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Chapter 2: Preparation: What to Do Before Negotiation

Sound planning and careful preparation are vital for a successful negotiation. The work
that you do prior to negotiation pays off substantially when you finally find yourself
seated at the table. The 80-20 rule applies to negotiation: about 80% of your effort should
go toward preparation; 20% should be the actual work involved in the negotiation.

The dominant force for success in negotiation is not in the game playing or the power of
persuasion. The foundation for success is in the planning that takes place prior to the
dialogue of negotiation. According to Prof. Leigh Thompson, excellent preparation
encompasses three general abilities: self assessment, assessment of the other party,
assessment of the situation.

1. Self assessment
For the task of self assessment, the following question should be asked:
a. What do I want?
b. What is my interest?
c. What are my objectives? And in what order of importance are they be ranked?
e.g. relationship with others/your own benefit. Which one is more important?
d. What am I willing to give up in exchange for what I want?
e. What is my target point and limits – the bottom line?
f. What are my alternatives if no agreement can be reached?
g. What pattern should we set for offering our concessions? (The preparation of
making concession will be discussed in Chapter 7).
h. What is my negotiation strategy? win-win or win-lose approach?

2. Assessment of the other party/opponent

a) Who will we be negotiating with? What will be their style and range of objectives?
b) What will be their styles and objectives?
c) What is the other party’s alternative, and authority?

3. Assessment of the situation

a) When will suit us best to hold the negotiations? And when would not?
b) Where do we want the negotiations to take place? Do we want to meet on our
ground, theirs, or on neutral territory?
c) How much time will we need to reserve?

I. Self Assessment
Step 1: Define the issues
The first step in negotiation planning is to define the issues to be discussed. For
instance, in buying a house, both parties recognize that the central issues include price,
date of sale, and date of occupancy.

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Many negotiators make the mistake of identifying only one single issue, leading to
win-lose negotiation situation (The more I gain, the more you lose). Usually, the
single issue is the price. Negotiation with only ONE single issue is a Win-Lose
negotiation situation where the weak party has to give in more than the strong party.

By identifying a list of different issues, negotiators can achieve win-win negotiations

by making trade-off. Once you know what issues the other party highly values that
you value less, you can give up more on less important issues in exchange for
getting more concession on issues that are important for you. Especially, a weak
party should add more issues into negotiation which enable you to give up something
not important for you in exchange of what you want in other issues. (Detailed
discussion about win-lose and win-win negotiation will be covered in Chapter 3 and
5).

Golden Rule of Preparation in Negotiation

When you are the weak party in negotiation, adding more issues help you to give up
something that cost you little but valuable to the other party in exchange for what you want.
You have higher chance to gain more from win-win negotiation than from win-lose
negotiation.

Step 2: How important is each issue to you?

After generating a list of issues, it is helpful to set priorities by asking “What do I want”?
This can be achieved by ranking all the issues from the highest priority to the lowest
priority. As a general strategy, negotiators are willing to trade a lower-level issue to gain
a higher-level issue.

Step 3: Defining your interests

After defining the issues, the negotiator must proceed to define the underlying interests
and needs. Positions – an opening bid or a target point – are what a negotiator wants
which are tangible negotiation needs. Interests are underlying concerns, motivation, and
needs behind the positions which are the intangible negotiation needs. For example, a
person who negotiates for promotion in his job is a “position”. The underlying interest is
to gain higher status and recognition from others.

Defining interests is very important for integrative (win-win) negotiation. (Detailed

discussion would be provided in Chapter 5). Asking the question “why” usually brings
critical values, needs, or principles to the surface.

Step 4: Knowing your bottom line/resistance point and target point

As mentioned in Chapter 1, negotiation is the process that includes offering and
demanding concessions from the other parties. To create room for making concession,
you have to define your bargaining range - the distance between the target point (ideal
point - 最理想的價位) and bottom line/resistance point (底線 – 最低可接受的價位).
The following section would guide you how to set up the bottom line and target point.

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Set your bottom line/resistance point

The resistance point is the point where you decide that you should stop the negotiation
rather than continue, because settlement beyond this point is not acceptable. If you are the
seller, your bottom line is the least you will take for the item you have for sale; if you are
the buyer, your bottom line is the most you will pay for the item. Without setting the
bottom line, we may get the deal from negotiation in the heat of the moment which is not
good for you. In other words, your resistance point is the reference point for rejecting or
considering the other party’s offer.

