The Nature of Negotiation

1
The Nature of Negotiation
2
Introduction

• Negotiating is a basic, generic human activity -
  a process that is often used in
• Labor-management relations
• Business deals like mergers and sales
• International affairs
• Everyday activities
• Negotiation is not a process that everyone does,
  almost daily

3
Characteristics of a Negotiation or Bargaining
Situation

• There are two or more parties-two or more
  individuals, groups, or organizations
• There is a conflict of interest between two or
  more parties that is, what one wants is not
  necessarily what the other one wants, and the
  parties must search for a way to resolve the
  conflict
• The parties negotiate because they think they can
  use some form of influence to get a better deal
  instead of simply taking what the other side will
  voluntarily give them or let them have.
• Negotiation is a largely voluntary process.
• It is a strategy pursued by choice seldom are we
  required to negotiate.

4
Characteristics of a Negotiation or Bargaining
Situation

• The parties, at least for the moment, prefer to
  search for agreement rather than fight openly,
  have one side capitulate, permanently break off
  contact, or take their dispute to a higher
  authority to resolve it.
• Negotiation occurs when there is no fixed or
  established set of rules, procedures, or system
  for resolving the conflict, or when the parties
  prefer to work outside of the system to invent
  their own solution to the conflict.

5
Characteristics of a Negotiation or Bargaining
Situation

• When we negotiate, we expect give and take.
• We expect that both sides will modify or give in
  somewhat on their opening statements, requests,
  or demands.

6
Characteristics of a Negotiation or Bargaining
Situation

• Management of the intangibles as well as the
  resolution of the tangibles (e.g., the price and
  terms of agreement).
• What are intangible factors?
• Deeper psychological motivations that may
• Examples of intangibles include
• The need to look good to the people you represent
• The desire to book more business than any other
  salesperson in your office
• The fear of setting precedent in the
  negotiations.

7
Interdependence

• Both parties need each other. A buyer cannot buy
  unless someone else sells and vice versa each is
  dependent upon the other.
• When we are dependent on another, we have to
  accept and accommodate the demands of another
• Interdependent relationships are characterized by
  interlocking goals-both parties need each other
  to accomplish their goals.

8
Standards for Evaluating Relationship Outcomes

• Anticipated Outcome (0) What we expect to
  receive from this relationship.
• Comparison Level (CL) The standard against which
  a person evaluates a relationship---what we could
  receive from other relationships.
• Comparison Level for Alternatives (CLalt) The
  lowest level of outcome that would be accepted
  from this relationship before changing to another
  relationship.

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Standards for Evaluating Relationship Outcomes

• Example
• Laura has been employed by an organization for
  six months and is making 31,000 per year. The
  average salary of Laura's college classmates who
  were accepting new jobs was 30,000. Recently,
  the organization where Laura works was downsized
  and Laura's job was eliminated. Her boss offered
  her another job in the organization at 28,000.
  Laura realizes that most other companies are not
  currently hiring because it is not the end of the
  school year, and she believes that it would be
  difficult to find a new job for more than
  25,000.
• Anticipated Outcome The salary for the new job
  in the organization is 28,000.
• Comparison Level The average starting salary of
  Laura's classmates is 30,000.
• Comparison Level for Alternatives (CLait) The
  perceived salary of a readily available
  alternative job is 25,000.

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Standards for Evaluating Relationship Outcomes

• The greater the distance between 0 and CL, the
  greater the attractiveness or unattractiveness of
  the relationship.
• When a relationship is unattractive, we may think
  of leaving, but whether we do depends upon our
  options.
• We may not like our current job, but if we are
  relatively unskilled, we may find it difficult to
  get another job.
• If we have many skills, however, we may know of
  several jobs to which we can easily move.
• People leave relationships when outcomes fall
  below this CLalt.
• It is assumed that the more a person's actual
  outcome exceeds the CLalt, the more dependent
  upon the relationship she is.

