UNIT 6 Integrative Negotiation QBook

INTRODUCTION Negotiations always begin with a difference between the two sides. Whatever that difference is, in distributive bargaining situation, the negotiator is not concerned with understanding the other side or in releasing any secret information. Anything gained by one side is something lost by the other side. QBook

INTRODUCTION Integrative bargaining takes a very different approach that assumes if differences can be understood, they can be overcome so that both sides can get what they want without losing anything. Integrative bargaining is often called win-win, rather than win-lose. QBook

INTRODUCTION Differences between the two sides of the negotiation are minimized and an emphasis is placed on what the two sides have in common. In order to obtain a win-win solution, both sides emphasize understanding needs, rather than demands. By understanding what the other side actually needs, the negotiation can move away from an emphasis on singe issues, such as price, which are distribute, causing one side to lose. QBook

INTRODUCTION Integrative bargaining is not about compromise. When negotiators compromise, both sides may be unhappy with the result (neither side gets what they want). Integrative solutions find a solution that gives both sides what they need in full, not in part. To do this, new solutions must be found through cooperation, openness and honesty—opposite of the distributive bargaining setting. QBook

DIALOG (Personal Integrative Bargaining) Jane: A hot dog is not quite what I had in mind for lunch. Fred: We could consider going to the restaurant down the block. Jane: No we couldn’t. I only brought five dollars with me. Fred: Well then, unless you have a better option, I think we have no choice. Jane: I really don’t want to eat a hot dog. Fred: I didn’t know you hate hot dogs so much. Jane: I don’t hate hot dogs, but I’m on a diet and can’t eat too much bread. Fred: We have to compromise anyway, since we only have enough money for one hot dog, we will have to cut it in half. So you only get half of the bread. Jane: Yeah, I guess that is better, but I’m not supposed to eat any bread today. QBook

DIALOG (Personal Integrative Bargaining) Fred: Maybe we can find a mutually satisfactory answer. Jane: You mean a way to make everyone happy? I don’t see how. Fred: You want to avoid the bread, and I don’t mind eating the bread. Jane: Right. Fred: We can take the hot dog out for you, and I’ll eat the bread. Jane: We both get what we want. QBook

DIALOG (Business Integrative Bargaining) Alex: What is your target starting salary? Fred: I was thinking $50,000. Alex: That is too high for us. Our starting salary for this position is $40,000. Fred: I can’t take your offer if the salary is that low. I have many alternatives. Alex: I understand you may see this offer as low, but let me explain our position. Our firm has very clear guidelines for starting salaries. We are inflexible on this point. Fred: I appreciate your position, but I think I’m worth more. There are other companies offering compensation well over 40. Alex: Perhaps we can find a mutually beneficial solution. Can you explain how you came up with the number of $50,000? Fred: The industry average for this position is $42,000 and to be honest, I also have extra college courses. That makes me more valuable. Alex: What kind of courses are we talking about? Fred: In fact, I am just slightly less than six months away from completing a master’s degree in management. I think that gives me a value added feature. QBook

DIALOG (Business Integrative Bargaining) Alex: Would you mind telling me, are you taking these classes at Lake View University? Fred: Yes, and you know the cost there is very high. Alex: Our company offers a college payment program. If you take classes related to your job, half the cost is paid for by our company. Fred: It seems we have something in common. It does sweeten the package for me. Alex: We also have a special agreement with Lake View University that our employees receive a 20 percent discount on all classes in the business school. Fred: That does add up to some money saved, but I still think my degree is worth more. Alex: After you graduate, there is an automatic pay increase of 10 percent. Fred: So that would put my pay at $46,200, and I would save tuition expense for my last semester. QBook

DIALOG (Business Integrative Bargaining) Alex: Exactly. When you consider all you get with our company, the difference with other firms is slight. We value continuing education for all our employees and try to accommodate them. Fred: This does change the situation. I still think the starting salary is too low. Alex: Our company has very tight costs controls in order to increase competitiveness. Rather than emphasizing individual pay in dollars, we try to reward our employees through numerous programs, such as education. Fred: I’m starting to think this offer is attractive after all. I’ll need to consider the options. QBook

