Introduction to negotiation management program

1. Course
on
nego*a*on
techniques
and
theory
IE
Business
School
Sessions
3
&
4
Enrique
Peña
Imma
Puig-­‐Simon

2. Concessions
IE
Business
School

3. 3
SESSIONS 3 and 4- Concessions. Interests and objectives. Planning and preparing.
• Label
your
concessions.
−Make
it
clear
that
you
are
making
a
concession
and
that
your
acBon
is
costly
for
you.
Concessions
(I)

4. 4
SESSIONS 3 and 4- Concessions. Interests and objectives. Planning and preparing.
• Avoid
making
unilateral
concessions.
−ParBes
widely
expect
and
understand
that
they
will
take
turns
making
concessions.
−There
is
a
norm
of
reciprocity.
But
define
what
does
it
mean:
“I
am
making
a
concession
with
the
understanding
that
you
will
reciprocate
with
concessions
of
similar
magnitude”.
Concessions
(II)

5. 5
SESSIONS 3 and 4- Concessions. Interests and objectives. Planning and preparing.
• Make
con*ngent
concessions.
−Tie
your
concessions
to
specific
acBons
by
the
other
party.
Concessions
(III)

6. 6
SESSIONS 3 and 4- Concessions. Interests and objectives. Planning and preparing.
• Be
comfortable
with
silence.
−Do
not
speak
when
you
should
not.
−Specially
aOer
you
have
made
an
offer
and
the
other
party
is
considering
it.
Concessions
(IV)

7. 7
SESSIONS 3 and 4- Concessions. Interests and objectives. Planning and preparing.
Concessions
(V)
• TIME:
This
paSern
means
that
the
intervals
between
the
successive
offers
become
shorter
and
shorter.
• SIZE:
The
rate
of
convergence
is
a
sign
for
the
other
party
that
the
limit
we
are
approaching
is
the
reserve
price.
The
sequence
of
offers
is
an
essen*al
strategic
instrument
in
the
claim
for
value.

8. 8
SESSIONS 3 and 4- Concessions. Interests and objectives. Planning and preparing.
The
Blue
Bananas
Case

9. Interest-­‐based
negoBaBons
IE
Business
School

10. 10
SESSIONS 3 and 4- Concessions. Interests and objectives. Planning and preparing.
• Mo*va*ons
that
guide
nego*ators:
needs,
wishes,
fears…
• E.g.
Being
happy,
improving
my
professional
career,
star<ng
a
new
business
line,
etc.
• Awareness
of
our
interests
enables
us
at
all
*mes:
• To
know
why
we
are
negoBaBng
• To
select
the
components
to
be
negoBated
and
value
them
correctly
in
relaBon
to
the
interests
• To
be
consistent
in
our
arguments
• This
is
a
strategic
analysis
of
each
party
which
normally
need
to
be
men6oned
at
the
nego6a6ng
table
Interests:
the
origin
of
the
negoBaBon

11. 11
SESSIONS 3 and 4- Concessions. Interests and objectives. Planning and preparing.
• Interests
become
real
through
objecBves
• A
wide
range
of
objecBves
can
be
considered
to
saBsfy
one
interest
• e.g.
Having
a
salary
of
more
than
€50k,
launching
3
new
products
next
year,
reducing
leverage
under
3.5x
debt/EBITDA,
etc.
• The
aim
is
a
strategic
analysis
that
does
not
normally
need
to
be
men6oned
at
the
nego6a6ng
table.
Interests
ObjecBves
ObjecBves

12. 12
SESSIONS 3 and 4- Concessions. Interests and objectives. Planning and preparing.
• Different
combinaBons
of
variables
once
the
negoBaBon
has
started
in
order
to
achieve
objecBves
OpBons
ObjecBves
OpBons

13. 13
SESSIONS 3 and 4- Concessions. Interests and objectives. Planning and preparing.
NegoBaBon
structure
and
levels
• Intangible
moBvaBons
• Interests
become
real
through
objecBves
–
seZng
specific
goals
• CombinaBons
of
variables
to
achieve
objecBves
• Outside
of
negoBaBon
range
-­‐>
ALTERNATIVES
-­‐>
Best
one
-­‐
BATNA
LEVEL
1:
INTERESTS
LEVEL
2:
OBJECTIVES
LEVEL
3:
OPTIONS
1
2 2
2
3 3 3
3
3

14. 14
SESSIONS 3 and 4- Concessions. Interests and objectives. Planning and preparing.
Interests
B
Interests
A
PosiBon
A
PosiBon
B
PosiBonal
vs.
Interest-­‐based
NegoBaBons
• PosiBons
A
and
B
are
too
far
away
for
a
mutually
beneficial
agreement
• Interests
A
and
B,
as
a
broader
concept,
allow
for
a
commonground
for
agreement
Zone
of
potenBal
agreement
• Unidimensional
vs.
MulBdimensional
• Focusing
on
posiBons
can
lead
to
sub-­‐opBmal
agreements

