MGMT20011

BUSINESS NEGOTIATIONS
1. The Nature of Conflict & 5. Power, Ethics & Relationships
Negotiation 5.1. Power, Ethics and Relationships
1.1. Overview 5.2. Ethics
1.2. What is conflict? 5.3. Ethics in Negotiation
1.3. Introduction to Negotiation 5.4. Unethical Behaviour in Negotiations
1.4. Conflict Diagnostic Model 5.5. Power
1.5. Characteristics of Negotiations 5.6. Relationships
1.6. Negotiator Downfalls
1.7. Dual Concerns Model 6. Perceptions, Cognitions, Emotions
1.8. Key Ideas in Negotiations 6.1. Perception
1.9. Styles of Handing Conflict 6.2. Cognition Framing
6.3. Cognitive Biases in Negotiation
2. Distributive Bargaining 6.4. Emotions
2.1. Distributive Negotiation
2.2. Prices in Distributive Negotiations 7. Effective Communications
2.3. BATNAs for Distributive Negotiations 7.1. Communication in Negotiation
2.4. Strategies for Distributive Negotiations 7.2. How People Communicate in Negotiation
2.5. Tactics Tasks in Distributive Negotiations 7.3. Improving Communication in Negotiation
2.6. Positions in Distributive Negotiations 7.4. Communicating Effectively
2.7. Hardball Tactics 7.5. Questions in Negotiations

3. Integrative Negotiation 8. Creativity in Negotiations

3.1. Integrative vs Distributive 8.1. Creativity
3.2. Integrative Negotiation 8.2. Creativity in Negotiations
3.3. Integrative Negotiation Process 8.3. Being Creative in Negotiations
3.4. Questions for Integrative Strategy
9. Cross-Cultural Negotiations
4. Planning & Strategy 9.1. International Negotiation
4.1. Strategies vs Tactics 9.2. Culture in Negotiations
4.2. Planning Process 9.3. Negotiating Across Cultures
4.3. Preparation Process
4.4. Finalising a Deal 10. Best Practice in Negotiations
4.5. Investigative Negotiation 10.1. Subject Overview
4.6. Situational Factors 10.2. Best Practices in Negotiations
1 The Nature of Conflict & Negotiation
Overview Learning Outcomes
1. The Nature of Conflict & Negotiation
2. What is negotiation? And what are the different approaches to doing it?
3. Why is it harder to do well than we first think?
4. Four ideas that are fundamental to how we understand the negotiation process
There is more than one way to negotiate
There are two dilemmas to overcome in order to get a good outcome:
- Dilemma of Honesty
- Dilemma of Trust
Nego ia ion i a dance of mutual adjustment
Value Creation vs Value Claiming

What did we learn today?

Conflict is everywhere! And it i n always bad
Negotiation is a core skill in business and management for dealing with conflicts and differences of
interests.
But the principles for negotiating effectively apply in many different contexts, but just
business and management.
Negotiation is typically a better mean to resolve conflicts
Compared with using force or asserting rights alone.
M e le a e a g d a eg ia i g as they think they are
Turns out, i not rocket science, but it is not always easy to execute either.

What is Conflict
conflict? Conflict: There is a perception of opposing interests o ha a ie goals cannot be achieved
simultaneously.
Conflict may be defined as a ha di ag eeme ii a fi e e idea e c
(Pruitt & Rubim, 1986, p. 4)
Intrapersonal or Intrapsychic Conflict: occur within an individual
- e.g. sources of conflict can include ideas, thoughts, emotions, values, predispositions, or
drives that are in conflict with each other.
Interpersonal Conflict: conflict is between individuals
- e.g. between co-workers, spouses, siblings, roommates, or neighbours
- most negotiations in the subject are interpersonal
Intragroup Conflict: conflict is within a group
- e.g. among team and work group members and within families, classes, living units, and
tribes.
- this kind of conflict affects the ability to work and be productive
Intergroup Conflict: intergroup
- e.g. organizations, ethnic groups, warring nations, or feuding families or within
splintered, fragmented communities.
- quite intricate and complex

Categorising Conflict
1. On the basis of its cause or source
Substantiated Conflicts
- e.g. who should get what and what values to measure
Judgement
- e.g. whether there is particular cause or effect or why
Perceptual
- e.g. how is something being interpreted
2. On the basis of where it is focused
The Task
- e.g. the task, the nature of the task, who is doing what work
The Process
- e.g. the process, the r le he her he re fair and balanced
Status
- e.g. who is in charge, who gets to decide, etc.
Relationship Conflict
- e.g. interpersonal or relationships with co-workers
 - often causes negative effects through less productivity and more conflict
3. On the basis of its consequences
Functional vs Dysfunctional

