{"id":104,"date":"2014-08-16T20:34:42","date_gmt":"2014-08-16T20:34:42","guid":{"rendered":"https:\/\/courses.candelalearning.com\/orgbehavior1xmaster\/?post_type=chapter&p=104"},"modified":"2019-04-18T19:05:38","modified_gmt":"2019-04-18T19:05:38","slug":"10-5-negotiations","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/suny-orgbehavior\/chapter\/10-5-negotiations\/","title":{"raw":"10.5 Negotiations","rendered":"10.5 Negotiations"},"content":{"raw":"
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Learning Objectives<\/h3>\r\n
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  1. Learn the five phases of negotiation.<\/li>\r\n \t
  2. Learn negotiation strategies.<\/li>\r\n \t
  3. Avoid common mistakes in negotiations.<\/li>\r\n \t
  4. Learn about third-party negotiations.<\/li>\r\n<\/ol>\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\nA common way that parties deal with conflict is via negotiation. <\/span>Negotiation<\/span><\/span> is a process whereby two or more parties work toward an agreement. There are five phases of negotiation, which are described below.<\/span>\r\n
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    The Five Phases of Negotiation<\/h2>\r\n
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    \r\n\r\n[caption id=\"\" align=\"aligncenter\" width=\"455\"]\"\"<\/a> Figure 10.8<\/strong> The Five Phases of Negotiation[\/caption]\r\n\r\n<\/div>\r\n

    Phase 1: Investigation<\/h2>\r\nThe first step in negotiation is the investigation<\/span><\/span>, or information gathering stage. This is a key stage that is often ignored. Surprisingly, the first place to begin is with yourself: What are your goals for the negotiation? What do you want to achieve? What would you concede? What would you absolutely not concede? Leigh Steinberg, the most powerful agent in sports (he was the role model for Tom Cruise\u2019s character in Jerry Maguire<\/em>), puts it this way: \u201cYou need the clearest possible view of your goals. And you need to be brutally honest with yourself about your priorities.\u201d<\/span>\r\n\r\nDuring the negotiation, you\u2019ll inevitably be faced with making choices. It\u2019s best to know what you want, so that in the heat of the moment you\u2019re able to make the best decision. For example, if you\u2019ll be negotiating for a new job, ask yourself, \u201cWhat do I value most? Is it the salary level? Working with coworkers whom I like? Working at a prestigious company? Working in a certain geographic area? Do I want a company that will groom me for future positions or do I want to change jobs often in pursuit of new challenges?\u201d\r\n\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n
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    Phase 2: Determine Your BATNA<\/h2>\r\n
    \r\n\r\nIf you don\u2019t know where you\u2019re going, you will probably end up somewhere else.\r\n\r\nLawrence J. Peter\r\n\r\n<\/div>\r\nOne important part of the investigation and planning phase is to determine your BATNA<\/span><\/span>, which is an acronym that stands for the \u201cbest alternative to a negotiated agreement.\u201d Roger Fisher and William Ury coined this phrase in their book Getting to Yes: Negotiating without Giving In<\/em>.\r\n\r\nThinking through your BATNA is important to helping you decide whether to accept an offer you receive during the negotiation. You need to know what your alternatives are. If you have various alternatives, you can look at the proposed deal more critically. Could you get a better outcome than the proposed deal? Your BATNA will help you reject an unfavorable deal. On the other hand, if the deal is better than another outcome you could get (that is, better than your BATNA), then you should accept it.\r\n\r\nThink about it in common sense terms: When you know your opponent is desperate for a deal, you can demand much more. If it looks like they have a lot of other options outside the negotiation, you\u2019ll be more likely to make concessions.\r\n\r\nAs Fisher and Ury said, \u201cThe reason you negotiate is to produce something better than the results you can obtain without negotiating. What are those results? What is that alternative? What is your BATNA\u2014your Best Alternative To a Negotiated Agreement? That is the standard against which any proposed agreement should be measured.\u201d<\/span>\r\n\r\nThe party with the best BATNA has the best negotiating position, so try to improve your BATNA whenever possible by exploring possible alternatives.<\/span>\r\n\r\nGoing back to the example of your new job negotiation, consider your options to the offer you receive. If your pay is lower than what you want, what alternatives do you have? A job with another company? Looking for another job? Going back to school? While you\u2019re thinking about your BATNA, take some time to think about the other party\u2019s BATNA. Do they have an employee who could readily replace you?\r\n\r\nOnce you\u2019ve gotten a clear understanding of your own goals, investigate the person you\u2019ll be negotiating with. What does that person (or company) want? Put yourself in the other party\u2019s shoes. What alternatives could they have? For example, in the job negotiations, the other side wants a good employee at a fair price. That may lead you to do research on salary levels: What is the pay rate for the position you\u2019re seeking? What is the culture of the company?\r\n\r\nGreenpeace\u2019s goals are to safeguard the environment by getting large companies and organizations to adopt more environmentally friendly practices such as using fewer plastic components. Part of the background research Greenpeace engages in involves uncovering facts. For instance, medical device makers are using harmful PVCs as a tubing material because PVCs are inexpensive. But are there alternatives to PVCs that are also cost-effective? Greenpeace\u2019s research found that yes, there are. Knowing this lets Greenpeace counter those arguments and puts Greenpeace in a stronger position to achieve its goals.\r\n
