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Negotiations Training MAT. Dilbert on Negotiations. You don’t get what you deserve in life… You get what you negotiate. Dilbert on Negotiating. Clearly we can do better than Dilbert!. Agenda. Importance of Negotiations Negotiations Styles and Tips The Negotiation Process and Preparation

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dilbert on negotiations
Dilbert on Negotiations

You don’t get what you deserve in life…You get what you negotiate

dilbert on negotiating
Dilbert on Negotiating

Clearly we can do better than Dilbert!

agenda
Agenda
  • Importance of Negotiations
  • Negotiations Styles and Tips
  • The Negotiation Process and Preparation
  • Creating Alternatives
  • Final Exercise & Key Takeaways
let s start with the facts
Let’s start with the facts…

1

  • 70%of people say they don’t like negotiating
  • 80% of business people say they want to be better negotiators
  • 90% of people after finishing a negotiation say they have no idea if they could have done better

And, most importantly…

  • Everyone negotiates every day

2

3

what types of negotiations have you been involved in remember everyone negotiates every day
What types of negotiations have you been involved in? Remember, everyone negotiates every day

Note: Write answers on flipchart paper

this is the last day of mat you should be structuring segmenting your answers
This is the last day of MAT – You should be structuring/segmenting your answers

Types of Negotiations

Daily

Periodical

Professional

Personal

Let’s put the list we just developed in our 2-by-2

everyone has personal and professional negotiations on a daily and periodic basis
Everyone has personal and professional negotiations on a daily and periodic basis

Types of Negotiations

Daily

Periodical

  • Deadlines for delivering work to boss
  • Amount of improvement needed in work by subordinates
  • Asking for more responsibility / money
  • Purchasing equipment / supplies / products
  • Winning support for your ideas

Professional

  • Driving – passing and turning others
  • What time you’ll be home for dinner
  • Who does chores / errands
  • Buying a car / house
  • Agreeing with partner / spouse on key decisions

Personal

Other examples and segmentations are possible as well!

learning comes from doing let s do an exercise
Learning comes from doing: Let’s do an exercise…
  • In Negotiations, as in most things in life, the more we practice the better we get
  • The following exercise will give you a chance to try your negotiation skills
  • This is a competitive negotiation between groups… The goal is to maximize profits!
exercise instructions
Exercise Instructions
  • You are each a member of the Board of an Oil Company in one of two countries: Alba or Batia
  • Alba and Batia sell oil to a third country, called Capita
  • Alba and Batia make profits depending on:
    • What price they sell oil at, and
    • What price the other country sells oil at
  • However, Alba and Batia have bad relations
    • They do not talk to each other
    • They each want their country to grow more than the other

Note: Trainer should read Trainer’s Note that accompanies case for full information

exercise
Exercise

Do exercise!

post exercise questions
Post-Exercise Questions
  • What were everyone’s final profits?
    • Write them on a flip-chart
  • What did we learn?
the negotiation mentality has to be win win

Win

Win

Win

Win

Win

Win

The negotiation mentality has to be win-win

Wrong Mentality: I Win, You Lose

Lose

Win

Right Mentality: Let’s Find a Way to Both Win

Win

you need to focus on the big picture and long term
You need to focus on the big picture and long-term

Wrong Mentality:The Tree

Right Mentality:The Forest

Wrong Mentality:The Battle

Right Mentality:The War

however you also need to master the following three things
However, you also need to master the following three things:

NegotiationStyles

  • Understand your own
  • Be aware of theirs

Process and Preparation

  • Prepare, prepare, prepare
  • Recognize that most negotiations succeed because of work done in advance!

