NEGOTIATION SKILLS Business Management12 Ms. Melbourne
What is negotiation? • Managers spend a great deal of time negotiating. Some examples: • salaries for employees • making deals • working out differences with peers • resolving conflicts with employees • Negotiation is a process in which two or more parties who have different preferences must make a joint decision and come to an agreement. • Both parties typically use a bargaining strategy.
Bargaining Strategies • There are two general approaches to negotiation: • distributive bargaining • integrative bargaining
Example You see a used car advertised for sale in the newspaper. It appears to be just what you’ve been looking for. You go out to see the car. It’s great and you want it. The owner tells you the asking price. You don’t want to pay that much. The two of you then negotiate over the price. This negotiating process is called distributive bargaining.
Distributive Bargaining • Negotiation in which any gain made by one party involves a loss to the other party • Every dollar you can get the seller to cut from the price of the used car is a dollar you save. • Every dollar the seller can get from you comes at your expense.
Distributive Bargaining • the essence is negotiating over who gets what share of a fixed pie • widely used in labour-management negotiations over wages and benefits • each party has a target point that defines what he/she would like to achieve • each party has a resistance point that marks the lowest outcome that’s acceptable • the area between these points is the settlement range • the tactic should focus on trying to get your opponent to agree to your specific target point or to get as close to it as possible
Distributive Bargaining Party A’s target point (buyer) Party B’s resistance point Party A’s resistance point Party B’s target point (seller) $1000 $1100 $1150 $1200
Integrative Bargaining • Negotiation in which there is at least one settlement that involves no loss to either party. • Integrative bargaining is preferable to distributive bargaining because it builds long-term relationships and facilitates working together in the future. • We see more integrative bargaining in organizations because of the conditions necessary for this type of negotiation to succeed.
Distributive leaves one party a loser builds animosities and divisions between people who may have to work together Bargaining Strategies • Integrative • creates win-win situations • bonds negotiators and each feels he/she has achieved a victory
How do you develop effective negotiation skills? • Research your opponent. Acquire as much information as you can about his interests and goals. • Begin with a positive offer — a small concession. • Address problems, not personalities. Avoid the tendency to attack your opponent. Separate the person from the problem.
How do you develop effective negotiation skills? • Pay little attention to initial offers. Treat an initial offer as merely a starting point. • Emphasize win-win solutions. Present options in terms of your opponent’s interests. • Be open to accepting third-party assistance. When stalemates are reached, consider the use of a neutral third party.
Neutral third parties • Mediators can help parties come to an agreement, but they don’t impose a settlement. • Arbitrators hear both sides of the dispute, then impose a solution. • Conciliators are more informal and pass along information between the parties, interpret messages and clarify misunderstandings.