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Building Blocks 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

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Building Blocks of Negotiation

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  1. Building Blocks of Negotiation

  2. 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

  3. 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.

  4. Preparation Is the Key • Situation & parties • Issues & bargaining mix • Interests • Goals • Bids & tactics • Limits & alternatives

  5. BATNA • Best Alternative to a Negotiated Agreement (Fisher & Ury, 1981) • 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

  6. BATNA • Realistic, not idealistic • Not static • Stick to it

  7. Example: Car Buying How do you strengthen your BATNA? What makes a dealer’s BATNA stronger?

  8. Car Buying Your AP Dealer’s RP Your RP Dealer’s AP $18,000 $20,000 $22,000 $15,000 Bargaining Zone $19,000=compromise

  9. Example: Job Hunting • Your BATNA • How is it strengthened? • Recruiter’s BATNA • How is it weakened? • How is it strengthened?

  10. 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

  11. Reservation Point – Job Hunting Exxon’s Offer? Shell salary offer BP salary offer $46,000 $50,000

  12. Your RP - BP Exxon’s TP Your TP Exon’s RP $50,000 $52,000 $55,000 $57,000 Target Point • Your ideal goal

  13. Your RP - BP Exxon’s TP Your TP Exon’s RP $50,000 $52,000 $55,000 $57,000 Bargaining Range Exxon’s Bargaining Range Your Bargaining Range

  14. Exon’s Bargaining Range Your Bargaining Range Your RP - BP Exxon’s TP Your TP Exon’s RP $50,000 $52,000 $55,000 $57,000 Bargaining Zone • The range of negotiated outcomes that are acceptable to all parties

  15. Exxon’s TP Exxon’s RP Your RP Your TP $40,000 $45,000 $50,000 $57,000 Negative Bargaining Zone Exxon’s Bargaining Range Your Bargaining Range

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

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

  18. The big idea Preparation is the key. No preparation = no success.

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