1. Creating & Claiming Value

2. Today’s Agenda Debrief New Recruit
How can value be created in a negotiation?
How interests create value
Using cooperation as a tool in negotiation
Why you should create and clasaim value

3. New Recruit What were the BATNAs for each party?
What were the reservation values for each party?
What were the aspiration values for each party?
What were the issues?
What priorities did each party have?
BATNAs were going with another candidate/job
Reservation values depend on what you think you can get from the other job, so not necessarily -8600
Aspiration values were 13200
Outline 8 issues and which ones were most important to each party

4. Types of issues in new recruit
Distributive
“zero-sum,” “fixed pie”
Different preferences, but same values
Congruent
Integrative
Different preferences but DIFFERENT values
Allows for trades
There are three types of issues that we see in new recruit.
(see slide list)

5. Examples of distributive and congruent issues
Candidate
Recruiter
Total
Starting Date
Sept 15
2400
Oct 1
1800
600
Oct 15
1200
Nov 1
Nov 15
Location
New York
Boston
900
Chicago
Atlanta
300
San Francisco
When we talk about value creation, we are really talking about the total value obtained by both parties, not just what one party gets.
As you can see in distributive negotiations, the value has been created. No matter the option, the most value that can be claimed in the distributive issue of “starting date” is 2400 points. It is just how you divide the points. Since the points here are maximized, what outcome seems to be best for each individual party? Oct This is an example of a compromise, which we will discuss in a minute, but the important thing to note here is that compromises are often the most fair outcome in a distributive negotiation.
When we are dealing with a congruent issue, like location, the group as a whole loses value if the top preference of both parties is not selected. So it takes communication and trust to recognize that my preference is the same as yours… and I am going to share that with you and not try to use that against you.
When you try to misrepresent your preference in this type of issue, you are not only hurting yourself, but the other party.
It is difficult to know what issues are congruent, emphasizing again the importance of understanding interests by sharing information and asking probing questions

6. Compromise
Compromise: making an agreement in which parties both get some of what they want by giving up some of what they want
Meeting in the middle
Splitting the difference
Something accepted rather than wanted
Agreement by concession
Lessen the value of something
Compromises occur when engaging in a distributive negotiation. Rather than compromising, use distributive negotiation tactics to get more of what you want!
So the important thing to remember with value creation is that you are pushing the boundaries, not just creating something that everyone is willing to settle on.
A lot of us think about a compromise as a good thing, and thus associate it with being a value creator, but do you think compromising has more to do with integrative negotiations or distributive negotiations?
You are essentially settling for less than what you expected to get
A lot of times we become satisfied with this because we assume that we could not have gotten what we did any other way, but really we just settled for the size of pie we had initially, rather than trying to push the boundaries
Compromise is very positional focused, rather than interest focused (lets each give in on our initial positions so that we can get part of what we want)
We have these definitions, but then these are also definitions of compromise
This may be what a reasonable person sees as appropriate, but it is not what a skilled negotiator accepts!
If your partner wants to give in, that is fine, but you should never be ok with a compromise unless you feel that it is necessary for the relationship and you care about the relationship.
Remember, you are in a distributive negotiation when you are considering a compromise, so compromises are not optimal for you.
By focusing on your aspiration price at all times, you can overcome the attractiveness of a compromise and get more of what you want (just as in a distributive negotiation)
Value creation is not soft on the problems inherit in the negotiation.

7. NOT INTEGRATIVE!! Compromise Candidate Recruiter Joint Salary 86K
-3000
-6000
Start date
10/15
1200
2400
Location
Chicago
600
Job Assignmt C
-1200
-2400
Bonus 6%
2000
800
2800
Vacation
20 days
Moving %
80%
1600
400
Insurance
Kaiser
Total
4800
NOT INTEGRATIVE!!
Need to change these 2 slides.
So we discussed the importance of recognizing the difference between and integrative solution and a compromise and new recruit is able to show us quantitatively the differences. So here is a cmpromise.
Essentially you are splitting down the middle of each issue.
In what issues does it make sense to actually do this?