Creating Alternatives

  • Identify win-win opportunities
  • Think outside the box

These three items will be the focus of the rest of the module

agenda1
Agenda
  • Importance of Negotiations
  • Negotiations Styles and Tips
  • The Negotiation Process and Preparation
  • Creating Alternatives
  • Final Exercise & Key Takeaways
what is your negotiation style
What is your negotiation style?
  • Think of a negotiation you are currently involved in (or have recently been involved in)
    • Write it down
  • Take 1 minute to think about how you would describe your style in this negotiation
    • Write it down
  • Take 2 minutes to tell the person next to you about the negotiation and your style in it
    • 4 minutes total
circle the element which is more your negotiation style for each of the following pairs
Circle the element which is more your negotiation style for each of the following pairs

OPTION A

OPTION B

Participants are friends

The goal is agreement

Make concessions for relationship

Be soft on the people and the problem

Trust others

Change your position easily

Make offers

Disclose your bottom line

Accept losses to reach agreement

Search for the answer they will accept

Insist on agreement

Try to avoid a contest of wills

Yield to pressure

Participants are adversaries

The goal is victory

Demand concessions from relationship

Be hard on the people and the problem

Distrust others

Dig into your position

Make threats

Mislead as to your bottom line

Demand gains to reach agreement

Search for the answer you will accept

Insist on your position

Try to win a contest of wills

Apply pressure

what is your negotiation style1

But, is there another option?

What is your negotiation style?
  • Sum up your Total of Option A and divide by 13
    • This is how much you make Concessions
  • Sum up your Total of Option B and divide by 13
    • This is how much you Compete
collaboration concession or competition
Collaboration > Concession or Competition

Collaboration is the balance of consideration for self and others

circle the element which is more your style for each of the following pairs 1 of 2
Circle the element which is more your style for each of the following pairs (1 of 2)

Concession

Collaboration

Competition

Participants are friends

The goal is agreement

Make concessions for relationship

Be soft on the people & problem

Trust others

Change your position easily

Make offers

Participants are adversaries

The goal is victory

Demand concessions from relationship

Be hard on the people and the problem

Distrust others

Dig into your position

Make threats

Participants are problem solvers

The goal is awin-win outcome

Separate peoplefrom the problem

Be soft on people,hard on the problem

Proceed independent of trust

Focus on interestsnot positions

Explore interests

circle the element which is more your style for each of the following pairs 2 of 2
Circle the element which is more your style for each of the following pairs (2 of 2)

Concession

Collaboration

Competition

Disclose your bottom line

Accept losses to reach agreement

Search for the answer they’ll accept

Insist on agreement

Try to avoid a contest of wills

Yield to pressure

Mislead as to your bottom line

Demand gains to reach agreement

Search for the answer you will accept

Insist on your position

Try to win a contest of wills

Apply pressure

Avoid having a bottom line

Invent options for mutual gain

Develop mutual options

Insist on objective criteria

Reach a result independent of wills

Be open to reasonnot pressure

collaboration the negotiation vision

Collaboration

Collaboration

Participants are problem solvers

Avoid having a bottom line

The goal is awin-win outcome

Invent options for mutual gain

Separate peoplefrom the problem

Develop mutual options

Be soft on people,hard on the problem

Insist on objective criteria

Proceed independent of trust

Reach a result independent of wills

Focus on interestsnot positions

Be open to reasonnot pressure

Explore interests

Collaboration – The Negotiation Vision
what is your negotiation style2
What is your negotiation style?
  • Think back to the negotiation you talked with your partner about a few minutes ago
  • Take 3 minutes (total) to answer the following questions with your partner:
    • Were you more conceding or competing?
    • How can you use the concept of collaboration to help you specifically in that negotiation?
    • What is the one thing you want to improve in your personal negotiation style?
a proactive personal style is positive and never angry
A proactive personal style is positive, and never angry

“If you can make a man laugh, you can make him like you”– Alfred E Smith, NY State Governor

“You can’t shake hands with a clenched fist”

– Ghandi

use non verbal communication to soften the hard line position of others
Use non-verbal communication to SOFTEN the hard-line position of others

S MILE

  • Make a positive, friendly, connection

O PEN POSTURE

  • Show you are open to negotiate

F ORWARD LEAN

  • Create a bond

T OUCH

  • Put yourselves on the same team

E YE CONTACT

  • Maintain the bond and the focus

N OD

  • Gain their trust
here are 8 tips to negotiating well 1 of 3
Here are 8 tips to negotiating well… (1 of 3)
  • Don’t be afraid to negotiate!

