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Coffee Contract

Coffee Contract

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Coffee Contract

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Presentation Transcript

  1. Coffee Contract • Role of seller • Anderson Coffee • Role of buyer • Statler Hotel, Cornell University • 10 minutes to read materials • 20 minutes to negotiate

  2. Slicing the Pie • How do you get the biggest piece? • Preparation • Offers • Alternatives • Concessions

  3. Offers • Folklore says to let the other party make the first offer • Is that a good idea? • Anchoring • People tend to focus heavily on the first offer • First offer correlates .85 with the final price

  4. Offers (continued) • What if the other party makes the first offer? • Immediate counteroffer • Take away the psychic hold of the 1st offer

  5. Offers (continued) • How do you feel when the other party accepts your first offer? • I should have asked for more • Maybe I just got into a bad deal • Less satisfaction • Do not accept first offers • They are just that – an opener • Expectation to negotiate

  6. BATNA • Best Alternative to a Negotiated Agreement • The lowest acceptable value to an individual for a negotiated agreement • Develop alternatives so you know at what point to stop negotiating • Gives you the POWER to walk away • If we cannot receive an offer of X-amount for the house, then what will you do? • Rent it out?

  7. What’s your bottom line? • “Tell me the bare minimum you would accept and I’ll try and throw in something extra” • “Why don’t you tell me the very maximum you are willing to pay, and I’ll try and I’ll see if I can shave off a bit”

  8. Concessions • Need some cushion (Target price versus reservation price) • Make the first concession • Why? • Norm of reciprocity • Positive feelings • Magnitude of concessions • Less and less to signal you are reaching the end

  9. Now What….. • I want the last remaining orange and so do you

  10. Principled Negotiation • Getting to Yes: Negotiating Agreement Without Giving In • Fisher & Ury • Principled Negotiation Strategies • Integrative negotiations • MIND-SET

  11. Mythical Fixed-Pie: Piece 1 • Assume there can only be one winner and one loser (distributive bargaining approach) • Fail to find mutually agreeable trade-offs

  12. “Let’s Compromise” • The middle ground • “Let’s split the difference” • Seems like a good strategy: Isn’t it better than no deal at all? • However, the middle ground results in incomplete satisfaction for both parties • “Leaving money on the table”

  13. However, only a small percentage of organizational negotiations are purely distributive, involving just one resource or just one issue • Consider: • Price, delivery date, financing, service, relationships • Salary, bonuses, flexible scheduling, location, vacation, moving expenses

  14. Negotiation Approaches Distributive Integrative Characteristics Bargaining Bargaining Available resources: Primary MINDSET: Primary interests: View of relationships: Fixed amount of resources to be divided I win, you lose Opposed to each other Short term Variable amount of resources to be divided I win, you win Convergent with each other Long term

  15. Integrative Negotiation Process and Preparation • BATNA • Determining & Valuing Interests • Objective Criteria • Sitting down at the negotiation table • Convey your interests effectively • Emotional Strategy • Where do you start?

  16. Focus on interests, not positions: • How do interests differ from positions? • Behind opposed positions lie shared and/or compatible interests • Each side likely has multiple interests that may be valued differently by each party • Complete satisfaction for both parties • There may be only one way to satisfy a position, but there are multiple ways to satisfy interests

  17. Preparation: Interests, not positions • Do you know your interests? • Identify and valueyour interests • Ranking process is one way to start • Consult with team to help valuation process

  18. Logrolling Approach • Trade-off on issues that are valued differently • Concessions • Concede on issue that is valued lowest to you – it may be of higher value to the other • Salary versus moving expenses

  19. Mythical Fixed-Pie: Piece 2 • The interests of the other party conflict with ours • “What’s good for them must be bad for us” • Our theories and assumptions about negotiation and conflict strongly impact our approaches and behaviors

  20. SALT (U.S. & Russia) • “I have had a philosophy for some time in regard to SALT, and it goes like this: the Russians will not accept a SALT treaty that is not in their best interest, and it seems to me that if it is in their best interest, it can’t be in our best interest” • Floyd Spence, U.S. Congress

  21. Finding Compatible Interests Can Be Difficult • Pairs were presented with a negotiation involving multiple issues regarding a job offer. • On two of these issues, the opposing sides had completely compatible interests (similar to an interest in the orange peel versus an interest in the fruit) • What percentage of the time did the negotiators make the trade-offs? • 50% • Left money of the table ½ the time

  22. Ways to find out the other party’s interests and related values • Ask questions • Listen to the response!

  23. Contingent concessions • I can give here if you can give on something • Make multiple offers simultaneously • Each is different, yet results in the same level of profitability for you

  24. Neutral Party • Two students in a library, one wants the window open, the other wants it closed. A loud argument breaks out. • How might this be resolved? • Fixed-pie assumptions • Anger closes our minds to alternative solutions • Not wanting to “give in” • There may be just ONE way to satisfy a position, but there are MULTIPLE ways to satisfy interests. • Inventing options for mutual gain

  25. Sitting down at the table • Perceive yourself working side by side with the other party to resolve the issue • Separate the people from the problem • Resist the temptation to “attack” people • Typically sit across from the other

  26. The Same Side • Try sitting on the same side of the table • Together we can attack this problem

  27. Presentation Approaches • Option 1: “I want that orange because I am interested in baking an orange cake and I need the peel” • Option 2: “I am interested in baking an orange cake and I need the peel, that’s why I want that orange” • How are these options different? • Which one better ensures the other knows your interests?

  28. Approaching the Issues:Where do we start? A. Start with the easy issues first! B. Start with the most difficult ones first! C. Either A or B: It depends D. Start with all of the issues at once

  29. Emotional Strategy • Poker face • Positive • Tough: Negative, Angry & Forceful

  30. For Integrative Bargaining… • Positive is best • More creative, more ideas • Found most trade-offs for joint gain • Highest level of value • Detriments of anger • Found fewest trade-offs • Least value

  31. Expressing positive emotion • “Put on a happy face” • Your smile is often reciprocated by the other side in terms of: • Positive feelings and behaviors • Finding trade-offs • Offering concessions

  32. Policy • “It’s company policy – there is nothing I can do” • Two volunteers to read an example?

  33. Insist on objective criteria • Search for a standard such as market value, expert opinion, law • This way, neither party is “giving in” to the other and a fair agreement is possible • We are asking for $200,000 in fees • How did you arrive at that figure?

  34. Conclusions • Most negotiations leave money on the table • Too quick to compromise • Fixed-pie assumptions are prevalent • Assume it is all or nothing • Assume our interests conflict with the other side

  35. Reaching agreement without giving in • To maximize value for you and the other party adopt an integrative mindset • Interests, not positions • Develop your BATNA • Adopt a problem-solving approach

  36. Short & Long Term Benefits • A collaborative approach may seem counter-intuitive, but it is often more effective • Consider joint gains and positive word of mouth • Better over the long run