Use alternative to determine your bottom line/assistant point.

Alternatives are important because they give the negotiator power to walk away from
any negotiation when the emerging deal is not very good. A common problem is that
negotiators don’t identify and consider enough alternatives. As a result, they have less
power when they negotiate. For example, some people stay in jobs where they are not
happy because they believe they don’t have other alternatives. Instead of looking for
other possibilities (e.g., returning to school to acquire additional skills), they stay
where they are and assume that this is their lot in life.

In negotiations where they have many alternatives, they can set their goals higher and
make fewer concessions. In contrast, when they have no attractive alternative, such as
when dealing with a sole supplier, they have much less bargaining power.

Find your BATNA

Good bargainers identify their realistic alternatives before beginning negotiations so
that they can properly determine how firm to be in the negotiation. A negotiator needs
to determine his or her BATNA (Best Alternative to a Negotiated Agreement). For
instance, negotiating with the only supplier in town, or do you already have several
attractive bids in your pocket? ALTERNATIVE makes all the difference. Once
BATNA is available, you can use it to determine your resistance point (bottom line)
– the point beyond which a person will not go and would rather break off negotiations.

Use BATNA to determine your resistance point/bottom line, don’t

rely on your judgment.
In practice, it means that negotiators should be willing to accept any set of terms that
is better than their BATNA and reject outcomes that are worse than their BATNA.
Each side’s BATNA is a key factor in determining negotiation power. The better
your BATNA, the better an offer the other party must make to interest you in
reaching an agreement. Without BATNA, you have to rely on your own judgment to
determine your resistance point. You might set the resistance point less favorable for
you. BATNA is an important indicator for you to determine the RESISTANCE
POINT (Bottom Line).

What will happen if negotiators do not have BATNA, and rely on their own
judgment to determine the resistant point?

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(1) Negotiators may become too demanding/too mild in determining their bottom
line in negotiation. The bottom line determined by their own choice may be
unrealistic, thus becoming the major barrier for negotiators to make a deal.
For example, suppose you can buy a second-hand motorcycle not more than
$10,000. You don’t realize this due to the lack of BATNA to determine the
resistant point. If the seller is very aggressive who asks for $15,000, you must
rely on your own judgment to determine the resistant point which is fixed at
$14,000. You may end up paying much more extra money than the market value
in closing the deal !!

(2) Negotiators also have less bargaining power as they have no alternative to back them
up.

Golden Rule of Negotiation

Good negotiators should accept any set of terms that is better than their
BATNA and reject outcomes that are worse than their BATNA.

Improve your BATNA

You should be constantly attempting to improve your BATNA based upon objective
information. Negotiators have to keep negotiation open with other parties offering
different outcomes so as to enhance their bargaining position.
One strategy for improving BATNA is to follow Bazerman and Neale’s “Falling in
love” rule. According to this rule, negotiators should not fall in love with one house,
one job, or one set of circumstances, but instead, try to identify two or three options
of interest.
The “falling in love” rule is difficult to follow because most people set their sights on
one target job, house, or set of terms and exclude all others.

Do not let the other party manipulate your BATNA

Since you have to improve your BATNA based upon objective information, it is
important to realize that the other party always has an incentive to change your
perception about the quality of your BATNA, and this will be motivated to provide
negative information about your BATNA. However, your BATNA should NOT
change as a result of the other party’s persuasion techniques. Your BATNA should
only change as a result of objective facts and evidences.

Golden Rule of Negotiation

It is important to develop a BATNA before commencing negotiations and stick to it
during the course of negotiations.

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Determine your target point

In any negotiation scenario, a negotiator needs to determine a specific target point
where one realistically expects to achieve a settlement. Identifying a target may
sound straightforward enough, but two major problems often arise at this point:

Underaspiring negotiator
The underaspiring negotiator sets his or her target too low. The underaspiring
negotiator opens the negotiator by requesting something that is immediately granted
by the opposite side, resulting in a regrettable state of affairs. The immediate
acceptance of one’s offer by an opponent signal that a negotiator did not ask for
enough.
Consider what happened to Joseph Chan who was engaged. Joseph wanted to buy a
beautiful necklace for this bride-to-be. When he entered the jewelry store, he knew
not to offer full price for the gold necklace. Then he offered exactly half of the
marked price. At that moment, the shopkeeper accepted his offer immediately! Joseph
was deeply regretted and said, “I would have paid less money if I had just started with
one-third of the marked price! Oh! The deal is too bad !”
Joseph’s key mistake: His initial offer was too generous because he had not done
sufficient search to figure out the market value of the necklace.

