“Negotiation is a problem-solving process in which two or more people voluntarily discuss their differences and attempt to reach a joint decision on their common concerns.

Christopher W. Moore, PhD

NEGOTIATION

“Negotiation requires participants to identify issues about which they differ, educate each other about their needs and interests, generate possible settlement options and bargain over the terms of the final agreement.”

Christopher W. Moore, PhD

NEGOTIATION

THE NATURE OF NEGOTIATION

Negotiation is a form of decision making in which two or more parties talk with one another in an effort to resolve their interests.

◦ Bargaining – the term used to describe competitive win-lose situations such as haggling.

◦ Negotiation – the term used to refer to win-win situations when parties try to find a mutually acceptable solution to a complex conflict.

THE NATURE OF NEGOTIATION - continued

Negotiation is a very complex social process

The “heart of negotiation” is not the give-and-take process used to reach an agreement.

Many of the most important factors that shape a negotiation occur before the parties start to negotiate, or shape the context around the negotiation.

1) The PRELIMINARY Stage2) The OPENING Stage 3) The EXPLORATORY Stage 4) The CLOSING Stage

NEGOTIATION STAGES

Characteristics of a Negotiation Situation

1. Negotiation is primarily a two-party or interpersonal process—two individuals, two groups, two organizations.

2. The parties have a conflict in interest.3. Negotiation is largely a voluntary activity.4. Negotiations involve the management of

two kinds of entities: the tangibles and intangibles.

5. It is a process of give and take.

Interdependence

The parties need each other to achieve their objectives.

They must coordinate with each other or choose to work together to achieve a better outcome.

Three kinds of relationships:1. Interdependent2. Independent3. Dependent

Types of interdependence affect outcomes

When the goals of two people are interconnected so that only one can achieve the goal, i.e., running a race where there is only one winner. --zero-sum or distributive situation

When the goals are linked so that one person’s achievement helps others to achieve their goals. – non-zero sum or integrative situation.

Interdependence - continued

Alternatives shape interdependenceBATNA – Best Alternative to a Negotiated

AgreementThe value of a person’s BATNA is always

relative to the possible settlements available in the current negotiation.

A BATNA may offer independence, dependence, or interdependence with someone else.

Ex. A student close to graduation who has one job offer vs. a student who has two job offers.

Mutual Adjustment

When parties are interdependent, they have to find a way to resolve their differences.

Negotiation is a process that transforms over time and mutual adjustment is one of the key causes of changes that occur during negotiation.

Mutual Adjustment and Concession Making

Mutual adjustment process:1. Statements of opening position2. Defend original proposal3. Critique the other’s proposal4. Alternations to one’s proposal

When one party agrees to make a change in his or her position, a concession has been made.

When a party makes a concession, the bargaining range (the difference between the preferred acceptable settlements) is constrained.

Two Dilemmas in Mutual Adjustment

1. Dilemma of honesty – how much truth to tell the other party.

2. Dilemma of trust – how much to believe what the other party is telling.

NEGOTIATION GOALS AND APPROACHES

1.Two Important Goals: ◦ Substance Goals – concerned with

outcomes, tied to content

◦ Relationship Goals – concerned with processes, tied to way people work together while negotiating and how they will be able to work again in the future.

NEGOTIATION GOALS AND APPROACHES

2. Two Approaches:◦ Competitive or Distributive

Negotiation – focuses on “claims” made by each party for certain preferred outcomes.

◦ Principled or Integrative Negotiation – focuses on substance and the interests of all parties.

Value Claiming and Value Creation

The structure of the interdependence shapes the strategies and tactics that negotiators employ.

1. In distributive situations, negotiators are motivated to win and beat the other party. The purpose of the negotiation is to claim value.

2. In integrative situations, the negotiators attempt to find a way for all parties to meet their objectives. The purpose is to create value by identifying more resources or a unique way to use existing resources

Creating value by exploiting differences that exists between the parties.

1. Differences in interests.2. Differences in judgments about the

future.3. Differences in risk tolerance.4. Differences in time preference.

Most negotiations processes are a combination of claiming value and creating valueImplications:1.Recognize situations that require more

of one approach than the other.2.Be versatile in the use of both major

strategic approaches.3.Accurately perceive the nature of the

interdependence between parties. Avoid tendency to see problems as more competitive/distributive than they really are.

THREE CRITERIA FOR EFFECTIVE NEGOTIATION

a. Quality –– negotiating a “wise” agreement that is truly satisfactory to all sides.

 b. Cost –– negotiating efficiently, using

up minimum resources and time. c. Harmony –– negotiating in a way that

fosters, rather than inhibits, interpersonal relationships.

GAINING INTEGRATIVE AGREEMENT

Four rules of principled negotiation:

1. Separate the people from the problem.

2. Focus on interests, not position.3. Generate many alternatives before

deciding what to do.4. Insist that results are based on

some objective standard.

GAINING INTEGRATIVE AGREEMENTS(continued)

Two important foundations for integrative agreements:

1. Attitudinal Foundation – willingness to trust, share information with, and ask reasonable questions.

2. Informational Foundation– each party knowing what is really important to them and finding out what is really important to the other party. Both parties should understand their best alternatives to a negotiated agreement (BATNA).

BATNA - Knowing “What will I do if an agreement can’t be reached?”

Bargaining Zone

P 400Mi

P 1000

Ui

Mi = Management’s initial offer

Ui = Unions initial offer.

THE BARGAINING ZONE IN CLASSIC TWO-PARTY NEGOTIATION.

Mr = Management’s maximum reservation point

P 500Ur

P 700Mr

Ur = Union’s minimum reservation point

NEGOTIATION PITFALLS

Four negotiation pitfalls that can be avoided by proper discipline and personal attention:

1. Falling prey to the myth of the “fixed pie”.2. Non-rational escalation of the conflict.3. Overconfidence and ignoring the other

party’s needs.4. Tendency to do “too much telling

and too little hearing”.

ALTERNATIVE DISPUTE RESOLUTION

MEDIATION –

In mediation a neutral party tries to help conflicting parties improve communication to resolve their dispute.

ARBITRATION –

In arbitration a neutral third party issues a binding decision to resolve a dispute.

ETHICAL ISSUES IN NEGOTIATION

1. Managers, and other negotiators, should maintain high ethical standards when negotiating.

 2. Motives for unethical negotiation.

•   Overemphasis of the profit motive.•   Competitive desire to “win” a

negotiation.

3. Tendency for rationalization. “The results justify the means.”

ETHICAL ISSUES IN NEGOTIATION(continued)

While acceptance of and rationalizations of unethical negotiating behavior can lead to short-run gains---

---long-run losses may also accrue as the other parties lose their trust in the negotiator or seek revenge.