1

  • Experienced negotiators know you can negotiate anything
  • Other people will take advantage of you if you’re shy/timid
  • Not wanting to negotiate can be very expensive!
  • It’s like anything – the more you practice, the better you get. So practice!

2

  • Don’t get suckered by “rules” or “standard contracts”
  • Experienced negotiators know you can negotiate anything
  • Rules are often a trick – experienced negotiators refer to rules because they know people respect rules
  • There are no standard contracts – You can always negotiate
  • You should feel 100% comfortable making contract changes before you sign – the other party might say this is not normal, but it is!
here are 8 tips to negotiating well 2 of 3
Here are 8 tips to negotiating well… (2 of 3)

3

  • Never be the first to name a figure
  • Once you give a figure, that becomes the anchor point – and you’ll never know what you could have got
  • Ask them “What’s their budget?” or “What are they expecting?” – You have nothing to lose

4

  • Ask for more than you expect to get
  • Always start high – the worst that happens is they feel good because you’re giving them a “special deal”
  • Once the other person gives their number, even if it\'s much better than you expected, say something like "I think you\'ll have to do better than that". Don\'t be arrogant or aggressive. Just say it calmly.

5

  • Don’t get emotionally involved
  • Keep calm, patient, and friendly
  • Leave your ego at the door and look for win-win opportunities
here are 8 tips to negotiating well 3 of 3
Here are 8 tips to negotiating well… (3 of 3)

6

  • The final decision doesn’t rest with you
  • This shouldn’t be a way to re-negotiate after agreeing, but does give you time to evaluate the terms without the pressure
  • This prevents other people from rushing you

7

  • Don’t act too interested
  • Giving the impression that you’re willing to walk away will have a big impact on the negotiations. It’s even better if you really are willing to walk away.
  • Play the reluctant buyer or seller

8

  • Don’t make the other person feel they’ve been cheated
  • Negotiations should leave both parties feeling satisfied – or it will come back to bite you in this or a future deal
  • Be willing to give up things that don’t matter to you to gain goodwill
your character who you are and how you act will follow you through negotiations
Your character – who you are and how you act – will follow you through negotiations

“Men of genius are admired…

Men of wealth are envied…

Men of power are feared…

But only men of character are trusted”

-Alfred Adler, Austrian Psychologist

In Negotiations, be a man or woman of character

agenda2
Agenda
  • Importance of Negotiations
  • Negotiations Styles and Tips
  • The Negotiation Process and Preparation
  • Creating Alternatives
  • Final Exercise & Key Takeaways
preparation is the key to negotiations
Preparation is the key to negotiations
  • “By failing to prepare you are preparing to fail”– Benjamin Franklin
  • “If I had 6 hours to cut down a tree, I’d use the first hour sharpening the ax”– Abraham Lincoln
  • “Information is a negotiator’s best weapon”- Zdenek Necas, CzechAdventurer & Entrepreneur

Should Abraham Lincoln have spent more time preparing?

typical negotiations have three parts

Request bids

Receive bids

Negotiate

Typical negotiations have three parts
  • Contact suppliers
  • Inform them of what you want
  • Ask for lowest possible price
  • Ask when they can submit bid by
  • Receive bids
  • Analyze bids
  • Discuss pros and cons of each supplier
  • Choose supplier(s) you are most interested in
  • Contact them to negotiate best possible price

Typical negotiations follow this standard format… and have little planning / preparation

the right way to negotiate is to start with a plan negotiate terms first and provide bid feedback

DevelopPlan

Request Company Info

Prepare Terms(RFP)

NegotiateFinalTerms

Request & ReceiveBids

ProvideBidFeedback

HoldFinal Negotiation

The right way to negotiate is to start with a plan, negotiate terms first, and provide bid feedback