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    OB Toolbox: BATNA Best Practices<\/h3>\r\n
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    1. Brainstorm a list of alternatives that you might conceivably take if the negotiation doesn\u2019t lead to a favorable outcome for you.<\/li>\r\n \t
    2. Improve on some of the more promising ideas and convert them into actionable alternatives.<\/li>\r\n \t
    3. Identify the most beneficial alternative to be kept in reserve as a fall-back during the negotiation.<\/li>\r\n \t
    4. Remember that your BATNA may evolve over time, so keep revising it to make sure it is still accurate.<\/li>\r\n \t
    5. Don\u2019t reveal your BATNA to the other party. If your BATNA turns out to be worse than what the other party expected, their offer may go down, as PointCast learned in the opening case.<\/li>\r\n<\/ol>\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n
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      Phase 3: Presentation<\/h2>\r\nThe third phase of negotiation is presentation<\/span><\/span>. In this phase, you assemble the information you\u2019ve gathered in a way that supports your position. In a job hiring or salary negotiation situation, for instance, you can present facts that show what you\u2019ve contributed to the organization in the past (or in a previous position), which in turn demonstrates your value. Perhaps you created a blog that brought attention to your company or got donations or funding for a charity. Perhaps you\u2019re a team player who brings out the best in a group.\r\n\r\n<\/div>\r\n
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      Phase 4: Bargaining<\/h2>\r\nDuring the bargaining<\/span><\/span> phase, each party discusses their goals and seeks to get an agreement. A natural part of this process is making concessions<\/span><\/span>, namely, giving up one thing to get something else in return. Making a concession is not a sign of weakness\u2014parties expect to give up some of their goals. Rather, concessions demonstrate cooperativeness and help move the negotiation toward its conclusion. Making concessions is particularly important in tense union-management disputes, which can get bogged down by old issues. Making a concession shows forward movement and process, and it allays concerns about rigidity or closed-mindedness. What would a typical concession be? Concessions are often in the areas of money, time, resources, responsibilities, or autonomy. When negotiating for the purchase of products, for example, you might agree to pay a higher price in exchange for getting the products sooner. Alternatively, you could ask to pay a lower price in exchange for giving the manufacturer more time or flexibility in when they deliver the product.\r\n\r\nOne key to the bargaining phase is to ask questions. Don\u2019t simply take a statement such as \u201cwe can\u2019t do that\u201d at face value. Rather, try to find out why the party has that constraint. Let\u2019s take a look at an example. Say that you\u2019re a retailer and you want to buy patio furniture from a manufacturer. You want to have the sets in time for spring sales. During the negotiations, your goal is to get the lowest price with the earliest delivery date. The manufacturer, of course, wants to get the highest price with the longest lead time before delivery. As negotiations stall, you evaluate your options to decide what\u2019s more important: a slightly lower price or a slightly longer delivery date? You do a quick calculation. The manufacturer has offered to deliver the products by April 30, but you know that some of your customers make their patio furniture selection early in the spring, and missing those early sales could cost you $1 million. So, you suggest that you can accept the April 30 delivery date if the manufacturer will agree to drop the price by $1 million.\r\n\r\n\u201cI appreciate the offer,\u201d the manufacturer replies, \u201cbut I can\u2019t accommodate such a large price cut.\u201d Instead of leaving it at that, you ask, \u201cI\u2019m surprised that a 2-month delivery would be so costly to you. Tell me more about your manufacturing process so that I can understand why you can\u2019t manufacture the products in that time frame.\u201d\r\n\r\n\u201cManufacturing<\/em> the products in that time frame is not the problem,\u201d the manufacturer replies, \u201cbut getting them shipped<\/em> from Asia is what\u2019s expensive for us.\u201d\r\n\r\nWhen you hear that, a light bulb goes off. You know that your firm has favorable contracts with shipping companies because of the high volume of business the firm gives them. You make the following counteroffer: \u201cWhy don\u2019t we agree that my company will arrange and pay for the shipper, and you agree to have the products ready to ship on March 30 for $10.5 million instead of $11 million?\u201d The manufacturer accepts the offer\u2014the biggest expense and constraint (the shipping) has been lifted. You, in turn, have saved money as well.<\/span>\r\n\r\n<\/div>\r\n
