Negotiation Essentials
Reference – Negotiation Analysis: An Introduction (Michael Wheeler)
BATNA
BATNA = Best Alternative To a Negotiated Agreement
(Fisher, Ury & Patton, Getting to Yes)
‘What will you do if you do not reach agreement’
It is coming up with all the alternatives (imaginative
solutions) you can think of in the event no agreement is
reached
Selecting the alternative that seems best
BATNA
BATNA analysis
Identify all possible alternatives away from the table
tools provided by decision analysis, micro-economics
Imagining Creative alternatives
Identify best option among them
Should be rigorous
Should be done for both the parties
Defining BATNA
Sometimes alternatives are obvious & well defined, other
times they are difficult to define & measure
Salient issues in defining BATNA
‘I can work out my BATNA with the other party’ - No you
cannot. A BATNA is the best you can do without him.
BATNA is about objective reality, not wishful thinking.
(Raiffa – Personal injury lawsuit experiment)
BATNA’s are not passive or static. Negotiators can and should
cultivate additional alternatives or increase the value of an
existing alternative.
Walk Away/ Reservation price/
Resistance points
The value (maximum or minimum) at which you would be
indifferent between entering into or not entering into an
agreement
Break even point – where you would walk away rather than
agree
Quantification of BATNA
RP tends to be significant drivers of final outcomes.
Walk Away/ Reservation price/
Resistance points
Walkaways should include all your interests – tangible & otherwise
RP sets limits that prevent us from settling for less than what we
could have achieved without negotiating with this party
It also enables us to avoid rejecting offers that are better than our
BATNA
Rigid bottom line
May blind creative solutions
May become self fulfilling prophecy that leads to a result close to the
minimum
ZOPA
Zone of Possible Agreement/Bargaining range
The range, if one exists between the parties reservation
prices, a.k.a the bargaining range
Any price between these two figures leaves both parties
better off than they would be if they fail to make a deal
Hard for negotiators to have an accurate picture of the ZOPA
The dance of offers & counteroffers is a way of
simultaneously testing the true dimensions of the ZOPA
PARTIES
Who are the real parties in the negotiation?
Besides the evident parties there might be influential players
who are not immediately visible at the bargaining table
Identify the real parties – current and potential
Confirm the authority of the people you are negotiating with
PARTIES
Two Dilemmas in mutual adjustment
Dilemma of trust
Other party may take advantage of you if you believe too much of
what he or she tells you, but you may not be able to reach an
agreement if you believe too little.
Dilemma of honesty
Other party may take advantage of you if you share too much
information, but you may not be able to reach an agreement if you
share too little
Interests Vs. Positions
What are the interests and priorities of the key parties?
A position is an option that one party is committed to as a
solution to the conflict.
An interest is the concerns, needs, and/or desires underlying the
conflict, i.e., why the conflict is being raised.
Positions are what people say they want in a conflict.
Interests refer to what people really want, and what
motivates them
Probing for underlying interests helps in maximizing the potential
value of their deals.
Assess interests before, during and even at the end of the
negotiation.
Interests Vs. Positions
“Focus on interest, not positions
For example, the Board has made a decision not to circulate
minutes of meetings to members. This has resulted in anger
and feelings of secrecy and lack of trust.
BOARD MEMBERS
POSITION No circulation of Board must circulate
minutes to members minutes or appear to be
hiding something
INTERESTS Retain confidentiality To know what is
on certain issues happening in their org
Interests Vs. Positions
Lies Beneath the Position A demand
The Human Need A strategy to get needs met
The Driver or Motivator A ‘want’
Reconciling interests rather than positions works for two reasons
1. For every interest there are usually several possible positions
that could satisfy it.
2. Underneath people's positions there are often many more
shared & compatible interests than there are opposing ones.
Why seek the underlying interests?
Communication occurs at more meaningful, respectful and “human”
level
Promotes better understanding
Improves negotiation atmosphere. Tends to decrease hostility and
conflict
Often discover more possible solutions or more different strategies
to meet the underlying needs
Solutions are more likely to solve the “real” problem and be more
effective and durable
But revealing interests too quickly and without adequate trust and
reciprocity may be unwise as it can leave you vulnerable to
exploitation.
Discovering Interests
Direct questioning
Investigate the parties' underlying interests by asking: "Why is this
important for you?". Keep asking "why" repeatedly until the list of
interests comprehensively covers both needs and fears.
Conversely, ask the question "Why not?". What reasons does one
group have for not meeting the demands or interests of the
other(s)?
Value
How can value be created and who will get it
Differences are the core material for value creation in
negotiation
Value differences that exist between negotiators include:
Differences in interest
Differences in judgments about the future
Differences in risk tolerance
Differences in time preferences
Value Claiming and Value Creation
Opportunities to “win” or share resources
Claiming value: result of zero-sum or distributive situations where
the object is to gain largest piece of resource
Creating value: result of non-zero-sum or integrative situation
where object is to have both parties do well
It is possible to reach agreements that create gain for both the
parties.
The creation of mutual gains does not necessarily mean that they
will be evenly divided
Creating value requires revelation of information and
brainstorming
Value Claiming and Value Creation
Most actual negotiations are a combination of claiming
and creating value processes
Negotiators must be able to recognize situations that require
more of one approach than the other
Negotiators must be versatile in their comfort and use of both
major strategic approaches
Negotiator perceptions of situations tend to be biased toward
seeing problems as more distributive/ competitive than they
really are
By establishing problem solving environment, parties can
identify a range of items and issues that can be crafted into a
package that maximizes benefit.
Value Claiming and Value Creation
Value
The figure represents a negotiating arena between two companies, who are
trying to extract maximum value from a negotiable agreement.
Points Y and Z represent outcomes which are superior for both parties
compared to outcome F, in terms of creating and claiming value.
The Pareto Frontier represents what is ultimately possible by joint
action after the negotiators from both companies have tried their best to
maximize value for themselves and for each other. This requires creativity,
unlocking hidden value, etc., which are all ingredients of integrative
bargaining, as opposed to a distributive approach.
Value
Pareto Frontier is a heuristic, and exists only theoretically. Neither
party may know the exact location of this frontier.
Given a set of alternative allocations & a set of individuals, a movement
from one allocation to another that can make at least one individual
better off, without making any other individual worse off, is called a
Pareto improvement or Pareto optimization.
An allocation of resources is Pareto efficient or Pareto optimal when no
further Pareto improvements can be made
BARRIERS
Structural: value of each side’s BATNA, lack of a ZOPA
Interpersonal: Lack of trust, excessive value claiming,
positional bargaining etc.
Psychological: characteristic biases in negotiators perceptions
and judgment
Institutional: Internal political and organizational dynamics
within institutions
Cultural: differences in communication styles, norms etc.
Power
What gives you power?
Your BATNA
How other party perceives its own BATNA
Context, Information, Positional, Personal power, Relationship
Ways to increase power
Developing other alternatives/redefining parties
Weakening other parties BATNA
Deadlines
Knowledge
Skill
Ethics
What is the right thing to do? – Questions to ask
What if anything do they owe to the other parties in way of
candor?
Fairness of the agreement – distributional fairness
Use of force – example– economic pressures
Impact of negotiation on bystanders
Conflict of interest when negotiating on behalf of others
Carefully considered principles
Should not be improvised at the bargaining table