Negotiation: John Carroll

 

Negotiation John Carroll 15.301 Managerial Psychology Fall 2006

 

Negotiation negotiation is a process by which two or more parties make decisions and do not have identical preferences

 

Negotiation Is Work • Ec Econ onom omic ic Game Game Th Theo eory ry su sugg gges ests ts th that at ou outc tcom omes es are determined by game structure • Ye Yett ne nego goti tiat ator ors s fa failil tto o find find m mut utua uallllyy-de desi sira rabl ble e agreements, settle be foracceptable, less, agree etc. when no agreement should • Th The e wor work ko off n neg egot otia iati tion on is to id iden enti tify fy po poss ssib ible le agreements, estimate the desirability of outcomes to all parties, understand the other parties, communicate and persuade

 

Negotiation Exercise

• Re Recr crui uite terr a and nd jjob ob c can andi dida date te ne nego goti tiat ate e the the o off ffer er,, consisting of salary, signing bonus, vacation days, and location • Each has has “in “inte terres estts” or th thin ings gs the hey y va vallue • If you you c can anno nott rrea each ch ag agre reem emen ent, t, the the dea deall iis so off  ff  • Pa Pair ir off off wit with h a ne neig ighb hbor or,, rrea ead dy you ourr rrol ole e individually, THINK about your interests and goals, and negotiate • Yo You um may ay NOT sh show ow th the eo oth ther er pe pers rson on yo your ur pa payyoff schedule • Good luck!!

 

Negotiation Strategies • Distributive

• Confl onflic icti ting ng go goal als, s, fixe fixed dp pie ie (“ (“ze zero ro-sum game”), task is to claim value and maximize personal gains

• Integrative

• Sh Shar ared ed go goal als, s, expa expand ndab able le pi pie e ((“w “win in-win”), task is to create value, maximize joint gains

• Mixed-Motive

• B oth exofpaall ndor ingmost the pparties ie -- mas eetmuch ing needs as possi possible ble ---- whi while le cl claim aiming ing y your our share

 

 A Distributive Issue I want to hire for $84K or less;

I want $88K or more;

my limit is $85K “I offer $82K”

at least $87K “I ask for $90K”

------------/------------/------------/ /------------/------------/ /----------/--------/-----------/----------/--------/  A’’ s  A

 A’’ s  A

Opening Offer 

Target Point

 A ’ s  A’ Resistance

B’s Resistance

B’s Target

B’s Opening

Point

Point

Point

Offer 

Negativ gative e Contr on tra act Zon one e Gap b be etw twe een A [Re [Recr crui uiter] ter] & B [[C Cand ndid ida ate]

 

I want to hire for $84K or less; my limit is $88K

I want $88K or more; at least $86K

“I offer $82K”

“I ask for $90K”

/-----------/-----------/----------/-----------/-----------/ -----------/-----------/------------/ /-----------/------------/  A ’ s  A’ Opening Offer 

 A ’ s  A’ Target Point

B’s Resistance Point

 A ’ s  A’ Resistance Point

B’s Target Point

Positi osi tive ve Contr on tra act Zon one e  A [ Recr Rec r u i t er er]] & B [ Can Cand d i d at ate] e] Res Resii s t an anc ce Point oi nts sO Overlap verlap

B’s Opening Offer 

 

Resistance Points?

• Re Resi sist stan ance ce Poi oint nts s ma may a ari rise se fr from om alternative offers: Best Alternative to a Negotiated Agreement (BATNA) • In th this is ca case se, , eac each h neg negot iato torr was waszone? gi give ven na BATNA: was there a +otia contract • Re Resi sist stan ance ce Po Poin ints ts ar aris ise e from from othe otherr comparisons • Re Resi sist stan ance ce Po Poin ints ts ma may y sh shif iftt du duri ring ng negotiation if negotiators lack information or confidence

 

How to “Claim laim”” Value alue (Distributive Bargaining) • Know you ourr BATNA an and d iim mprov prove e iitt • Co Cons nsid ider er the the o oth ther er si side de’s ’s BATN BATNA A ((as as we wellll as their perception of their BATNA) and how it might be influenced • Use stan stand dar ards ds of leg egiitim imac acy y • Draw on you ourr sour sourc ces of po pow wer 

 – But be careful not to force to h hard/far! ard/far!  – DON’T state a BATN BATNA A you are not prepared to use if necessary

 