VOCABULARY Alternative (n): Two or more choices; Options that are not worse than, and may be better than, the current option being considered. Appreciate (v): Be aware of and understand the situation; express understanding for the other side’s negotiating position. Attractive (adj): Having features that make the offer appear good; Creating interest because of some favorable points. Automatic (adj): Happing independent of any human involvement; something guaranteed to happen, especially in the future. Competitiveness (n): Some strength or advantage a company has compared to other companies. Explain (v): Make clear through giving details, usually spoken. Feature (n): A special part of something. Mutually (adv): Doing something that helps both sides equally. Package (n): All the parts of the deal together; The smaller details of the agreement combined into one. QBook

VOCABULARY Perhaps (adv): A positive and polite way to say maybe; something is possible. Satisfactory (adj): Meeting or passing requirements; good enough. Slight (adj): Small difference. Slightly (adv): Something so small that it is not important. Sweeten (v): Make an offer more attractive; Some edition to an offer that the other side will like. Tight (adj): Little or no flexibility; No room for changes or movement. Understand (v): Be familiar with a point; Show some relationship with the other side by listening to some information. Valuable (adj): Having a high value; Some part of an offer that makes the price higher. Value (n): The importance of something; Something that has an influence on price. QBook

FOLLOW UP In integrative negotiations, both sides try to find out what the other side really needs. Rather than fighting over every point, it is possible that what one side wants is different from what the other side wants. Integrative negotiation moves through four stages. QBook

FOLLOW UP At each stage, both sides try to see the issues as problems to solve. Each side in the negotiation avoids making issues personal. QBook

FOLLOW UP A number of tactics are helpful in moving through the four stages. In the first stage, both sides share their information by stating what the problem each face. A buyer may complain that products they received were defective, while the seller may complain the product quality was acceptable. Rather than argue over who is wrong and who is right, each sides can define what the problem is. QBook

FOLLOW UP QBook 1) Define Common Problem Tactic How to do it Define problem without blame State the problem without blaming the other side. Show what the problem means to you. Explain how the problem impacts your own company. Show the facts; All the facts Explain the problem by showing the facts, the details and everything linked to the problem. Avoid emotion. Avoid the personal Don’t use words like “you” or “we.” Center on small parts of the problem. Don’t talk about solution Stay on the details of the problem. Explain how the problem is measured. Describe how you will know when the problem is solved. QBook

FOLLOW UP In the second stage, each side tries to understand the problem and what the other side needs. A buyer may need a system to return products that have a quality problem, while a seller may need a way to confirm which products have a problem. 2) Find Interests & Needs Tactic How to do it Explain Interests Ask yourself, “What do I want?” Show what is important in areas of economics, such as price, finance, etc. (substantive issues). Ask yourself, “Who do I want to get it?” Show what is important about the way the negotiation is completed (process interests). Ask yourself, “How important is this relationship?” Show what is important about the relationship between the two sides (relationship interests). QBook

FOLLOW UP Thinking up many possible solutions Create many possible solutions. Don’t think what ideas are good or bad. 3) Think up Solutions Tactic How to do it Change the problem Expand the pie. Many differences come from the lack of resources. If resources can be increased, problems may be solved. Larger markets, and increased budgets may avoid problems. How can both sides get what they want? Is there a shortage of something? How can we create more so both sides get more? Logroll Break the problem into smaller problems then make solutions for the small problems first. This keeps the negotiation moving forward and saves the harder problems for last. What are the important and not so important parts of the problem for me? What is important to the other side? What can I give to the other side that I really don’t need but the other side wants? Outside compensation Reward the other side with something they want, but is not related to the problem. This can include rewards or gifts that seem to have no importance to the current issues in the negotiation. What are the goals of the other side? What can I do for the other side that will make them happy and help me get what I want? QBook

FOLLOW UP QBook Cut costs Make it less expensive for the other side to agree. Do I want something that will increase the cost to the other side? What can I do to lower the cost to the other side? Build a bridge Create a new way to give both sides what they want. Brainstorming creates many ideas that are new and different. What do I really want? What does the other side really want? What is most important to me? What is most important to the other side? How can we both get what we really want and what is important to us? QBook