Session 3 - Integrative Negotiations - FINAL.pdf

smu lecture notes - negotiation in business

1. Negotiating in Management and Business
Integrative Negotiations
Dr. Michael Schaerer
Associate Professor
Lee Kong Chian School of Business
Singapore Management University

2. © Michael Schaerer
What have you learnt in the last class?
2
►Take notes –you’ve got 2 minutes
►Then share with the class

3. © Michael Schaerer
Recap: Distributive negotiations
3
►Distributive negotiations
▪Opposing preferences; try to maximize your slice!
▪But let the other party win something too!
▪Only reveal strong BATNA but never your reservation price!
►Distributive strategies
▪Improve BATNA (new ones, improve value, increase certainty)
▪Ambitious, precise first offers (sets the tone, anchors opponent)
▪Use qualitative anchors (e.g., highlight pros / cons)
▪Use decreasing concessions (signals reaching bottom line)

4. © Michael Schaerer
Two fundamental types of negotiations
4
Distributive negotiations Integrative negotiations
►Opposing preferences (my
gain is your loss)
►Goal: Maximizing one’s
individual gain
►“Slicing the pie”
►Common interests exist (e.g.,
both want the same)
►Goal: Maximizing individual
andjoint gain
►“Increasing the pie”

5. © Michael Schaerer
Today’s class
5
1.Exercise (“Holy Crab”)
2.Introduction to Integrative Negotiations
▪Debrief “Holy Crab”
▪Pitfalls in Integrative Negotiations
3.Integrative Strategies
4.Next Class

6. © Michael Schaerer
Exercise “Holy Crab” (G1)
6
Pick up and read
role materials
Find your partner
and location
Write down your
“BRA” values
Preparation
(10 minutes)
Negotiate
(30 minutes)
Class continues
(in 55minutes)
1
2
Negotiate
Enter your results
in Google Sheet:
bit.ly/47EwVjy
4
5
Take 15 min break
Be back in class
6
3
7

7. © Michael Schaerer
Exercise “Holy Crab” (G2)
7
Pick up and read
role materials
Find your partner
and location
Write down your
“BRA” values
Preparation
(10 minutes)
Negotiate
(30 minutes)
Class continues
(in 55minutes)
1
2
Negotiate
Enter your results
in Google Sheet:
bit.ly/494xzbk
4
5
Take 15 min break
Be back in class
6
3
7

8. © Michael Schaerer
Exercise “Holy Crab” (G3)
8
Pick up and read
role materials
Find your partner
and location
Write down your
“BRA” values
Preparation
(10 minutes)
Negotiate
(30 minutes)
Class continues
(in 55minutes)
1
2
Negotiate
Enter your results
in Google Sheet:
bit.ly/3Oc6UkH
4
5
Take 15min break
Be back in class
6
3
7

9. © Michael Schaerer
Your negotiation partner (G1)
9

10. © Michael Schaerer
Your negotiation partner (G2)
10

11. © Michael Schaerer
Your negotiation partner (G3)
11

12. © Michael Schaerer
Today’s class
12
1.Exercise (“Holy Crab”)
2.Introduction to Integrative Negotiations
▪Debrief “Holy Crab”
▪Pitfalls in Integrative Negotiations
3.Integrative Strategies
4.Next Class

13. © Michael Schaerer
Exercise “xxx”
13
Debriefing
questions
What were your experiences?

14. © Michael Schaerer
Exercise “xxx”
14
Debriefing
questions
How was the negotiation similar toor different
from the previous negotiations?

15. © Michael Schaerer
Exercise “xxx”
15
Debriefing
questions
What did you learn about the other party?

16. © Michael Schaerer
Exercise “xxx”
16
Debriefing
questions
What was the maximumthe VP Operations
was willing to pay?
What was the minimumthe Restaurant Owner
was willing to accept?

