a high level of aspiration for one's own "side." •obtain as much information from the other side as possible• give as little information about one's own position away•bluff•mislead •threaten retaliatory action if the other side does not comply.
•Make contingent concessions, i.e., we’ll drop price to $1.9 million if you provide letter of credit or increase initial payment, etc.
•Creates appearance of increase in their number•Almost risk free
•Label concessions & demand reciprocity• Stress difficulty in making concession
•This will cut our profit razor thin•If we make this concession, you should be willing to pay in dollars rather than yen (or every 30 rather than 60 days or with interest)
Concessions & Reciprocity
A Reason and a Number
Resource Materials Part I, page 49
The Population of Iraq(exercise)
ANCHORINGANCHORING
The party making the first reasonable The party making the first reasonable offer should prevail over his bargaining offer should prevail over his bargaining partner who partner who must respond in the must respond in the range set by that party.range set by that party.
Using, Resisting & Creating (Meta)
Anchors
• Set false anchor• Frame the “deal”
• Nature of problem deal is capable of resolving
• Characterize deal in way favorable to your strengths– Routine extension of old
rather than new “deal”– View sale of biz as stand-
alone vs. synergy created by acquisition by buyer» Focuses on future rather
than present» Focuses on value to
BOTH partiesLax & Sebenius 3-D Negotiation at 199-201
FramingFraming
• Present Losses as Gains
•Strong tendency to prefer avoiding losses over acquiring gains
• competitor’s deal would be a loss because – mired in bureaucracy; can afford to fail; product not as good
• Use language that emphasizes your position & frames information in your favor
• fewer rather than greater – greater attention to needs; partner in place; more dedicated, motivated, faster
Cooperative Responses to Competitive Bargainer
•sub-divide concessions by dividing issues into smallest parts & offer concessions only on sub-parts; •make hypothetical offers that can be disowned later; •demand principled justifications for positions; and, •respond tit-for-tat, i.e., to intransigence with intransigence and cooperation with cooperation.
Mutual problem-solving inquiries include:
•what the parties believe would be a "fair" solution to the problem; •whether the parties can agree on criteria for a "fair" settlement; •and, what priorities each party has, i.e.,
•which issues are most important to each party and •which unimportant.
McNamara’s First Rule of WarEmpathize with your enemy
The man able to put himself into Kruschev’s shoes was the only one able to suggest a way for Kruschev to back down AND save face, i.e., ignore the second hard-line message and respond
to the first.
Tit for Tat
• Cooperation in a world of distrust
• Romeo and Juliet• The Prisoner’s
Dilemma
Negotiate from Strength
"When others sense your willingness to "When others sense your willingness to walk away, your hand is strengthened. walk away, your hand is strengthened. Sometimes you are better off not getting to yes.“
Robert Rubin, Chairman of Citigroup Executive Committee, former Secretary of the Treasury
Prepare Purchase and Sale of Pharmaceutical Plant Over Lunch
Distributive vs. Integrative Bargaining Dividing Fisher and Ury’s Famous Orange
Distributive Solution
Interest Based SolutionThe Cash Register
Exercise &The Persuasion Exercise
Asking Diagnostic Questions
THE GUY WALKS INTO THE BAR EXERCISE
• Competitor’s strengths, Competitor’s strengths, weaknessesweaknesses
• Competitor’s motivations, Competitor’s motivations, concerns, preferences, concerns, preferences, desires, needs, priorities, risk desires, needs, priorities, risk tolerance, tolerance, optimism/pessimism about optimism/pessimism about the futurethe future
• Know Your Best Alternative Know Your Best Alternative to a Negotiated Agreement to a Negotiated Agreement (“BATNA”) (“BATNA”)
Agreement reached Agreement reached must be better than must be better than no agreement at allno agreement at all
Bottom line or Bottom line or “reserve” price“reserve” price
• Plan Your Opening Plan Your Opening Offer/Demand Offer/Demand
• Plan the Number of Bargaining Plan the Number of Bargaining Moves (concessions) you’re Moves (concessions) you’re willing to make in Advance willing to make in Advance
A good hockey player plays where the puck is. A great hockey player
plays where the puck is going to be.
