Chapter 5 Distributive Bargaining and Integrative Negotiation

Learning Objectives By the end of this chapter, you should – be aware of the basic framework for negotiation (four arenas or fields) be familiar with the definition and nature of distributive bargaining and integrative negotiation know the strategies and tactics of the two kinds of negotiation

Distributive or competitive bargaining According to Walton and McKersie ,it is a useful, practical framework to conceive of any negotiations as consisting of four arenas of activity occurring simultaneously, or at least simultaneously. Distributive or competitive bargaining Integrative or interest-based bargaining Attitudes and relationship structuring Internal or intra-organizational bargaining

Claiming and Creating Value 3-4

Attitudes and relationship structuring Relationships can affect the process, and ultimately the outcome. Organizational relationships Personal characteristics and relationships

Internal or intra-organizational bargaining In general terms, two things happening here: “boundary conflict” and “factional conflict”. The negotiators or negotiating teams are , in effect, on the boundary between their own constituency and the party on the side of the bargaining table. Key: audience expectations and evaluation

Distributive or competitive bargaining the fixed-pie assumption or a fixed sum game: the more you win, the less that is left for me. positional bargaining tactics a power-based interaction

Competitiveness in negotiation Four elements in being ‘competitive’ the outcome the issue the process the desire to do well A lawyer’s negotiating strategy: “go for the jugular and if that does not work, try something competitive”

The typical competitive situation concessions Walkaway point Opening offer SELLER Target £ Opening offer Target Walkaway point BUYER concessions The bargaining range谈判空间(P35) - starting points The settlement range - walkaway points Negative settlement range(消极的解决空间)? Walkaway point Opening offer SELLER Target £ Opening offer Target Walkaway point BUYER

The logic of competitive negotiation The opening offer must be a ‘yesable proposition’ A final, committed offer ‘inside’ the other party’s walkaway or resistance point claims maximum value（P16） A misplaced commitment loses control of the negotiation and outcome concessions Opening offer Walkaway point SELLER Target £ Opening offer Walkaway point BUYER The settlement range, the ‘value’ on the table Buyer’s final offer

Finding/Influencing their resistance point (p.38) seller’s RP?? I’ll look at that Got to be joking! That’s pushing me seller’s responses <--> £ trial offers by buyer

Competitive bargaining: preparation 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? Commitment How are we going to convince them of our commitment offer? And maintain our commitment? What are we going to do if they try to make a commitment offer?

Competitive negotiation behaviour Other factors which increase competitive behaviour include time pressure presence of a constituency the importance of the issue the extremity of the other’s position a ‘win’ orientation

Competitive negotiation (Pruitt et al, 1994) Negotiators may use some of the following to get their opponent to agree: ingratiation gamesmanship guilt persuasive argument threats, positive and negative commitment

Competitive negotiation (Mnoonkin et al, 2000) extreme claims followed by small, slow commitment tactics take-it-or-leave-it offers inviting unreciprocated offers flinch personal insults and feather ruffling bluffing, puffing and lying threats and warnings belittling the other party’s alternatives good cop, bad cop concessions

Competitive in whole or in part? - the competitive end game According to our definition Negotiation is … ... exchanging offers The competitive end game to most negotiations Creating, then claiming value (Lax and Sebenius, 1986) The notion of phases The notion of tit-for-tat & reciprocity The importance of the BATNAs Framing

The competitive end game The notion of tit-for-tat & reciprocity Friendly Forgiving Firm Fair Facilitating cooperation through reciprocity?

The competitive end game The importance of the BATNAs what happens if we walk away? can we improve this alternative? what happens if they walk away? can we worsen their alternative? cooperation because we have to?

The competitive end game Framing: points of comparison cooperation by preferred choice Their walkaway point Starting point SELLER Target Starting point Target Walkaway point BUYER £15 my opening offer £20 my final offer £25 their latest offer £30 their opening offer gain frame loss frame

The competitive end game: the options Successful, firm commitment (p.53) -> concessions by the other party Two committed positions -> deadlock Two committed positions -> mutual concessions Successful, firm commitment by the other party -> concessions by self

The competitive end game - committed to the end Clearly state your final position, making it clear that it is final Check your BATNA Emphasise the benefits to both parties of achieving an agreement Allow the other party whatever rationale they chose Allow the other party some behavioural scope Apply pressure, but steadily Leave the other party with the final choice, of accepting your offer or of walking away

The competitive end game - conceding without capitulating Check that what you are about to agree to is better than your BATNA Clearly state what you are agreeing to Emphasise the benefits to both parties of agreement being achieved

Integrative or interest-based bargaining potential for mutual gain the parties can expand the sum total Complementary priorities and values Integrative, collaborative, interest-based bargaining strategies are appropriate

Where have we got to so far? That negotiation is complex and messy That we should make distinctions between how we manage the issue and how we manage the process and our behaviour That we have to manage both competition and cooperation in the same negotiation So How do we actually cooperate in practice?