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Standards for Evaluating Relationship Outcomes

• The Thibaut and Kelly mode of analysis permits us
  to draw a distinction between attractiveness and
  satisfaction on one hand and dependency on the
  other.
• A person can dislike a relationship and stay, or
  like a relationship and leave.
• In negotiation, the other party may dislike
  dealing with us, but since we have "the best deal
  in town' he or she will continue to negotiate
  with us.
• Alternately, the other party may like us, but
  nonetheless break off negotiations because of
  more attractive possibilities elsewhere.

12
Standards for Evaluating Relationship Outcomes

• Whether you should or should not agree on
  something in a negotiation depends entirely upon
  the attractiveness to you of the best available
  alternatives
• This concept is called BATNA (an acronym for Best
  Alternative To a Negotiated Agreement) and
  suggest that negotiators need to understand both
  parties' BATNAs when they negotiate.

13
Mutual Adjustment

• Interdependent relationships-those in which
  people are mutually dependent- are complex.
• Both parties know that they can influence the
  other's outcomes and that their outcomes can, in
  turn, be influenced by the other.
• Behavior in an interdependent relationship,
  frequently, is calculated behavior - calculated
  on the premise that the more information one has
  about the other person, the better.

14
Mutual Adjustment

• Problem solving is essentially a process of
  specifying the elements of a desired outcome,
  examining the components available to produce the
  outcome, and searching for a way to fit them
  together.
• What will happen if a person approaches problem
  solving in negotiation from her own perspective
  and attempts to solve the problem by considering
  only the components that affect her own desired
  outcome?

15
Mutual Adjustment

• When approaching the situation as a joint
  problem-solving effort, however, the outcomes
  desired by the other party must be taken into
  account.
• What is the problem for the negotiator at this
  point?

16
Mutual Adjustment

• One difficulty is that opposing parties may not
  be open about their desired outcomes, or they may
  not be clear in their own minds about what they
  actually want.
• Hence, a necessary step in all negotiation is to
  clarify and share information about what both
  parties really want as outcomes.

17
Mutual Adjustment

• If the suggested outcomes don't immediately fit,
  negotiation continues as a series of proposals.
• These proposals usually suggest alterations in
  the other party's position, and perhaps contain
  alterations in the proposer's own position.
• When one party accepts an alteration in its
  position, a concession has been made.

18
Mutual Adjustment

• Concessions restrict the the range of options
  within which a solution or agreement will be
  reached.
• If Sue would like a starting salary of 45,000,
  but scales down her request to 40,000, thus
  eliminating all possible salary options above
  40,000.
• People may recognize that concessions are
  necessary for a settlement, but they will be
  reluctant to make all or most of them.

19
Mutual Adjustment

• Making and interpreting concessions is no easy
  task, especially when there is little trust
  between negotiators.
• Two of the dilemmas that all negotiators face,
  identified by Harold Kelley, help explain why
  this is the case
• The dilemma of honesty
• The dilemma of trust

20
The Dilemma of Honesty

• Concerns how much of the truth to tell the other
  party
• Telling the other party everything about your
  situation may give that person the opportunity to
  take advantage of you.
• However, not telling the other person anything
  about your needs, wants, and desires may lead to
  a stalemate.
• Just how much of the truth should you tell the
  other party?

21
The Dilemma of Honesty

• Example
• If Sue told Bob that she would work for as little
  as 35,000 but would like to start at 40,000, it
  is quite possible that Bob would hire her for
  35,000 and allocate the extra money, that he
  might have paid to her elsewhere in the budget.
  If Bob does this, he might hurt their long term
  relationship. Bob should insure that both
  parties needs are met. If Sue does not tell Bob
  any information about her salary aspirations,
  then Bob would have a difficult time knowing how
  to satisfying those needs.

22
The Dilemma of Trust

• Concerns how much to believe what the other party
  tells you.
• If you believe everything the other party says,
  then he or she could take advantage of you.
• If you believe nothing the other party says, then
  you will have a great deal of difficulty in
  reaching an agreement.
• Exactly how much to believe of what the other
  party tells you depends on many factors
• The reputation of the other party
• How he treated you in the past
• The present circumstances, and so on.

