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Negotiations: Author Hal Stack for Chelst and Canbolat Successful negotiation requires careful management of the key elements of
the negotiation process, as illustrated in Table 15-3. Value creation is an important part of this process. We often view negotiation as a test of wills, a
contest over the division of the pie. While negotiation does involve claiming value, it also includes the possibility of creating value. As noted earlier, the key
to successful negotiation is the ability to manage the tension between value creation and value claiming. This requires careful preparation.
15.4.1 Preparation
Preparation for negotiations is perhaps the most important element of the process. It involves a careful assessment of your goals and strategic situation, a
preliminary assessment of the other party’s goals and strategic situation, and an analysis of the context in which the negotiation is occurring. As reflected in Table
15-2, preparation requires thoughtful assessment of self, the other party, and the situation or context in which the negotiation is occurring.
In preparing for negotiation, it is important to identify the goals you hope to achieve in the upcoming negotiation, considering both outcome and future
relationship goals. In addition, one should identify and prioritize the issues that must be addressed in achieving these goals. For each issue, clarify the underlying
interests and brainstorm potential solutions. If you hope your initial offer will serve as a strong anchor, prepare supporting arguments with relevant facts and
data. Also identify the information or data you might need to address the issues intelligently. Where appropriate, establish your target and reservation price.
Finally, identify and prioritize your BATNA, your alternative courses of action to reaching agreement with the other party.
If I am negotiating for a job and have been out of work for six months, I have a far weaker BATNA than if I am currently employed. The better my
BATNA, the more power I have at the bargaining table. I should therefore seek ways to improve my BATNA. This means exploring all possible courses of
action. In the job scenario, this might involve continuing the job search, taking a part-time job, or reducing my cost of living. Skilled negotiators always keep their
alternatives open and attempt to improve upon them. Revealing your BATNA, particularly if it is very weak, dramatically reduces your bargaining power. And
even where you have a very strong BATNA, revealing it means that you will not receive any offer better than that.
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Negotiations: Author Hal Stack for Chelst and Canbolat Table 15-3: Process of managing negotiations
Preparation Value Creation
Value Claiming Closure
Assessment of self
§
Goals
§
Issues
§
Interests and priorities
§
Target and reservation price
§
Supporting arguments
§
Information needs
§
Your BATNA
Assessment of other party
§
Other party
§
Goals
§
Issues
§
Interests and priorities
§
Target and reservation price
§
Their BATNA
Assessment of situation
§
Importance of relationship
§
Linkage effects
§
Time pressures
§
Difference in power
§
Need for change
Strategies
§
Problem solving
o
Define the issue
o
Identify interests
o
Brainstorm options
o
Consider criteria
o
Select best solutions
§
Beneficial trades
o
Add issues
o
Fractionate issues
§
Leverage differences
§
Contingent contracts
§
Cost-cutting
Tactics
§
Take problem- solving approach
§
Ask diagnostic questions
§
Build trust
§
Share information
§
Solve the other party’s problem
§
Provide reasons for disagreement
Strategies
§
Determine BATNAs
§
Establish reservation and target price
§
Probe valuation and information
differences
§
Estimate ZOPA
§
Manage negotiation dance:
o
When to begin?
o
Who goes first?
o
How much to offer?
o
How to react to offers?
o
How to make concessions?
Tactics
§
Open aggressively
§
Reciprocal concessions
§
Concession size and timing
§
Make first offer
§
Avoid ranges
§
Provide rationale
§
Label your concessions
§
Save face
Strategies
§
Take it or leave it
§
Appeal to “fair” standard
§
Deal with objections
§
Summarize agreements and
concessions
§
Package issues
§
Make equivalent proposals
§
Split the difference
§
Mediation
§
Fact finding
§
Arbitration
§
Use power strategically
§
Post-settlement settlement
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Negotiations: Author Hal Stack for Chelst and Canbolat Assessing the other party’s situation requires a similar analysis, beginning
with a basic understanding of who you face at the bargaining table. What is their reputation? What authority do they have? Much of your assessment of the other
party’s interests, priorities, and BATNA will be little more than your best guesses. However, careful research and continued probing during the
negotiations will enable you to be a better prepared negotiator. Many negotiators find it helpful to use a planning document, such as one developed by Jeanne
Brett of Northwestern University Table 15-4. In column 1, the table lists the issues to be negotiated,,followed by your priority ranking, position, and interests
for each issue in column 2. In column 3, you list the other party’s priority ranking, position, and interest. The respective priorities are not likely to be the
same. For example, a job prospect may want a salary of 86,000. His interests are security and paying off loans. For him, salary is his first priority. The employer’s
salary position, however, is 72,000 and his primary interest is fairness. Salary is ranked only third on his list of issues.
