Negotiation excerpt

42 hrs Negotiation Course Excerpt

Agabio Consultants

The dominance of NegotiationAll aspects of our life practically go through some kind of negotiation.Children are the best negotiators

The parties involved have different degrees of power, but never absolute power over the other (total control vs. partial control).

There are always people who have a different point of view from ours.Since everyone demands the right to have a personal opinion, we must find ways to respond to the mutual right to dissent.

This is the reason for negotiation.

Alternatives to the Negotiations:1. A party may dictate their decisions to the other.2. Joint Troubleshooting3. Arbitration

Conditions for NegotiationIn case of conflict parties can

4. ignore the issue and agreed to continue to disagree5. accept the "agree to disagree“ approach6. resolve the conflict

Drivers of Negotiating7. own convenience (business or personal)8. a penalty to force change9. an incentive to encourage to make a change10.high costs in the absence of agreement (history,

time) vs. cost minimization agreement

Negotiation is possible only when the parties are willing to abandon their initial positions and when this will shall be expressed in one or several points of contact.

Negotiation is impossible due to• immovable stance• circumstances precluding one of the parties

Negotiation is an ongoing process based on the interaction of the parties. The first estimates may be revised or confirmed (including SWOT analysis).

Negotiation is a process of resolving a conflict between two or more parties whereby both or all parties modify their demands to reach a compromise acceptable to all.

Negotiation is…

Negotiation is a process of setting up an achievable result, the views of both parties on what constitutes the ideal result.

At any time you can decide whether to negotiate (/continue to negotiate) or not to negotiate (/suspend negotiation) based on considerations of convenience (advantages vs. disadvantages).

There is always the possibility of waiving the agreement

Types of conflicts:1. Conflicts of interest: agreeing the terms of a

transaction or a contract (or re-negotiate)2. Conflicts of rights: difference in interpretation when

there is an agreement between the parties

You have to note that:1. The word "conflict" does not mean rupture, schism,

dispute, fight, quarrel, violence...2. A conflict of rights or interests has to be, for a good

negotiator, a precondition for resolution.3. The negotiation of the conflict is a victory of ideology over

experience.

Conflicts

Negotiation has to resolve conflicts without jeopardizing the whole of the relations between the parties.

Relations

Even ongoing relationships presentcommon interest

andconstraints between the parties

Common interest doesnot mean that any

conditions areacceptable

Acceptable conditioninvolves a conflict betweenthe parties, until they agree

to conditions that are allacceptable

Each party has the veto toany outcome that is

proposed by the other part:avoid the answer "no"

Remember that: Negotiated agreements are voluntary agreements.

A

Bdistance betweentwo opposite sides

A

B

A B

The negotiation is to reduce the distance between two opposite sides…

…until they reach a mutually acceptable position

Signals of willingness to move closer (from a syndicalist):"I see both sides walking toward each other.My objective is making the business side walking fasterand giving workers greater benefits than the steps theyactually made."

The "approach" word brings up the concept of distance:"The distance that separates them from us on this subject …""We have come very close."

We move from one place and we go to another placeWe move from our present position with the aim to reach a point ofagreement acceptable and, better, from a systemic point of view, thanthe initial one.

The "approach“ word means moving closer to the other party.

Our opponent does the same thing.

BAA

B

Reciprocity distance

The rangeoffered underthe negotiator islocated betweenthe MFP and itsbreaking pointor limit

At any point ofthe overlappinginterval (called"field ofexchange") ispossible theagreement

In practice how does it work the Process Approach?

A

B

A

BMFP MFP

breaking pointor limit

The two segmentsoverlap

Limit

Limit

A

B

A

B

MFP

MFPBP

MFP

BPMFP

BP

A

BParty A'sAspiration Range

Party A'sAspiration Range

ZOPA

ZOPA:Zone OfPossibleAgreement

Party A's...

Party B's...

Target PointResistance

Point

ResistancePoint

Target Point

More FavorablePosition

Limit,Borderline

Limit,Borderline

More FavorablePosition

Real base Aspiration Base

Aspiration Base Real base

Buyer

Seller

A

B

Target Point

ResistancePoint

Party A's...

ResistancePoint

Target Point

Party B's...