15. 15
SESSIONS 3 and 4- Concessions. Interests and objectives. Planning and preparing.
PosiBonal
vs.
Interest-­‐based NegoBaBons
• Differences
in
appreciaBon
and
valuaBon
of
the
interests
are
the
base
for
good
agreements
• Eg.
M&A
-­‐
Different
value
assigned
to
<me
and
price
• Most
situaBons
of
conflict
are
not
strictly
compeBBve
and
allow
obtaining
joint
benefits
Interest-­‐based
nego*a*ons
allow
coopera*on

16. Planning
and
Preparing
for
nego*a*ons
IE
Business
School

17. 17
SESSIONS 3 and 4- Concessions. Interests and objectives. Planning and preparing.
PreparaBon
worksheet
(1/2)
IE
Publishing
PREPARATION WORKSHEET – [NAME, GROUP, SECTION]; [ROLE]:________________________________
PARTIES
(Negotiating parties)
INTERESTS
(Why are you negotiating?)
OBJECTIVES
(What do you want? How do your interests
became real?)
NEGOTIATION OBJECT
(What are you negotiating?)
•
•
•
OURS:
•
•
•
THEIRS:
•
•
•
OTHER PARTIES:
•
•
•
OURS:
•
•
•
THEIRS:
•
•
•
OTHER PARTIES:
•
•
•
A) SPECIFY THE NEGOTIATION OBJECT:
B) LIST OF ISSUES:
(Negotiating variables)
•
•
•
•
•
•
•
•
•
NG4-101-I
This
document
is
authorized
for
use
only
in
Global
Executive
MBA
MAY-2016
by
IE
Business
School.

18. 18
SESSIONS 3 and 4- Concessions. Interests and objectives. Planning and preparing.
PreparaBon
worksheet
(1/2)
IE
Publishing
POSSIBLE OUTCOMES
(Off the negotiating table) (On the negotiating table)
ALTERNATIVES BATNA OPTIONS
PROPOSAL:
(Communication of the chosen option)
OURS:
•
•
•
OUR B.A.T.N.A.:
(The best of our alternatives)
•
OTHER PARTIES:
•
•
•
OTHER PARTIES B.A.T.N.A.:
(The best of their alternatives)
•
(Possible combinations of variables)
Best aspirational option
Average option
Minimum acceptable option
A) ELEMENTS THAT SUPPORT IT:
A.1.) EXTERNAL LEGITIMACY CRITERIA:
•
•
•
•
•
•
A.2.) ARGUMENTS WITH A PERSUASIVE EFFECT:
•
•
•
•
•
•
This
document
is
authorized
for
use
only
in
Global
Executive
MBA
MAY-2016
by
IE
Business
School.

19. 19
SESSIONS 3 and 4- Concessions. Interests and objectives. Planning and preparing.
Preparing
for
negoBaBon
About
you
• Define
your
interests,
objecBves
and
opBons
• What
are
the
issues?
• How
important
is
each
issue
to
you
(organize
your
tradeoffs)
• What
is
your
BATNA?
• What
is
your
reservaBon
point?
• How
can
you
improve
your
BATNA?
Prepara*on
Mee*ng
/
debate
Closing
Execu*on

20. 20
SESSIONS 3 and 4- Concessions. Interests and objectives. Planning and preparing.
• What
criteria
are
you
going
to
apply
and
what
arguments
are
you
going
to
use?
• Ways
to
create
value
and
generate
joint
benefits?
Shall
you
make
the
iniBal
offer?
• Are
you
ready
to
make
a
commitment?
• How
do
you
want
to
be
perceived?
Halo
effect
and
signaling
Preparing
for
negoBaBon
(II)
Prepara*on
Mee*ng
/
debate
Closing
Execu*on

21. 21
SESSIONS 3 and 4- Concessions. Interests and objectives. Planning and preparing.
Preparing
for
negoBaBon
(III)
Prepara*on
Mee*ng
/
debate
Closing
Execu*on
About
the
other
side
• What
is
their
interest?
• How
important
is
each
issue
to
them?
• What
is
their
BATNA?
• What
is
their
resistance
point?
• ReputaBon
-­‐
What
do
you
know
about
the
other
party?
• Track-­‐record
-­‐
What
do
you
know
of
the
other
party’s
styles
and
tacBcs?
• Limits
of
the
other
party’s
authority?