Table 15-4: Planning document Issue
Your perspective Other perspective
Issue Priority Position
Priority Position Interests
Interests Salary
1 86,000
3 72,000
security, pay off loans fairness
BATNA Reservation
Price
Because most negotiations involve multiple issues and differing priorities, effective negotiators are constantly considering different ways to package these
issues. A union, for example, may be willing to agree to changes in work rules in return for a wage increase. These work rule changes may be of low cost to the
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Negotiations: Author Hal Stack for Chelst and Canbolat union but of high value to the employer. Typically, it is the ability to create a
mutually acceptable package that will lead to a deal. A related issue is sequencing, or the relative order in which the issues
should be discussed. Many negotiators prefer starting with easy issues and then moving to difficult ones as the parties build positive momentum. Other
negotiators prefer tackling the hard issues first and then wrapping up the easy ones. Still others like to take all the issues together. The challenge is not to be
too linear. In most cases, your ability to bring negotiations to a successful conclusion will depend on your ability to identify potential trades and create a
package of issues that effectively addresses the priority issues of each side. This may require looping back to earlier issues and making adjustments to put
together a winning package. Unfortunately, once an issue has been resolved, it is unlikely to be revisited and incorporated into a value-creating package.
6. Activity – Managing issues in negotiation: Use the planning document in Table 15-4 to construct a chart for one of the negotiations identified in
Activity 1.
In assessing the situation or context of the negotiations, it is helpful to consider the following:
Relationships
: What is the current relationship with the other party and what do you want that relationship to be in the future? Is the other party
someone you will want to do business with again? For example, does the supplier you are negotiating with have a technology critical to your
product?
Linkages : Are there linkage effects between these negotiations and other
negotiations? Will these negotiations establish precedents likely to influence a negotiation with another party? For example, will the wage
increase you
negotiate
with union A set a precedent for your upcoming negotiations with union B?
Time Pressure : Are there any time pressures that may impact you or the
other party?
Do these negotiations need to be completed before a certain date such as a new product launch? Does the teachers’ union contract end
on the first day of school?
Power : What is the relative power of the two parties? Does the other party
have an attractive alternative to doing business with you?
Pressure to change : Also, is there a need for change? Are your costs out of
line with your competition? Are new technologies disrupting your markets?
Ground Rules : What ground rules do you want to establish to guide the
negotiations? Where will the negotiations occur? What will be the bargaining calendar? At what point can new issues not be added without
the consent of the other party? Are the parties willing to extend the
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Negotiations: Author Hal Stack for Chelst and Canbolat current contract if necessary? How will communication with constituents
or the press be handled?
Opening Statement : Opening statements are your opportunity to set the
tone for the negotiations while signaling your basic themes. What do you want to accomplish at the start of negotiations? Should you address
significant cost issues or the other party’s responsibility for product engineering?
Even when your message contains unwelcome issues for the other side, be sure your opening statement is delivered without hostility or threats. Do not
frame your opening statement as a set of demands but as a way of starting discussion. The opening statement can relieve the tension that is often present at
the beginning of negotiations. Frame the negotiation as a joint effort that will benefit both parties and emphasize your openness to the other party’s issues and
concerns.
7. Activity – Opening Statement: Drawing upon one of the negotiations identified in Activity 1, identify the key points you would have made in
your opening statement. __________________________________________________________
The opening bargaining session is crucial in getting the negotiations off on the right foot and in laying the foundation for a positive outcome. As in any
meeting, it is helpful to have a clear, agreed-upon agenda. Similarly, the meeting should end with agreement on the next steps and the agenda for the next
meeting. Often a flip chart can be helpful in keeping the bargaining teams focused and on track. Although some negotiations may begin with an exchange
of specific proposals, these can quickly transform into fixed positions and rigid demands. A better approach is to focus on understanding and clarifying these
issues and identifying issues that will need to be addressed. Potentially controversial data might best be collected jointly by a subcommittee consisting of
members from both teams. This will save time and reduce conflict over “the facts.”
15.4.2 Value Creation
