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College of Business Administration Negotiations: Ed Wertheim Putnam Investments, February- March 2011 “Every human interaction is a negotiation.” “I have one thing that’s not negotiable. I demand that we meet your interests. The reason we need to meet your interests is that if we don’t meet your interests, you won’t meet mine. And I’m a real selfish guy…I want my interests met.” Bob Woolf, late great Sports Agent and Negotiator 1

Putnam 2011

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Page 1: Putnam 2011

College of Business Administration

Negotiations: Ed Wertheim

Putnam Investments, February-March 2011“Every human interaction is a negotiation.”

“I have one thing that’s not negotiable. I demand that we meet your interests. The reason we need to meet your interests is that if we don’t meet your interests, you won’t meet mine. And I’m a real selfish guy…I want my interests met.”

Bob Woolf, late great Sports Agent and Negotiator

1

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A negotiation is…An attempt to influence or persuade someone to think or act differently:

At least two partiesMaking decisions aboutInterdependent objectivesPeacefullyWithout knowing the outcome in advance

from Moshe Cohen

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College of Business Administration

Dispute Resolution Spectrum

Party Control Third Party Control

Negotiate Mediate ArbitrateLitigate

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Negotiating Styles

Concern for

Other person

Concern for self

Avoiding

Compromising

Competing

Collaborating

Problem solving

Yielding/

Accomodating

HighLowLow

HighHigh

Assertion

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Points to remember

At various times we use all the styles at different times (depending on your skill, the situation, experience)Be aware of your “default” style; we tend to rely on one style more than othersEach approach has a time and place; know whenTry to get a sense of your counterpart’s styleThink about how the two styles interact

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When we use each stle

Competing: when quick action needed, when unpopular actions needed; when you know you are right; to protect yourself from others who might take advantage of youAccommodating: when you know you are wrong; when issue more important to other; to build social credit; preserve harmony; help other learn by experienceAvoiding: when you need more time; when potential damage outweighs benefits of resolution; when issue is trivial to you; allows others to cool down

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When a style might be used

Collaborating: when both sides’ interests are too important to be compromised or overridden; to gain commitment; create value, make pie bigger, to learnCompromise: when goals are moderately important but not worth effort to be more assertive; when two sides committed to mutually exclusive goals; when collaboration fails; expediency

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Tendency when faced with conflict

Competing: likes to take charge, win, willing to lead, force; willing to sacrifice relationshipAccommodating/ Yielding: sensitive to feelings of others; wants to be supportive; prefers to maintain relationshipAvoiding: dislikes conflict; reluctant to get too involved in conflictCollaborating: problem focused; likes being creative, likes working with opposing sideCompromising: focuses on fairness; enjoys sharing; doesn’t want to appear selfish or too one sided

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We will focus on Integrative (win-win, cooperative, problem Solving, creating value)

Distributive (competitive, win-lose, claiming value)

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The Competitive BargainerAsk for more than you needNever say yes to first offerDon’t split the differenceMake concessions painfullyUse silenceUse authority ploy and other tactics“take it or leave it”Will walk awayActs as if “pie is fixed.”

Don’t let their tactics determine your approach

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The elements of Integrative (win-win) Negotiations

PlanningGoals

InterestsBATNA

Authoritative StandardsInventing options for mutual gain (create common ground)

Maximize joint gainRelationships

LeverageBargaining Styles

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Keys to Win-Win negotiation

•Careful planning•Principled negotiations•Separate the people from the problem•Focus on interest, not rights•Use objective standards•Invent options for mutual Gain

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Strategic PlanningIdentify Interests: What do all parties need and want?What do they have that we want?What do we have that they need?Look past hardened positions to softer underlying interestsDevelop non-economic optionsCreative problem-solvingBATNA and WATNA (best/worst alternative to a negotiated agreement)

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Strategic PlanningWhat do we know?What do we want to know?What information can we get in advance?

• Basic fact-gathering • Personality profiles

Preparing for an information exchangeWhat do they need/want?What are we willing to give? When?

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Strategic PlanningWhat is your basic style?What is the basic style of the other side?What approach will work best in this case?

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GoalsEnhance your skills in preparing for negotiations and conducting negotiationsEmphasize a joint problem solving (win-win) approach to negotiationsProvide opportunity to practice and evaluate your skillsHave some fun

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Goals“High Achievement comes from high aims”

-King Ching of Chou (1100 B.C.)

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InterestsThis is the key to every negotiation

“If there is one secret of success, it lies in the ability to get the other person’s point of view and see things from that person’s angle as well as from your own.”

---Henry Ford

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InterestsPositions are what people say they want (I want six months of free service)Interests are why they want what they say they want

(I want to make sure the system works; I want someone available to train my people and answer questions: I want to show my boss I got a good deal; I want a long term relationship with this vendor)

Set goals aiming at satisfying your interests, not your positions

Try to find your counterpart’s interests

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Interests: the “Iceberg”

Positions

Issues

Interests

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BATNABest Alternative to a Negotiated AgreementBe clear on what your alternatives are if this negotiation breaks downTry to improve your alternatives before the negotiationIt is a backup plan, not a fallback optionA benchmark, not a bottom lineEmpowerment for you, not punishment for themBrainstorm many alternatives, develop a few, select oneDevelop sequence of BATNA’s from intermediate to ultimateLook for creative alternatives (e.g. mediation)

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Know their BATNAwhat is the worst they can do to youTake away their stick

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Inventing options for Mutual GainOptions are possible deals or arrangements that both parties can agree toGenerate a number of options During the negotiation, try to generate options together based on interestsTry Reframing, BenchmarkingIdentify creative use of moneyAsk questions to elicit options…“what if…?”