22. 22
SESSIONS 3 and 4- Concessions. Interests and objectives. Planning and preparing.
• Are
there
any
deadlines?
Who
is
more
impaBent?
• What
fairness
norms
or
reference
points
apply?
• What
topic
or
quesBons
do
you
want
to
avoid?
How
will
you
respond
if
they
ask
anyway?
Preparing
for
negoBaBon
(IV)
Prepara*on
Mee*ng
/
debate
Closing
Execu*on
About
the
situa*on

23. 23
SESSIONS 3 and 4- Concessions. Interests and objectives. Planning and preparing.
• Will
negoBaBons
be
repeBBve?
• Can
you
trust
the
other
party?
Does
the
other
party
trust
you?
• What
are
the
limits
of
the
other
party’s
authority?
• Consult
in
advance
with
the
other
party
about
the
agenda
Preparing
for
negoBaBon
(V)
About
the
rela*onship
between
the
par*es
Prepara*on
Mee*ng
/
debate
Closing
Execu*on

24. 24
SESSIONS 3 and 4- Concessions. Interests and objectives. Planning and preparing.
Hamilton
Real
Estate

25. 25
SESSIONS 3 and 4- Concessions. Interests and objectives. Planning and preparing.
CASE:
Hamilton
Real
Estate
Nego*a*on
par*es:
• The
buyer:
CEO
of
Estate
One,
a
premier
real
estate
company
in
the
region.
• The
seller:
VP
of
Pearl
Investments,
a
Estate
One,
a
holding
company
that
specializes
in
real-­‐estate
investments.
Object:
the
sale
of
real
estate
in
the
town
of
Hamilton
(original
value:
27M$,
7
years
ago).
Issues:
One
(the
price)
Situa*on:
About
to
meet
for
the
first
Bme.
Timing:
Reading
10
min.
&
PreparaBon
30
min.

26. 26
SESSIONS 3 and 4- Concessions. Interests and objectives. Planning and preparing.
CASE:
Hamilton
Real
Estate
ROLEPLAYING
DEBATE

27. 27
SESSIONS 3 and 4- Concessions. Interests and objectives. Planning and preparing.
Hamilton
Real
Estate
-­‐-­‐
Wrap
Up
What
will
I
do
if
the
current
nego*a*on
ends
in
no
deal?
1
Assess
your
BATNA
(PI)
•Iden*fy
all
the
op*ons
you
might
pursue
if
you
are
unable
to
reach
an
agreement
•Es*mate
the
value
associated
with
each
of
the
alterna*ves
•Select
the
best
alterna*ve:
YOUR
BATNA
Aproach
others
-­‐-­‐
Aproach
Quincy
Developments
–
Not
sell
at
all

28. 28
SESSIONS 3 and 4- Concessions. Interests and objectives. Planning and preparing.
Hamilton
Real
State
-­‐-­‐
Wrap
Up
2
Calculate
your
RV
(PI)
What
might
this
offer
be?
$
38
Millions
+
10-­‐15%=
$41.8
-­‐
43.7
Midpoint
$42.75
M

29. 29
SESSIONS 3 and 4- Concessions. Interests and objectives. Planning and preparing.
Hamilton
Real
Estate
-­‐-­‐
Wrap
Up
3
Assess
other
party´s
BATNA
(EO)
If
EO
is
unable
to
purchase
the
Hamilton
property…
a)Invest
in
a
different
development
project:
another
place
on
which
to
build
luxury
condominiums
(hamilton
or
any
other
place)
b)Wait
it
out
un*l
proper*es
are
available.

30. 30
SESSIONS 3 and 4- Concessions. Interests and objectives. Planning and preparing.
Hamilton
Real
Estate
-­‐-­‐
Wrap
Up
4
Calculate
othersʼs
party
RV
(EO)
Residen*al
use:
$36-­‐$44
million
($40
million)
Luxury
condominiums:
$43.2-­‐$52.8
million
($48
million)
Commercial
use:
$54-­‐$66
(150%)
–
($60
million)
$72-­‐$88
(200%)
–
($80
million)
Seller
RV
Buyer
RV
$
42.75
???
Prob.
Range
$40-­‐$80
ZOPA

31. 31
SESSIONS 3 and 4- Concessions. Interests and objectives. Planning and preparing.
Hamilton
Real
Estate
-­‐-­‐
Wrap
Up
5
Evaluate
the
ZOPA
Seller
RV
Buyer
RV2
$
42.75
M
$60
M
$48
M
Buyer
RV1
RV3
$80
M
Zopa
Scenario
1

32. 32
SESSIONS 3 and 4- Concessions. Interests and objectives. Planning and preparing.
Hamilton
Real
Estate
-­‐-­‐
Wrap
Up
5
Evaluate
the
ZOPA
Seller
RV
Buyer
RV2
Buyer
RV1
RV3
Zopa
Scenario
2
$
42.75
M
$60
M
$48
M
$80
M

33. 33
SESSIONS 3 and 4- Concessions. Interests and objectives. Planning and preparing.
Hamilton
Real
Estate
-­‐-­‐
Wrap
Up
5
Evaluate
the
ZOPA
Seller
RV
Buyer
RV2
Buyer
RV1
RV3
Zopa
Scenario
3
$
42.75
M
$60
M
$48
M
$80
M