Bargaining Chips
INTERESTSINTERESTS
• Potential future business Potential future business opportunitiesopportunities
• Competitive market Competitive market advantagesadvantages
• Protecting market positionProtecting market position• Gaining competitive Gaining competitive
advantageadvantage• Acquiring a Piece of the Acquiring a Piece of the
ActionAction• Securing FutureSecuring Future• Avoiding RiskAvoiding Risk• Creating a Trading PartnerCreating a Trading Partner• Gaining SynergiesGaining Synergies• Expanding Customer BaseExpanding Customer Base
TERMS•Service/guarantees
• third party sources of recovery
•Timing of payments
• Metrics for satisfactory performance
•Method of payment
•Exchange rates
•Letters of credit
DiagnosticQuestions
• What are my intended outcomes and interests?– Preferences, priorities,
needs, desires, fears, aspirations, bottom line
• What are their possible interests and outcomes?– Put yourself in their shoes
• What are the options?– Potential points of
agreement– Differences that might be
dove-tailed
• Give good legal customer service– Probe for what customer really
needs• “if I can find a way to satisfy
that need, I will– Facilitate sales process without
sacrificing protection for company• Identify probable risks• Be willing to bear some risk
in exchange for satisfying more important interest
• Persistent points of impasse, have several potential solutions
• What is my Plan B?• Worst case scenario?• External standards• Reserve
price/terms/limits• Game plan
Creating Value
• Compatibility (identifying issues for which parties don’t have a conflict of interest)
• logrolling, or trading off concessions on low-priority issues for gains on higher priority issues
• trading differential time preferences, or allocating more initial outcomes to the more impatient party and greater profits over a longer period to the more patient party
• adding issues, or adding to the agreement issues not inherent in the initial negotiation framework
• contingent contracts, or bets based on different expectations regarding a future event.
Research reveals that negotiators often fail to implement these strategies and to reach integrative agreements
Creating Value for Both
“It’s a Buyer’s Market”
• Don’t reveal own weakness• Leverage their Weakness• Identify and value your Distinct
Value Proposition– Better product– Higher quality service– Good reputation– Attention– Nimbleness– Working outside the box
Negotiating from a Position of Weakness, Resource Materials, Vol. I at 41-43
Bargaining from a Position of Weakness
Reframe Weakness as Strength
• 1912 Presidential campaign
• Used photo of Roosevelt without permission
• 3 million copies printed• Penalty $1/copy
• Telegram: planning to print 3 million copies of campaign speech. Excellent opportunity for photographers.
• How much are you willing to pay us to use your photograph?
• “Appreciate opportunity but can afford to pay $250.”
“How David Beats Goliath” 5/11/09 New Yorker
• Last 200 years of warfare– Goliaths won 71.5% of time– Contests where Goliath has 10x
> power, Davids win nearly 1/3rd of the time
– Where “Davids” chose unconventional strategy, won 63.6% of the time• Bedouins v. Turkish
– Speed, time, endurance, knowledge of terrain, courage
– “art of war [is] about legs not arms”
• Full-court press– Endurance, stamina– surprise
Half Hour to Negotiate Sale of Pharmaceutical Plant
Dealing with Difficult People
%$%#@*@
May 11-12, 2009Victoria Pynchon, J.D., LL.M, ADR Services, Inc.