Buyer

Seller

Pressure

Pressure

BATNA is the Best Alternative to a Negotiated AgreementBATNA

WATNA is the Worst Alternative to a Negotiated Agreement

Example.Purchasing a car:

• my BATNA might be to accept the best deal I can get at a different dealer

• my WATNA might be to accept a car with fewer of the features I would like

60004000 5000 7000

seller

8000 €

buyer

ZOPA

5800

seller'sBATNA

5100

I'm the buyerI want to by a carCeteris paribus all the alternativesare illustrated in the table on the right

alt. 1 8000alt. 2 6050alt. 3 5800alt. 4 6500alt. 5 6800

this is myBATNA

BATNA is the bestwe can hope for ifnegotiations don't

succeedWATNA is theworst we can

realistically fear

Q. What decides the location of the point of agreement and the distance we have to travel to reach it?

A. The relative power of the parties and their ability.The skill of the negotiator is to travel the minimum consistent distance with obtaining the agreement.

A

B

MFPA

PBA

MFPBPBB

In this case, the rangegoes beyond the limit

PMFB

€

If B discovers this, in thecourse of negotiations, it will

be able to reach an agreementin the interval MFPB-PBA or

revise its initial position

If B doesn't discover this,it may reach an agreement

on inferior conditions tothose which would have

had to accept.

new PBB

because

A

B

MFPA

MFPBPBB

€

PBA

In this case, the rangegoes beyond the limit

PMFBIf B discovers this, in the

course of negotiations, it willbe able to reach an agreement

in the interval MFPB-PBA orrevise its initial position

because

If B doesn't discover this,it may reach an agreement

on inferior conditions tothose which would have

had to accept.

Simple negotiation process: • The negotiator has to reach the field of

trade-off• Once in it, the negotiator has to find an

agreement• When the negotiator discovers the

possibility of an agreement, he has to secure it at minimum cost and to agree on its execution

More detailed negotiation process

A negotiation can be considered as a more or less ordered sequence of different phases that can be modeled in our mind in a relatevily simple and credible way

ph1 ph2 ph3 ph4 ph5 ph6 ph7 ph8

We call it: The "method of the eight phases."It is a model and like all the models does not imply that it is a rule to be followed by all and in very religious way.

I will illustrate a specific process proposal due to the common experience, that every practitioner can use during a negotiation...

...but if you will find the concepts, that I will expose to you, useful, you can apply them (I hope) with success in the future; if you will find the same concepts useless or not completely useful, you have to abandon them immediately or modify them until you can find a formula that perfectly suits your needs.

Orthodox behavior vs. unorthodox behavior

• The method of eight phases: it focuses on the ability to negotiate (conflict is a fact and not an obstacle).

• The method of psychological school: it is mainly based on ideological ("neuro") schemes of the negotiators

• The method of necessity theory: it implies that the negotiator is independent of the interests because take in account the necessity of both parties

• The method of transactional analysis: "I am a person trustworthy and worthy of respect in myself and in the other."

• The method of approach to probability: it leaves much to be desired

• The method of game theory: it is explanatory, but very limited in practice

The most common methods of negotiation

Our approach is based on what the negotiators do, not on what they should do.

The success of a method doesn't depend on he fact that both negotiating parties use the same method.

The method of the eight phases

For now we will face the study of the negotiation without taking into account the levels of thought, that will be discussed later.

For now we will breakdown the development of the negotiation in eight phases that runs through every negotiation, which aim is to reach an agreement, taking in account that every phase • it doesn't necessarily proceed in a rigid order• it doesn’t need the same dedication and

attention

The differences among the phases are the different skills and the different techniques which are suitable in each case.

The eight phases constitute a map of the environment in which the negotiation takes place.

As in the case of a map• there is a relationship between the relative

position of its parts.• we don't need to start from a predefined point

The purpose of the map is to help us identify our surroundings,...

...so we can get going in the right direction to reach our destination,...

...which in the case of negotiation is to reach an agreement.

Metafora visiva della negoziazione

In the method of the eight phases there are four outstanding phases:

Preparation

1

Discussion

2

Proposal

3

Exchange

4

Among these main steps there are other minor.

Preparation ExchangeProposalDiscussion

1 2 3 4

Signals Package Closing Agreement

1

Preparation

2

Discussion

3

Signals

4

Proposal

5

Package

6

Exchange

7

Closing

8

Agreement

Here there are all the eight phases.

In any negotiation four of the eight stages are crucial:

The method is dynamic and develops continuously (no semantic apnea) in real-time:

• Preparation• Discussion • Proposal• Exchange

• what it is happening at every moment of the negotiation• the next position to which you want to reach• what you have to do to get it

1 2 3 4 5 6 7 8

There are no predefined sequential schemes

An adequate prep is the necessary condition for a successful negotiation

PREPARATION

The sine qua non of an adequate prep is • not having to find us in the negotiating table in the

condition to improvise• not having to take note that we should have had to

prepare ourselves better• not having to take note that the counterparty has

become aware of our lack of preparation, becoming more confident in itself and increasing its demands

The negotiator's attitude should be aimed at a continuous process in order to know

On the contrary the negotiator needs to know• what to get and• how to get it

• his behavior• what he want in the short and long term• why he want to get it• the aspirations and the circumstances of his opponent

The key issues of the preparation are:1. Objectives with their order of priority2. Information3. Concessions4. Strategy (Behavior)5. Tasks

Main objective:to maintain the status quo

Prep

arat

ion

No!