Benefits of Conflict
1. Makes organizational members more aware and able to cope with problems through discussion
2. Promises organizational change and adaptation
3. Strengthens relationships and heighten1s morale
4. Promotes awareness of self and others
5. Enhances personal development
6. Encourages psychological development - it helps people become more accurate and realistic in
their self-appraisals
7. Can be stimulating and fun

Method to Resolve Conflict

Use Force or Power
Evoking Rights
e.g. legal processes through courts and tribunals or internal policy
Communication and Negotiation
an interest-based approach for both parties

Introduction What is negotiation?

to Negotiation Nego ia ion i a process by which two or more parties attempt to resolve their opposing interests -
Lewicki et al., Essentials of Negotiation (p.6)

Nego ia ion i an interpersonal decision-making process necessary whenever we cannot achieve our
objectives single-handedly -LL Thompson The Mind & Heart of the Negotiator

Negotiation: Negotiation is an interactive communication process that may take place whenever we
want something from someone else or another person who wants something from us.
There are two or more parties involved
There are differences of interests
The parties have an interdependence
but working in a relationship where there is conflict and interdependence, is better than no
relationship at all
The parties generally choose to negotiate
in certain situations, the parties are obligate to enter into a negotiation

Negotiation vs Bargaining
Bargaining to describe the competitive, win lose situations
e.g. haggling over the price of that item that happens at a yard sale, flea market, or used car
lot
Negotiation: a win win situations such as those that occur when parties are trying to find a
mutually acceptable solution to a complex conflict.

Why negotiate in ead re or ing o migh and rights

The law requires it
e.g. law requires negotiation prior to getting legal options involved
Time
Opportunities to explore new options
Maintain relationships
might and rights may ruin interpersonal relationships

Why are people ineffective negotiators?

1. The heightened emotional climate of negotiations
Makes rational decision-making difficult
2. The ab e ce f feedback eg ia i effec i e e results in biases against learning from
experience
Feedback: good feedback must be accurate, immediate and specific
Confirmation bias: the tendency to elec i f ma i a d ee ha a ee when
evaluating your own performance
- e.g. tending to credit yourself for good work and blame others for bad work
Egocentrism: i not me, i your fault, stupid!
3. The natural e de c a d a i fici g ma imi i g beha i
 Complex negotiations
Too much information
4. The problem of self-reinforcing incompetence
Under controlled experiments, most people over-estimate their performance on simple tests.
People are often reluctant to change behaviour.
Peo le end o a ionali e nde e fo mance and e e nali e he ca e
5. The i a gible hich ha e beha i
Intangibles: underlying psychological motivations that may directly or indirectly influence the
party during a negotiation
- The need to look good to people you represent.
- The desire to outperform your peers:
- Fear of setting a precedent in negotiations.
- The need o a e face
- The felt need to respond to provocative remark.
- A perceived failure to meet expectations.

Conflict
Diagnostic
Model

Characteristics Interdependence
of Interdependent parties: have interlocking goals the parties need each other in order to
Negotiations accomplish their objectives
hence have the potential to influence each other.
Independent parties: are able to meet their own needs without the help and assistance of others
they can be relatively detached, indifferent, and uninvolved with others
Dependent parties: must rely on others for what they need; because they need the help,
benevolence, or cooperation of the other
he de enden a m acce and accommoda e o ha o ide him and
idiosyncrasies
Interdependence depends on alternatives to working together
BATNA (best alternative to a negotiated agreement): negotiators need to understand their
o n BATNA and he o he a
- The al e of a per on BATNA i al a rela i e o he po ible settlements available in
the current negotiation

Types of Interdependence
Zero-Sum or Distributive Situation: in hich indi id al a e o linked oge he ha he e i a
negative correlation between their goal attainments
when parties are attempting to divide a limited or scarce resource
- e.g. a pot of money, a fixed block of time
Non-Zero-Sum or Integrative Situation: hen a ie goals are linked and there is positive
correlation between the goal attainments of both parties.

