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Negotiation

Section 01: Negotiation

Fundamentals

Chapter 04: Negotiation:

Strategy and Planning

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 Goals

The first step in a negotiation strategy is to determine your

goals.
• Substantive, intangible, or procedural.
Goals affect negotiation in four direct ways.
• Wishes are not goals, especially in negotiation.
• A negotiator’s goals may be linked to the other party’s goals.
• There are limits to what realistic goals can be.
• Effective goals must be concrete, specific, and measurable.
Indirectly, short-term thinking affects our choice of strategy.
• We may lose sight of the relationship in favor of the outcome.

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 Strategy—The Plan to Achieve Your Goals

After negotiators articulate goals, they move to the second

element: selecting and developing a strategy.

Applied to negotiations, strategy refers to:

• The overall plan to accomplish one’s goals in a negotiation and the
action sequences that will lead to the accomplishment of those goals.

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 Strategy versus Tactics

A major difference between strategy and tactics is that of

scale, perspective, or immediacy.
• Tactics are short-term, adaptive moves designed to enact strategies.

• Tactics are subordinate to strategy.

The formulation of our own strategy is often guided by:

• Our expectations of the other.
• Past experiences with this other.
• Hunches and guesses.
• Even insignificant comments or nonverbal signals by the other party.

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 Figure 4.2: The Dual Concerns Model

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Source: Adapted from Walter B. Newsom, “The Dual Concerns Model,” The Academy of Management Executive (Briarcliff Manor, NY: Academy of
Management, 1989).

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 The Nonengagement Strategy: Avoidance

There are reasons not to negotiate.

• If you can meet your own needs, use an avoidance strategy.

• It may not be worth the time and effort.

• Attractive alternatives provide a reason to avoid negotiation.

A negotiator with strong alternatives has considerable power.

• They can choose to avoid negotiation.
Having a weak alternative may also lead to avoidance.
• Negotiators may accept poor outcomes when the alternative is poor.

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 Active Engagement Strategies

Competition is seen as distributive, a win–lose situation.

• Accommodation is as much a win–lose strategy as competition.

Each of the active engagement strategies have drawbacks.

• Distributive strategies distort the other side’s contributions, motives,
needs, and position.
• Integrative strategies, without regard to reciprocity, allow others to
manipulate and exploit the collaborator and take advantage.
• Accommodative strategies may generate a pattern of giving in to keep
the other happy or avoid a fight.

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 The Flow of Negotiations: Stages and Phases

One model relevant to integrative negotiation suggests seven

key steps to an ideal negotiation process.
• Preparation.
• Relationship building.
• Information gathering.
• Information using.
• Bidding.
• Closing the deal.
• Implementing the agreement.

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 The Planning Process
1. Define the negotiating
goal.
2. Define the major issues.
3. Assemble issues, rank
them, and define the mix.
4. Define the interests.
5. Know your BATNA.
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6. Know your limits.
7. Analyze the other’s goals,
issues, and limitations.
8. Set your own targets and
opening bids.
9. Assess the social context.
10. Present the issues.
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 Defining Goals and Major Issues

Goals can be substantive, psychological, or procedural.

• They can be tangible or intangible.
• They can have direct and indirect effects on strategy.

The number of issues may determine a negotiation approach.

• Single-issue negotiations may dictate distributive negotiations.
• Multiple issues encourage integrative ways to package those issues.
Multiple issues allow parties to “create value.”
• Whether to pursue a claiming-value or a creating-value strategy is the
“negotiator’s dilemma.”
Compile issues using analysis, previous experience,
research, and consultation.
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 Figure 4.4: How Issues Affect Choice between
Distributive and Integrative Strategy

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Sources: David Lax and James Sebenius, Manager as Negotiator (New York, NY: Simon & Schuster, 1986); Michael Watkins, Breakthrough Business
Negotiation: A Toolbox for Managers (New York, NY: John Wiley & Sons, Inc., 2002).

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 Issue Importance and the Bargaining Mix

Assemble all issues into a comprehensive list and combine

the lists from both sides to determine the bargaining mix.

Prioritize the issues in three steps.

• Determine which issues are most important and less important.
• Determine whether the issues are linked or separate.
• Be willing to use “carrots” and “sticks.”

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 Defining the Interests

After defining the issues, negotiators define the underlying

interests and needs.

Positions are what a negotiator wants.

• Interests are why they want them. Interests may
Interests fall into three groups. also be based
on the
• Substantive.
intangibles of
• Process-based. negotiation.
• Relationship-based.

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 Know Your BATNA and Limits

BATNAs are alternative agreements a negotiator could

achieve and still meet their needs.
• Alternatives are important in both distributive and integrative processes.
• The better the alternatives, the more power the negotiator has.

A resistance point is the place you should stop negotiations.

• A settlement beyond this point is not minimally acceptable.
Clear resistance points keep negotiators from agreeing to
deals they later realize were not very smart.

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 Analyze the Other’s Goals, Issues, and Resistance
Points

Gathering information about the other party is critical.

• Try to understand the other party’s approach and what they want.
Collect information during the opening stages.
• Try to understand whether the other party has the same goals as you.
• Get a sense of their issues and bargaining mix using business history,
financial data, and inventories—visit, or ask questions of others.
• Uncovering their interests and needs may require a meeting.
• Understanding the other’s limits and alternatives gives you information
on how far you can “push” them.

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 Set Your Targets and Opening Bids

Keep these principles in mind when setting your targets.

• Targets should be specific, difficult but achievable, and verifiable.
• Target setting requires proactive thinking about your own objectives.
• Consider how to package several issues and objectives.
• Understand trade-offs and throwaways.

An opening bid may be the best possible outcome, an ideal

solution, or something even better than achieved last time.
• Beware over confidence—do not set an opening that is so unrealistic
the other party gets angry or walks away before responding.

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 Assessing the Social Context of Negotiation

When people negotiate in a professional context, complexity

increases dramatically.
A “field analysis” assesses key parties.
Other context
• Who is, or should be, on your team or on your
issues include:
side of the field?
history of the
• Who is on the other side of the field? “game”
• Who is on the sidelines and can affect the play relationship and
of the game? what rules and
relationship
• Who is in the stands?
they desire in
• What is going on in the broader environment the future.
in which the negotiation takes place?

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 Presenting Issues: Substance and Process

Presenting and framing the issues.

• Consider how to present your case to the other negotiator, providing
facts and counterarguments to refute their anticipated arguments.

When planning and structuring, consider these elements.

• What agenda should we follow?
• Where should we negotiate?
• How should we begin?
• What is the time period of the negotiation?
• How will we keep track of what is agreed to?
• Have we created a mechanism for modifying the deal if necessary?

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 Some Cautionary Notes about Planning

There is a disconnect between the importance of preparation

and negotiator behavior.
• Most negotiators dislike planning in favor of “diving into the action.”
• Negotiators often do not follow the plans they create.
• Negotiators do not adjust their plan once they encounter the other’s
opening statements and offers.
While advance planning is essential, a well-prepared
negotiator adjusts their plan once the dialogue begins.

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