Strategic Negotiation and Power

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Strategic Negotiation and Power
Professor Joe Magee US Conference of Mayors,
Executive Staff Institute, 2006
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Todays Agenda

• Introduction to Negotiation
• EXERCISE Acme-Pinnacle Negotiation
• Key Power Negotiation Concepts Strategies

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Introduction to Negotiation and Conflict
Resolution

• Why are conflict management and negotiation
  skills so important today?
• High job mobility
• Workforce diversity
• Rapidly expanding collaboration across sectors
• Managers spend 20 of their time managing
  conflict.

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Rules to Remember for the Exercise

• You may not show your role materials to your
  counterpart at any time, even after you are
  finished
• You can tell your counterpart anything you want,
  but
• Follow your role instructions
• You cannot change the facts of the case
• You cannot invent new facts

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Acme-Pinnacle

• Negotiation Preparation Time 20 minutes
• Negotiation Time 30 minutes
• Return to Class with outcomes
• Complete contract
• Return materials to Prof. Magee immediately after
  finishing

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Negotiations

• What is negotiation?
• Negotiation is a decision-making process by which
  two or more people agree how to allocate scarce
  resources
• Debate
• Convince another party of the validity of your
  position or interest
• Give information away to another party
• Negotiation
• Determine how to satisfy their needs
• Get what you want
• Take information from another party

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Types of Negotiation Issues

• Compatible
• Both parties want the same thing
• Distributive
• Competitive
• Zero-sum parties interests are directly opposed
  
• Integrative
• Cooperative
• Jointly maximize individual and collective gain

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Compatible Issue Regional Wetland Recovery

• Acme

• Pinnacle

1 -100,000 2 -250,000 3 -400,000 4
-650,000 5 -800,000
1 -100,000 2 -250,000 3 -400,000 4
-650,000 5 -800,000
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Distributive Issue Public Landfill

• Pinnacle

• Acme

Plymouth Park -1,000,000 Northville Hills
-800,000 River County
-600,000 Highland Grove -400,000 Southwest
Valley -200,000
Plymouth Park -200,000 Northville Hills
-400,000 River County
-600,000 Highland Grove -800,000 Southwest
Valley -1,000,000
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Integrative Issues
Commercial Landfill
Acme
Pinnacle
-1,000,000 -800,000 -600,000 -400,000 -200,000
Adams Gulch -400,000 Burnt Mt
-800,000 County Line
-1,200,000 Dark Hollow -1,600,000 East Branch
-2,000,000
Waste Water Mgmt
River Parks
Acme
Pinnacle
Acme
Pinnacle
Charcoal Unit -150,000 Secondary Treatment
-300,000 Primary Treatment
-450,000 Tri-halomethane
-750,000 Pretreatment Facility -900,000
-1,500,000 -1,200,000 -900,000 -600,000 -300,000
Fish Creek -50,000 Grouse Rapids -100,000 Henry'
s Ford -150,000 Icy Gorge -250,000 Juniper
Bend -300,000
-500,000 -400,000 -300,000 -200,000 -100,000
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Integrative Possibilities

• Multiple issues
• Multiple alternatives
• Differing interests

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Mid-Point Approach

• Acme Pinnacle Joint
• Commercial Landfill -1200 -600
• Public Landfill -600 -600
• Waste Water Mgmt. -450 -900
• River Park Recl. -150 -300
• Wetland Recovery -400 -450
• Total -2800 -2850 -5650

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The Pareto Efficient Frontier

• An agreement is defined as pareto efficient when
  there is no other agreement that would make any
  party better off without decreasing the outcomes
  to any other party.
• With any pareto inefficient agreement, there
  exists an alternative that would benefit at least
  one party without injuring the other party.

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An Example of a Pareto-Optimal Solution

• Acme Pinnacle Joint
• Commercial Landfill -400 -1000
• Public Landfill -600 -600
• Waste Water Mgmt. -900 -300
• River Park Recl. -300 -100
• Wetland Recovery -100 -100
• Total -2300 -2100 -4400

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Another Example of a Pareto-Optimal Solution

• Acme Pinnacle Joint
• Commercial Landfill -400 -1000
• Public Landfill -800 -400
• Waste Water Mgmt. -900 -300
• River Park Recl. -300 -100
• Wetland Recovery -100 -100
• Total -2500 -1900 -4400

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Power

• Static Power derived from personal
  characteristics
• Expert, Charisma, Position (Authority)
• Dynamic Power derived from your position in an
  exchange network
• Reward, Coercive
• A has power over B when B depends on A (i.e.,
  when B cannot get a resource elsewhere).
• A and B have equivalent power over each other
  when they are interdependent (i.e., when each
  controls resources valued by the other).

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Power in Negotiation

• BATNA
• Best Alternative to a Negotiated Agreement
• The greatest source of power in negotiations
• Power increases tendency to make first offer
• People make estimates by starting from an initial
  anchor value (e.g., first offer) and adjusting
  from there to yield a final answer.
• And they rarely make sufficient adjustments.
• Final agreements are more strongly influenced by
  initial offers than by concessions.
• Initial offers provide an anchor.
• Re-anchor!!
• Magee, Galinsky, Gruenfeld, 2006

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Homework for Negotiating with Power

• What type of bargaining situation are you in
• Debate, Distributive, Integrative
• Understand power dynamics
• Know your BATNA
• Estimate your opponent's BATNA