Coffee Contract Role of seller Role of buyer Anderson Coffee Role of buyer Statler Hotel, Cornell University 10 minutes to read materials 20 minutes to negotiate

Slicing the Pie How do you get the biggest piece? Preparation Offers Alternatives Concessions

Offers Folklore says to let the other party make the first offer Is that a good idea? Anchoring People tend to focus heavily on the first offer First offer correlates .85 with the final price

Offers (continued) What if the other party makes the first offer? Immediate counteroffer Take away the psychic hold of the 1st offer

Offers (continued) How do you feel when the other party accepts your first offer? I should have asked for more Maybe I just got into a bad deal Less satisfaction Do not accept first offers They are just that – an opener Expectation to negotiate

BATNA Best Alternative to a Negotiated Agreement The lowest acceptable value to an individual for a negotiated agreement Develop alternatives so you know at what point to stop negotiating Gives you the POWER to walk away If we cannot receive an offer of X-amount for the house, then what will you do? Rent it out?

What’s your bottom line? “Tell me the bare minimum you would accept and I’ll try and throw in something extra” “Why don’t you tell me the very maximum you are willing to pay, and I’ll try and I’ll see if I can shave off a bit”

Concessions Need some cushion (Target price versus reservation price) Make the first concession Why? Norm of reciprocity Positive feelings Magnitude of concessions Less and less to signal you are reaching the end

Now What….. I want the last remaining orange and so do you

Principled Negotiation Getting to Yes: Negotiating Agreement Without Giving In Fisher & Ury Principled Negotiation Strategies Integrative negotiations MIND-SET

Mythical Fixed-Pie: Piece 1 Assume there can only be one winner and one loser (distributive bargaining approach) Fail to find mutually agreeable trade-offs

“Let’s Compromise” The middle ground “Let’s split the difference” Seems like a good strategy: Isn’t it better than no deal at all? However, the middle ground results in incomplete satisfaction for both parties “Leaving money on the table”

However, only a small percentage of organizational negotiations are purely distributive, involving just one resource or just one issue Consider: Price, delivery date, financing, service, relationships Salary, bonuses, flexible scheduling, location, vacation, moving expenses

Negotiation Approaches Distributive Integrative Characteristics Bargaining Bargaining Available resources: Primary MINDSET: Primary interests: View of relationships: Fixed amount of resources to be divided I win, you lose Opposed to each other Short term Variable amount of resources to be divided I win, you win Convergent with each other Long term

Integrative Negotiation Process and Preparation BATNA Determining & Valuing Interests Objective Criteria Sitting down at the negotiation table Convey your interests effectively Emotional Strategy Where do you start?

Focus on interests, not positions: How do interests differ from positions? Behind opposed positions lie shared and/or compatible interests Each side likely has multiple interests that may be valued differently by each party Complete satisfaction for both parties There may be only one way to satisfy a position, but there are multiple ways to satisfy interests

Preparation: Interests, not positions Do you know your interests? Identify and value your interests Ranking process is one way to start Consult with team to help valuation process

Logrolling Approach Trade-off on issues that are valued differently Concessions Concede on issue that is valued lowest to you – it may be of higher value to the other Salary versus moving expenses

Mythical Fixed-Pie: Piece 2 The interests of the other party conflict with ours “What’s good for them must be bad for us” Our theories and assumptions about negotiation and conflict strongly impact our approaches and behaviors

SALT (U.S. & Russia) “I have had a philosophy for some time in regard to SALT, and it goes like this: the Russians will not accept a SALT treaty that is not in their best interest, and it seems to me that if it is in their best interest, it can’t be in our best interest” Floyd Spence, U.S. Congress

Finding Compatible Interests Can Be Difficult Pairs were presented with a negotiation involving multiple issues regarding a job offer. On two of these issues, the opposing sides had completely compatible interests (similar to an interest in the orange peel versus an interest in the fruit) What percentage of the time did the negotiators make the trade-offs? 50% Left money of the table ½ the time

Ways to find out the other party’s interests and related values Ask questions Listen to the response!

Contingent concessions I can give here if you can give on something Make multiple offers simultaneously Each is different, yet results in the same level of profitability for you

Neutral Party Two students in a library, one wants the window open, the other wants it closed. A loud argument breaks out. How might this be resolved? Fixed-pie assumptions Anger closes our minds to alternative solutions Not wanting to “give in” There may be just ONE way to satisfy a position, but there are MULTIPLE ways to satisfy interests. Inventing options for mutual gain

Sitting down at the table Perceive yourself working side by side with the other party to resolve the issue Separate the people from the problem Resist the temptation to “attack” people Typically sit across from the other

The Same Side Try sitting on the same side of the table Together we can attack this problem

Presentation Approaches Option 1: “I want that orange because I am interested in baking an orange cake and I need the peel” Option 2: “I am interested in baking an orange cake and I need the peel, that’s why I want that orange” How are these options different? Which one better ensures the other knows your interests?

Approaching the Issues: Where do we start? A. Start with the easy issues first! B. Start with the most difficult ones first! C. Either A or B: It depends D. Start with all of the issues at once

Emotional Strategy Poker face Positive Tough: Negative, Angry & Forceful

For Integrative Bargaining… Positive is best More creative, more ideas Found most trade-offs for joint gain Highest level of value Detriments of anger Found fewest trade-offs Least value

Expressing positive emotion “Put on a happy face” Your smile is often reciprocated by the other side in terms of: Positive feelings and behaviors Finding trade-offs Offering concessions

Policy “It’s company policy – there is nothing I can do” Two volunteers to read an example?

Insist on objective criteria Search for a standard such as market value, expert opinion, law This way, neither party is “giving in” to the other and a fair agreement is possible We are asking for $200,000 in fees How did you arrive at that figure?

Conclusions Most negotiations leave money on the table Too quick to compromise Fixed-pie assumptions are prevalent Assume it is all or nothing Assume our interests conflict with the other side

Reaching agreement without giving in To maximize value for you and the other party adopt an integrative mindset Interests, not positions Develop your BATNA Adopt a problem-solving approach

Short & Long Term Benefits A collaborative approach may seem counter-intuitive, but it is often more effective Consider joint gains and positive word of mouth Better over the long run