Overaspiring negotiator
This type of negotiator is too “tough”. He or she sets the target point too high and refuses
to make any concessions. Setting an unrealistic high target may result in strong rejection
from the opposite side.
How to avoid being an underaspiring or overaspiring negotiator?
Negotiators need to know the general range of their targets which should be concrete
and realistic. To achieve this aim, negotiators have to conduct research extensively to
know the current market. e.g. current property transaction record available at the Land
Registry.

II. Assessment of the other party/opponent

Once the negotiator has gone through the preparation procedure for evaluating what he or
she wants in a negotiation situation, it is time to think about the other party.
1. Who are the other parties?
It is always important to identify who are the players in a negotiation. Parties are
readily identified when they are physically present, but often, the most important
parties are not present at the negotiation table.
When more parties are involved in the negotiations, the situation becomes a team or
multiparty negotiation, and the dynamics change considerably. A variety of issues crop
up as more parties enter the bargaining room.

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For example, with more than two parties, coalitions may develop, and teams of
negotiators may form.

2. Information gathering about the other party’s:

1. Background and current resources
2. Tangible and intangible negotiation needs
3. Objectives and targets
4. Reputation and style
5. Alternative/BATNA
6. Authority

2.1 The other party’s background, and current resources.

Negotiators will learn much about the other party in advance through research and
homework. For example, of the multiple issues, which issues are most important to the
other party? What alternatives are most preferable to the other party?
Financial data about the other party might be obtained through channels such as Dun and
Bradstreet, financial statements, newspapers, company’s annual report or
biographies….etc. In addition to learning about the party’s background, one also needs to
get information about his or her current interests and needs through a variety of routes:
• Visit other party or speak to his or her friends and peers.
• Ask others who know or have negotiated with the other party.
• Conduct a preliminary interview, including a discussion of what the other party
would like to achieve in the upcoming negotiations.
2.2 The other party’s tangible and intangible negotiation needs
You should put yourself in other’s shoes to understand the standpoint of the other
party. Successful negotiation involves the management of tangible and intangible
negotiation needs.

a. Tangible negotiation needs are the price, delivery, payment, warranty …..
etc which are countable.

b. Intangible negotiation needs are uncountable psychological needs that

may directly or indirectly influence the parties during a negotiation.
Intangible needs may have an enormous influence on negotiation process
and outcomes and need to be managed proactively during negotiations.
Examples of intangible needs are:

(1) A manager stands very firm and gains nothing in negotiation as he

does not want to lose face to his boss who expects him to get very
favorable deal from the other party. Such action is driven by the

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psychological need of winning respect from others (Maslow’s self-

esteem needs).

(2) The fear of setting precedent in the negotiations.

e.g. Lecturers refuse to let students change their tutorial class without
any valid reason. Why? Once this precedent is allowed to happen,
the lecturers can’t reject other students who make the same request.

You may review your own and the other party’s intangible (psychological)
negotiation needs by reference to a classification system such as this one
adapted from Maslow’s ‘needs hierarchy’.

safety

physical

2.3 The other party’s targets and objectives

One of the best ways to get this information is directly from the other party. Because
information about the other party’s is so important to the strategy formulation of both
parties, professional negotiators will often exchange information about targets or initial
proposals days or even weeks before negotiations begin.
It is NOT appropriate for you to use your targets and values as a guide and assume that
others are like yourselves and want similar things. For example, a manager who is always
after a bigger paycheck is usually surprised that some of his subordinates are more
interested in having a challenging job, schedule flexibility, or increased leisure time than
they are in maximizing their salary.

Why it is important to know other party’s needs, priority, and targets?

Because all of this information allows you to make the best exchange! Once you
discover that other party has different interest, priority or target, you have the opportunity
to give up something less costly or important to you in exchange for obtaining
something you really want! Look at the following example:

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Satisfy the other party’s hidden needs

A highly regarded executive with a company in the process of expanding asks for a
pay rise. Since cash flow is critical and the company does not wish to set a precedent
by giving in to the demand for more money, the request is refused. A conflict is
imminent. Fortunately, the head of accounting discovers that the executive needs the
rise to buy a new car. The executive is offered a company car instead of a pay rise. It
works out cheaper for the company, and the executive is perfectly satisfied with the
arrangement.