Negotiator When Not to Negotiate

Downfalls 1. Situations where you can lose everything
2. When o e running at capacity
3. Don nego ia e hen o he a a k fo something illegal unethical or immoral
4. When you have no stake in the outcome
5. When o e pressed for time
 6. When the counterpart is acting in bad faith
7. When waiting can improve your position
8. When o e not prepared

Negative Associations That Poorly Influence Performance in Negotiations

Nego ia ion i abo inning
But few negotiations are purely fixed sum
Yo need o be com e i i e in nego ia ion o do ell
The principle of maximizing joint outcomes does better
Good nego ia o a e bo n
Few good negotiators are born
E e ience i al a g ea eache of nego ia ion kill
But in the absence of feedback e d lea
Good nego ia o ake i k
Good negotiators plan and prepare to minimize risks.
Good nego ia o el on in i ion
Effective negotiators rely on information and evidence.

Common Negotiation Downfalls

Leaving money on the table.
don ma imi e al e b no e lo ing all o o ni ie
need to create value for both parties and claim value for yourself
Selling short inne c e
winning a negotiation but then realising there were opportunities unrealised
winning an outcome and then dissatisfied if the negotiation was too easy
Walking away without a superior alternative to go to.
walking away from a negotiation can make it difficult to come back with a new alternative
Settling for terms worse than the alternative (agreement bias).

Dual Concerns Dual Concerns Model: different ways of negotiating mapped out on the axis of c ce ab he
Model outcome vs concern about own outcome
Contending/Competitive: high concern for own without other outcomes
Inaction/Avoidance: low concern about own or others outcome
Compromising: moderate concern about both
Yielding: low concern about own outcome with high concern of others
Problem-solving: high concern for both own and o he a o come

Key Ideas in Methods of Negotiation

Negotiations Dual Concerns Model: different ways of negotiating mapped out on the axis of cooperativeness
(conce n abo o he o come) vs assertiveness (concern about own outcome)
Contending/Competitive: high concern for own without other outcomes
parties who employ this maintain their own goals and try to persuade the other party to yield
Inaction/Avoidance: low concern about own or others outcome
inaction is often synonymous with withdrawal or passivity; the party prefers to retreat, be
silent, or do nothing
Compromising: moderate concern about both
some argue that compromising is either lazy problem solving involving a half-hearted attempt
o a i f he o par ie in ere or simple yielding by both
others say it is a valid strategy to approach conflict
Yielding: low concern about own outcome with high concern of others
in ol e lo ering one o n a pira ion o le he o her in Yielding
- may seem like a strange strategy but it has its definite advantages in some situations
Problem-solving: high concern for both o n and o he a o come
the two parties actively pursue approaches to maximize their joint outcome from the conflict
Dilemmas of Negotiation
There are two dilemmas to overcome in order to get a good outcome
Dilemma of Honesty: Concern about how much of the truth to tell the other party.
Dilemma of Trust: Concern about how much should negotiators believe what the other party
tells them.

Mutual Adjustment
Negotiation is a da ce f m al adj me
Continues throughout the negotiation.
- The effective negotiator learns ead h e le ill adj a d eadj and work
o hidden i e and ha im o an
Adjustment works through a number of mechanisms
Concession Making
Justifying Proposals
Exploring Possibilities
Identifying Trade-Offs and Sources of Value
Over the course of a negotiation, concession making anchors future directions and restrict the
range of options.
- The e i man a li be een c and li
Concessions: when one party agrees to make a change to their original position, a concession has
been made
when a concession is made, the bargaining range (range of possible agreements) is further
constrained
- Sue would like to get a starting salary of $80,000, but she scales her request down to
$75,000, thereby eliminating all possible salary options above $75,000. Before making
any concessions to a salary below $75,000, Sue probably will want to see some
willingness on the part of the bank to improve its salary offer.

Value Creation vs Value Claiming

Value creation versus value claiming
Value Creation:
Negotiations involve both creating and claiming value.
They often represent different phases or parts of the negotiation process.
- Navigating this transition can lead to escalation if not managed well.
- The importance of what happens after the deal is done
Value Claiming: to do whatever is necessary to claim the reward often in distribute situations
with distributive bargaining
Distributive Bargaining: win lose strategies and tactics in distributive situations where there
can only be one winner given the situation and pursues a course of action to be that winner
Value Creation: to find a way for all parties to meet their objectives, either by identifying more
resources or finding unique ways to share and coordinate the use of existing resource
Integrative Negotiation: attempts to find solutions so both parties can do well and achieve
their goals with the purpose of the negotiation is to create value
Styles of
Handing
Conflict