The order ofthe objectivescan bealtered in thecourse of thenegotiation

No!

Assigninga priority

to theobjectives Pr

iorit

y Objective 1

Objective 2

Objective 3

Objective 4

Objective 5

Prio

rityObjective...

Objective...

Objective...

Objective...

Objective...

We mustestimate ...

... the order ofpriority ...

Objective 1

Objective 2

Objective 3

Objective 4

Objective 5

difficult to determineduring negotiations

Our opponent will try tohide their preferences convincing us that allare equally important

The negotiatoralso practices

this type of bluff

60004000 5000 7000

B

€

A

ZOPA

Limit

MFP

There isan overallobjective:

to obtain the largest possiblepart of our objectives staying

as close as we can to ourMore Favorable Position

(MFP)

Obj

ectiv

e 1

Obj

ectiv

e 2

Obj

ectiv

e 3

Obj

ectiv

e 4

Obj

ectiv

e 5

The gap MFP-Limit meanssome goals less important than otherswe have fallback positions

...of theobjectives of the

opponents,

Negotiators with a lack of confidence in themselves or in theirproposals or that are intimidated by their opponent, even before

meeting him, are oriented to choose "soft" targets

Objective 1

Objective 2

Objective 3

Objective 4

Objective 5

Questioning realism.

Little is gained bypretending the

impossible.

S

A

M

T

R

Specific

Measurable

Achievable

Realistic

Timed

detail exactly what needs to be done

achievement or progress can be measured

objective is accepted by those responsiblefor achieving it

objective is possible to attain (important formotivation effect

Time period for achievement is clearly stated

Objectivesmust be...

Us and us only we can decide what areour objectives in negotiations.

When we are fixing them we aredefining the "success" or "failure" criteriachoosing the most probable level ofresistance of the opponent to our proposals

time

Prep Neg

There will beprevious circumstances,

or arising in the course of negotiations,preventing to achieve some or all of

the most favorable targets.

Experience and detailed planning will help choosing realistic goals.

A

LimitMFP

B

Limit MFP

Objective B

Objective A

Objective B

B

A

C

like to getlow priority

B

A

C

B

must gethigh priority

important to getmedium priority

B

C

A



A

B

A

C


We have to make a list of our objectives, including:

• those we want to achieve• those that are implicit and• those we already enjoy

We have to take into account that:• in any negotiations all the points can

be discussed again and againand

• we may lose some points that we had previously considered as earned

Full list = more favorable position, i.e. what we would like to get.

A

MFP Limit

B

A

C

B

C A




B

Limit MFP

B

A B A




1

1

A

MFP Limit

B

A

C

B

C A




B

Limit MFP

B

A B A




2

2

3

3A

MFP Limit

B

Limit MFP

B

A

C


B


B

C


A

important to getmedium priority B

A


A

MFP Limit

B

A

C

B

C A




B

Limit MFP

B

A B A




2

2

A


ZOPA 4

E




B

A

C

B

C AD

E

A B A




D C

B&A ask A1

B ask B + C

2

& DA ask A

3

A

MFP

LimitLimit

B

Limit MFP

Limit

ZOPA 1

ZOPA 3

ZOPA 2

A

B

A

B

A

B

Si:• todos nuestros objetivos son vitales (segun nosotros)• todos los objetivos de nuestro opositor son vitales (segun

ellos) • esperamos que sea el otro a moverse

el resultado serà• un punto muerto (ninguna de las partes quiere moverse)• una larga sesión (tendremos que prepararnos mejor)

A

LimitMFP

B

Limit MFP

Uno de los dos tendrá que hacer algún movimiento......para empezar el baile y motivar la otra parte a moversetambien y buscar conjuntamente soluciones sostenibles.

Como obtener un ZOPA?

Therefore, during the preparation, we have to train ourselves to make the first move, if necessary, and how to handle any countermoves

Preparation Discussion

Starting thesessions

between theparties

We have to prepareourselves before the

negotiation

Preparing ourselves inthe course of the

negotiation is the worstthat can be done

(objectives andintentions of the

opponent could act as aPattern Interruption)

must provideinformation onour opponent

we can verify informationthroughout the negotiating

sessions

Starting thesessions

between theparties

If our interlocutor tells us:"that, unless I get this and that"...

