Building Blocks of Negotiation
What Is Negotiation? p Leigh Thompson: “An interpersonal decisionmaking process necessary whenever we cannot achieve our objectives single-handedly” n p Ex. Buying a car; buying a house; things at work Most people are not great negotiators b/c of: n Faulty feedback p p n n Confirmation bias Ego-centrism Satisficing—settling for less Self-Reinforcing Incompetence
Myths of Negotiation p 1. Negotiations are fixed-sum. p 2. You need to be either tough or soft. p 3. Good negotiators are born. p 4. Experience is a great teacher. p 5. Good negotiators take risks. p 6. Good negotiators rely on intuition.
Preparation Is the Key p Situation & parties p Issues & bargaining mix p Interests p Goals p Bids & tactics p Limits & alternatives
BATNA p Best Alternative to a Negotiated Agreement (Fisher & Ury, 1981) p Good for: n n n Knowing when to walk away Testing proposals Accepting things that are superior to your BATNA and rejecting things that are inferior to your BATNA
BATNA p Realistic, not idealistic p Not static p Stick to it
Example: Car Buying How do you strengthen your BATNA? What makes a dealer’s BATNA stronger?
Car Buying Your AP $15, 000 Dealer’s RP $18, 000 Your RP $20, 000 Bargaining Zone $19, 000=compromise Dealer’s AP $22, 000
Example: Job Hunting p Your BATNA n p How is it strengthened? Recruiter’s BATNA n n How is it weakened? How is it strengthened?
Reservation Point p Lowest point you can go n n p Ex: If BP offered you a job, what would Exxon. Mobile have to offer to match it? Includes any relevant issues Determines when you should walk away
Reservation Point – Job Hunting Exxon’s Offer? Shell salary offer $46, 000 BP salary offer $50, 000
Target Point p Your ideal goal Your RP BP $50, 000 Exxon’s TP Your TP $52, 000 $55, 000 Exon’s RP $57, 000
Bargaining Range Exxon’s Bargaining Range Your RP BP $50, 000 Exxon’s TP Your TP Exon’s RP $52, 000 $55, 000 $57, 000
Bargaining Zone p The range of negotiated outcomes that are acceptable to all parties Exon’s Bargaining Range Your RP BP $50, 000 Exxon’s TP Your TP Exon’s RP $52, 000 $55, 000 $57, 000
Negative Bargaining Zone Exxon’s Bargaining Range Exxon’s TP $40, 000 Your Bargaining Range Exxon’s RP Your TP $45, 000 $50, 000 $57, 000
So What? p BATNA & Reservation Point n n n p Target Point n p Something to shoot for Bargaining Range n p Judge agreements Improve agreements No raw deals Determines flexibility in strategy & concessions Bargaining Zone n Know if agreement is possible
Anchor Point p Reference point n Adjusted as appropriate p Can be arbitrary p Set your anchor first!…sometimes n (Make the 1 st offer w/ a good anchor)
The big idea Preparation is the key. No preparation = no success.
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