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We warmed up with a reflection exercise about what we've learned so far, did lots of theory then worked through a competitive negotiation exercise - meep!
What do I remember from last week? Meet them at their level, be honest, address issues, not positions.
Have I had an opportunity to put it into practice and how well did I do? Erm, not for public posting publicly, I put it into practice in an unexpected part of my life and so far it seems to be going fairly well.
R. talked about needing to start on the big picture and go to details later, she said it was very obvious at her work this week - people going to detail too fast and getting side-tracked.
Theory!
Competitiveness in Negotiation has four elements: the outcome, the issue, the process and a desire to do well. Understand that if you go in assuming it's going to be a 'win/lose' dynamic, it probably will be.
A typical competitive situation has a bargaining range (starting points) and a settlement range (walkaway points) - this makes so much more sense as a chart which I have tried to represent below.
Walkaway Opening Offer
Point Target SELLER
$----------------|--------------||--------X--------------------------------------Y-------||--------------|---------------$
BUYER Target Walkway
Opening Offer Point
Important to recognise when an outcome is not possible or too hard and walk away (ideally as friends). For maximum advantage try to put your final offer just inside the other person's walking away point. This is the hard-nosed competitive model where we assume we have to get as much as possible and give away as little as possible.
Logic of competitive negotiation: go slowly and listen very carefully.
Preparation: (formulate questions and speculate on the answers)
Information
Break to do prep for BondForm Make-over Contract exercise, I had one fantastic partner V. and we went through the brief as thoroughly as we could but I was feeling like I wanted more. Then we regrouped and R. did everything he could to wind us up - practicing competitive negotiation when we're a bit cooperation oriented.
The brief was we (QL) had a contract for 12 months to deliver X items and once we 'won' the contract it got squeezed down to 9 months, we could make the deadline and still make money but it was going to be high risk. Another company (WA) bid on the same contract and offered (without knowing about our time squeeze) to make widgets for us - we want them to if they can do it in 9 months and a price that means we still make money. They know we must have lower production costs then them to have won the bid and assume we must be making a substantial profit. Our maths says they can produce 100 units for 12.3M (in 9 months) and we can produce for 13.9M (in 9 months). Also, we don't have the technical expertise that WA has, they know what they are doing.
Possible outcomes:
Outcomes:
Interesting factors: I never felt like we had all the information, my trust levels were LOW, their attitude irritated me and I felt stubborn and pushy as a result. We would have agreed to higher if they'd been softer in their approach and I think that was a reflection of how uncomfortable we all felt.
Trivia: increase in hiring female car salespeople - implications for sales dynamics? More conceding on the part of male purchasers? Female do a soft approach and use persuasion to get people to accept their price?
End game:
How can I be more effective as a competitive negotiator? I think I need to know EVERYTHING beforehand and not get irritated.
Lunch: Parking ticket - I think my ticket was upside down. Darn, oh well, will contest and if that fails it was only $45
Churchill: "In the end a curious and characteristic solution was reached. the Admiralty had demanded six, the economists offered four; and we finally compromised on eight."
Discussed assignment: negotiation assignment is about interviewing someone and to tap into their experience and compare that to the books then look at how i am going to do things as a result. Choose something with some sort of practical role - doesn't HAVE to be! Literature review - part A versus part B marking guide? Doesn't want us to regurgitate book knowledge, wants us to learn something. Very vague show that you've done hard work and learnt something. Am I suggesting something that is going to work? Go on the journey and tell me about it!
Phases in Negotiation (broad theories):
Discussion about deadlocks (a period of no evident progress, a stage on the way to agreement) and how they can be an opportunity: take time out to 'think process'; summarise and restate your main points, consider your alternatives, be clear on your objective, reconsider their perspective, talk about underlying interests, keep exploring their offer for benefits.
Exercise!
Make up metaphors for negotiation process in teams with HUGE pieces of paper and pretty coloured pens. My team did the Avon Descent. Was hard working with the team, we had different orientations and we viewed the metaphor differently. Frustration! Presentations by teams! I got nominated to present for our team - r. Said good job and that the final stage really showed how the major issues are resolved but little things keep cropping up.
Good to have own concept to map process to in own head. Having a good script to work to helps!
Break! 15mins.
Discussion about iron ore (handouts from last week) negotiation. Collectivist cultures have an in-group and by definition has an out-group - you're ok so long as you are in-group. How do you do this? Assumption is that if you're rich and young in China that you are corrupt. Background? Competitors doing it as well? Pressure to do it as well? Tiss not a small company but running two books. Just out the back of Kalgoorlie :p What set the scene? Price was gong up and up and Rio were in a hole and needed Chinalco, then prices up so deal off - very public. Asian mindset (in R.'s mind) is longer term. Inherently honorable people who got caught out?
Lesson is that what we might regard as legitimate information gathering is spying to someone else. Exchange of documents tipped it over? Treason thing started it and bribery was a byproduct.
Culture!