“Under what circumstances could you agree….?”Ask for Advice: “How would you solve this problem?”Don’t reject….redirect

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Authoritative (legitimate) Standards“The first duty of a wise advocate is to convince his opponents that he understands their

arguments”Prepare in advance; be open to reason; Perception of fairness is often criticalFind out what the other side thinks is fair and use their standardAsk other party for objective criteria Independent Standards for deciding what is fairNo matter how integrative the discussion the “pie” still must be dividedPresent logic before position/priceUse as anchorsExamples: industry standard, proposals from other vendors, advice from 3rd party expert, precedent, market value, law, costs, fairness, equality, science

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Relationships“If you treat people right, they will treat you right-at least 90% of

the time” F. D. Roosevelt

Be clear about what you would like the relationship to be in the future

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CommunicationInquire about the other’s interests at every opportunityEverything you do conveys a messageAsk questions constantly“what do you do normally to ensure…”

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CommitmentMake sure the agreement is understood, that there is commitment that both parties will carry it out

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Leverage“Every reason that the other side wants or needs an

agreement is your leverage-provided you know those reasons.”

If you have leverage, you don’t need to be a great negotiatorWhichever party thinks they have the least to lose from “no deal” has the most leverageWhichever party thinks they have the most to lose have the least leverageIf you can’t walk, you can’t negotiate

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Social Influences on Negotiation

Our negotiations are surrounded by cultural norms that influence what we do; these may vary by culture

Norm of reciprocityConsistency ruleCommitment ployPhysical attraction and likability

Similarity (we tend to agree with people who are like us)

Authority:

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Preparing to negotiate

Set goals around each of the elementsGather information on each element; what information are you missingDevelop a strategy

How to begin the negotiationWhich interests to revealWhat questions to askWhat messages to conveyWhat options to advance and whenHow to support options with objective criteria

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Preparation pointers Setting Goals

Make sure your goals represent your interests, not positionsPrioritize interests

Gathering informationBe clear on BATNA, alternativesObjective criteriaOther parties: their interests, expectations, BATNA

How to Gather informationAsk questions and do research

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Developing a StrategyQuestions

What information are you missingHow well do you know the other sideDo their expectations match yoursAre your standards of fairness persuasive; what might they consider fair

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Thinking about RelationshipsWhat is the current relationshipWhat would you like it to beWhat messages should you convey

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Thinking about Interests and Options

Set their expectationsGenerate some optionsThink about framing your proposalsMake your standards of legitimacy and fairness clearTry to improve your BATNABe clear on your WALKAWAY and criteria for accepting an option

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Negotiating Behaviors

Be open to information; let go of your assumptionsLet your interests and goals guide your behavior, not the tactics of the other partyAsk open ended questionsActive listening: acknowledge the other’s responses; check for understandingListen for interests; reflective responses

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Example of open ended questionsOpen: “what would you like to see happen as a result of this meeting”Closed: you really don’t want this sale to go through, do you?”Open: “What did you discuss with my client?”Closed: Are you trying to steal this client?”

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Active ListeningMake sure you look like you are paying attentionWhen the other is finished paraphrase back to them what you think you heardDon’t assume you understand them; don’t cut them offBe respectful and validate what the other said even if you disagree

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Negotiation Psychology-biasesInformation BiasesBiased assimilation

We hear what we want to hear

Reactive Devaluation“If the other side proposed that, something must be wrong.”“If they want Jim as mediator, we don’t.”

Commitment“We have already spent that much on discovery.”

Consistency“We said we wanted $ 1MM. We can’t settle for a penny less”

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psychologyBe aware of the psychological impact of ….

AnchorsFraming

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Your sources of power1. Balcony: Power of Perspective2. Side: Power of diplomacy3. Interests: Power of Understanding4. Options: Power of Creativity5. Criteria: Power of legitimacy6. BATNA: power of Alternatives7. Bridge: Power of Persuasion

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Avoiding Impasse

Take breaks or adjournView from the balconyUse mediators

Transactional mediationPre-dispute mediationLitigation mediation

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Don’tDon’t get intimidatedDon’t make concessions too quicklyDon’t surprise the other sideDon’t assume the other side sees “fairness” the same way you do

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Practice good etiquetteAvoid things which irritate the other sideAvoid getting into the attack defend spiralGive one or two strong reasons rather than many little onesCheck for understanding and summarize frequentlyConstantly seek more information Reflect how they are thinking or feelingBest negotiators are good listeners, not talkers; be attentive, empathize, paraphraseNothing is just “their problem”Be patient; Make hypothetical proposals (“what if”)Manage expectations; lower those of others so your proposal can be accepted

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Review the NegotiationEvaluate the outcomeEvaluation your preparationEvaluate the process

What did you do that was effectiveWhat did the other side doWhat would you do differently next time

Learn from your negotiationsWhat surprisesWhat workedWhat didn’t workWhat would I do DifferentlyWays to Improve the AgreementSkills to work on

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Suggested ReadingsGetting to Yes, Fisher, Ury, Patton)Getting Past NO, UryInfluence: The Psychology of Persuasion, CialdiniGetting Together, Fisher and Brown

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Resources Getting to Yes: Negotiating Agreement Without Giving In-Roger Fisher, William Ury, Bruce Patton (Penguin Books, 1991)

Getting Past No: Negotiating with Difficult People -William Ury (Bantam Books, 1991)

Bargaining for Advantage: Negotiation Strategies for Reasonable People-Richard Shell (Penguin Putnam, 1999)

The Art and Science of Negotiation-Howard Raiffa (Harvard University Press, 1996)

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Final AdviceBe principledMake reasoned argumentsBe patience; use silenceListen; ask questions, paraphraseLet them save face; don’t corner an opponentAlways consider your BATNA; be prepared to walkLook for the positive; don’t just rebut

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I wish you much success in your negotiations