What do we mean by ‘cooperation’? According to our definition, negotiation is … … … … though exploring options … … so … The integrative model achieve the added value underlying rationality of problem solving approach

Cooperation through an integrative problem solving approach Lewicki et al, 2006 ch.3 Identify and define the problem the ‘problem’ is that the other side won’t agree!! Understand the problem fully identification of interests is an iterative process  Generate alternative solutions adding value or just creative trading? Evaluate and select alternatives giving ‘objectivity’ to the end game? Techniques from models of rational problem solving are expanded into a process of ‘integrative negotiation’

Cooperation through problem solving (Lewicki et al, 2006, p.93ff) Create common goals or objectives Have faith in own ability to solve problems A belief in the validity of the other party’s opinion Share the motivation and commitment to working together Trust Clear and accurate communication An understanding of the process

Can I trust you? In the context of negotiation: Are you telling me the truth? If I provide information or make a concession will you reciprocate? Can I believe that you will do what you are saying you will do? Is it ok not to tell the truth in a negotiation?

Cooperative negotiation ‘If you are too honest and trustworthy, most people will take advantage of you.’ What has been your experience? ‘Fear is a stronger persuader than trust’ What do you think? ?

Trust Trust: A willingness to take unilateral action which might lead to exploitation but which anticipates a non-exploitive response from the other person. Building trust: Talk process - about the need for cooperation, trust etc and get some reciprocation - before actually taking the risky move on information exchange or on the issue itself.

Fisher, Ury and Patton’s ‘Getting to Yes’ Separate the people from the problem Focus on interests, not positions Generate a variety of options Problem solving approach Use objective criteria When preparing, consider Interests Options Alternatives Legitimacy Communication Relationship Commitment (Fisher and Ertel, 1995

The interest based approach Focus on interests, not positions (Getting to Yes) define your interests! pursue and protect your needs, not your position (Lewicki et al, 1996) Joint gains arise from differences, not just from commonalities review resources, relative valuations, forecasts, risk preferences, time preferences for any differences (Lax and Sebenius, 1986; Mnoonkin et al, 2000)

Underlying interests at Rudall River The issue: mining exploration access Dept of Aboriginal Affairs No access position Dept of Conservation Preserve the integrity of the land interest Dept of Minerals and Energy Access position Dept of Premier and Cabinet Increase the State’s wealth interest

Cooperation: issue, process and behavioural dimensions contend: stand firm on interests creative compromise - only if the other party is interested clear cut concessions - not unless you have to Issue Process Behaviour discover interests (emergent) information exchange (drip feed) option generation (pragmatic) ask questions and give good responses, to explore differences take your time, allow repetition, expect partial answers reflect, clarify, ask “why?” “why not?” summarise put suggestions tentatively

The real problem with problem solving in negotiation - claiming value (p75) Benefit to Party A A1 A2 B2 B1 Benefit to Party B

Walton and McKersie’s model of integrative bargaining: the strategic dilemma The best strategy is integrative bargaining to establish the maximum total sum, accompanied by relatively hard distributive bargaining to claim your share. ‘if executed effectively, this strategy appears to be the most attractive; but unfortunately it is the most difficult to implement’ (p.165) ‘in brief, integrative bargaining is tentative and exploratory and involves open communication processes, whereas distributive bargaining involves adamant, directed and controlled information processes’ (p.166) See also Lax and Sebenius, 1986 ch.6

So what do we mean by ‘cooperation’? It does not mean making concessions! It means standing firm on what is really important to you It means uncovering and exploring interests It means managing the process to create opportunities for new solutions to emerge and be explored It means knowing what your walk away option is and It means being part of the inevitable competitiveness

A final task What one thing did I learn about negotiation in this session? and what difference is it going to make to how I negotiate?