Some caveats
Negotiating traits - your style, or comfort zone (many variations across culture)
Cultural awareness: some dimensions of cultural differences
Cultural awareness: negotiation process insights some responses to problems in negotiation
READ the Brett and Gelfand, 2006 article.
Reflection
What do I remember from last week? Meet them at their level, be honest, address issues, not positions.
Have I had an opportunity to put it into practice and how well did I do? Erm, not for public posting publicly, I put it into practice in an unexpected part of my life and so far it seems to be going fairly well.
R. talked about needing to start on the big picture and go to details later, she said it was very obvious at her work this week - people going to detail too fast and getting side-tracked.
Theory!
Competitiveness in Negotiation has four elements: the outcome, the issue, the process and a desire to do well. Understand that if you go in assuming it's going to be a 'win/lose' dynamic, it probably will be.
A typical competitive situation has a bargaining range (starting points) and a settlement range (walkaway points) - this makes so much more sense as a chart which I have tried to represent below.
Walkaway Opening Offer
Point Target SELLER
$----------------|--------------||--------X--------------------------------------Y-------||--------------|---------------$
BUYER Target Walkway
Opening Offer Point
Important to recognise when an outcome is not possible or too hard and walk away (ideally as friends). For maximum advantage try to put your final offer just inside the other person's walking away point. This is the hard-nosed competitive model where we assume we have to get as much as possible and give away as little as possible.
Logic of competitive negotiation: go slowly and listen very carefully.
Preparation: (formulate questions and speculate on the answers)
Information
- What do we know about them which will help us estimate their resistance point?
- What information do we still need to get during the negotiation?
- What questions are we going to ask to find out?
- What are we prepared to reveal?
- How are we going to resist their attempts to find out more about our resistance point.
- How are we going to convince them of our commitment offer?
- How will we maintain our commitment?
- What are we going to do if they make a commitment offer?
- time pressure
- presence of a constituency (we're more competitive when negotiating for someone else)
- the importance of the issue
- the extremity of the other's position
- a 'win' orientation (which means the other side has to 'lose')
- ingratiation
- gamesmanship (making people wait etc.)
- guilt
- persuasive argument (this is effective btw)
- threats, positive and negative (works, but works better late in the negotiation)
- commitment (when you commit you close down)
- extreme claims followed by slow, small concessions
- commitment tactics
- take it or leave it offers
- inviting unreciprocated offers
- flinch
- personal insults and feather reuffling
- bluffing, puffing and lyging
- threats and warnings
- belittling the other party's alternatives
- good cop, bad cop (can sometimes dissolve by letting it happen then naming it - 'oh so you're the bad cop' - or if you're good at it, wind up the bad cop)
Break to do prep for BondForm Make-over Contract exercise, I had one fantastic partner V. and we went through the brief as thoroughly as we could but I was feeling like I wanted more. Then we regrouped and R. did everything he could to wind us up - practicing competitive negotiation when we're a bit cooperation oriented.
The brief was we (QL) had a contract for 12 months to deliver X items and once we 'won' the contract it got squeezed down to 9 months, we could make the deadline and still make money but it was going to be high risk. Another company (WA) bid on the same contract and offered (without knowing about our time squeeze) to make widgets for us - we want them to if they can do it in 9 months and a price that means we still make money. They know we must have lower production costs then them to have won the bid and assume we must be making a substantial profit. Our maths says they can produce 100 units for 12.3M (in 9 months) and we can produce for 13.9M (in 9 months). Also, we don't have the technical expertise that WA has, they know what they are doing.
Possible outcomes:
- Successful, firm commitment - concessions made by other party
- Two committed positions - deadlick
- Two committed positions - mutual concessions
- Success, firm commitment by other party - concessions by self
Outcomes:
| Team | Units | Price (million) | Time (months) | Conditions |
| 1 | 100 | 13 | 9 | Penalties for late delivery |
| 2 | 100 | 14.5 | 8.5 | |
| 3 (us) | 100 | 13 | 9 | Penalties for late delivery & technical services for 3 months |
| 4 | 100 | 14.3 | 9 | Penalties for late delivery |
| 5 | 100 | 14.4 | 4? | Penalties for late delivery |
| 6 | 100 | 12.55 | 9 | Penalties for late delivery |
Interesting factors: I never felt like we had all the information, my trust levels were LOW, their attitude irritated me and I felt stubborn and pushy as a result. We would have agreed to higher if they'd been softer in their approach and I think that was a reflection of how uncomfortable we all felt.
Trivia: increase in hiring female car salespeople - implications for sales dynamics? More conceding on the part of male purchasers? Female do a soft approach and use persuasion to get people to accept their price?
End game:
- Clearly state your final position - making it clear that it is final
- Check your BATNA
- Emphasis the benefits to both parties of achieving agreement
- Allow the other party whatever rationale they chose
- Allow the other party some behavioural scope
- Apply pressure, but steadily (not hot then cold)
- Leave the other party with the final choice, of accepting your offer or of walking away.