17. © Michael Schaerer
Role information (1/2)
17
VP Operations (buyer) Restaurant Owner (seller)
BATNA
Reservation
price
►$200k to build new
►Lose clients
►$140k offer
►Dream killed
►Spouse has breakdown
$160k $190k

18. © Michael Schaerer
Bargaining zone
18
$160k $170k $180k $190k $200k$150k
VP (buyer)
Reservation Price:
$160,000
Owner (seller)
Reservation Price:
$190,000
Negative
bargaining
zone
How to overcome a negative bargaining zone?

19. © Michael Schaerer
Interests are key!
19

20. © Michael Schaerer
In negotiations, it is important to distinguish between positions
and interests
20
Positions
Interests
What you ask for
Why you ask for it

21. © Michael Schaerer
What are the interests of the Restaurant Owner?
21
Trip of a lifetime!
$60k boat
$20k ready to sail
$50k living expenses 2 years
$20k maintenance
$40k on return to find a job
---------------------------------------------
$190k in total
---------------------------------------------

22. © Michael Schaerer
What are the interests of the VP Operations?
22
►Restaurant with good location
►Retain customer base
►Managersto support expansion

23. © Michael Schaerer
Role information (2/2)
23
VP Operations (buyer) Restaurant Owner (seller)
BATNA
Reservation
price
Interests
►$200k to build new
►Lose clients
►$140k offer
►Dream killed
►Spouse has breakdown
$160k
►Rest. with good location
& little competition
►Good managers
►Good life of rest. owner
►Sail the world
►Security upon return (job)
$190k
Reservation
price
Interests

24. © Michael Schaerer
Only interests can bridge the deal
24
$160k $170k $180k $190k $200k$150k
VP (buyer)
Reservation Price:
$160,000
Owner (seller)
Reservation Price:
$190,000
What were your deals?

25. © Michael Schaerer
Your deals (G1)
25

26. © Michael Schaerer
Your deals (G2)
26

27. © Michael Schaerer
Your deals (G3)
27

28. © Michael Schaerer
Potential solutions
28
$160k $170k $180k $190k $200k$150k
VP (buyer)
Reservation Price:
$160,000
Owner (seller)
Reservation Price:
$190,000
Why do impasses still occur?
▪Job guarantee
▪Line of credit
▪Boat sponsoring

29. © Michael Schaerer
Why do we fail to realize integrative potential?
29
►Perception that the other
party’s interest are
completely opposed to one’s
own interests
►Believed by most (68%)
negotiators
Fixed pie bias Emotions and Escalation
►Letting visceral influences
take over, which often results
in further commitments to
failing courses of action
(Thompson & Hastie, 1990)
…leading to a lack of communication and
information sharing!

30. © Michael Schaerer
Today’s class
30
1.Exercise (“Holy Crab”)
2.Introduction to Integrative Negotiations
▪Debrief “Holy Crab”
▪Pitfalls in Integrative Negotiations
3.Integrative Strategies
4.Next Class

31. © Michael Schaerer
Strategies to help you create value
31
1 Delay first offers

32. © Michael Schaerer
Strategy 1: In integrative negotiations, make latefirst offers
32
►Waiting to make a first offer
facilitates the discovery of
creative agreements
►Reduces early focus on
positions and leaves flexibility
to discuss interests first
►Allows for greater
information exchange
between parties
Late first offers
Offer condition
0
0.5
1
1.5
2
2.5
3
No
instructions
Early first
offer (within
first minute)
Late first
offer (after
15 mins)
Interests of other party met
(1
-
7 scale)
Effect on deal making
Sinaceuret al. (2013)
Draw an E on your forehead with the index finger
of your dominant hand…

33. © Michael Schaerer
Which perspective did you take?
33
Galinsky et al. (2006)

34. © Michael Schaerer
Strategies to help you create value
34
1
2 Take their perspective
Delay first offers

35. © Michael Schaerer
Strategy 2: Take the other side’s perspective
35
Perspective taking: the act of perceiving a situation from another
individual’s point of view.
Experiment using similar task
►Control: no instructions
►Empathy: “Try to understand
what the other party is
feeling…”
►Perspective taking: “Try to
understand what the other
party is thinking…”
Galinsky et al. (2008)