23
The Dilemma of Trust

• Example
• If Bob told Sue that 38,000 was the maximum has
  was allowed to pay her for the job, without
  seeking approval from above, should Sue believe
  him or not?

24
Search For An Optimal Solution

• The search for an optimal solution through the
  processes of giving information and making
  concessions is greatly aided by trust and a
  belief that you're being treated honestly and
  fairly.
• Two efforts in negotiation help to create this
  trust and belief
• Perceptions of outcomes
• Perceptions of the process
• The former attempts to change a party's
  estimation of the perceived importance or value
  of something

25
Perceptions Of Outcomes

• Attempts to change a party's estimation of the
  perceived importance or value of something
• If Bob convinces Sue that a lower salary for the
  job is relatively unimportant given the high
  promotion potential associated with the new job,
  the Sue can feel more comfortable making a
  concession on this point.

26
Perceptions Of The Process

• Efforts based on the negotiating process help
  convey images of equity, fairness, and
  reciprocity in proposals and concessions
• Satisfaction with a negotiation is as much
  determined by the process through which an
  agreement is reached as with the actual outcome
  obtained

27
Structure Of The Negotiation

• The structure of the negotiation itself plays an
  important part in determining how two negotiating
  parties should interact.
• Typical structures
• Win-Lose
• Win-Win

28
Understand the Nature of the Interdependence

• Understanding the nature of the interdependence
  between parties in a negotiation is a critical
  negotiation skill.
• Unfortunately, negotiation situations do not
  present themselves with neat labels, typically,
  describing the nature of the interdependence
  between parties.
• Negotiators make judgments about the nature of
  the interdependence in their negotiation
  situations, and negotiator perceptions about
  interdependence become as important as the actual
  structure of the interdependence

29
Understanding History

• The point here is that people bring much baggage
  with them to a negotiation, including
• Past history
• Personality characteristics
• Moods
• Habits
• Beliefs about how to negotiate
• These factors will influence how people perceive
  an interdependent situation, and this perception
  will in turn have a strong effect on the
  subsequent negotiation.

30
Cooperators and Competitors

• There are two general types of negotiators
• Cooperators
• Competitors
• Competitors enter negotiations expecting the
  other party to compete, and to compete with
  everyone.
• Cooperators will cooperate with other cooperators
  and compete with competitors

31
Competitors

• Competitors believe that all negotiations are
  competitive and that the world contains only
  competitors because all the people they negotiate
  with compete (either they were natural
  competitiors, or they were cooperators who have
  adapted and compete rather than being taken
  advantage of)

32
Cooperators

• Cooperators understand that negotiations may be
  cooperative or competitive and recognize that
  there are both cooperators and competitors in the
  world.

33
Mythical Fixed Pie

• Most negotiators in a situation containing both
  cooperative and competitive elements
  (mixed-motive) will assume that there is a fixed
  pie the more I get the less you have
• 68 of negotiators assume that negotiations will
  be win-lose and only 32 assume a win-win
  situation
• Those negotiators that adjust to a situation
  quickly generally achieve better results

34
Levels of Conflict

• Intrapersonal or Intrapsychic conflict occurs
  within the individual. Souces of conflict can
  include ideas, thoughts, emotions, values,
  predispositions, or drives that are in conflict
  with each other.
• Interpersonal conflict between individual
  people
• Intragroup conflict within a small group
  among team members, committee members, familes,
  etc
• Intergroup conflict between groups, unions and
  management, warring nations, feuding families,
  etc

35
Elements That Contribute to Conflicts
Destructive Image

• 1. Competitive Processes parties compete
  against each other because they think their goals
  are in competition and that the two of them
  cannot both achieve their objectives.
• 2. Misperception and Bias as conflict
  intensifies, perceptions become distorted. People
  tend to view things consistently with their own
  perspective on the conflict. Thinking tends to
  become stereotypical and biased
• 3. Emotionality conflcits tend to become
  emotionally charged as the parties become
  anxious, irratated, annoyed, angry, or
  frustrated. Emotions tend to dominate thinking
  and the parties may become more emotional and
  irrational as the conflict escalates.

