Negotiation and the

Anatomy of Conflict

with a word on gender and negotiation and negotiation ethics

May 11-12, 2009Victoria Pynchon, J.D., LL.M

ADR Services, Inc. Century City, California

• Why we negotiate• The field of conflict in which

we negotiate• How disputes arise• 3 ways we negotiate disputes• 3 types of agreements• How our cognitive biases affect

our ability to negotiate the best deal

• How to remedy those biases

• A short detour to talk about male and female negotiation styles

• Distributive (divide the pie) and Interest-based (enlarge the pie) bargaining

• 3 primary strategies for dealing with difficult people

• 3-D Negotiation Strategy & Tactics

• What you need to know about negotiation ethics

Why Do We Negotiate?

Scarcity

Power

Values

Identity

Community

Autonomy

Pride

Self Expression

Relative Benefits v. Absolute Numbers

Conflict is a

Perceived divergence of interests or the belief that the current aspirations of

the parties cannot be simultaneously met

Relative deprivation

Injurious Event

Perceptions

Self interest/desire

Other interest/desire

Conflict’s Source

ResourcesValues

Dispute = Immediate Manifestation of

Conflict

NamingBlamingClaiming

Tactics

YieldingAvoiding

Contending

Problem Solving

Tit for TatStart nice

Be Provokable

Be Forgiving

Persuasion Exercise

• Object of the game– Get your partner to come

over to your side of the line

– The winners will each will $1.00

Optimal Negotiated Outcome• Identify Value = precedent,

relationships, reputation, political appearance, fairness, profit, future opportunities, survival, praise, fulfillment (personal or corporate)

• Create value by locating and identifying all of your own and your bargaining partner’s interests (preferences, priorities, needs, desires, fears)

• Claim value by making a case for your entitlements, trading differences, finding commonalities

• Reap value by crafting durable agreements

Remedy the perceived divergence of interests or the belief that the current aspirations of the parties cannot be

met

Deprivation

• Perceived• Relative• All parties’

interests cannot be met at the same time

Dispute Erupts

• Injurious event• Name• Blame• Claim

http://www.break.com/index/fight_over_parking_spot.html

Bay City News ServicePosted: 04/28/2009 07:14:29 AM PDTUpdated: 04/28/2009 07:14:29 AM PDT

Two men have been arrested for their alleged involvement in a fight over a parking space in South San Francisco early Sunday that left one person injured, police said Monday.

Officers responded around 3:15 a.m. Sunday to a report of a fight in progress on Susie Way and found four assault victims, according to police.

One of the victims had been struck in the back of the head with a beer bottle and had a serious head laceration, police said. The victim was taken to a local hospital for treatment and is reportedly in stable condition.

Authorities learned the suspects and victims were arguing about a parking space when the assault ensued.

Tactics

Yielding/AvoidingNegative for yielder

Nothing changes for other

in a blind approach for landing through clouds where the first officer is

convinced that the plane is heading against solid mountain rock all he says is “I am not sure if we have established

our gliding path with necessary precision”.

Malcolm Gladwell, Outliers

Contentious TacticsIngratiation & gamesmanshipThreat, promises & arguments

ShamingCoercive Commitments

Physical Violence

Win-loseResolution unstable

Problem SolvingSatisfies some of both

parties’ interestsResolution is stable

Malcolm Gladwell, Outliers

• Agreement possible• Better than walking away• BATNA• Achieved through compromise

• “Win win”• Meets interests of both parties better

than compromise would• Achieved through identifying interests,

identifying and/or creating value

• Pareto-optimal• Best possible negotiated outcome for

both

Thompson & Leonardelli “Why Negotiation if the Most Popular Business School Course”

Scarce Resources• Contending

• Shirley Jackson’s “Lottery”• Logan’s Run• Strong survive/weak die

• Problem solving– Hunting/gathering to

agriculture/husbandry– Farming/hunting to

industry– Industry to technology– Material (steel, cars,

trains, planes) to Immaterial (knowledge)

“Innovate, don’t litigate (contend)” Jonathan Schwartz,

CEO Sun Microsystems

theory of mind

26© Victoria Pynchon ‘07

Our ability to reason arose from our need to understand one another’s intentions and motivations, allowing us to coordinate within a group

we developed certain

tendencies of thought called

cognitive biases

universal ways of thinking about what motivates other people

But we never learned to read one another’s minds

Suspicion followed

What do we most want to know

What the HECK are they THINKING?

and will it be harmful

TO ME?

