Negotiating at a Glance INTRODUCTION By Timothy M. Dayonot

In negotiation, there is no single best approach or fool-proof strategy. Every action or strategy has advantages and corresponding downside risks. Negotiation is about persuading the other side to say yes to something that both sides can live with. Hence, their "problem" is your problem. Persuasion can be accomplished through integrative and/or distributive moves. In large part, effective negotiating involves the effective management of the tension between moves to claim and create value. Preparation is key to successful negotiations.

INTERESTS

Dig for underlying wants, needs, concerns and fears: 1) Focus on interests, not positions; 2) Carefully think about the full range of interests of all parties; 3) Many interests are hidden and must be surfaced; 4) A position is how people think their interests will be satisfied. Interests are the motivations behind positions; 5) Carefully consider what your opponents interests might be; 6) Focus on why they say "no", and seek to "solve" their problem.

Uncovering Interests: 1) Imagine yourself in their shoes; 2) Ask them; 3) Ask others; 5) Do research; 6) Brainstorm a list.

Priority and importance: In most cases, a person will have multiple interests of different importance. Interest can often shift in respect to importance in the course of a negotiation.

Common Underlying Interests: 1) Reducing risk; 2) Precedents (avoid or set); 3) Saving face; 4) Approval; 5) To impress; 6) To matter; 7) Reward/punish behavior; 8) Feel competent; 9) Desire to help; 1 0) Fair treatment; 11) Be proven right; 12) Desire for a bargain; 13) Joy; 14) Time; 15)To be respected; 16) Reputation and legacy; 16) To teach a lesson; 17) Create a deterrent; 18) Desire for closure.

Value Creation: Joint gains are a product of the identification of interests that are used as a basis for fashioning options that are attractive to both sides. You must actively surface interests to achieve this and more time will be needed when negotiating.

NO AGREEMENT ALTERNATIVES (BATNA)

The best of your no-deal alternqtives. The standard by which any proposed agreement should be measured. Generally speaking, the better your BATNA, the stronger your position.

1) Carefully evaluate your BATNA, failure to do so is essentially negotiating blindly. To "do nothing" may be your/their BATNA.

2) It's often not the reality but the perception of your BATNA that gives you strength. But, a truly strong BATNA will give you more confidence and you will tend to be more assertive.

The BATNA Game.1) Ask: Do you/they have a BATNA? Is your/their BATNA strong /weak? Has the perception of your/their BATNA been manipulated? What will trigger you/them to take BATNA? What's the impact of time on your/their BATNA?

2) Diplomatically disclose your BATNA if strong, (inform, not warn). Don't disclose if your BATNA is weak.

3) Carefully consider your opponents BATNA. If they appear to over estimate their BATNA, you may want to lower their expectations. Where appropriate, consider ways to strengthen your BATNA and weaken theirs.

Reservation Value (RV): Initial amount or set of circumstances that triggers one to take their BATNA. Set this value in advance, but be open (but cautious) to adjusting it as circumstances require. RV's are usually confidential and highly guarded.

STANDARDS & CRITERIA

Use standards and principles to help strengthen your arguments and proposals. Creating your own standards in absence of any can be useful. Note: They can be a form of an anchor. Suggestions: 1) Have some standards in mind before hand 2) Speculate on what standards they might use 3) Think about how to challenge detrimental standards offered 4) Anticipate dueling standards and what your response will be 5) Where two competing but legitimate standards exist, offering to split the difference may be justified.

Examples of Standards/Criteria:

1) Market Value; 2) Precedent; 3) Scientific judgment; 4) Professional standards; 5) Moral standards; 6) Equal treatment; 7) Tradition/custom; 8) Industry standards: 9) Self-created, but rationally based. Dueling standards between parties is common.

OPTION BUILDING and VALUE CREATION

When appropriate, seek to generate creative ideas that can satisfy the interests of both sides, i.e. , create joint gains or pie expanding solutions. Value-create to bridge any value gaps between the parties. Try not to leave any potential value on the table (i.e., unclaimed). Seek to reach Pareto Optimality. Brainstorm ideas. Build rapport and then invent, then decide, when brainstorming

Formulas for Value Creation

1) Look for differences in the value of resources {low cost, high benefit exchanges) and consider the use of logrolling.