- The end game should only be at the end of the negotiation, not all of it!
- Importance of information exchange (gathering) prior to commitment
- Importance of BATNAs (yours and theirs)
- The use of framing to encourage agreements
- Need to manage process, despite competitiveness.
How can I be more effective as a competitive negotiator? I think I need to know EVERYTHING beforehand and not get irritated.
Lunch: Parking ticket - I think my ticket was upside down. Darn, oh well, will contest and if that fails it was only $45
Churchill: "In the end a curious and characteristic solution was reached. the Admiralty had demanded six, the economists offered four; and we finally compromised on eight."
Discussed assignment: negotiation assignment is about interviewing someone and to tap into their experience and compare that to the books then look at how i am going to do things as a result. Choose something with some sort of practical role - doesn't HAVE to be! Literature review - part A versus part B marking guide? Doesn't want us to regurgitate book knowledge, wants us to learn something. Very vague show that you've done hard work and learnt something. Am I suggesting something that is going to work? Go on the journey and tell me about it!
Phases in Negotiation (broad theories):
- Douglas - three broad phases; establishing bargaining range, reconnoitering, precipitating decisions making crisis
- Morley and Stephenson - distributive bargaining, problem solving, decision making
- Fisher, Ury and Parron - three different broad phases (Getting to Yes)
- Putnam's notion of interdependence
- Brett's research on breaking adverse reciprocity
- Watkin's order in the chaos
- Prepare by asking questions
- Prepare the other side's position too
- Don't assume anything
- Don't ignore the other side
- Exploration phase(s)
- Purpose: to look for options, for ways to resolve the differences
- Main activity: indicating and testing flexibility
- Specific behaviours: clarifying, reflecting, summarising
- Don't: reject any suggestion totally
- Exchange Phase(s)
- Purpose: to reach a final decision to conclude the negotiation
- Main activity: concession making
- Specific behaviours: making clear statements, emphasise the benefits of agreement, checking
- Don't: agree to anything you can or will not do
Discussion about deadlocks (a period of no evident progress, a stage on the way to agreement) and how they can be an opportunity: take time out to 'think process'; summarise and restate your main points, consider your alternatives, be clear on your objective, reconsider their perspective, talk about underlying interests, keep exploring their offer for benefits.
Exercise!
Make up metaphors for negotiation process in teams with HUGE pieces of paper and pretty coloured pens. My team did the Avon Descent. Was hard working with the team, we had different orientations and we viewed the metaphor differently. Frustration! Presentations by teams! I got nominated to present for our team - r. Said good job and that the final stage really showed how the major issues are resolved but little things keep cropping up.
Good to have own concept to map process to in own head. Having a good script to work to helps!
Break! 15mins.
Discussion about iron ore (handouts from last week) negotiation. Collectivist cultures have an in-group and by definition has an out-group - you're ok so long as you are in-group. How do you do this? Assumption is that if you're rich and young in China that you are corrupt. Background? Competitors doing it as well? Pressure to do it as well? Tiss not a small company but running two books. Just out the back of Kalgoorlie :p What set the scene? Price was gong up and up and Rio were in a hole and needed Chinalco, then prices up so deal off - very public. Asian mindset (in R.'s mind) is longer term. Inherently honorable people who got caught out?
Lesson is that what we might regard as legitimate information gathering is spying to someone else. Exchange of documents tipped it over? Treason thing started it and bribery was a byproduct.
Culture!
Some caveats
- Sebenius (2002) - stereotyping, over attribution, skewed perceptions, compliance
- Salacuse (1998) - occupational effect (and other effects?)
- Westocentricity - NB from a Western perspective, methodology is Western
- Our own cultural impact - we do things!
Negotiating traits - your style, or comfort zone (many variations across culture)
- Goal
- Attitude
- Personal style
- Communication
- Time sensitivity
- Emotionalism
- Agreement form
- Agreement building
- Team organization
- Risk taking
Cultural awareness: some dimensions of cultural differences
Cultural awareness: negotiation process insights some responses to problems in negotiation
READ the Brett and Gelfand, 2006 article.
- Motivation: how should we evaluate the outcome of the negotiation?
- Communication: how do I get the information I need about the other party's interests and priorities without giving up too much information about my own interests, thereby making myself vulnerable to exploitation?
- Persuasion: how do I get the other party to make the concessions necessary to reach my desired endpoint?
- Attribution: why did this event occur?
- Confrontation of conflict: how do we manage conflict?
- High context: we like your package overall and would like to accept it. Some other companies have put in offers to us which place a higher value on our product. We'd like to discuss that further. Means "raise your offer"
- Low context: we had expected your offer to be around $4 million not $3. May not be true but at least it's clear
Reflection
- Competitive negotiation is hard!
- Be very clear on what you want, don't give up any advantage, stick to your position.
- Easyish to slip in extra concessions if other team is anxious.
- Don't piss off the other team, unless they obviously don't care about pissing you off.
- Might be culture, might just be them
- Respect is key