8. Creating value
Value can be created by identifying what each party cares about most
The goal of the negotiation should be to create the most value for yourself overall, not the most value on each issue

9. Common integrative solutions
Bridging
Contingency
Allows for expectations to be different between parties
Logrolling
Trading lower priority issues for higher priority issues
The first common integrative solution is what is called bridging.
Both parties want an agreement, but they don’t agree on the value (i.e. they expect different levels of earnings in the future, etc…)
Reach an agreement that protects each party from the perceived risk they feel they will encounter if they choose to buy into the other party’s expectations
Both gain more value because they have different expectations of the future
Example, paying a lower price up front and then giving the other party a % of profits
The second example is logrolling
Multiple issues are required in logrolling
Finding tradeoffs across issues that each party places different values on
I don’t care about the color of my new car, but I want leather in it. The dealer has a bright green car that she can’t get rid of that has leather.

10. Examples of integrative issues
Candidate
Recruiter
Total
Signing Bonus
10%
4000 8%
3000
400
3400 6%
2000
800
2800 4%
1000
1200
2200 2%
1600
Vacation Time
30 days
25 days
20 days
15 days
4300
10 days
So in a lot of cases, we want to create value, not compromise. Most unskilled negotiators think that value creation is compromise since everyone is getting some of what they want, but lets look at an example from new recruit to see how value creation is distinct and usually better.
With integrative issues, you still have opposite preferences.
You can see this in the preferences of the recruiter and candidate
Who cares a lot more about the signing bonus?
Who cares a lot more about the vacation time?
If you do a compromise on both issues (like in a distributive issue) what values do you get 2800 on both, so a total of 5600 points
How can we gain the maximum value of points here? By making tradeoffs!
The tradeoffs that we make can make it appear like there is a winner and a loser, but is there? (instead of both parties getting some of what they want, both parties are getting all of what they really care about – isnt that a better solution?)
This shows that everyone is more satisfied with their offers b/c the point values are higher.
So the point I want to make here is that compromises are a cooperative but distributive mindset and we can do better than that when we try to be integrative.

11. Integrative solution Candidate Recruiter Joint Salary 86K -3000 -6000
Start date
10/15
1200
2400
Location SF
Job Assignmt A
Bonus
10%
4000
Vacation
10 days
Moving %
100%
3200
Insurance IA
Total
6600
13200
So in a more integrative solution, we can see that it still makes sense in some issues to compromise (see red issues)
But the other issues it does not make sense. On Location and Job asignment, everyone wanted the same thing: New York and assignment A.
The four other issues show that tradeoffs can be made.
What was the value on a bonus for the recruiter? (1600)
What was the value on vacation time for the candidate? (1600)
We can begin to see how when one party values something more/less than the other, it can lead to advantageous tradeoffs!

12. Creating and claiming value
Pareto-efficient: The point at which there are no agreements that are better for both parties
Your Partner
Pareto-improvement: Changes to a deal that make one party better off while also making the other party better off
So earlier we talked about the problems with starting with distributive issues (makes party competitive, takes a lot of time, etc…)
Possibly the biggest problem with starting with distributive issues is that it then puts you in a mindset that there is no more value to be created.
Lets look at this graph as an example.
We start with you and your negotiating partner and each of your RP’s (the X)
This is what both of your perspectives is of the value that will be created in the negotiation. Lets say you are a good value claimer and reach this deal. That is good for you (you did better than the other person), but is it the most value you could have gotten?
In this negotiation, lets say there were several integrative issues that you made compromises on, so you did not recognize all this value up here on this second line.
It is likely that if you had been more integrative, revealing your underlying interests and recognizing your partner’s interests, you could have gotten more value out of the negotiation! When you have realized all the value that you could in a negotiation, this is called a pareto-optimal agreement, or the point at which there are no other agreements that when put together leave both parties with as much of what they want as these agreements do.
But this line represents multiple offers (show different offers)
The way the final offer is determined is by how you choose to divide the value you have created.
What happens when we add in each party’s BATNA? (add this to the graph and discuss bonus question) X
4800
13200
You