Request bids

Receive bids

Negotiate

  • Identify scope
  • Create work plan and timeline
  • List stake-holders
  • Set goals
  • Identify all possible suppliers
  • Identify company info required
  • Send suppliers detailed request for info
  • Create terms you want included
  • Think outside the box for all terms
  • Request feedback on terms
  • Update terms where it makes sense
  • Inform suppliers terms are final
  • Ask suppliers for bids
  • Set a firm date
  • Receive and analyze bids
  • Provide relative / absolute feedback
  • Make it clear to all providers they need to reduce price
  • Inform selected providers they are in final stage
  • Hold final round (in person if large purchase)
the key to negotiations is to do them on your terms
The key to negotiations is to do them on your terms

Common Misconceptions

Reality

  • We’re a small company and they’re a huge company – we have no leverage
  • We can’t change the terms
  • Suppliers won’t provide their company information
  • Before you sign a contract is when you have ALL of the leverage– ask for what you want
  • It takes time and hard work to do the preparation – but it’s worth it!
  • This works for big and small negotiations – the only thing that differs is the extent of your effort

If you are the customer and there are competitive suppliers,YOU have all the power to set the terms the way you want them

two recent taca volaris negotiations followed this process to success
Two recent TACA & Volaris negotiations followed this process to success

Maintenance Components

Flight Simulator

Scope

  • 10-year Component repairs contract for TACA & Volaris Airbus fleet
  • Purchase of Flight Simulator for Pilot Training

Key Success Factors

  • Following the process
  • Setting terms in advance of price
  • Creating a competitive environment
  • Following the process
  • Setting terms in advance of price
  • Creating a competitive environment

Time-frame

  • 3 months
  • 3 months
  • Large savings over previous contract terms
  • Purchase price significantly below market price

Results

developing a clear plan will lead you to success
Developing a clear plan will lead you to success

DevelopPlan

1

Identify scope

  • What’s in scope? What’s out of scope?
  • Why?

Create workplan and timeline

  • What activities do we need to plan?
  • How long will each activity take?

List stakeholders

  • Who needs to be involved?
  • How and when should we get them involved?

Set goals

  • What do we expect to achieve?
  • What are our financial targets?

If you don’t make time to plan, you might as well not negotiate

a detailed business questionnaire was sent to each supplier at the very beginning of the process
A detailed Business Questionnaire was sent to each Supplier at the very beginning of the process

Request Company Info

2

TACA-Volaris Component MaintenanceBusiness Partner QuestionnaireTable of Contents

  • Ask for as much information as you want – Don’t be shy!
  • This is your chance to learn more about the suppliers
  • If they don’t do a good job filling this out, it’s an indicator of how much they value your business

1.1 Company Information

1.2 Financial Information

1.3 Organization & Capabilities

1.4 Key Accounts

1.5 Engineering and Technical Capabilities

1.6 Component Maintenance Capabilities

1.7 Staffing

1.8 Inventory Management

1.9 Customer Support and Account Management

1.10 Pricing Proposal Questions and Payments

1.11 Quality and Schedule Requirements

1.12 Warranty

1.13 Components Shipment

APPENDIX A: SUB-CONTRACTOR INFORMATION

the terms should be prepared using supplier contracts and internal brainstorming
The terms should be prepared using supplier contracts and internal brainstorming

Prepare Terms (RFP)

3

Analyze supplier contracts

  • Use old contracts
  • Request supplier contracts

Setterms

Update terms

Synthesis

Feedback

  • Synthesize thoughts
  • Use external consultant / SME if needed
  • Create document with all terms other than price
    • Product description
    • Service levels
    • Timelines
    • Penalties
    • Additional benefits
    • Volume discounts
    • Etc…
  • Use process shown on next slide (or other similar process)
  • Hold multiple rounds of feedback if necessary
  • Finalize terms that you want – The negotiations should be on your terms
  • Remember however that everything has a cost

Conduct internal sessions

  • Identify company needs
  • Think creatively about what else to include
feedback on terms should be addressed fairly and must be agreed before negotiating price
Feedback on terms should be addressed fairly, and must be agreed before negotiating price

NegotiateFinal Terms

Supplier input required

4

RFP Category

Supplier 1 Response – Round 1

TACA Response

Supplier 1 – Compliance (Yes/No)