2.4 The Other party’s reputation and style

The other party’s past negotiating behavior is a good indication of how he or she will
behave in the future. Speaking to those who have dealt with that person in the past can be
very valuable.

2.5 The other party’s alternative/BATNA:

Probably the most important piece of information a negotiator can have in negotiation is
the BATNA of the other party. Unfortunately, unless you are negotiating with an
extremely naïve negotiator, it is unlikely that opponents will reveal their BATNAs.
However, a negotiator can and should do research about the other party’s BATNA before
negotiating. Most negotiators do very little to search their opponent’s BATNA.
For example, many people do not adequately utilize real estate agents when purchasing
houses. Real estate agents can provide a wealth of valuable information about the nature
of the market and the history of a house that is for sale – all of which can be valuable
when trying to determine an opponent’s BATNA.

2.6 The other party’s authority

When negotiators represent others, their power to make agreements may be limited. This
happens frequently and generally takes the form of the other negotiator saying something
such as, “the boss wouldn’t accept your offer, but if you’ll just raise it a bit, I’m sure we
can get it done.” Some negotiators use the need of “higher approval” as a ploy to extract
additional concession from you.
In order to minimize this problem, it is wise to ask the other party specifically about any
limits to authority before the negotiation begins. Otherwise, you’ll work toward an
agreement only to be told at the end that someone else’s approval is needed. This could
be very frustrating and exhausting and may create unproductive tension in the negotiating
relationship. Some negotiators even refuse to begin the negotiation until someone who
has the power to answer questions and make decisions is bought to the table.

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III. Situation Assessment

1. Choose your negotiation style (Win-Win/Win-lose)

To determine your negotiation style, you have to analyze the situation based on:
⚫ Repeatability of the deal
⚫ Importance of relationship (Long term vs short term)

Ask yourself: Is the negotiation one shot, long term or repetitive? What overall
negotiation style do I want to select?
The answer of the question determines your choice of negotiation style: Win-Win (co-
operation) or Win-Lose (Competition). In a one-shot negotiation, a transaction occurs,
and no future ramifications accrue to the parties. Your choice of win-lose negotiation
style to maximize your outcome at the expense of those of others is acceptable since you
don’t need to maintain the long-term relationship with the other party.
On the other hand, repetitive negotiations are situations in which negotiators must
renegotiate terms on some regular basis. In long-term and repetitive negotiations, parties
must consider how their relationship evolves and how trust is maintained over time.
Probably, long-term relationship is one of the most important considerations in job
employment negotiation.

2. Time Pressure and Deadlines

A final deadline is a fixed point in time that ends the negotiations. The rate of
concessions made by negotiators increases as negotiators approach final deadlines. This
means that the closer the deadline, the more concessions the negotiators are willing to
make. According to Moore (2004), negotiators believe that final deadlines (time pressure)
are a strategic weakness, and so avoid revealing their deadlines for fear that their
“weakness” will be exploited by opponents. You must make sure that you have sufficient
time to negotiate without any time pressure in closing the deal. If time pressure does
exist, try to arrange another time for negotiation to avoid this effect.

Golden Rule of Negotiation

You must make the Deadline and Timing in your favor

Where do the negotiations take place? Your place or mine?

Common wisdom holds that it is to one’s advantage to negotiate on one’s own place. So
important is this perception that great preparation and expense are undertaken to find
neutral ground for important negotiations. For example, when John Mack, of Credit
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Suisse First Boston, negotiated with Frank Quattrone, the investment firm’s powerful
bank, Mack insisted that they not meet in New York, where the firm had its headquarters,
and not in Palo Alto, where Quattrone was based, but in Kansas City because it was
“halfway between”.

What are the advantages to have negotiations taken place at your own place?
• Control over physical arrangements: seating planning, meeting room, temperature,
etc.
• Familiar surrounding and stress levels
• The other party may suffer from fatigue after overnight flights, long drive, and hotel
beds.
• Access to support personnel and documentation backup.

Reference Book:
1. The Mind and Heart of the Negotiator.(2022). By Leigh L. Thompson. Prentice Hall.
Chapter 2.
2. Essentials of Negotiation (2021). By Lewicki, R.J., Saunders D.M., Barry, B., &
Minton J.W. McGraw Hill. Chapter 2

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