Negotiations

Leigh Thomson

Brief Overview

“Never negotiate out of fear, but never fear to negotiate”- John F. Kennedy

Page 1 Pradeep Kumar Vasdev,
Edag Technologies Pvt Ltd

Preparation is the key for any successful negotiation

Crucial steps of Negotiations
Identify your key goals
Brainstorm your options
Plan your opening move

“Goal must clearly state your interests and answer the why question.“

Fundamental rules of Brainstorming
List all options, however outlandish they may appear
Strive for quantity
Reserve judgement and evaluation until later
Mix, match and combine different options

Opening move must clearly articulate the goal ( ideal situation ) and suggest how to reach it


5 P‘s- Prior Preparation prevents poor performance

Preparation Pattern X
Rehearsing your demands
Pumping yourself up
Making a personal pledge to yourself to act tough
Figuring out how to throw off the other party -make them feel uncomfortable
Rehearsing phrases like “this is my final offer”, ”my bottom line “ , “ non negotiable “ etc
Framing your opening offer as a demand

Preparation Pattern Y
Listing all issues under consideration ( e.g . Payments , terms and conditions , volume , distribution
etc )
Arranging those issues in order of importance or priority to you
For each issue , brainstorming all the alternatives ( from one extreme to the other . e.g 0 % advance
payment to full down payment )
Brainstorming issues the other party might bring up
Identify your most desirable set of terms for each of the issues
Identify and prioritize alternate course of action
Identify the other party’s alternate course of action
Preparing an opening offer as a way of starting discussions

If you can‘t prepare , go for guided preparation

Steps of Guided preparation
1. List all the issues to be negotiated in the first column
2. For each of the issues listed , in the second column , indicate its relative importance to you , your most
desired terms and your underlying interests
3. For all the issues , in the third column make your guess about the other party‘s interests, ranking and
most desired terms


Example

List of issues ( General )
Scope of work of the project
• Volume
• BOM
• List of preferred makes ( if any )
• Level of import content ( if any )
• Level of Automation
• Soft part
• Expatriate support ( if any )
• On Site support
• Post SOP support
• Customer inputs ( in terms of data , components , on site material , logistics and other support , battery
limits of utilities etc )

Time line of the project ( Clear definition of the various milestones )
Price
Payment terms ( Advance , after design approval etc )


Making the opening move

Points to remember opening offer
Like the game of chess , person making the first move is more likely to win
Do not make opening move if the other party knows more about you than you do about the other party
Do not make outrageous offer
No one is going to accept your first offer (gleefully and immediately )–so making concession is inevitable
Try to make an offer as close to other party’s barely acceptable terms
Always write down your opening offer
If the other party has made an opening offer , before reacting to that , make sure that you have stated your opening offer
and that all terms can be discussed.
Its possible to be competitive and cooperative at the same time. Always try to create value ( cooperate ) and claim value
( compete )
Do not walk away from the table even if you have made a take it or leave it offer – never close the doors of discussions
Always note and remember your walk away point and refer to it before accepting a proposal.

Myths about Negotiations
Every industry is unique
Business people care only about money- “Maximise utility“
Always maintain a poker face- never reveal anything
Never make the first offer

If you have not prepared an opening offer , you should not be at the bargaining table
Always remember tough guys finish last

Best alternative to negotiated agreement (BATNA )

Points to rememeber
Always create/define one BATNA before going into negotiations
Do make attempts to constantly improve your BATNA
Always keep playing the field until the deal is signed, sealed and delivered.
Do not reveal your BATNA, except under special conditions
Do not lie about your BATNA
Signal to the other party that you have a BATNA without revealing it in case the party presses for it.
Do as much research as possible on the other party’s BATNA
Do not engage in bidding war
After you identify your BATNA , convert it to a reservation point.
Your BATNA tells you when to walk , not when to sign .
Do set your target price (aspiration point )
Do not withhold your aspiration until the other party has spoken