14. Compromise (total: 4800 points)

15. Improvements (total: 7800 points)

16. Improvements (total: 10800 points)

17. Pareto Optimal (total: 13200 points)

18. Being Integrative during the negotiation
Trust
Cooperation
Information Sharing
Shared understanding of the situation
Identification of interests
Invention of solutions
Integrative negotiation included both the creation and effective claiming of value that is on the table.
This not only includes effective prepping during the negotiation, but also more work during the negotiation itself.
You goals in integrative negotiation are no longer centered around just winning. You now care that the other party’s interests are being satisfied to some extent.
Thus you want to make them feel like you are not seeing them as an opponent, but as a partner
Initially, you may want to help the other party “warm up” to you so that there is more trust cooperation and information sharing occurring in the negotiation.
These are components of a negotiation that then lead to the following (see slide) since you are working together now instead of in direct opposition.
However, keep in mind that an integrative negotiatior both creates and claims value. There is no point in working to create value in a negotaition if you arent going to claim more than what you otherwise would.

19. Strategies for integrative solutions in the negotiation
Focus on multiple issues at once
Allows you to be creative
Helps overcome more difficult issues
Give your partner several options
Allows you to ensure that you get an optimal outcome
Promotes your willingness to be cooperative
Provide a trusting and cooperative environment
One of the key concepts to integrative negotiations is to focus on more than one issue. This helps you to see where tradeoffs can be made, helps you to prioritize the issues for yourself and for your partner, helps you see what the underlying interests and themes in the negotiation are, and gives you an opportunity to expand the pie and claim more of it.
The other benefit to multiple issues is that often negotiators believe that they need to focus on the most difficult issue first. When they do that they often get stuck on that issue, bad feelings are created, and the negotiation goes sour. Being aware of multiple issues can help you recognize where tradeoffs can be made so that both the easy and difficult solutions are overcome.
Second, think back to our graph where we had the line representing the creation of value. There may be offers that provide you with the same value, but appear more or less appealing to your partner. By knowing multiple issues you can create several “packages” that give you the same value, but give your partner the choice of what works best for him or her.
Finally, trust is a major component of integrativeness. It suggests that you want what is best for the other person as well as yourself, which puts them at ease and helps them to think in a more problem solving mode than a defensive mode. Starting out with integrative mindset will increase trust in the negotiation, which will then increase cooperation and the potential to reach optimal agreements.

20. Next week: El Tek Two roles
Magnetic Advances
Audio Components
Negotiating over the production and sale of technology
Outcome:
Option number (which tells you months of not selling product and parties to whom the product cannot be sold)
Transfer payment
Total profits for each party
You will be negotiating in groups of four
Two representatives of MA and two representatives of AC
15 minutes to coordinate with partner in next class
One of the key concepts to integrative negotiations is to focus on more than one issue. This helps you to see where tradeoffs can be made, helps you to prioritize the issues for yourself and for your partner, helps you see what the underlying interests and themes in the negotiation are, and gives you an opportunity to expand the pie and claim more of it.
The other benefit to multiple issues is that often negotiators believe that they need to focus on the most difficult issue first. When they do that they often get stuck on that issue, bad feelings are created, and the negotiation goes sour. Being aware of multiple issues can help you recognize where tradeoffs can be made so that both the easy and difficult solutions are overcome.
Second, think back to our graph where we had the line representing the creation of value. There may be offers that provide you with the same value, but appear more or less appealing to your partner. By knowing multiple issues you can create several “packages” that give you the same value, but give your partner the choice of what works best for him or her.
Finally, trust is a major component of integrativeness. It suggests that you want what is best for the other person as well as yourself, which puts them at ease and helps them to think in a more problem solving mode than a defensive mode. Starting out with integrative mindset will increase trust in the negotiation, which will then increase cooperation and the potential to reach optimal agreements.