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      Phase 5: Closure<\/h2>\r\nClosure<\/span><\/span> is an important part of negotiations. At the close of a negotiation, you and the other party have either come to an agreement on the terms, or one party has decided that the final offer is unacceptable and therefore must be walked away from. Most negotiators assume that if their best offer has been rejected, there\u2019s nothing left to do. You made your best offer and that\u2019s the best you can do. The savviest of negotiators, however, see the rejection as an opportunity to learn. \u201cWhat would it have taken for us to reach an agreement?\u201d\r\n\r\nRecently, a CEO had been in negotiations with a customer. After learning the customer decided to go with the competition, the CEO decided to inquire as to why negotiations had fallen through. With nothing left to lose, the CEO placed a call to the prospect\u2019s vice president and asked why the offer had been rejected, explaining that the answer would help improve future offerings. Surprisingly, the VP explained the deal was given to the competitor because, despite charging more, the competitor offered after-sales service on the product. The CEO was taken by surprise, originally assuming that the VP was most interested in obtaining the lowest price possible. In order accommodate a very low price, various extras such as after-sales service had been cut from the offer. Having learned that the VP was seeking service, not the lowest cost, the CEO said, \u201cKnowing what I know now, I\u2019m confident that I could have beaten the competitor\u2019s bid. Would you accept a revised offer?\u201d The VP agreed, and a week later the CEO had a signed contract.<\/span>\r\n\r\nSometimes at the end of negotiations, it\u2019s clear why a deal was not reached. But if you\u2019re confused about why a deal did not happen, consider making a follow-up call. Even though you may not win the deal back in the end, you might learn something that\u2019s useful for future negotiations. What\u2019s more, the other party may be more willing to disclose the information if they don\u2019t think you\u2019re in a \u201cselling\u201d mode.\r\n
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      Should You Negotiate for a Higher Salary?<\/h3>\r\nYes! According to a survey conducted by CareerBuilder.com, 58% of hiring managers say they leave some negotiating room when extending initial job offers. The survey also found that many of the hiring managers agree to a candidate\u2019s request for a higher salary. \u201cSalary negotiation has become a growing opportunity in the job acquisition process,\u201d says Bill Hawkins, president and CEO of The Hawkins Company, a full-service executive search firm with offices in Los Angeles and Atlanta. \u201cCandidates who fail to make a counteroffer could forfeit significant income.\u201d\r\n
      \r\n\r\nSource: Adapted from information in Reed-Woodard, M. (2007, April). Taking money off the table. Black Enterprise<\/em>, 37<\/em>(9), 60\u201361.\r\n\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n
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      Negotiation Strategies<\/h2>\r\n
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      Distributive Approach<\/h3>\r\nThe distributive view<\/span><\/span> of negotiation is the traditional fixed-pie approach. That is, negotiators see the situation as a pie that they have to divide between them. Each tries to get more of the pie and \u201cwin.\u201d For example, managers may compete over shares of a budget. If marketing gets a 10% increase in its budget, another department such as R&D will need to decrease its budget by 10% to offset the marketing increase. Focusing on a fixed pie is a common mistake in negotiation, because this view limits the creative solutions possible.\r\n\r\n<\/div>\r\n
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      Integrative Approach<\/h3>\r\nA newer, more creative approach to negotiation is called the integrative approach<\/span><\/span>. In this approach, both parties look for ways to integrate their goals under a larger umbrella. That is, they look for ways to expand<\/em> the pie, so that each party gets more. This is also called a win\u2013win approach. The first step of the integrative approach is to enter the negotiation from a cooperative rather than an adversarial stance. The second step is all about listening. Listening develops trust as each party learns what the other wants and everyone involved arrives at a mutual understanding. Then, all parties can explore ways to achieve the individual goals. The general idea is, \u201cIf we put our heads together, we can find a solution that addresses everybody\u2019s needs.\u201d Unfortunately, integrative outcomes are not the norm. A summary of 32 experiments on negotiations found that although they could have resulted in integrated outcomes, only 20% did so. One key factor related to finding integrated solutions is the experience of the negotiators who were able to reach them.<\/span>\r\n
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      OB Toolbox: Seven Steps to Negotiating a Higher Salary<\/h3>\r\n