Negotiation part 2

Negotiation Skills II (Harvard Business School Publications)

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First Line MBS
“Ashraf Morsy”
Jeddah, 4
th
,March. 2008

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Summary Part 1
•Definition / types.
•4 key concepts.
–(BATNA – Reservation Price – ZOPA – Trade values)
•9 Steps to deal.
–(Outcome – Value creation – BATNA – Res. Price – Authority – Data –
Flexibility – standard)
•How to play game well?
–(table – start – Win / Lose ”Anchoring – Concessions – Package” – Win
/ Win “Start – Options – Time” – General “Framing – Evaluate”)

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Chapter 5
FAQ
Frequently Asked Questions

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•Q1: Should I state my acceptable range ?
–As last step to announce your top.
•Q2: Should I ever tell my bottom line ?
–Only if you reach it or near (firm and assertive).
Tactics Regarding Price

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•Q3: Should I make extreme low offer if other present extreme high
expectations ?
–Don't take it seriously (make a joke).
–Tell it is an out of line offer, we can't consider it.
–Ask him to revisit it (never refer to it)
–Better to go back to interests.
Tactics Regarding Price

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Tactics Regarding Process
•Q1:Is it acceptable to bid against myself “2 in a row”?
–Not a good idea, wait and see.
–If you have, let him know.
•Q2:Is it smart or fair to bluff?
–Sure, but within ethics and legality.

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Tactics Regarding Process
•Q3: Is it good to reach agreement on issue by issue or wait for total
complex deal to end?
–Situational, could help in creating values.
•Q4:Is it better to start with difficult or easy issue?
–Pros, positive momentum and enhance understanding & commitment.
–Cons, save time and the rest goes smoothly.

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Tactics Regarding People
•Q1: What if you play collaborative Vs positional hard
bargainers ?
–Review your BATNA.
–Limit sharing information.
–Focus on interests.

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Tactics Regarding People
•Q2: How should I respond to change terms after deals
closed ?
–Check sincerity (low cost, do it).
–Express role of closing (open one, open all).

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Tactics Regarding People
•Q3: What if he got nervous?
–Be calm, quit and wait a minute.
–Express “it will take deal no where”.
–Clarify, if he want you to leave.

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Tactics Regarding People
•Q4: What should I do if I don’t believe him?
–State that accuracy is a corner stone for the deal.
–Make future incentive to comply with deal.
–Make penalties to breaking the deal.

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Tactics Regarding People
•Q5: Is it good to negotiate through phones, e- mails?
–No, face to face is better (nonverbal).
–To clarify conflict on spot.

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Chapter 6
Barriers to Agreement

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1-Die hard bargainers
•Recognize the game (keep your balance).
•Review your BATNA & Res. Price.
•Don't share imp. inf., present options of solutions.
•Be ready to walk away.

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2- Lack of Trust
•No trust ……..low opportunity to deal.
•Trust is to be polite, Respect, Sincere.
•Entrusted person means “insecure deal”.
•Create trust “clear communication”.
•Documentation “penalties & incentives”.
•Adult Relations.

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3- Information vacuums
“Negotiation Dilemma”
•Each side hide information from other.
–Example: Royal Navy Motors.

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3- Information vacuums
“Negotiation Dilemma”
Western
Open & truthful
Conceal or
mislead
Peabody
Open & truthful
Both makes
modest gain
Major gain for Ws
Small gain for PB
Conceal or
mislead
Major gain for PB
Small gain for Ws
Neither co. gains
Neg. may fail

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3- Information vacuums
“Negotiation Dilemma”
•The solution to this dilemma is cautious, mutual and
incremental information sharing
•Tactics:
–take the lead with a little risk
–“give info to take info”.

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Other Barriers
4.Structural impediments.
–ex. Purchase & Finance.
5.Spoilers
–Ask Why and put them aside.

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Chapter 7
Mental Errors

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Escalation
•Causes:
1.Ego (don’t go home empty handed).
2.Action (play what they can, not what it worth).
3.Principal / agent prop. (other people’s money).
•Solve:
1.Set a limit to walk away before Neg.
2.Group evaluation of The Limit.
3.Think to save money (unneeded) for other projects.

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Partisan Perception
•Psychological misunderstanding.
•Solve :
–objective measures (standard).
–Put your self in their shoes then judge.

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Irrational Expectations
•Unreasonable or out of line expectation will lead to no
deal.
•Solve :
–Educating dialogue
–New information is new expectations.
–Example:
•New writer expect 4 m$, offer is 10,000 $.

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Over confidence
•Over or under estimation of you or them is dangerous
•Solve:
–External mentor or observer.
•Business like marriage could be spoiled by emotion.
•Solve:
–Fairness in objective standards and measures.
–Ex. 100 $ split.
Un checked emotions

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Time out

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Chapter 8
Does Relationship Matter ?

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Why relationship matter ?
•Organizations desire in long term business.
•Claiming aggressively hurts relationship.
•Solve :
–Never ignore gaps in evaluating relation.
–Separate deal from relation.
“relation is crucial for HOW, not WHAT”

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When not to negotiate
(ways of saying ‘No')

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People say a lots of different things when they
really know the answer is "No."
•"I'll see what I can do."
•"I'll let you know.""
•"Maybe."
•"I'll ask."
•"I'll find out."
•"You could call head office and ask"

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•Demand is not possible.
•Too commercially demanding, or not reasonable.
Do not negotiate WHEN?

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Do not negotiate WHY?
•Don't lose ground unnecessarily.
•Avoid false hopes (difficult to satisfy later).
•Help authority and professionalism.

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Do not negotiate HOW?
•A clear and honest "No, I'm afraid not,“.
•Suitable explanation and empathy for the other
person's situation is all it takes.

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Chapter 9
Negotiating for others

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Agent represent companies
•Benefits
•More expertise.
•Create more values.
•Reduce risk of damage.
•Drawbacks
•Conflict of interest.
•Sharing confidential data.
•Decline relation.

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Chapter 10
Building organization competence

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Building organization competence
•Organization and individual competence.
•Growth is “continues improvement process”.
•Overview on:
–Continues improvement.
–Remove Barriers.
–Improve organization capability.
–Develop effective negotiator.

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Continues improvement
•Discipline process and learning by analysis.
–Example :
–Bank Loans and insurance claim.
Pre
Negotiation
Evaluating &
Learning
Post Neg.
Learning
Agree or notNegotiationPreparation
Learning
Cont.

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Barriers to cont. imp.
1.Out come is not clear (may take years).
2.Not detectable (which for which).
3.Negotiators with no incentives to share know-how

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Improve organization capability
•Training and preparation.
•Clarify goals, expectations and when to walk away.
•Insist to set BATNA.
•Learning lessons and measure success.

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Develop Effective Negotiator
•Align negotiator and organization goals.
•Thoroughly preparation with data updates.
•Develop creativity to find value options.
•Separate people from issues.
•Recognize barriers and handle it.
•Develop trust and reputation.

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Close
POA

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GOOD LUCK