MBA: Consolidated overview of Negotiations

Types of negotiations:Distributive:One person gets more than anotherIntegrative:Can be used when other party is willing to problem solveThere is trustLong term relationship is importantA good agreement is better than a quick or bad oneHow To:Create a free flow of informationAttempt to understand the other persons real needs and objectivesEmphasize commonalities between the partiesSearch for solutions that meets both goals and objectivesConventional Negotiations* Focus on winning* Assert positions/personal preferences* Concede stubbornly* Seek arbitrary compromises* Engage in threats, bluffs or similar tactics
4 principles of effective negotiation* Separate the people from the problemListen activelyAcknowledge perceptions and emotionsSpeak about yourself, not them* Focus on interests, not positionsInterests:Often more than oneCan changeOften stem from deeply rooted human needs or valuesTypes of interests:Substantive: How people describe the issueRelational: How people think they should be treated or acknowledgedProcedural: How people think issues should be addressed* Invent options for mutual gainAvoid assuming there is a single solutionThink creativelySeparate brainstorming from evaluating optionsInvent options by redefining the problem:* Compromise* Logroll: give up what you want to get what you need* Expand/Modify the pie: increase the mutual gain by making the pie bigger, but still having the same percentage share* Find a bridge solution:Bogey technique inflate importance of something NibbleSnowballUltimatumAnchoringHypothetical* Insist on objective criteriaFair standardsMarket value, best practices, industry averages, equal treatment etc.Fair proceduresTake turns, last best offers
Evaluate and Select AlternativesNarrow the range of solution optionsEvaluate based on quality, objective standards, acceptabilityAgree to evaluation criteria in advanceBe alert to the influence of intangibles!!!Develop a BATNAWhat would you do if you fail to reach an agreementConvert the most promising options into practical choicesIf an offer is better than the BATNA, consider selecting it, otherwise consider rejecting it.
Framing* Represent the subjective mechanism through which people make sense out of situations* Lead people to pursue or avoid subsequent actions* Focus, shape and organize the world around us* Make sense of complex realities* Define a person, event or processReframing an offer:Ask why did you select that number?What if we agree to your offer, but you cover a warranty and service?
Cognitive Biases* Irrational escalation of commitmentCommit to a course of action even when that commitment is irrational* Anchoring and adjustmentStead fastThe anchor might be based on faulty of incomplete info* Issue framing and riskFraming can lead people to seek, avoid or be neutral about risk* Availability of informationInformation presentation can sway choices* OverconfidenceTendency to believe that their ability to be correct is greater than it actually isThe law of small numbersThe tendency of people to draw conclusions from a small sampleSelf serving biasEndowment effectThe tendency to overvalue something you own or believe you possesReactive DevaluationDevaluing the other parties concessions simply because they made them
Posted in MBA