How do you know if it's true?For the way she says it?Because she seems irritated or sincere?

Maybe, but this is a veryunreliable way

It is better to start byinquiryaccurate study of thecontext

Preparation Discussion

we can verify informationthroughout the negotiating

sessions

But...

Can our opponent manipulate theinformation we receive before thenegotiation?

Is it about• a genuine discomfort?• an "environment adjustment" ritual?

Preparation isan ongoing

activity

Does the opponent come to the negotiation with a fully homogenized interests and objectives?

In the group of the opposition do not exist differences of opinion, of priority criteria, of sensitivities, of aspirations, of "position"?

Must get

Must getImportant to get

Must getImportant to getLike to get

Beginning withthe leastimportantpoints that

we'd like to get

Example

Contract: CDelivery (days): DDiscount: d

C: 100%D: 90d: -

C: 100%D: 60d: -

After identifying theminor objectives, wehave to define the

objectives that we mustto achieve.

C: 100%D: 70d: 15%

C: 75%D: 60d: 12%

C: 50%D: 40d: -

equallyacceptable

options

bottom linefallback position

limit position

Sometimes is verydifficult to identifywith precision this

point

objectives withoutwhich it would bebetter not to reach

any agreement.

best notto closethe deal

C: 41.5%D: 50d: 18%

At what point weshould leave the

negotiation withoutachieving anagreement?

C: 42%D: 50d: 18%

Not all our objectives have a chance of being achieved

It is very likely that, while the negotiation progresses, we have to leave • some objectives• a part of them

Must get

Must getImportant to get

Must getImportant to getLike to get

Must

Must Important

Must Important Like

€

€

Is crucial to spend toomuch time to definethe limit position of

the opponent?

Having an idea, a trace?

Yes

Spending too much time?

No

The objectives must wait until theright time to fix them definitely.

the circumstances,people and the power they hold,time,information

The objectives depend on, e.g.:

It is essential to checkthem continuously

the opponent

Beyond the goals wewant to achieve are

the objectives that wewould get.

It is even moreambitious targets,

we could get in the mostoptimistic circumstances

that if they had to besacrificed in the course

of negotiations, thenegotiator would not feel

too upset or guilty.

the opponent

It's important to take into consideration therelationship of forces with the opposing party.

Obviously it is a subjective exercise andwe have to avoid overestimating or

underestimating

our ownstrengths andweaknesses

opponent'sstrengths andweaknesses

• "irrationally" prefers a worse deal than whatis offered, or• "irrationally" decides apply a penalty to harmyou more than it's worth the concession can get

Comparative analysis to define • strengths and weaknesses • relative priority • realism of objectivesof both sides

n°Xx

weakness

strength

priority

unrealistic

realistic

objective

objective A

B

"A"'s situationevaluated by "A"

7a

8h 3d

9i

6g 5b 1f

2c4e

likeimportant must

"B"'s situationevaluated by "B"

1A 8D6F5G2E

3H 4B7C

likeimportantmust

"B"'s situationevaluated by "A" 5G'2E'

3A'1B' 4D' 8C'

7H'

6F'

likeimportantmust

"A"'s situationevaluated by "B"1b'

7d'8

8g'

2e'4a'

3c'

9h'

6f' 5d'

like important must

The parties must also thinkabout the list of their opponents.

A

7a

8h 3d9i

6g 5b 1f

2c4e

likeimportant must


n°Xx

weakness

strength

priority

unrealistic

realistic

objective

objective

A

7a

8h 3d9i

6g 5b 1f

2c4e

likeimportant must


Before the start of negotiations the parties must leave the unrealistic (or lessrealistic) and weakest objectives, concentrating themselves in the objectiveswith higher priorities, with more strengths and more realistic outlooks.

…will be filtered in the following way

E.g.: the “A's” objectives…

Prep Action in NegoMore time to think Less time to think

a part of this information willbe known in advance, during

the early stages of negotiation,especially during prep

alt alt2

alt

alt

ali alt1

alt

alt

alt5

altalt

alt

altn

alt3

alt

alt

alt4

The definition ofobjectives requires aconsiderable amount

of information.

INFORMATION

t

obj1 obj2 objn

At the beginning, generally, wehave the opportunity to correcthypotheses and assumptions

declared assumptions generatereaction from the opponent

We assume the existence of order and regularity

reaction

hypotheses try to evaluatereaction based on their

objectives

our part opponentourassumptions

about opponentmost likely targets

on the likelyreactions of theopponent to our

requests

setting the natureof opponent targets

ourtarget

opponenttarget

we assumes that ourrequests generate reactions

our requests

we hypothesize theevaluation of thekind of reaction

opponent reactionsopponent requests

setting the nature ofopponent tasks

setting the nature ofour tasks

Hypotheses Assumptionsvs.