3.4.3 Over and above repair conditions

Question from Supplier: If we understand the paragraph in the RFP correctly, you mean that “over and above pricing” will only apply to repairs or removals due to: (see table on left)

Yes, Over and above pricing only apply to the circumstances listed in the RFP

4.4 Turn Time Requirements

The return destination of subject component has to be specified by Volaris-TACA on the first day of shipping from any Volaris-TACA designated station

We cannot provide a return destination as inventory planning is dynamic

4.5.2 Responsiblities

- Penalties

Under the assumption that all packages will be awarded to Supplier

Please see Revised RFP Requirements sent on May 22nd for new terms – overall cap on Penalties

4.11 PMA support and credit

For PMAs used upon Volaris - TACA\'s request, TAT-performance, MTBR performance guarantee and AOG rules as set forth in the RFP will not apply

All Components, OEM or PMA, that are part of the Agreement will be subject to TAT, MTBR, and AOG penalties

a pricing sheet should be based on your terms and allow you to compare apples to apples
A Pricing Sheet should be based on your terms and allow you to compare apples-to-apples

Request & Receive Bids

5

qualitative feedback should be provided to allow suppliers to address areas of weakness
Qualitative Feedback should be provided to allow suppliers to address areas of weakness

Provide Bid Feedback

6A

Poor

Average

Excellent

Below Average

Key Strengths

Good

  • Experience with A320 simulators
  • Competitive prices

Weaknesses

  • Customer service
  • Level of detail
  • Software upgrades
  • Product is new
pricing feedback should also be provided in a way that forces competition
Pricing Feedback should also be provided in a way that forces competition

Legend

0%-15% away from best offer

15%-30% away from best offer

30%+ away from best offer

Provide Bid Feedback

6B

Level D Simulator plus Airbus Parts & Data

Supplier 1

Competitor

Competitor

Competitor

Note: Price variation in legend can and should be different for each supplier

a final negotiation day also possible by email will ensure you get to the lowest price
A final negotiation day (also possible by email) will ensure you get to the lowest price

Hold Final Negotiation

Simulator Final Negotiation Day

7

Objectives

  • We have asked suppliers:
    • To present advantages of their company / product
    • To address any perceived weaknesses
  • We will give feedback and ask for additional benefits
  • Review updated offers
  • Choose and inform top two suppliers
  • Give additional feedback
  • Look for win-win ways to reduce price
  • Ensure clarity
  • Receive final offers
  • Review offers
  • Make decision
  • Make final ask
how can you use this process
How can you use this process?
  • Imagine you are responsible for negotiating Volaris’s new photocopier leasing contract
  • What would you do for each of the first three elements of the process?

1

2

3

DevelopPlan

Request Company Info

Prepare Terms(RFP)

  • Identify scope
  • Create work plan and timeline
  • List stake-holders
  • Set goals
  • Identify all possible suppliers
  • Identify company info required
  • Send suppliers detailed request for info
  • Create terms you want included
  • Think outside the box for all terms
  • How can you use this process in any work-related negotiations you have now or will have in the near future?
agenda3
Agenda
  • Importance of Negotiations
  • Negotiations Styles and Tips
  • The Negotiation Process and Preparation
  • Creating Alternatives
  • Final Exercise & Key Takeaways
creating alternatives starts with interests instead of positions
Creating alternatives starts with interests instead of positions

Interests

Positions

  • What’s really important to me?
  • Can I put myself in your shoes?
  • How can we both achieve our interests?
  • How can I explain my position?
  • Why don’t they understand me?
  • How do I win?
once you identify interests you can start generating alternatives
Once you identify interests, you can start generating alternatives

Position

Interests

Alternatives

  • I want a salary increase
  • I want to be recognized equally with Jose
  • Title
  • Office
  • Responsibilities
  • Salary
  • Short-term vs long-term pricing
  • Benefits related to other products boss manages
  • We’re having a tough quarter
  • I need to make this look good for my boss
  • I need 25% savings on this contract
  • You clean the house this weekend
  • I look after the kids all week and want to be appreciated for it
  • Flowers
  • Vacation
  • Dinner for two
the pareto principle demonstrates how you can be equally satisfied in different situations
The Pareto Principle demonstrates how you can be equally satisfied in different situations

Pareto Principle

  • You can be equally happy at any point on the line
  • So, you can make trade-offs (find alternatives) that enable an equally satisfactory agreement
  • Remember – everyone has a differently shaped line!

