1. Negotiation Spring 2015 Course convenors: Ivar Bredesen Robert Hartnett Spring 2015 Course convenors: Ivar Bredesen Robert Hartnett

2. Negotiation http://home.hio.no/~ivar-br/fag/Negotiation/Negotiaton.htm 7.5 ECTS 4 - 5 lectures 7 January – 4 February 3 full days given by Robert Hartnett, Edinburgh Business School. On February 13 he will cover Influencing and on 25 and 26 February there will be intensive negotiation training. 4 hour closed book exam 20 March Exam format: Case study with 5 questions (40 %) + 3 essay questions (60 %). Case study without questions published about 1 week ahead Slide 2

3. Slide 3 Negotiation?

4. Slide 4 Course objective The course consists of two parts – negotiation and influencing The part in negotiation aims to provide a thorough grounding in the science and practice of negotiation. Various academic disciplines (economics, psychology, sociology, politics, anthropology and mathematics) have researched negotiation from their particular standpoints and much of this material forms the basis for the scientific analysis of negotiation

5. Slide 5 Course objective Influencing explains how people are influenced, how to exert influence, how to develop relationships with those around us to achieve personal and organisational goals and how to recognise influencing games played by other managers

6. MBA based course The Negotiation part of the course is based on Edinburgh Business School MBA, where the Negotiation course is a very popular elective Robert Hartnett is Senior Teaching Fellow at Edinburgh Business School and regularly teaches MBA students and managers negotiation and influencing Slide 6

7. Slide 7 Course contents The course in negotiation will address: What is negotiation? Preparation for negotiation Debate in negotiation Prososals and bargaining Rational bargaining Ploys and manipulation techniques

8. Slide 8 Readings: Negotiation

9. Readings: Influence Also available in Norwegian and other languages Slide 9

10. Supplementary reading Getting to Yes – highly influential book published in 1981, now in 2nd ed. Slide 10

11. Slide 11 Course structure The textbooks are international best selling books on negotiation The texts give examples and theories and these will be further developed in the case studies and essay questions Past exams with solutions is an important learning tool, perhaps the most important one

12. Kennedy web www.negotiate.co.uk Slide 12

13. Slide 13 Behavioural negotiation There are many ways to study negotiation Fisher and Ury: Principled Negotiations Karass: Ploys and manipulation Kennedy: Behavioural (process) model Some people think of a skilled negotiator as someone who can bluff and double bluff his way to whatever he wants. Negotiation is a lot more than ploys and tactics

14. Slide 14 What would you do? You have been very busy at work lately, and this is the last day before your annual holiday Your family has already gone ahead to the villa you have rented Your taxi to the airport is waiting outside Your boss comes in and asks you to work on some customer account over the weekend

15. Slide 15 Alternative methods of making decicions Say ”No” Persuasion Problem-solve Chance Negotiate Litigation Arbitrate Coercion Postpone Instruct Give in

16. Slide 16 Adam Smith (Book 1, ch. 2) Nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog. Nobody ever saw one animal by its gestures and natural cries signify to another, this is mine, that yours; I am willing to give this for that. But man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and show them that it is for their own advantage to do for him what he requires of them

17. Slide 17 What is negotiation? Give me some of what I want and I will give you some of what you want The process by which we search for the terms to obtain what we want from somebody who wants something from us Negotiation is an explicit voluntary traded exchange between people who want something from each other

18. Slide 18 Negotiation Negotiation is one of several means available to managers to assist in the making of decisions. It is neither superior nor inferior to other forms of decision- making - it is appropriate in some circumstances but not in others

19. Slide 19 When do we negotiate? We negotiate: When we need someone's consent When the time and effort of negotiating are justified by the potential outcome When the outcome is uncertain We negotiate because our decisions affect others and their decisions affect us

20. Slide 20 The four phases Negotiations involve a four stage process: Preparation – what do we want? Debate – what do they want? Propose – what wants might we trade? Bargain – what wants will we trade

21. Slide 21 What do you think?

22. Slide 22 Red and blue behaviour Everyone will accept that an outcome will depend on both our own activity and the activity of others Is the opponent ”red” or ”blue” ? Red – exploits the other party Protects oneself - ”I defect not because I want to, but because I must” Has dishonest agenda and often seek zero-sum outcomes

23. Slide 23 Red assumptions ”In a successful negotiation, both parties gain – but one gains more than the other.” ”We recognise that, far from being honest, negotiation is a web of even more delicate lies. A skilled negotiatior will appear friendly if this is the role he considers to be most effective, but will never sacrifice profit for friendship in his business dealings”

24. Slide 24 Red attitudes Be aggressively competitive and non- cooperative Dominate your opponents Seek always to win All deals are ”one-offs” Use ploys and tricks Bluff and coerce Exploit the submissive

25. Slide 25 Blue behaviour Be co-operative – even with agressive partners Show respect to all partners Seek to succeed All deals lead to others Avoid manipulation Be open and play it straight

26. Slide 26 Blue behaviour Blue players seek non-zero-sum outcomes – what they gain is not at their partner`s expense Extreme blue - naive, are often taken advantage of Within negotiations – purple behaviour is often recommended

27. Slide 27 Prisoners dilemma Prisoner A ConfessDeny Confess Deny Prisoner B -5, -5-1, -10 -2, -2-10, -1

28. Prisoners dilemma This is a dilemma because the choice of how to behave is is motivated by the prisoner doing what is best for himself or doing what is best for the pair of them The choice for one prisoner is complicated by the choice made by the other prisoner Red and blue game Slide 28

29. Slide 29 Blue and blue Only about 8 % av players in negotiation games open with blue Blue is only selected if the other party opens with blue If the other player selects red, you will respond with red (tit-for-tat) Players need to trust each other before blue/blue behaviour will emerge

30. Slide 30 Distributive Bargaining

31. Slide 31 Single issue negotiation Vital (but probably unavailable) information is how little is John prepared to accept There is no obvious solution to this dilemma Zero sum game – one loses what the other one gains Lose-lose is a possible outcome too and both strive hard to make the other party moving

32. Slide 32 Single issue negotiation In negotiation we start with at least two solutions (yours and mine) to the same problem, and the objective is to end up with only one solution, if we can What is to be the agreed price for the used car? A negotiator opens with an entry price, the price he prefers to get. The gap between the entry prices for each negotiator is called the total negotiating range or the haggling range

33. Slide 33 Negotiating range The negotiating range implies distance and movement ”After 12 hours of talks, we are still a long way apart” Movements from entry prices are of course inevitable. No one opens with his/her final price

34. Slide 34 Negotiating range There will always be a limit beyond which you do not want to go – this is the exit price The exit price will normally lie somewhere in the negotiating range. Unless exit prices at least meet, there will be no agreement

35. Slide 35 Negotiating range

36. Slide 36 Settlement range

37. Slide 37 Disclosing entry price can be dangerous

38. Slide 38 The Run-down bar Negotiation

39. Slide 39 The Run-down bar Negotiation

40. Slide 40 Negotiators surplus Assume you are willing to sell a property for 150 000 but hope to get 250 000 The difference of 100 000 can be divided between buyer and seller – settlement range

41. Slide 41 Settlement range 115 is the lowest price the seller will accept and 120 is the highest price the buyer is prepared to pay Any price in between can be a settlement price

42. Slide 42 Settlement price Diffence between settlement price and the seller exit price is called sellers surplus, and difference between settlement price and buyers exit price is called buyers surplus. Sum of buyers and sellers surplus is negotiators surplus