Chapter 1: Part One: Negotiation Essentials
Negotiations 1. Win-Win Negotiations
Def: an interpersonal decision-making process necessary whenever • both negotiators optimize potential joint gains, captured all
we cannot achieve our objectives single-handedly possible value
• your key communication & influence tool • intergrative agreements: combines interests to maximize joint
• not just about resources - it is essentially about relationships and economic value
trust (creating a value system) 2. Win-Lose Negotiations
The Mind & Heart • 1 party prevails at other’s expense (threatened / captivated)
• we focus on the mind of the negotiator as it involves the 3. Lose-Lose Negotiations
development of deliberate rational & thoughtful strategies for • both parties made unwise/unnecessary sacrifices
negotiation Negotiations as a Core Management Competency
• also focus on heart of negotiator, ultimately care about Key reasons why effective negotiation skills are important:
relationships & trust Knowledge Economy
• base all our teaching & best practices on scientific research in • nature of knowledge work changes rapidly
the areas of economics & psychology, reflecting that both the • millennials largest group of professionals in workforce (job-
bottom line & our relationships are important hopping)
Relationships vs Economics Specialized Expertise
• want to build relationships in future (not advisable), people won’t • increasing interdependence of people within organizations,
forget if you are rude to them - work on both laterally & hierarchically
• kindess as a value assest always relates • people need to know how to integrate interests & work across
Satisficing vs Optimizing different areas
• Satisficing: doing just enough to reach one’s minimum goals, not • balance of cooperation & competition reauires negotiation
pushing to maximize one’s potential gains Information Technology
• When negotiations optimize: capture all potential gain in a • 24/7 availability, communicate anywhere in world
situation (set high aspirations & attempt to achieve as much as • people not online feel pressure to perform when they log on
possible ie. efficiency) • AI
Short vs Long-Term Relationships Globalization
• negotiators often struggle with which strategy they should use in • cross cultural borders, different norms of communication
a single-shot negotiation vs one’s could possibly reoccur with Negotiation Traps
same party in future 4 major shortcomings between disputants in negotiation:
• all negotiators should assume details of negotiation accessible 1. Leaving money on the table (lose-lose): negotiators fail to
to anyone & all negotiations have long-term implications recognize & capitalize on win-win potential
(values) 2. Settling for too little (winner’s curse): negotiators make too
Intra vs Inter-Organizational Negotiation large concession, resulting in too small share of bargaining pie
• would seem that internal negotiations might go more smoothly 3. Walking away from the table: reject terms offered by other
& collaboratively than external party, better than other options. Pride/gross miscalculation
• envy & internal competition may loom longer internally (or as 4. Settling for terms that are worse than your best
long as bottom line is never forgotten) alternative (agreement bias): feel obligated
Low vs High-Stakes Negotiation Becoming an Effective Negotiator
• Low Stake: not committed to win-win • successful negotiation strategies involve preparation,
• High Stake: committed to win-win strategy at negotiation table, & post negotiation behaviors
• Treat each negotiation as significant • investigations of contract negotiations consider 4 key
objectives when assessimn quality of contracts
,Key objectives
• what is the likelihood of reaching a good agreement?
• does the agreement fulfill its intended purpose?
• will the agreement last?
• will the agreement lead to subsequent negotiations?
Evaluating the success of negotiation
Prior to negotiation Negotiation Post-Negotiation
Iniate negotiation preparation Strategy: • post deal implementation
• planning worksheet • opening • durability
• access BATNA • first offer(s) • reputation
• develop reservation price • counter offers • willingness to negotiate again
• develop target price (aspiration) • substantiation & persuasion • trust
• concessions
Agreements:
• efficiency
• economic value
• individual & joint gain
Relational Value
• satisfaction
• fairness
3 Key Elements for improving negotiation skills:
1. Diagnostic feedback: information about counterparty’s interests & priorities
2. Strategy: analysis of success / failure of negotiation
3. Focused behavioral practice: experiential learning dramatically more effective than didatic learning
Debunking Negotiation Myths
1. Negotiations are fixed-sum
2. You need to be either tough/soft
3. Good negotiators born with skill
4. Good negotiators rely on their intuition
, Chapter 2: Preparation: what to do before negotiation
Preparation for Negotiation 1. Brainstorm your alternatives
The Fixed-Pie Perception 2. Evaluate & order each alternatives value
• Most negotiators believe whatever is good for 1 party must be 3. Attempt to improve your BATNA
bad for the counterparty 4. Determine reservation price based on facts
• People with perception take 1 of 3 mindsets when preparing for Setting up the Negotiation
negotiation: • Focal Points: salient numbers, figures/values that appear to be
1. Resign themselves to capitulating to counterparty (solo valid but have no basis
bargaining) • Sunk Costs: money already invested, irrecoverable (purchase
2. Prepapre themselves for attack (hard bargaining) price of house)
3. Compromise in attempt to reach midpoint between opposing • Distinguish target point from reservation point
demands • Identify issues in the negotiation (Single-issue negotiations are
• commonly assumed that concerns necessary by 1/both parties purely fixed-sum. By identifying the other, create integrative
to reach an agreement potential. Brainstorm how single-issue negotiations may be
• foxed-pie perception almost always wrong & often leads to segmented into multiple issues-add issues)
ineffective approach • Identify several alternatives for each issue
Mixed-Motive Decision Making • Multi-issue Proposals: determine variety different combinations
• more accurate & effective model of negotiation involving both of issues that all achieve target/aspirations too low point.