Other Benefits

Money

knowing your batna or more importantly having one allows you to negotiate confidently
Knowing your BATNA (or more importantly having one!) allows you to negotiate confidently

Best Alternative To a Negotiated Agreement

Or, your next best option

  • The most single powerful tool in a negotiation is the ability to get up and walk away from the table without making a deal
  • Negotiating from a position of real need is a bad, bad situation. You are almost certainly going to lose. The other party will push until they find your threshold of pain
  • In order to negotiate effectively, efficiently, and wisely, it is crucial to prepare. Preparation means studying the interests and BATNAs of the other side as well
  • Think about wanting to buy tickets to a football game – but they’re only available from scalpers. You start to negotiate. Then you think… This is getting expensive… What’s my BATNA?
never negotiate without having alternatives
Never negotiate without having alternatives
  • What are examples of business negotiations you have done (or might do in the future) on behalf of Volaris?
  • What alternatives did you (or can you) create?
  • What happens if you don’t have alternatives?
look for points of leverage you can benefit from
Look for points of leverage you can benefit from

What is leverage?

  • Imbalances of information
  • A situation which is competitive between two parties who both want your business
  • Something that is more important to one party than the other

How can you use leverage?

  • Search for and identify points of leverage as early as possible
  • Hold your position when you have a point of leverage
    • The other party will eventually agree
  • Don’t flaunt it

Generate alternatives taking advantage of your points of leverage

agenda4
Agenda
  • Importance of Negotiations
  • Negotiations Styles and Tips
  • The Negotiation Process and Preparation
  • Creating Alternatives
  • Final Exercise & Key Takeaways
one more exercise
One more exercise…
  • Hand out Parker exercise
one more exercise1
One more exercise…
  • What did we learn from this exercise?
if you only remember four things from this session
If you only remember four things from this session:

NegotiationStyles

  • It’s about collaboration
    • Not concession or competition

1

Process and Preparation

  • Negotiations succeed because of work done in advance

2

Creating Alternatives

3

  • Always create alternatives

4

Everything is negotiable

here are the 8 tips to negotiating well
Here are the 8 tips to negotiating well…
  • Don’t be afraid to negotiate!

1

  • Don’t get suckered by “rules” or “standard contracts”

2

  • Never be the first to name a figure

3

  • Ask for more than you expect to get

4

  • Don’t get emotionally involved

5

  • The final decision doesn’t rest with you

6

  • Don’t act too interested

7

  • Don’t make the other person feel they’ve been cheated

8

and finally a list of negotiation tactics
And finally, a list of negotiation tactics…

Tactic

Explanation

  • Need to go to boss for approval above $x
    • Used to get agreement on lower price
  • Switch negotiators mid-negotiation
    • Allows the new person to re-open items
  • Combine the best prices on different items
    • Ask other side for best deal including other’s pricing
  • State that this is the final offer
    • Use it only when you mean it or lose credibility
  • Work in pairs, one nice and one tough
    • Nice one can gain knowledge, tough one blamed
  • Say you’re ready to sign, then raise final issue
    • Try to take advantage of other’s eagerness
  • Act to extremes – rude, crazy
    • The real act here is distraction
  • Signals can be true or false and intentional or unintentional
    • Look for them and use them, but proceed with caution
  • Leave the room because of an issue
    • Usually designed to make the other person over-think something
  • Ask lots of questions, indicating creative solutions
    • Used to understand other side better, especially by buyers
  • Authority Limits
  • Change the Negotiator
  • Cherry Picking
  • Final Offer
  • Good cop / Bad cop
  • Hovering Pen
  • Mind tricks
  • Signaling
  • Walk Out
  • What if?
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