Plan your Concessions

Points to rememeber
No one is going to accept your first offer -so making concession is inevitable
Plan your concessions in advance
Do not make concessions too quickly before you explore interests
Do not make too large concessions
Do not make concession while other party remain intransigent ( static )
Make concessions to only issues which are less important to you
Negotiate only with people who have the authority to make deals without consultation with
superiors.
If the negotiation terms have not been written down take the initiative of writing down and
circulating them to the parties involved
A win– win negotiation is the one is a negotiated outcome in which parties have reached an
agreement that cannot be mutually improved upon


The truth about negotiations

Type of negotiations
Fixed sum/Single issue
Variable Sum
Prevent making any negotiation from becoming a fixed sum negotiation
• Add an issue from outside the current negotiation’s scope
• Split the issue (s ) at stake into multiple issues ( “ What if I paid with credit ?” )
By unbundling single issue negotiations into multi-issue negotiations , you create more opportunities for
win-win trade offs.
Win –Win questions satisfy one or more of the triple “ I ” principles- interests, incentives, and inquiry
Reveal your interests
Negotiate issues simultaneously , not sequentially
• It prevents negotiators from being completely positional
• It forces them to prioritize their values and preferences across several issues
• It may spark a brilliant idea of considering distinct packages or combinations of agreement terms
A negotiator needs to be firm about the issue most important to him but flexible on things that are not
as important
Make multiple offers of equivalent value simultaneously ( shirt and pant worth Rs 1000 / t shirt and
jeans worth $ 22 )
Logrolling is the art and science of being firm but flexible- I support your bill in return of
reciprocal support


The truth about negotiations

Type of negotiations
Fixed sum/Single issue
Variable Sum
Prevent making any negotiation from becoming a fixed sum negotiation
• Add an issue from outside the current negotiation’s scope
• Split the issue (s ) at stake into multiple issues ( “ What if I paid with credit ?” )

By unbundling single issue negotiations into multi-issue negotiations , you create more opportunities for win-win trade offs.
Win –Win questions satisfy one or more of the triple “ I ” principles- interests, incentives, and inquiry
Reveal your interests
Negotiate issues simultaneously , not sequentially
• It prevents negotiators from being completely positional
• It forces them to prioritize their values and preferences across several issues
• It may spark a brilliant idea of considering distinct packages or combinations of agreement terms

A negotiator needs to be firm about the issue most important to him but flexible on things that are not as important
Make multiple offers of equivalent value simultaneously ( shirt and pant worth Rs 1000 / t shirt and jeans worth $ 22
)

Logrolling is the art and science of being firm but flexible- I support your bill in return of reciprocal support


Negotiation Strategy

Points to rememeber
A postsettlement settlement represents a mutual improvement over a given deal that both parties
currently find acceptable
Contingent contracts are if – then agreements that specific actions will result in specific outcomes (
if you finish the commissioning by Dec’-09 , you get 10 lakhs extra as bonus )
When there is trust among negotiators , you want the pie to be divided equally and when there is
mistrust you want to your pie to be as big as possible which is generally the case
We always want to extract the maximum potential value of a deal
Win Win negotiation can be used for solely self interest, but it is also the best strategy in
completetly altruistic negotiations.
Unenlightened negotiator clings to positions and demands as if they were rafts in a stormy ocean
Enlightened negotiator realizes that the other party is his identical twin- someone who is every bit
as knowledgeable , smart and motivated as he is , thus works for win win situation all the time
The reciprocity principle is quite simply the tendency for people to treat others the way they are
treated –aggression invites aggression, cooperative and constructive approach invite the same
from other party
Assume that counterparty is every bit as smart and motivated as you are .
Follow reinforcement principle – encourage and appreciate the desired behavior and ignore or even
punish the undesired behavior
The similarity principle works-there is always an urge to find a point of similarity in others .