Will they cooperate

or attack ?

How can I make them

do what I want

them to do?

we read signs and symbols

in an effort to control our own destiny

and make common cognitive errors

Over-ascribing intention to our fellows when we are harmed andUnder-ascribing situation and circumstanceFalling prey to fundamental attribution error

in the absence of information, we

make stuff up

We see patterns

where none exist

Clustering Illusion

Cash Register Exercise

we discount everything our

bargaining partners say

reactive devaluation

confirmation bias

we search for and interpret information in a way that confirms our preconceptions

Prevent us from learning Other’s mind

• what do they want/need• what do they have of value• how do they value it• why do they want what they are seeking

Prevent us from accurately assessing •perils •opportunities

Cognitive biases

so how can we reach a mutually beneficial and durable agreement?

By ascertaining their interests, preferences, priorities, needs, desires, constraints, strengths, and weaknesses, as well as our own

•Form groups from as many different internal groups as possible

•List common and adverse interests of each external and internal bargaining party

10 minutes

Let’s start here!

Negotiating Women

May 11-12, 2009Victoria Pynchon, J.D., LL.M

ADR Services, Inc. Century City, California

• In 2000, 76.8 percent of women aged 25 to 54 worked outside the home.

• Women's earnings relative to men's have stagnated at 73.2 percent.

• 2.5 x > more women than said they feel "a great deal of apprehension”

• Men initiate negotiations about four times as often as women.

• will pay as much as $1,353 to avoid negotiating the price of a car

• typically ask for and get less when they do negotiate—on average, 30 percent less than men.

• 20 percent of adult women say they never negotiate at all

• lose more than $500,000 by age 60 if don’t negotiate first salary

• eight times as many male MA’s from Carnegie Mellon negotiated their salaries..

• women who consistently negotiate salary increases earn a $1 million more during their careers than women who don't.

• Women own 40 percent of all businesses in the U.S. but receive only 2.3 percent of the available equity capital. Male-owned companies receive the other 97.7. percent.

• Women report salary expectations between 3 and 32 percent lower than those of men for the same jobs

• men expect to earn 13 percent more than women during their first year of full-time work and 32 percent more at their career peaks.

Male Bargaining Advantages

Feel bargaining advantageFeel entitled to more rewardsLess likely to back downUse more distributive tacticsFeel entitled to informationSeen as stronger speakers than

women Seek more powerIntimidate

Female Bargaining Advantages

• more likely to follow a set of rules or steps to get to a final outcome

• take a broad or 'collective' perspective• view elements in a task as interconnected

and interdependent• see the big picture and come up with a

systematic plan on how to solve it.• work through steps by sharing experiences

while figuring out what both sides can gain to achieve an integrated outcome.

• more concerned about how problems are solved than merely solving the problem itself

• Instead of concentrating on what they want or need to get out of the negotiation women focus on what both sides need and how both parties can get what they want

Distributive and Interest

Based Bargaining

May 11-12, 2009Victoria Pynchon, J.D., LL.M

ADR Services, Inc. Century City, California

Distributive Bargaining

• The process by which the parties distribute between themselves what they believe to be a fixed “pie” of money, goods or services

• A Zero Sum exchange in which whatever one side gains, the other side loses

• Parties move toward resolution through a series of concessions

Grammar of Negotiation

Zone of Potential Agreement (“ZOPA”)

SELLER’S WALK AWAY POSITION $4,500SELLER’S WALK AWAY POSITION $4,500

BUYER’S WALK AWAY POSITION $5,000BUYER’S WALK AWAY POSITION $5,000$0$0

$7,000$7,000

Book Sale Exercise

Why We Don’t Enjoy Negotiating

Well, he never done this before, but seein' as it's

special circumstances and all, he says I can knock one

hunnert off that TruCoat.