2) Look for differences in the value of time {short term vs. long term, such as installment or phase-in agreements).

3) Look for differences in how parties forecast the future using contingency agreements (e.g. if X happens, then Y occurs).

4) Look for difference in aversion to risk (e.g., agreements where a party who takes the greater risks is rewarded).

· 5) Look for complementary exchange of goods or skills.

6) Look for opportunities to increase value through economies of scale (i .e., do things together to save money and resources).

PREPARATION

Adequately prepare for your negotiations (in writing), in proportion to importance of the outcome. Failure to prepare adequately is a major reason for poor outcomes. Preparation is one of the phases in a negotiation that you can control-so take advantage of this. Ask: a) What are my/their interests (and order of importance); b) What are my/their non-interests; c) What are my/their no-deal alternatives and which is my/their BATNA and is it strong or weak? d) What standards can 1/they use?; e) What is my/their initial reservation value?; f) What ideas can I use to create joint gains?; g) What info do I want to Give, Get or Guard?

2. If multiple persons are negotiating on your side, prepare as a group if possible and determine roles and responsibilities.

3. Ask yourself: What is my general strategy? Collaborative? Distributive? Tone? Probe for interests early? Anchoring early? Are long term relationships important? What is the impact of time?

TRAITS & PERSONALITY

Be aware of your default style and tendencies. Understand the implications of particular behavior patterns. Alter or modify your approach as strategic and appropriate. A very effective negotiating style is being collaborative (someone who is both assertive and cooperative). If you tend to have an unassertive personality, don't give up too easily. If you tend to be overly aggressive, seek to be more collaborative.

USING AGENTS I ACTING AS AN AGENT

Many negotiations employ the use of an agent or third party. Challenge: Interests of agent and principle are not always in alignment. Role of Agent: 1) Agent to Agent; 2) Agent to Principle; 3) Agent as mediator (between client and other agent or principle; 4) Principle who fakes agent status.

Why agents used: 1) Expertise; 2) Detachment; 3) Tactical Flexibility; 4) Time; 5) Ego; 6) Emergency; 7) Escape pain.

When using or acting as an agents, clarify: 1) Authority; 2) Interests; 3) Bargaining range; 4) BATNA; 5) Expectations (If possible, prepare a detailed preparation outline together) .

COMMUNICATIONS

The life blood of all negotiations. Frequently plagued by misunderstandings. Your ,one" is critical. Suggestions.

1) Aim for 2-way communications; 2) Treat people respectfully (build rapport); 3) Use active listening (repeat what they say and test for understanding); 4) Use questions more frequently; 5) Listen, listen, listen. Poor listening skills contribute to a large number of ineffective negotiations. People are often too preoccupied with what they are saying and neglect to listen attentively. Use •r statements rather than ')'ou" statements.

PERCEPTIONS

Be aware that your perception of the other side is often distorted by several dynamics. Be alert to: 1) Affiliation bias; 2) Advocacy bias; 3) Partisan perceptions; 4) Na'ive realism; 5) Selective perception; 6) Attributional distortion; 7) Reactive devaluation; 8) Advocacy bias.

Note: When in doubt, we tend to assume the worst; Our fears often translate into their intentions-guard against this.

Process Manager. View yourself as a "fly on the wall" and monitor the process from an outside point of view. Move between viewing the world from their point of view, your point of view and the view of a "fly on the wall".

INTERNAL ORGANIZATIONAL NEGOTIATIONS

Internal negotiations have special dynamics because of the higher level of interdependence and the inability to choose not to negotiate. Parties BATNA are typically weak. Suggestions:

1) Don't be blind sided, negotiations are taking place all the time; 2) Authority by itself does not guarantee solutions; 3) Technical solutions don't always address political problems; 4) Negotiate on all points on the compass; factor-in all the stakeholders in the situation; 5) Build coalitions incrementally and carefully; 6) Be alert to blocking coalitions; 7) Because of unavoidable long-term relationships in internal negotiations, be hard on the problem and soft on the people and seek solutions that create joint gains.