An hypothesis is atheory that needsverification and

investigation

An assumption isany statement thatis believed to be

true

assumptionaccepted

hypothesis

hypothesis lapsed

lapsed

hypothesis verified

t

Prep

firstassumptions

info known inadvance

first hypothesesestablished

infocorrected

first hypotheseschanged

continuous updating of infos and of hypothesesespecially in the first stage of negotiation

assumptionsassumptions assumptions

Without testing opponent hypotheses we can • deny something that our counterpart does not demand us,

or• require something that our counterpart is not denying us.

t0 t1

Only beyond t1 wecan meet opponenthypotheses, i.e.after thepreparation phase...

...i.e. during thenext phases

During prep phase it is possible totest in advance only our hypothesis

Among our first tasks: testingopponent hypotheses

Contrasting hypotheses

Information current situationtheir interrelationshipshistory trading stylepersonalitymotivationscultural leveletc.

We OtherPart

What information wehave to give to the

other party?

When and How?

Negotiators are morelikely to hide information,creating:

useless andlengthy

discussions

more need fornegotiation

The moreinformation youcan collect on theother hand, thebetter will be theagreementreached

We rarely have fullinformation (thisis why negotiationsare unpredictable)

Information can leadthe other party to reviseits objectives,

If a party becomes aware of what the opponent thinkit would start from the limit (resistance) point of its opponentit would reject any changes

We should not lose sight of

initial stance

when and how far tomodify the initial stance

future stance

when to stop andsecure positions

stop

tt0

information

helps us to decidewhat to do

when to do

information


when to do

securepositions

information


when to domore information = more power

this does not mean that we have tohide information...

...we have to give a selectedinformation useful to achieve ourobjectives.

where to start from

information of what?

information onwhat is desired andwhat is not desired

information aboutthe intensity ofthe desires

The information required depends on thenegotiating environment

For our own purposes, we candevelop a detailed checklistwith the information that wehave used in the past, anduse as a guide for the future.

pastinformation

checklistuse as a guidefor the future.

We need to define clearly• our position more

favorable• agreed position

more likely• the limit of our

negotiating authority

• concessions we are willing to try

• legal and financial implications of these concessions

• Whether or not the product or service is essential to your business• Value for money• Price• Long Term Costs

e.g.:• After-sales service and maintenance arrangements• Lifetime costs of a product or service

• Quality• Product or Service Specifications• Delivery Date• Payment Terms• Length of Warranty• Warranty Coverage• Legal Jurisdiction• Packaging Requirements and Charges• F.O.B. Terms• Freight Charges and Carrier Used• Order Quantity• Length of Agreement• Cancellation Terms• Patents and Copyrights

Example of “Objectives”

A

BDuring the preparation phase it is extremely important setting an initial model of strategy, i.e. a meta-strategy, able to reprogram its behavior, during its running, whenever it is necessary.

Strategy concept

A

BDuring the preparation phase it is extremely important setting an initial model of strategy,i.e. a meta-strategy, able to reprogram its behavior, during its running, whenever it is necessary.

Strategy concept

t2t4

t3

The resulting strategy should provide us at all times the best plan of action (variable over time) to achieve the envisaged goals (varying over time).

The main feature of a good strategy is the "simplicity".

t1

A strategy is like a mean of transportation that takes us from a situation "A" to another situation "B"

The path, that the aforementioned "coach" (understood as a transport carriage) runs through, looks like a tree (sometimes we tend to simplify this concept using it as "the decisions tree").

Situation "A"

Situation "B"

A

MaybeYes

*

No

Z*

**B

In this context, negotiation is part of a more complex strategy to move from point A to point B.To do this we must

• make key decisions,• finalize important agreements and• accept assumptions

Very simplified scheme:

AB

B

Scheme a little more complex (but not too much compared to the real world)

Our strategy mustconsider all possible

ways that we cantake to negotiate, ...

... e.g. we choosethis "path"...

...if we see that ittakes an unexpected

direction...

... we must pause ... ... to reconsiderour strategy...

...through arecovery

strategy ...

IntendedStrategyDeliberate

Strategy Process

Unrealized

Strategy

EmergentStrategy Process

RealizedStrategy

The strategy should not be excessively rigid but capable of reacting to events arising in the course of trading

Negotiation excerpt

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