Book Sale Exercise

Preparing to Bargain

The Dance The Dance

• Anchor

•Dance ends at Midpoint Between First Two Reasonable Offers

•Each Concession tends to be half the size of the previous concession and takes twice as long to be made

• If you try to short-circuit dance, your bargaining partner may be encouraged to use the mid-point offer to claim more value for himself

•Extreme Offers

•Make them soft

•Monitor response

•Anticipate making concessions

• Reasonable offer

•Demonstrate commitment

•Make only modest concessions

•Stress merit

Competitive BargainingCompetitive Bargaining

• make high initial demands•maintain those high level demands throughout the course of the negotiation •make few (and small) concessions •adhere to a high level of aspiration for one's own "side." •obtain as much information from the other side as possible• give as little information about one's own position away•bluff•mislead •threaten retaliatory action if the other side does not comply.

•Make contingent concessions, i.e., we’ll drop price to $1.9 million if you provide letter of credit or increase initial payment, etc.

•Creates appearance of increase in their number•Almost risk free

•Label concessions & demand reciprocity• Stress difficulty in making concession

•This will cut our profit razor thin•If we make this concession, you should be willing to pay in dollars rather than yen (or every 30 rather than 60 days or with interest)

Concessions & Reciprocity

A Reason and a Number

Resource Materials Part I, page 49

The Population of Iraq(exercise)

ANCHORINGANCHORING

The party making the first reasonable The party making the first reasonable offer should prevail over his bargaining offer should prevail over his bargaining partner who partner who must respond in the must respond in the range set by that party.range set by that party.

Using, Resisting & Creating (Meta)

Anchors

• Set false anchor• Frame the “deal”

• Nature of problem deal is capable of resolving

• Characterize deal in way favorable to your strengths– Routine extension of old

rather than new “deal”– View sale of biz as stand-

alone vs. synergy created by acquisition by buyer» Focuses on future rather

than present» Focuses on value to

BOTH partiesLax & Sebenius 3-D Negotiation at 199-201

FramingFraming

• Present Losses as Gains

•Strong tendency to prefer avoiding losses over acquiring gains

• competitor’s deal would be a loss because – mired in bureaucracy; can afford to fail; product not as good

• Use language that emphasizes your position & frames information in your favor

• fewer rather than greater – greater attention to needs; partner in place; more dedicated, motivated, faster

Cooperative Responses to Competitive Bargainer

•sub-divide concessions by dividing issues into smallest parts & offer concessions only on sub-parts; •make hypothetical offers that can be disowned later; •demand principled justifications for positions; and, •respond tit-for-tat, i.e., to intransigence with intransigence and cooperation with cooperation.

Mutual problem-solving inquiries include:

•what the parties believe would be a "fair" solution to the problem; •whether the parties can agree on criteria for a "fair" settlement; •and, what priorities each party has, i.e.,

•which issues are most important to each party and •which unimportant.

McNamara’s First Rule of WarEmpathize with your enemy

The man able to put himself into Kruschev’s shoes was the only one able to suggest a way for Kruschev to back down AND save face, i.e., ignore the second hard-line message and respond

to the first.

Tit for Tat

• Cooperation in a world of distrust

• Romeo and Juliet• The Prisoner’s

Dilemma

Negotiate from Strength

"When others sense your willingness to "When others sense your willingness to walk away, your hand is strengthened. walk away, your hand is strengthened. Sometimes you are better off not getting to yes.“

Robert Rubin, Chairman of Citigroup Executive Committee, former Secretary of the Treasury

Prepare Purchase and Sale of Pharmaceutical Plant Over Lunch

Distributive vs. Integrative Bargaining Dividing Fisher and Ury’s Famous Orange

Distributive Solution

Interest Based SolutionThe Cash Register

Exercise &The Persuasion Exercise

Asking Diagnostic Questions

THE GUY WALKS INTO THE BAR EXERCISE

• Competitor’s strengths, Competitor’s strengths, weaknessesweaknesses

• Competitor’s motivations, Competitor’s motivations, concerns, preferences, concerns, preferences, desires, needs, priorities, risk desires, needs, priorities, risk tolerance, tolerance, optimism/pessimism about optimism/pessimism about the futurethe future

• Know Your Best Alternative Know Your Best Alternative to a Negotiated Agreement to a Negotiated Agreement (“BATNA”) (“BATNA”)

Agreement reached Agreement reached must be better than must be better than no agreement at allno agreement at all

Bottom line or Bottom line or “reserve” price“reserve” price

• Plan Your Opening Plan Your Opening Offer/Demand Offer/Demand

• Plan the Number of Bargaining Plan the Number of Bargaining Moves (concessions) you’re Moves (concessions) you’re willing to make in Advance willing to make in Advance

A good hockey player plays where the puck is. A great hockey player

plays where the puck is going to be.