36. © Michael Schaerer
Strategies to help you create value
36
1
2
3
Take their perspective
Build trust
Delay first offers

37. © Michael Schaerer
Strategy 3a: Being likeable and vulnerable
37
Being likeable
►Focus on things that you have
in common (i.e., similarities)
Being vulnerable
►Reveal small pieces of
information and see whether
counterpart reciprocates
►Neverreveal your reservation
price!
Develop a trust mindset Effect on deal finding
Huang & Murnighan(2009)
0
5
10
15
20
25
30
35
40
% integrative deals
Distrust
Mindset
Trust
Mindset

38. © Michael Schaerer
Building trust in politics: National Security Advisor Condoleezza
Rice meets her Russian counterpart Sergei Ivanov (2:45)
38

39. © Michael Schaerer
Strategy 3b: Mimicry
39
Mimic your opponent
►Negotiators mimicking
the mannerisms of
their opponents
created more value.
►They also claimed
most of that value.
(Madduxet al., 2008; Swaab,
Maddux& Sinaceur, 2012)

40. © Michael Schaerer
Negotiators who mimicked their counterpart were more likely to
reach a deal
40
(Madduxet al., 2008)

41. © Michael Schaerer
Consider status differences and don’t overdo it!
41

42. © Michael Schaerer
Strategy 3c: Handshakes signal cooperative intent
42
(Schroeder et al., 2019)

43. © Michael Schaerer
Strategies to help you create value
43
1
2
3
Take their perspective
Build trust
Delay first offers
4 Ask questions

44. © Michael Schaerer
Strategy 4: Ask questions
44
What should I ask about? E.g.,
►Why is this important to you?
►How would this help you?
►Are there other options to achieve this?
Benefits of asking questions
►Reveals priorities
►Increases liking (Huang et al., 2017)

45. © Michael Schaerer
Asking questions in practice: Example from former student
Negotiation conducted as part of Real-World Negotiation Assignment
45
Haircut at “AfterXroom” @ SMU
►Student decided to get a haircut
►He noticed that most customers are 35+
years old and asked the stylist (Jeff) why
►Jeff mentioned that they have difficulties
attracting SMU students because their
prices are quite steep ($30-50 range)
►Student offered to promote salon to friends
and on Instagram…

46. © Michael Schaerer
Asking questions in practice: Example from former student
Negotiation conducted as part of Real-World Negotiation Assignment
46
AfterXroommade him “Salon Ambassador”
►For 2 months with potential for renewal
►Benefits
❑$15 discount on initial haircut
❑Free haircuts in the future (depending
on # of customers who quote
ambassador name)
❑10% discount + free hair wash for
customers who quote ambassador
name

47. © Michael Schaerer
Recap: Integrative negotiations
47
►Integrative negotiations are different!
▪Positions do not always overlap (negative bargaining zone)
▪Interests are more important (look below the surface)
►Roadblocks to integrative deals
▪Fixed pie bias, emotions, and escalation of commitment
►Strategies that work in integrative negotiations
▪Late first offers
▪Perspective taking
▪Building trust (e.g., being vulnerable, mimicry, handshakes)
▪Asking questions

48. © Michael Schaerer
Today’s class
48
1.Exercise (“Holy Crab”)
2.Introduction to Integrative Negotiations
▪Debrief “Holy Crab”
▪Pitfalls in Integrative Negotiations
3.Integrative Strategies
4.Next Class

49. © Michael Schaerer
Next session…
49
►Provide feedback to your negotiation partner
▪3thingsthey did well & 2 things they could improve (be constructive!)
▪If possible, provideideas on how your partner couldimprove
▪Email to partner andCc’ [email protected] within 72 hours
►Research / come up withone additional integrativestrategy
▪Give it a name, explain how it works, and why it would be effective,
highlight any potential risks or when not to use it
▪Use templateattached to summary email
▪Email to [email protected] before next class
►Read “Investigative Negotiation” (available on eLearn)

50. Thank you!