Century City, California
Behind every accusation is a cry for help
“They won’t use our form!”“They say ‘yes’ but they mean ‘no’.”“They don’t do what they say they will”“They don’t do their homework”“They don’t think of the big picture”“They don’t plan ahead”“It’s all or nothing”“They don’t use their discretion”“They’re not decisive”“They blind-side me”“They act like they’re playing for the other team”“They won’t close the deal”
• They’re not difficult, they are uninformed– Educate them about their
true interests, consequences of their actions, our BATNA
– Help them understand what is in their best interest
– May have misunderstood or ignored a crucial piece of information
From Bazerman & Malhotra, Negotiation Genius
They are not irrational; they have hidden constraints– Institutional– Precedential– Promises to others– Deadlines
From Bazerman & Malhotra, Negotiation Genius
They’re not evil; they have hidden interests.– Personal (unrelated to you or
deal)– Relational (related to you but
not to deal, i.e., “face”)– Political, social, cultural
From Bazerman & Malhotra, Negotiation Genius
Don’t say “yes yes yes” when what you really mean is “no no no”
• People err in one direction or the other by:– Prioritizing the relationship &
saying “yes” when you want/need to say “no” or
– Prioritizing their own power by brusquely saying “no” or
– Take middle ground of avoidance saying nothing & hoping a problem won’t arise
Resource Materials, Vol. I, 45-46
The Central Question
How can we address ______________________ our interests
While at the same time addressing ______________ your interests
in a way that satisfies _____________? our common interests
With thanks to mediator Sam Imperati
Name Where Focus Moves
Tactics “at the table” People, process Improved communication, build trust, counter hardball ploys, bridge interests
Deal design “on the drawing board”
Value, substance, outcomes
Invent and structure agreements to create greater value, better meet objectives, are more sustainable
Set Up “away from the table”
Architecture Ensure most favorable scope (right parties, interests, no-deal options, sequence
Party Interests: Apparent
Interests: Hidden Sequence
Customer Price, terms, external events, history, current corporate events, public statements
internal goals, pressures, priorities, fears
Sales, business representatives, legal, management
Qwest Price, terms, competition, history, current corporate goals, concerns
Internal goals, pressures, priorities, fears
Sales, CD&S, Offer Management, Regulatory, Legal, etc.
Competitors Price, terms, etc. Same as above
Scope Sequence Process Interests Goals
Type of deal: procurement, sale, service
Product, service, price, terms, parties, approval internal and external, press
Aligning interests, dove-tailing differences, problem solving, distributive/integrative strategy/tactics
Qwest: Profit, growth, reputation, limitation of liability
Right deal at right time with right parties at right price
Parties to deal: Qwest, customer, suppliers
Customer/Provider: profit, growth, reputation, limitation of liability
Moves Qwest in desired corporate direction; forwards interests of stakeholders
Non-parties:Government, shareholders, public, competition
Avoids potential liabilities, reputational damages
Apparent/Ascertainable Interests Hidden Interests/Constraints
Price, terms, timing Corporate Relation to other goals, plans, concerns, priorities, preferences
History, orientation to the future, threats to survival, profitability, stock price, mergers (planned or in process)
Personal: financial, power, reputation, fears, constraints, priorities
People whose interests are at stake if deal goes south
Third parties: stock market, analysts, bankers, government, customers, shareholders, competitors, adversaries, allies
Negotiation Ethics
– Lying about bottom line expected & sanctioned
– Misleading legal statements not likely problem – caveat emptor (“hire a lawyer”)
– Reasons for positions not expected to be believedREASONS FOR NEGOTIATION• Often very convincing• facts rather than opinion • Material or immaterial, • harmless puffing or bluffing
ABA Model Ruleslawyer shall not knowingly
make false statements of material fact or law fail to disclose material facts when necessary
to avoid assisting a criminal or fraudulent act
posturing or exaggeration
Statements regarding a party's negotiating goals or its willingness to
compromise, as well as statements that can fairly be
characterized as negotiation ‘puffing,' ordinarily are not considered ‘false
statements of material fact ‘within the meaning of the Model Rules.
understate willingness to make concessions
exaggerate strengths; minimize weaknesses
make estimates of price or value intentions re acceptable settlement withhold existence of an insurance
policy—unless required by law fail to correct the other party's
misunderstanding, based on information from third parties, of the finances of the lawyer's client.
ABA Advice
An attorney should avoid negotiating tactics that are
• abusive• not made in good faith• threaten inappropriate legal action• not true• set arbitrary deadlines• intended solely to gain an unfair
advantage or take unfair advantage of a superior bargaining position; or
• do not accurately reflect the client's wishes or previous oral agreements.
California Attorney Guidelines of Civility and Professionalism