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8/13/2019 CBN Article Summary Group 10
1/5
9/23/2012
ARTICLE
SUMMARYCOLLECTIVE BARGAINING AND NEGOTIATION
GROUP10
ANUJ THAKUR (2011PGP559)
GOVIND RAJ KAUSHIK M (2011PGP640)
PERALA PRATHEEK(2011PGP773)
PUPPALA MOUNIKA (2011PGP802)
SHAKUN GUPTA (2011PGP868)
UNHALE NARESHKUMAR RAMC (2011PGP921)
SIX HABITS OF MERELY EFFECTIVE NEGOTIATOR
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Effective Negotiation is both science as well as art. Though negotiation is done through a process
involving various stakeholders of buyer and seller companies, it is also an art to effectively close a
deal through negotiations and make sure both sides end up in a win-win situation. Most executives
know the basics of negotiation. While some are highly skilled in this area, yet due to high stakes,
intense pressure and careless and mistakes, they turn key negotiations into disasters. Even
experienced negotiators damage deals, leaving money on the table, getting stuck in deadlock
situations and damage working relationships.
In any negotiation, each side must ultimately choose between two options whether to accept the
deal or look for its best no-deal option i.e. BATNA. While it is important to protect our own choice,
we need to understand and shape our counterparts perceived decision and make sure they choose
in their own interest what we want. In this way we can jointly create and claim sustainable value
from a negotiation.
There are many specific reasons for bad outcomes in negotiations, yet experienced negotiators
make six common mistakes that can distract from their real purpose: getting the other side to
choose what you want for their own reasons.
Mistake 1: Neglecting the Other Sides Problem
We cant negotiate effectively unless we dont understand our own interests and other no-deal
alternatives. However if we dont understand the deal from the other sides perspective, we cant
solve their problem or ours. So we need to understand and address counterparts problem as a
means to solve our own. Most importantly we always need to try to put ourselves in the other
persons shoes and understand in depth what value the other side is actually looking out from the
deal.
Some tough negotiators sometimes see the other sides concerns but neglect them claiming that
they bother about their problem. This attitude can undercut the ability to profitably influence how
the counterpart sees its problem. Many executives succeeded by understanding the deal from the
other side of the table and reduced the gap of the golden bridge, spanning the gulf between where
the counterpart is now and our desired point.
Mistake 2: Letting Price Bulldoze Other Interests
Most deals are 50% emotional and 50% economics. While price is an important factor in most deals,
it is rarely the only factor to be considered while negotiating. Negotiators who pay attention
exclusively to price turn potentially cooperative deals into adversarial ones. This is called reverse
Midasnegotiation where hard-bargaining tactics (win-lose bargaining) are used that ultimately lose
potential gains that could have been achieved otherwise.
Several studies have revealed that people in reality care about much more than the absolute level of
their own economic outcome. Other interests such as relative results, perceived fairness, self-image,
reputation etc. are also important.
Successful negotiators who accepted that price isnt everything identified four important non-price
factors.
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The Relationship
Less experienced negotiators often undervalue the importance of developing working relationships
with the other parties by majorly concentrating on price and neglecting the relationship factor. This
is mostly true in cross-border deals. Results-oriented North Americans, Northern Europeans and
Australians often insist prematurely on get down to business way. Whereas countries like in LatinAmerica, southern Europe, and Southeast Asia stress more on relationships rather than transactions
working for long term deals.
The Social Contract
Similarly negotiators tend to focus more on the economic contract at the expense of social contract,
or the spirit of a deal. Employing a social contract develops peoples expectations about the
nature, extent and duration of the venture and about the way unforeseen events will be handled.
The Process
A deal making process is as important as its content. Negotiators often forget about this and takethings for granted and does not achieve the expected outcome. More sustainable results are
reached when all parties perceive the process as personal, respectful, straightforward and fair.
The Interest of the Full Set of Players
While overall economics are generally necessary they are often not sufficient. So we need to keep all
potentially influential internal players communicated and involved in the deal making process. We
should ensure not lose sight of their interests or capacity to affect the deal. What is rational for the
whole may not be so for the individuals.
So, wise negotiators need to work with the subjective as well as objective, with the process and the
relationship, with the social contract, and with the interests of the parts as well as the whole.
Mistake 3: Letting Positions Drive out Interests
Many negotiators often out-pass interests and give importance to their positions and lose a
potential gain which could have been achieved by jointly solving problems. Both the parties will have
their own set of interests so by jointly discussing the interests and coming to common consensus
would create new value to both the parties. Reverse Midas negotiators mostly fixate on price based
on their positions. This positional approach in turn will drive towards a value-claiming process.
Great negotiators understand that the dance of bargaining positions is only the surface game but the
real art lies when they have probed behind positions for the full set of interests at stake.