cooperation & competition Packages should all be of equivalent value/attractiveness)
• effective preparation for a negotiation encompasses 3 general Risk & Uncertainty
abilities: self assessment, perspective taking & situational • most people risk-seeking when it comes to losses, & risk
awareness adverse when it comes to gains
Self Assesment • Reference points define what people consider to be a gain/loss
Targets & Aspirations Types of negotiators Assess your Risk Propensity
3 major problems that could arise while identifying ideal outcome: In any negotiation, negotiators should consider differential impact
1. Under Aspiring Negotiator: sets targets/aspirations too low of 3 sources of risk:
(winner’s curse- feeling that if other party immediately agrees, 1. Strategic Risk: riskiness of tactics negotiators use at
you offered too much bargaining table. Often choose between extremely cooperative
2. Over Aspiring (positional) Negotiator: sets target point too high tactics & competitivd tactics (agreeing to co-author)
& refuses to make any concessions 2. BATNA Risk: many BATNA’s uncertain, alternatives arise
3. Grass is Greener Negotiator: does not know what they want, only sequentially, might expect negotiators with “gain frame” to be
that they want what other party does not want to give (reactive more risk averse than with “loss frame” (might hold out). Gain-
deviation) loss basis potential problem-negotiators can be “framed”
BATNA (Best Alternative To a Negotiated Agreement) 3. Contractual Risk: risk associated with willingness of other
• BATNA’s are not wishful, they are factual party to honor its terms (signing non-disclosure agreement)
• Time sensitive, at any time improving/deteriorating due to Endowment Effects
conditions • Buyers & sellers might want to adopt different bargaining
• Do not let other party manipulate BATNA (minimize quality) positions for object, but their private valuations for object should
• Negotiators should be willing to accept any set of terms superior not differ as consequence of who has possession
to their BATNA • Differences in negotiators refernce points may lead buyers to
Reservation Point have different valuations for same object
• quantification of negotiators BATNA with respect to other • someone who possesses an object has a reference point
alternatives that reflects his/her current endowment, private valuation
• Developing a resveration point (4 steps) of object
Negotiations 1. Win-Win Negotiations
Def: an interpersonal decision-making process necessary whenever • both negotiators optimize potential joint gains, captured all
we cannot achieve our objectives single-handedly possible value
• your key communication & influence tool • intergrative agreements: combines interests to maximize joint
• not just about resources - it is essentially about relationships and economic value
trust (creating a value system) 2. Win-Lose Negotiations
The Mind & Heart • 1 party prevails at other’s expense (threatened / captivated)
• we focus on the mind of the negotiator as it involves the 3. Lose-Lose Negotiations
development of deliberate rational & thoughtful strategies for • both parties made unwise/unnecessary sacrifices
negotiation Negotiations as a Core Management Competency
• also focus on heart of negotiator, ultimately care about Key reasons why effective negotiation skills are important:
relationships & trust Knowledge Economy
• base all our teaching & best practices on scientific research in • nature of knowledge work changes rapidly
the areas of economics & psychology, reflecting that both the • millennials largest group of professionals in workforce (job-
bottom line & our relationships are important hopping)
Relationships vs Economics Specialized Expertise
• want to build relationships in future (not advisable), people won’t • increasing interdependence of people within organizations,
forget if you are rude to them - work on both laterally & hierarchically
• kindess as a value assest always relates • people need to know how to integrate interests & work across
Satisficing vs Optimizing different areas
• Satisficing: doing just enough to reach one’s minimum goals, not • balance of cooperation & competition reauires negotiation
pushing to maximize one’s potential gains Information Technology
• When negotiations optimize: capture all potential gain in a • 24/7 availability, communicate anywhere in world
situation (set high aspirations & attempt to achieve as much as • people not online feel pressure to perform when they log on
possible ie. efficiency) • AI
Short vs Long-Term Relationships Globalization
• negotiators often struggle with which strategy they should use in • cross cultural borders, different norms of communication
a single-shot negotiation vs one’s could possibly reoccur with Negotiation Traps
same party in future 4 major shortcomings between disputants in negotiation:
• all negotiators should assume details of negotiation accessible 1. Leaving money on the table (lose-lose): negotiators fail to
to anyone & all negotiations have long-term implications recognize & capitalize on win-win potential
(values) 2. Settling for too little (winner’s curse): negotiators make too
Intra vs Inter-Organizational Negotiation large concession, resulting in too small share of bargaining pie
• would seem that internal negotiations might go more smoothly 3. Walking away from the table: reject terms offered by other
& collaboratively than external party, better than other options. Pride/gross miscalculation
• envy & internal competition may loom longer internally (or as 4. Settling for terms that are worse than your best
long as bottom line is never forgotten) alternative (agreement bias): feel obligated
Low vs High-Stakes Negotiation Becoming an Effective Negotiator
• Low Stake: not committed to win-win • successful negotiation strategies involve preparation,
• High Stake: committed to win-win strategy at negotiation table, & post negotiation behaviors
• Treat each negotiation as significant • investigations of contract negotiations consider 4 key
objectives when assessimn quality of contracts
,Key objectives
• what is the likelihood of reaching a good agreement?
