Basics of Negotiation

Building Blocks of Negotiation

What Is Negotiation?

• Leigh Thompson: "An interpersonal decision- making process necessary whenever we cannot achieve our objectives single-handedly"
  
  • Ex Buying a car; buying a house; things at work
• Most people are not great negotiators b/c of:
  
  • Faulty feedback
    
  • Confirmation bias
    
  • Ego-centrism
    
  • Satisficing - settling for less
    
  • Self-Reinforcing Incompetence
    
    

Myths of Negotiation

1. Negotiations are fixed-sum
   
2. You need to be either tough or soft
   
3. Good negotiators are born
   
4. Experience is a great teacher
   
5. Good negotiators take risks
   
6. Good negotiators rely on intuition
   
   

Preparation Is the Key

• Situation & parties
  
• Issues & bargaining mix
• Interests
  
• Goals
  
• Bids & tactics
  
• Limits & alternatives
  
  

BATNA

• Best Alternative to a Negotiated Agreement
  
• Good for:
  
  • Knowing when to walk away
    
  • Testing proposals
    
  • Accepting things that are superior to your BATNA and rejecting things that are inferior to your BATNA
    
• Realistic, not idealistic
  
• Not static
  
• Stick to it
  
  

Example: Car Buying

How do you strengthen your BATNA?

What makes a dealer's BATNA stronger?

$19,000=compromise

Example: Job Hunting

• Your BATNA
  
  • How is it strengthened?
    
• Recruiter's BATNA
  
  • How is it weakened?
    
  • How is it strengthened?
    
    

Reservation Point

• Lowest point you can go
  
  • Ex: If BP offered you a job, what would Exxon- Mobile have to offer to match it?
    
  • Includes any relevant issues
    
• Determines when you should walk away
  
  

Reservation Point – Job Hunting

Exxon's Offer?

Target Point

Your ideal goal

Bargaining Range

Bargaining Zone

The range of negotiated outcomes that are acceptable to all parties

Negative Bargaining Zone

So What?

• BATNA & Reservation Point
  
  • Judge agreements
    
  • Improve agreements
    
  • No raw deals
    
• Target Point
  
  • Something to hsoot for
    
• Bargaining Range
  
  • Determines flexibility in strategy & concessions
    
• Bargaining Zone
  
  • Know if agreement is possible
    
    

Anchor Point

• Reference point
  
  • Adjusted as appropriate
    
• Can be arbitrary
  
• Set your anchor first!…sometimes
  
  • (Make the 1st offer w/ a good anchor)
    
    

The big idea

Preparation is the key

No preparation = no success

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