People have built-in bias towards focusing on their positions though they can see clear advantages
of reconciling deeper interests. This assumption that the interests are incompatible implies a zero-
sum pie in which it is ones gain is anothers loss. If we recognize and productively manage the
cooperative actions needed to create value and competitive ones needed to claim it, we can actually
both expand and divide the pie.
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Mistake 4: Searching Too Hard for Common Ground
Though we need to find a win-win agreement by searching for common ground, many of the most
frequently overlooked sources of value in negotiation arise from differences among the parties.
Differences of interest and priority can help unbundling different elements and giving each party
what it values the most. Even when an issue seems purely economic, finding differences can break
open deadlocked deals.
Differences in forecast of a company can also help in joint gains like contingent payments or earn-
outs. A savvy negotiator could use these differences to bridge the value gap by proposing a deal in
which the buyer pays a fixed amount now and a contingent amount later on the basis of the
companys performance. A less risk-averse party can insure a more risk-averse one. An impatient
party can get most of the early money, while his more patient counterpart can get considerably
more over a longer period of time. While common ground helps, differences drive deals.
Mistake 5: Neglecting BATNAs
Negotiators often become preoccupied with tactics, trying to improve the potential deal while
neglecting their own BATNA and that of the other side.A BATNA may involve walking away,
prolonging a stalemate, approaching another potential buyer, making something in-house rather
than settling, forming a different alliance, or going on strike. BATNAs set the threshold in terms of
the full set of interests that any acceptable agreements must exceed.
Not only we should asses our own BATNA, we should but also think carefully about other sides. The
better our BATNA appears to both the parties, the more credible our threat to walk away becomes,
and the more it can serve as leverage to improve the deal.
Mistake 6: Failing to Correct for Skewed Vision
Different perceptions of negotiators can lead to major errors in deal making.
Self-Serving Role Bias: People tend unconsciously to interpret information pertaining to their own
side in a strongly self-serving way. Getting too committed to our own point of view i.e. believing in
our own line is an extremely common mistake. Even comparatively modest role biases can also blow
up potential deals.
Partisan Perceptions: We generally make mistakes by processing information critical to our own side
and assessing the other side. Research studies have proven that we have an unconscious mechanism
of portraying one side as talented, honest, and morally upright while simultaneously vilifying the
opposition.Partisan perceptions can easily become self-fulfilling prophecies. By seeking the views of
outsiders can help in getting a neutral assessment of the problem and this helps us in a better deal
making negotiations.
Finally by avoiding the above mistakes by following necessary remedial steps, negotiations help us in
maximizing the chances for better results with better focus on full interests of all parties rather than
fixating on price, by looking beyond common ground to unearth value-creating differences.
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Critical Review
It is important to note that the article Six Habits of Merely Effective Negotiators focuses on the six
common mistakes that are made even by the experienced negotiators and is not an exhaustive list
of the mistakes that are observed during negotiations.
In the introduction, the authors tone suggests a hint of irony; even though most executives know
the basics of negotiation, the bad habits that creep in makes them lose the negotiations, sometimes
losing money or straining the relationships. The author, James K. Sebenius rightly points out that the
ultimate goal of every negotiation should be to either accept a deal or take the best no deal option
available. This does not seem to be the goal of many negotiators.
Regarding the first mistake, it is true that overcoming self-centredbehaviour is critical. However, the
example cited about a technology company is not strong enough to support this point. The example
merely shows lack of thorough preparation by the company and has less to do with understanding
the opposite party. An example about someone trying to understand the expectations and motives
would have been a more suitable example.
Sometimes people go to any length to win a petty argument but only at a risk of losing the
relationship. This is particularly true in case of negotiation where price is given such a high priority
that the contracts and relationships are overlooked. The author also gives very strong examples from
research which validates this point. The article then focuses on issues, positions and interests which
are underlying elements in a negotiation. The author expresses his surprise as to how negotiators fail
in recognizing the importance of converging on the underlying interests and value creation rather
fixating on the position or the stand which one has taken. A very good example of a dam
construction has been cited where the solution has been reached because of focusing on the
underlying interest of the parties involved rather than assuming it to be a zero sum game.
A beautiful example has been cited for the 4th
common mistake where people get caught up in trying
to find out a common ground which further leads to assumptions. This mistake is in a way
contradictory to what was mentioned in the earlier however, the differences are actually used to
break the deadlocks. James then speaks about the other common mistakes which are neglecting the
BATNAs and negotiators failing to correct for a skewed vision. His tone appears to be disappointed
as he feels that even extremely seasoned negotiators tend to interpret information related to their
own side and calls it as the self-serving role bias.
He concludes by summarizing the common mistakes and provides a list of additional mistakes which
people commit. He suggests that to be an effective negotiator one has to take a broader approach tosolving the right problem.
The most important takeaway from the article is for the negotiators to focus on value creation. One
should not consider a negotiation to be a zero sum game; rather focus on value creation and try to
converge on the interest of all the parties rather than sticking to the position that one has taken.