36
Elements That Contribute to Conflicts
Destructive Image

• 4. Decreased Communication Communications
  declines. Parties stop communicating with those
  who disagree with them and communicate more with
  those that agree.
• 5. Blurred Issues Central issues in the dispute
  become blurred and less defined. New, unrelated
  issues are drawn in as the conflict becomes a
  vortex that attracts both related and innocent
  bystanders.
• 6. Rigid Commitments parties become locked into
  positions. As they are challenged by the other
  side, parties become more committed to their
  points of view and less willing to back down from
  them for fear of losing face and looking foolish.
  Thinking processes become rigid, and the parties
  tend to see issues as very simple and either or
  rather than as complex.

37
Elements That Contribute to Conflicts
Destructive Image

• 7. Magnified Differences Minimized Similarities
• 8. Escalation of the Conflict

38
Conflict

• The objective is not to eliminate conflict but to
  learn how to manage it so the destructive
  elements are controlled while the more productive
  aspects are enjoyed.
• Negotiation is a strategy for productively
  managing conflict.

39
Functions and Benefits of Conflict

• Discussing conflict makes organizational members
  more aware and able to cope with problems.
  Knowing that others are frustrated and want
  change creates incentives to try to solve the
  underlying problem.
• Conflict promises organizational change and
  adaptation. Procedures, assignments, budget
  allocations, and other organizational practices
  are challenged. Conflict draws attention to those
  issues that may interfere with and frustrate
  employees.

40
Functions and Benefits of Conflict

• Conflict strengthens relationships and heightens
  morale. Employees realize that their
  relationships are strong enough to withstand the
  test of conflict they need not avoid
  frustrations and problems. They can release their
  tensions through discussion and problem solving.
• Conflict promotes awareness of self and others.
  Through conflict, people learn what makes them
  angry, frustrated, and frightened and also what
  is important to them. Knowing what we are willing
  to fight for tells us a lot about ourselves.
  Knowing what makes our colleagues unhappy helps
  us to understand them.

41
Functions and Benefits of Conflict

• Conflict enhances personal development. Managers
  find out how their style affects their
  subordinates through conflict. Workers learn what
  technical and interpersonal skills they need to
  upgrade themselves.
• Conflict encourages psychological development.
  Persons become more accurate and realistic in
  their self-appraisals. Through conflict, persons
  take others' perspectives and become less
  egocentric. Conflict helps persons to believe
  that they are powerful and capable of controlling
  their own lives. They do not simply need to
  endure hostility and frustration but can act to
  improve their lives.

42
Functions and Benefits of Conflict

• Conflict can be stimulating and fun. Persons feel
  aroused, involved, and alive in conflict, and it
  can be a welcome break from an easygoing pace. It
  invites employees to take another look and to
  appreciate the intricacies of their
  relationships.

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Conflict Management
Yielding
Problem Solving
Concern About Others Outcomes
Compromising
Inaction
Contending

• Concern About Own Outcomes

44
Conflict Management

• Contending (competing or dominating) Parties
  who employ this strategy maintain their own
  aspirations and try to persuade the other party
  to yield
• Yielding (accommodating or obliging) Show
  little or no concern in whether they attain their
  own outcomes, but are quite interested in the
  other party attains their outcome
• Inaction (avoiding) show little interest or
  concern in whether they attain their own
  outcomes, nor do they show much concern about
  whether the other party obtains his outcomes.
  Inaction is often synonymous with withdrawal or
  passivity, the party prefers to retreat, be
  silent, or do nothing

45
Conflict Management

• Problem Solving (Collaborating and integrating)
  actors pursue a problem solving strategy showing
  high concern for attaining their own outcomes and
  high concern for whether the other party attains
  their outcome. Both parties pursue approaches to
  maximize their own joint outcome so both sides
  win.