Negotiation Test 1

1. What are the key reasons why effective negotiation skills are increasingly important in the business world?

- Authority is no longer unquestioned, businesses are run by cross-functional teams of peers - Negotiation happens in important meetings, new assignments, team leadership, reorganization, setting priorities for a work - Traditional business hierarchy is gone, people and ideas flow around the business and decisions are made closer to markets - **TODAY, people don't just ask "what should I do", they ask "why should I do it?" - Reasons: 1) Dynamic nature - means people must re-negotiate their place in organizations constantly 2) Interdependent on each other, both laterally and hierarchically - promote your own interests and create joint value for the organization 3) Economic forces - pressure from economy means learning how to operate in uncertain environments (focus on minimizing losses not profits) 4) IT - people are expected to be available 24/7, so how to respond quickly and also be the most effective when you have been away for some time 5) Globalization - most managers must effectively cross cultural boundaries to do their jobs, presents challenges in terms of different norms of communication, need to develop negotiation skills that can be successfully employed with people of different nationalities, backgrounds, and personalities

Why should negotiators break down the issues in a negotiation into multiple issues, rather than engage in a single-issue negotiation?

- Single-issue negotiations are fixed-sum, having multiple issues creates integrative potential; allows you to make more tradeoffs and less impasses • Which issue is most important to each party - Multiple issues = multiple alternatives = you more likely to achieve your target - MESOs (multiple equivalent simultaneous offer get you more profitable outcomes and you are evaluated more favorably by the other party • Can anchor more aggressively • Get better info about other party • Be more persistent • Signal priorities more effectively • Overcome concession aversion on other side

What are some of the advantages and disadvantages to negotiations between businesspeople, and how do they differ from purely personal negotiations?

1) Advantages • More comfortable because less pressure to be concerned with fairness and other party's welfare • Can be more competitive • Easier to focus on integrative solutions • Equity rule (those who have given more receive more) 2) Disadvantages • Don't choose coworkers and sometimes have to negotiate with people we don't like • Business relationships have rank and status issues associated • Often need swift trust • Business world is web of networked relationships (one-shot situation not a benefit anymore) 3) Embedded relationship - friends/family who do business together • Emotional potential is higher • Internal value conflict • Myopia

Be prepared to address some of the misperceptions about the meaning of win-win negotiation. Why do these misperceptions contribute to leaving money on the table in negotiation situations?

1) Compromise - not how pie is divided, how pie is enlarged 2) Even split - bargaining zone is divided without thinking about who really wanted what 3) Satisfaction - just because you're happy doesn't mean money and resources haven't been wasted 4) Building a relationship - doing this and establishing trust compromise thinking creatively, which leads to less integrative agreements

What are some of the most common errors made by negotiators who are attempting to expand the pie of resources?

1) False Conflict - Aka illusory conflict - Think your interests are incompatible with other party's interests - lose-lose effect - Will cause the lose-lose effect 2) Fixed-pie Perception - Think the other party's interests are directly and completely opposed to your interests, try to just slice the pie - Most negotiations are mixed-motive

What are the most prevalent myths about negotiation, and how do these myths hamper people's ability to learn effective negotiation skills?

1) Fixed-sum: whatever is good for one person must be bad for other party - Truth is that most negotiations are not purely fixed sum, most negotiations are variable sum in nature, meaning that if parties work together they can create more joint value than if they are purely combative 2) Need to be tough or soft - Truth is the most effective negotiators follow an enlightened view of negotiation and correctly recognize that to achieve their own outcomes they must work effectively with the other party 3) Experience is good teacher - Truth is that is partly true, experience in the absence of feedback is largely ineffective in improving negotiation skills and our memories tend to be selective meaning that people are more likely to remember their successes and forget their failures or shortcomings 4) Good negotiators born: effective negotiation skills are something that people are born with, not something they can learn -Truth is naturally gifted negotiators are rare 5) Good negotiators take risks - Truth is tough negotiators rarely effective, must evaluate risk and determine the appropriate time to make the final offer 6) Good negotiators rely on intuition - Truth is intuition does not serve people well, effective negotiations involve deliberate thought and preparation and is quite systematic

What are the most important factors to consider when making concessions in negotiation (so as to maximize your share of the bargaining zone)?

1) Pattern - unilateral means concessions made by one side, bilateral means concessions made by both sides •Only make one single concession at a time, wait for other side to make one before you make another UNLESS you feel they are truly at their reservation point • Negotiators who make fewer and smaller concessions maximize their slice of the pie compared to those who make larger and more frequent concessions 2) Magnitude - Shouldn't consistently be making larger concessions than the other party - Usual measure of a concession is the amount reduced or added from one's previous offer - GRIT (gradual reduction in tension): method in which parties avoid escalating conflict to reach mutual settlement within the bargaining zone - Trade off making concessions, first one is significant but not so much that the party is disadvantaged too much if the other party doesn't reciprocate 3) Timing - Immediate, gradual, or delayed - gradual is most effective in buyer-seller negotiations -- Immediate received the most negative reaction from the buyer

What are the fundamental differences between tough and soft negotiators, and what are the disadvantages of adopting either stance?

1) Tough - unflinching, makes high demands, concedes little, holds out to the end, rejects offers within the bargaining zone - Walks away from potentially profitable interactions - Gains reputation for being stubborn 2) Soft - offers too many concessions, reveals his or her reservation point and is too concerned with other party feeling good that they give away too much of the bargaining zone - Agrees too readily and never reaps much of the bargaining surplus

Negotiation

Negotiation: interpersonal decision-making process necessary whenever we cannot achieve our objectives single-handedly

Why is creativity often downplayed or ignored in the process of negotiation?

o People fixate on the competitive nature of negotiating - fixed-pie perception o Mental model is often - Haggling - trying to get largest share of bargaining zone - Cost-benefit analysis - think of negotiation with rational, decision making model - Game playing - chess game model - Partnership - clients treated as partners, more important to nurture long-term relationship by making sacrifices - Problem solving - instead of thinking outside the box, thinking inside the box and looking only at the issues in-hand

Be prepared to discuss why BATNA is the most important source of power in negotiation. Why should a negotiator constantly cultivate and improve his or her BATNA prior to negotiating?

o The better your BATNA, the stronger your walk-away card is and also the longer you can wait to receive the best offer and once you know your BATNA you can try to improve it in a negotiation • You can wave your BATNA during the negotiation and say "I'm prepared to walk away" which puts pressure on the other party and puts you more in control to get what you want o Keep your options open, signal BATNA but do not reveal it, assess other party's BATNA -The most important piece of information you can have **is the other party's BATNA

Bargaining zone (Zone of possible agreement ZOPA)

range between negotiator's reservation points -if it is positive, the reservation points overlap -if negative, then they do not overlap -bargaining surplus: amount of overlap between each person's reservation points