PROCESS MANAGEMENT

The following should take place in most negotiations: 1) Clarify issues; 2) Clarify facts; 3) Check for authority; 4) Check for time limits; 3) Build rapport (put parties at ease); 5) Probe for underlying interest; 6) Probe for strength of their BATNA; 7) Use active listening; 8) Invent, then decide; 9) Carefully record agreements in writing; 1 0) If possible, do shared note taking.

RELATIONSHIPS

The nature of your relationship frequently will impact the substance of your negotiation. Some risk must be taken to build trust. There are risks involved when surfacing underlying interest in order to create value. Trust lost, is extremely difficult to rebuild. Don't lose sight of opportunities for long term versus short lived gain. Be hard on the problem, soft on the people.

DISTRIBUTIVE BARGAINING (Value Claiming)

Most negotiations have elements of claiming and creating value. Tricks and ploys are viewed by some as useful in non-complex negotiations, one time negotiations (non­repeating), where your BATNA is strong and transaction time is limited. Be aware that distributive tactics impair efforts to create value, can be hard on relationships, and can leave value unclaimed (i.e., non-Pareto optimal deals).

Common Distributive Ploys: 1) Deceptive devaluation (bogey); 2) Artificial concession; 3) Good guy/bad guy; 3) Entrapment; 4) Ambiguous authority; 5) Extreme opening demands; 6) Hardhearted partner/superior; 7) Hardship to generate sympathy; 8) Fake or exaggerated BATNA; 9) Delay tactics; 1 0) Artificial deadlines; 11) Take it or leave it; Changing negotiating styles; 12) Insults/outbursts; 13) Praise; 14) Playing dumb; 15) Silence; 16) Deception or false facts;17) Lack of capacity;18) Impossibility (tied hands)

Patterns of Concessions Strategy in distributive bargaining. 1) Seek to control bargaining range; 2) Anchor high (ambitious but defendable); 3) Attempt to dislodge their anchors (filches); 4) Make gradually decreasing concessions and only if you have to; 5) Remember that there is an expectation by many that some back and forth should occur and failure to do this can result in non-optimal outcomes.

BATNA Weakening: 1) Consider weakening (real or perceived) their BATNA; 2) Manipulate their perception of their and your BATNA; 3) In conflict situations, work to reduce the attractiveness of there "do-nothing" alternative, including punishing or rewarding behavior.

SOURCES OF POWER (influence and persuasion)

There are a number of sources of power (influence) when negotiating. Having multiple sources can give you more power. Sources of power include: . . 1) A good alternative (BATNA); 2) Power to weakening attractiveness of no agreement alternatives; 3) Ability to

' reward/punish behavior; 4) Skill & knowledge; 5) Good relationship; 6) Elegant solution; 7) Standards & criteria; 8) Building coalitions; 9) Controlling the process; 1 0) Controlling the flow of key information; 11) Ability to skillfully execute distributive ploys.

DEALING WITH THE HARD BARGAINER

Defined: 1) Refuses to negotiate; 2) inflexible/ridged; 3) Non-communicative; 4) Offensive or hostile; 5) Employs tricks and ploys.

Traditional Approac"-: 1) Recognize the tactic; 2) Ignore the tactic; 3) Expose the tactic; 4) Negotiate about the rules of the negotiation.

William Uty •s Additional Suggestions. Don't:: 1) React; Go to the Balcony; 2) Argue; Step to their side; 3) Reject; Reframe; 4) Push; Build them a golden bride; 5) Escalate; Use power to educate. Note: Asking for advice can be disarming.

ATTRIBUTIES OF AN EFFECTIVE NEGOTIATOR

They include: 1) Flexibility on means, firmness on goals; 2) Ability to have empathy 3) Inventive/creative; 4) Patience; 5) Tenacity; 6) Well prepared; 7) Good listener; 8) Hard on the problem, soft on the people; 9) understands the implications of focusing on power, rights and interests when negotiating.

Complied by Timothy Dayonot, Fall 2012, U.C. Berkeley, Haas School of Business. & Goldman School of Public Policy. Copyright 2012