Distributive Tactics • De Deve velo lop p targ target et and and resi resist stan ance ce posi positi tion ons s in in adva advanc nce e • Overs versta tate te ope openi ning ng posi positi tion ons s (be (be “tou “tough gh”) ”) • Co Comm mmit it to thes these e posi positi tion ons s earl early y and and publ public icly ly • Ch Chan anne nell com commu muni nica cati tion ons s thr throu ough gh a spo spoke kesp sper erso son n • Give ive a as s lit littl tle ea as s pos possi sibl ble e ffor or what what you you get get • Use coercive ffo orms of po power  • Mo Mobi bililize ze supp suppor ortt from from cons consti titu tuen ents ts against the other party • Di Divi vide de a and nd con conqu quer er the the oth other er sid side; e; pro prote tect ct aga again inst st the the same on your side • An a agr gree eeme ment nt rel reluc ucta tant ntly ly acc accep epte ted d is a sign sign of of succ succes ess s

 

Integrative Bargaining Pareto Front Fro ntier  ier :

where one party B yt

yt

a P ot

cannot better off withoutbethe other being worse off 

r

Claiming Value

i

il

Ut

Creating Value Shaded Region Represents  All Mutually Acceptable  Agreements

Utility to Party A

 

Increasing the Pie

• Sa Sala lary ry iin n th this is exe exerc rcis ise e wa was sap pur urel ely y di dist stri ribu buti tive ve iiss ssue ue,, bu butt signing bonus and were • Th The e rec recru ruit iter er care ca red dvacation m mor ore ea abo bout ut vaca vadifferent cati tion on da days ys an and d tthe he candidate about bonus • A 2 2% %s sig igni ning ng bo bonu s and and 30 da days ys va vaca cati tion on10isvacation 32 3200 00 TOTAL points; anus 10% signing bonus and days is 8000 points • BO BOTH TH ne nego goti tiat ator ors sc can an be be bett tter er off off iiff tthe hey y iide dent ntif ify ya and nd trade these opportunities, raising total available points from -1600 to 3200 • We set the BATNA’s at 3200. Why?

 

Integrative Tactics • Fo Focu cus s on on IInt nter eres ests ts,, N Not ot Po Posi siti tion ons s • Bu Builild dT Tru rust st & S Sha hare re Info Inform rmat atio ion n • Se Sear arch ch fo forr Joi Joint nt Ga Gain ins s ((in inqu quir iry, y, make make multiple simultaneous offers, etc.) • Br Brai ains nsto torm rmin ing gm mul ulti tipl ple eo opt ptio ions ns,, s sub ub-committee explorations of problems, open communications Us Use eo obj bjec tive ve cr crit iter eria ia tto o and e eva valu op ons s •• Lo Look ok fo for recti opt optio ions ns to “e “exp xpan d luat the thate e epie” piopti e” tion

 

Reframing

• We of ofte ten n tthi hink nk au auto toma mati tica calllly yo off n neg egot otia iati tion on as zero-sum and this prevents expanding the pie • In a P Pri riso sone ner’ r’s sD Dililem emma ma ga game me,, s stu tude dent nts s wer were e told either that they were playing the “Wall Street Game” Gam e” or the “C “Comm ommuni unity ty Gam Game” e” • Th This is dram dramat atic ical ally ly affe affect cted ed th the e am amou ount nt of cooperation and the joint gains • Th The e eff effec ectt w was as mu much ch st stro rong nger er th than an do dorm rm advisors’ advis ors’ nomi nominati nation on of stude students nts a as s coo coopera perators tors vs. competitors/defectors

 

Creating AND Claiming Value • How much much to tr trus ustt th the e ot othe herr pa part rty? y?  – How much do we and they value the relationship? relationship?  – Is this a one-time negotiation or a long-term relationship?  – Are there reputational consequences or self-enforcing contract features that increase trust?  – Trust but verify?

• Ho Hold ld s sec ecre rett iinf nfor orma mati tion on tto og gai ain n pow power er o orr di disc sclo lose se information to build trust?  – What to disclose and when?

 

Lessons •

Lesso Le sson n 1: Li Listening stening for fo r in inte tere rest sts s is an act ctiv ive e process pr ocess of asking for mor more e inform inf orma atio tion na and nd cl cla arif rifica icatio tion. n.

•

Lesson Less on t2 2: : Ri ssues, efr fra ami ming ng ((e enge xp xpa nde the pi pie ea, me) e xp xpa and he ss ues, cha ch a ng eath the t im ime e fr fra is a va valuable luable to tool/skil ol/skill/ l/ta tact ctic ic— —try tr y it out out!!

• •

L es s o n 3: Pr ep ar e, Pr ep ar e, Pr ep ar e Lesson 4: 4: Al Always ways ask sk,, ca can n we do be bett tte er?