Bargaining Chips

INTERESTSINTERESTS

• Potential future business Potential future business opportunitiesopportunities

• Competitive market Competitive market advantagesadvantages

• Protecting market positionProtecting market position• Gaining competitive Gaining competitive

advantageadvantage• Acquiring a Piece of the Acquiring a Piece of the

ActionAction• Securing FutureSecuring Future• Avoiding RiskAvoiding Risk• Creating a Trading PartnerCreating a Trading Partner• Gaining SynergiesGaining Synergies• Expanding Customer BaseExpanding Customer Base

TERMS•Service/guarantees

• third party sources of recovery

•Timing of payments

• Metrics for satisfactory performance

•Method of payment

•Exchange rates

•Letters of credit

DiagnosticQuestions

• What are my intended outcomes and interests?– Preferences, priorities,

needs, desires, fears, aspirations, bottom line

• What are their possible interests and outcomes?– Put yourself in their shoes

• What are the options?– Potential points of

agreement– Differences that might be

dove-tailed

• Give good legal customer service– Probe for what customer really

needs• “if I can find a way to satisfy

that need, I will– Facilitate sales process without

sacrificing protection for company• Identify probable risks• Be willing to bear some risk

in exchange for satisfying more important interest

• Persistent points of impasse, have several potential solutions

• What is my Plan B?• Worst case scenario?• External standards• Reserve

price/terms/limits• Game plan

Creating Value

• Compatibility (identifying issues for which parties don’t have a conflict of interest)

• logrolling, or trading off concessions on low-priority issues for gains on higher priority issues

• trading differential time preferences, or allocating more initial outcomes to the more impatient party and greater profits over a longer period to the more patient party

• adding issues, or adding to the agreement issues not inherent in the initial negotiation framework

• contingent contracts, or bets based on different expectations regarding a future event.

Research reveals that negotiators often fail to implement these strategies and to reach integrative agreements

Creating Value for Both

“It’s a Buyer’s Market”

• Don’t reveal own weakness• Leverage their Weakness• Identify and value your Distinct

Value Proposition– Better product– Higher quality service– Good reputation– Attention– Nimbleness– Working outside the box

Negotiating from a Position of Weakness, Resource Materials, Vol. I at 41-43

Bargaining from a Position of Weakness

Reframe Weakness as Strength

• 1912 Presidential campaign

• Used photo of Roosevelt without permission

• 3 million copies printed• Penalty $1/copy

• Telegram: planning to print 3 million copies of campaign speech. Excellent opportunity for photographers.

• How much are you willing to pay us to use your photograph?

• “Appreciate opportunity but can afford to pay $250.”

“How David Beats Goliath” 5/11/09 New Yorker

• Last 200 years of warfare– Goliaths won 71.5% of time– Contests where Goliath has 10x

> power, Davids win nearly 1/3rd of the time

– Where “Davids” chose unconventional strategy, won 63.6% of the time• Bedouins v. Turkish

– Speed, time, endurance, knowledge of terrain, courage

– “art of war [is] about legs not arms”

• Full-court press– Endurance, stamina– surprise

Half Hour to Negotiate Sale of Pharmaceutical Plant

Dealing with Difficult People

%$%#@*@

May 11-12, 2009Victoria Pynchon, J.D., LL.M, ADR Services, Inc.