Points to rememeber
Anchoring effect refers to the fact that people tend to make judgements based upon an initial
starting point and then adjust upward or downward but fail to make sufficiently large adjustments .
Anchors have more staying power when they are supplemented with facts , data and logic. – The
opening offer often acts as an anchor.
Thus it is much more powerful to justify your opening offer with relevant information and facts than
simply state the offer.
When it comes to choosing among attractive course of action, most people would rather have a
bird in the hand than go beating around the bush ( risk aversion )
When it comes to choosing among un attractive course of action, people tend to take action which
is risk seeking ( i.e. either I loose both or none )
Indeed, almost any decision in our lives can be framed as a gain or a loss relative to something
While negotiating be careful of the temper tantrums- carefully orchestrated display of emotion
designed to evoke a response from you



Points to rememeber
Type of moves
Power move- Any statement that attempt to force another person to do something he would otherwise not do
( I have to escalate this issue to your seniors )
Rights move – are those that refer to the standards, norms, customs, rules, guidelines, legal rights or
precedents ( refer to my RFQ )
Interests- to get past the demands that party might have and focus on the underlying goals and interests.

Negotiations need to be trilingual .i.e . You need to be able to use interest , rights , power moves at
the appropriate time.
The main motive for using power is to move the party off an unreasonable position or stance .
But when you use power move you double the probability that the other party will use power with
you.


-We are not going to agree about the past but we might agree
about the future

Face Saving
Face is the value we put on our public image , reputation and status in negotiation
Saving face is a negotiators most sacred possession.
Face saving is important under the following situations
• When negotiations are conducted in a public setting
• When people are accountable to a group or a superior
• When people negotiate in teams
• When there are status differences between negotiators
• When negotiators have naturally thin skin

• In a buyer-seller negotiations fewer win win agreements are reached when the seller has a thin skin
( don’t respond well to direct criticism or get hurt easily )
• Face saving strategies if the other party has a thin skin
• Apologize for something
• Compliment the person
• Say you care about the relationship
• Talk about how you have learned important things as a result of this process
• Ask for feedback
• Point out concessions you have made
• Focus on the future not on the past


How to negotiate with a person you do not like

Three important things to keep in mind when dealing with difficult persons at the
negotiation table
Replace D ( dispositional ) statements with B ( behavioral ) statements
Label your feelings not people
Change your behavior not your feelings

What is type D statement ( It focus on the other party’s disposition )
Type D ( dispositional ) statement is characterized by the belief that a given person behaves the
way he does because of his personality or disposition
Type D statement locate the root cause of a persons behavior to that person’s fundamental
disposition rather than as a reaction to a situation he might be in
Type D statements are character assassination

Type D statement Type B statement
Jack is impossible to deal with I hate the fact that Jack is consistently late to meetings
You are annoying The way you are playing music is annoying me
You are bad Breaking DVD disks is very bad


How to negotiate with a person you do not like

Label your feelings , not people
Typical statement with no personal responsibility Reformulation of statements
You are making me mad I am feeling short tempered
She is too aggressive I feel resentful when I am given ultimatums
You are screwing up the deal I feel that it is unwise for me to make a deal
Your offer is ridiculous I am disappointed with the progress we are
making



Points to rememeber
When conflict actually exists and people perceive it , that is real conflict . When there is no actual
conflict but people believe there is , that is a case of false conflict .When conflict exist but people
fail to perceive it , that is latent conflict.
Select people who are triathletes in terms of having negotiation expertise, technical expertise
and interpersonal skills.
When a team negotiates against a lone negotiator claims about one third less than what the
team is able to claim


Think it over

Leadership is a matter of
Trustworthiness
Intelligence
Trustworthiness
Intelligence Humaneness
Humaneness
Leadership
Courage
Sternness
Sternness Courage

Factors affecting the outcome of any
war
Moral Influence
Leadership
Accustomed to conditions
Discpline
Skill
Training
Fair Performance Appraisal – Reward and
Punishment

5 P’s – “ Prior preparation prevents poor performance”


Negotiations

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