• does the agreement fulfill its intended purpose?
• will the agreement last?
• will the agreement lead to subsequent negotiations?
Evaluating the success of negotiation
Prior to negotiation Negotiation Post-Negotiation
Iniate negotiation preparation Strategy: • post deal implementation
• planning worksheet • opening • durability
• access BATNA • first offer(s) • reputation
• develop reservation price • counter offers • willingness to negotiate again
• develop target price (aspiration) • substantiation & persuasion • trust
• concessions
Agreements:
• efficiency
• economic value
• individual & joint gain
Relational Value
• satisfaction
• fairness
3 Key Elements for improving negotiation skills:
1. Diagnostic feedback: information about counterparty’s interests & priorities
2. Strategy: analysis of success / failure of negotiation
3. Focused behavioral practice: experiential learning dramatically more effective than didatic learning
Debunking Negotiation Myths
1. Negotiations are fixed-sum
2. You need to be either tough/soft
3. Good negotiators born with skill
4. Good negotiators rely on their intuition
, Chapter 2: Preparation: what to do before negotiation
Preparation for Negotiation 1. Brainstorm your alternatives
The Fixed-Pie Perception 2. Evaluate & order each alternatives value
• Most negotiators believe whatever is good for 1 party must be 3. Attempt to improve your BATNA
bad for the counterparty 4. Determine reservation price based on facts
• People with perception take 1 of 3 mindsets when preparing for Setting up the Negotiation
negotiation: • Focal Points: salient numbers, figures/values that appear to be
1. Resign themselves to capitulating to counterparty (solo valid but have no basis
bargaining) • Sunk Costs: money already invested, irrecoverable (purchase
2. Prepapre themselves for attack (hard bargaining) price of house)
3. Compromise in attempt to reach midpoint between opposing • Distinguish target point from reservation point
demands • Identify issues in the negotiation (Single-issue negotiations are
• commonly assumed that concerns necessary by 1/both parties purely fixed-sum. By identifying the other, create integrative
to reach an agreement potential. Brainstorm how single-issue negotiations may be
• foxed-pie perception almost always wrong & often leads to segmented into multiple issues-add issues)
ineffective approach • Identify several alternatives for each issue
Mixed-Motive Decision Making • Multi-issue Proposals: determine variety different combinations
• more accurate & effective model of negotiation involving both of issues that all achieve target/aspirations too low point.
cooperation & competition Packages should all be of equivalent value/attractiveness)
• effective preparation for a negotiation encompasses 3 general Risk & Uncertainty
abilities: self assessment, perspective taking & situational • most people risk-seeking when it comes to losses, & risk
awareness adverse when it comes to gains
Self Assesment • Reference points define what people consider to be a gain/loss
Targets & Aspirations Types of negotiators Assess your Risk Propensity
3 major problems that could arise while identifying ideal outcome: In any negotiation, negotiators should consider differential impact
1. Under Aspiring Negotiator: sets targets/aspirations too low of 3 sources of risk:
(winner’s curse- feeling that if other party immediately agrees, 1. Strategic Risk: riskiness of tactics negotiators use at
you offered too much bargaining table. Often choose between extremely cooperative
2. Over Aspiring (positional) Negotiator: sets target point too high tactics & competitivd tactics (agreeing to co-author)
& refuses to make any concessions 2. BATNA Risk: many BATNA’s uncertain, alternatives arise
3. Grass is Greener Negotiator: does not know what they want, only sequentially, might expect negotiators with “gain frame” to be
that they want what other party does not want to give (reactive more risk averse than with “loss frame” (might hold out). Gain-
deviation) loss basis potential problem-negotiators can be “framed”
BATNA (Best Alternative To a Negotiated Agreement) 3. Contractual Risk: risk associated with willingness of other
• BATNA’s are not wishful, they are factual party to honor its terms (signing non-disclosure agreement)
• Time sensitive, at any time improving/deteriorating due to Endowment Effects
conditions • Buyers & sellers might want to adopt different bargaining
• Do not let other party manipulate BATNA (minimize quality) positions for object, but their private valuations for object should
• Negotiators should be willing to accept any set of terms superior not differ as consequence of who has possession
to their BATNA • Differences in negotiators refernce points may lead buyers to
Reservation Point have different valuations for same object
• quantification of negotiators BATNA with respect to other • someone who possesses an object has a reference point
alternatives that reflects his/her current endowment, private valuation
• Developing a resveration point (4 steps) of object