Century City, California

Behind every accusation is a cry for help

“They won’t use our form!”“They say ‘yes’ but they mean ‘no’.”“They don’t do what they say they will”“They don’t do their homework”“They don’t think of the big picture”“They don’t plan ahead”“It’s all or nothing”“They don’t use their discretion”“They’re not decisive”“They blind-side me”“They act like they’re playing for the other team”“They won’t close the deal”

• They’re not difficult, they are uninformed– Educate them about their

true interests, consequences of their actions, our BATNA

– Help them understand what is in their best interest

– May have misunderstood or ignored a crucial piece of information

From Bazerman & Malhotra, Negotiation Genius

They are not irrational; they have hidden constraints– Institutional– Precedential– Promises to others– Deadlines

From Bazerman & Malhotra, Negotiation Genius

They’re not evil; they have hidden interests.– Personal (unrelated to you or

deal)– Relational (related to you but

not to deal, i.e., “face”)– Political, social, cultural

From Bazerman & Malhotra, Negotiation Genius

Don’t say “yes yes yes” when what you really mean is “no no no”

• People err in one direction or the other by:– Prioritizing the relationship &

saying “yes” when you want/need to say “no” or

– Prioritizing their own power by brusquely saying “no” or

– Take middle ground of avoidance saying nothing & hoping a problem won’t arise

Resource Materials, Vol. I, 45-46

The Central Question

How can we address ______________________ our interests

While at the same time addressing ______________ your interests

in a way that satisfies _____________? our common interests

With thanks to mediator Sam Imperati

Name Where Focus Moves

Tactics “at the table” People, process Improved communication, build trust, counter hardball ploys, bridge interests

Deal design “on the drawing board”

Value, substance, outcomes

Invent and structure agreements to create greater value, better meet objectives, are more sustainable

Set Up “away from the table”

Architecture Ensure most favorable scope (right parties, interests, no-deal options, sequence

Party Interests: Apparent

Interests: Hidden Sequence

Customer Price, terms, external events, history, current corporate events, public statements

internal goals, pressures, priorities, fears

Sales, business representatives, legal, management

Qwest Price, terms, competition, history, current corporate goals, concerns

Internal goals, pressures, priorities, fears

Sales, CD&S, Offer Management, Regulatory, Legal, etc.

Competitors Price, terms, etc. Same as above

Scope Sequence Process Interests Goals

Type of deal: procurement, sale, service

Product, service, price, terms, parties, approval internal and external, press

Aligning interests, dove-tailing differences, problem solving, distributive/integrative strategy/tactics

Qwest: Profit, growth, reputation, limitation of liability

Right deal at right time with right parties at right price

Parties to deal: Qwest, customer, suppliers

Customer/Provider: profit, growth, reputation, limitation of liability

Moves Qwest in desired corporate direction; forwards interests of stakeholders

Non-parties:Government, shareholders, public, competition

Avoids potential liabilities, reputational damages

Apparent/Ascertainable Interests Hidden Interests/Constraints

Price, terms, timing Corporate Relation to other goals, plans, concerns, priorities, preferences

History, orientation to the future, threats to survival, profitability, stock price, mergers (planned or in process)

Personal: financial, power, reputation, fears, constraints, priorities

People whose interests are at stake if deal goes south

Third parties: stock market, analysts, bankers, government, customers, shareholders, competitors, adversaries, allies

Negotiation Ethics

– Lying about bottom line expected & sanctioned

– Misleading legal statements not likely problem – caveat emptor (“hire a lawyer”)

– Reasons for positions not expected to be believedREASONS FOR NEGOTIATION• Often very convincing• facts rather than opinion • Material or immaterial, • harmless puffing or bluffing

ABA Model Ruleslawyer shall not knowingly

make false statements of material fact or law fail to disclose material facts when necessary

to avoid assisting a criminal or fraudulent act

posturing or exaggeration

Statements regarding a party's negotiating goals or its willingness to

compromise, as well as statements that can fairly be

characterized as negotiation ‘puffing,' ordinarily are not considered ‘false

statements of material fact ‘within the meaning of the Model Rules.

understate willingness to make concessions

exaggerate strengths; minimize weaknesses

make estimates of price or value intentions re acceptable settlement withhold existence of an insurance

policy—unless required by law fail to correct the other party's

misunderstanding, based on information from third parties, of the finances of the lawyer's client.

ABA Advice

An attorney should avoid negotiating tactics that are

• abusive• not made in good faith• threaten inappropriate legal action• not true• set arbitrary deadlines• intended solely to gain an unfair

advantage or take unfair advantage of a superior bargaining position; or

• do not accurately reflect the client's wishes or previous oral agreements.

California Attorney Guidelines of Civility and Professionalism