Art and Strategy of Negotiation Substantive and Relationship Outcomes

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Art and Strategy of Negotiation--Substantive and
Relationship Outcomes

• MGT 5374 Negotiation Conflict Management
• Section 002
• September 8, 2005
• John D. Blair, PhD
• Georgie G. William B. Snyder Professor in
  Management

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The Nature of Negotiation

• Negotiation is something that everyone does,
  almost daily
• Process involving interested parties who
• Resolve disputes
• Identify courses of action
• Engage in bargaining for win/lose outcomes--or
• Engage in bargaining for win/win outcomes
• Involve individuals or groups
• Is pervasive throughout ones life

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Negotiations

• Negotiations occur for several reasons
• To agree on how to share or divide a limited
  resource
• To create something new that neither party could
  attain on his or her own
• To resolve a problem or dispute between the
  parties

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What is Included in Negotiation?

• Many people treat bargaining and negotiation as
  distinctive phenomena
• Bargaining describes the competitive, win-lose
  situation
• Negotiation refers to win-win situations such
  as those that occur when parties try to find a
  mutually acceptable solution to a complex
  conflict
• We will use Negotiation to include both kinds of
  situations.

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Negotiation Style or Strategy ?

• People who are only good with hammers see every
  problem as a nail. -- Abraham Maslow

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Changing Nature of Business Today

• Intensifying competition
• Increased knowledge expertise among business
  people
• Changing expectations
• Various Descriptors
• Strategic Alliances/Partnerships
• Relationship Marketing
• Characterized by
• Closer and more integrated ties between
  organizations
• Collaborative 2-way communication
• More business with fewer suppliers

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Skills Necessary for business

• Key skills will be the ability to win friends
  and influence people at a personal level, the
  ability to structure partnerships, and the
  ability to negotiate and to find compromises.
  Business will be much more about finding the
  right people in the right places and negotiating
  the right deals.
• Charles Handy 2002

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Characteristics of a Skilled Negotiator

• Mindfulness alert to subtle changes or
  differences
• Active and effective listener
• Keen observer
• Always prepared
• Versatile and flexible in their communication
  style (See Reardon)
• Versatile and flexible in their negotiation
  strategy (See SBS Model)

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Understand the Context

• If you don't know where you're going, you'll end
  up somewhere else. -- Yogi Berra

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Savage, Blair and Sorenson (SBS) Model Emphasizes

• Negotiation made up of discrete episodes
• Negotiation may have 1 to 100 episodes
• Episodes occur within changing context impacted
  by each prior episode
• Substantive outcomes of negotiation matter
• But relationship outcomes of negotiation matter,
  as well

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Savage, Blair and Sorenson (SBS) Model
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Characteristics of aNegotiation Situation

• There are two or more parties
• There is a conflict of needs and desires between
  two or more parties
• Parties negotiate because they think they can get
  a better deal than by simply accepting what the
  other side offers them
• Parties expect a give and take process

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Characteristics of aNegotiation Situation Cont.

• Parties search for agreement rather than
• Fight openly
• Capitulate
• Break off contact permanently
• Take their dispute to a third party
• Successful negotiation involves
• Management of tangibles (e.g., the price or the
  terms of agreement)
• Resolution of intangibles (the underlying
  psychological motivations) such as winning,
  losing, saving face

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Interdependence

• In negotiation, parties need each other to
  achieve their preferred outcomes or objectives
• This mutual dependency is called interdependence
• Interdependent goals are an important aspect of
  negotiation
• Win-lose I win, you lose
• Win-win Opportunities for both parties to gain

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Interdependence

• Interdependent parties are characterized by
  interlocking goals
• Having interdependent goals does not mean that
  everyone wants or needs exactly the same thing
• A mix of convergent and conflicting goals
  characterizes many interdependent relationships

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Types of InterdependenceAffect Outcomes

• Interdependence and the structure of the
  situation shape processes and outcomes
• Zero-sum or distributive one winner
• Non-zero-sum or integrative mutual gains
  situation

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Value Claiming and Value Creation

• Opportunities to win or share resources
• Claiming value result of zero-sum or
  distributive situations where the object is to
  gain largest piece of resource
• Creating value result of non-zero-sum or
  integrative situation where object is to have
  both parties do well
• SBS Model focuses both on zero-sum and
  non-zero-sum situations.

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Value Claiming and Value Creation

• Most actual negotiations are a combination of
  claiming and creating value processes
• Negotiators must be able to recognize situations
  that require more of one approach than the other
• Negotiators must be versatile in their comfort
  and use of both major strategic approaches
• Negotiator perceptions of situations tend to be
  biased toward seeing problems as more
  distributive/ competitive than they really are

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Key to Relationships?
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Usefulness of Theory and Research for
Understanding Negotiation within Relationships

• Most current negotiation theory is based on
  trans-actional research. Only recently have
  researchers (such as in the SBS Model) begun to
  examine negotiations in a relationship context
• Negotiating within relationships takes place over
  time
• Negotiation is often not a way to discuss an
  issue, but a way to learn more about the other
  party and increase interdependence
• Resolution of simple distributive issues has
  implications for the future

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Usefulness of Theory and Research for
Understanding Negotiation within Relationships
Cont

• Distributive issues within relationships can be
  emotionally hot
• Negotiating within relationships may never end
• Parties may defer negotiations over tough issues
  in order to start on the right foot
• Attempting to anticipate the future and negotiate
  everything up front is often impossible
• Issues on which parties truly disagree may never
  go away

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Usefulness of Theory and Research for
Understanding Negotiation within Relationships
Cont

• In many negotiations, the other person is the
  focal problem.
• In some negotiations, relationship preservation
  is the overarching negotiation goal, and parties
  may make concessions on substantive issues to
  preserve or enhance the relationship

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Forms of Relationships

• Four fundamental relationship forms
• 1. Communal sharing
• 2. Authority ranking
• 3. Equality matching
• 4. Market pricing

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Communal Sharing Relationships

• 1. Communal sharing
• A relation of unity, community, collective
  identity, and kindness, typically enacted among
  close kin
• Such relationships are found in
• Families
• Clubs
• Fraternal organizations
• Neighborhoods

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Authority Ranking Relationships

• 2. Authority ranking
• A relationship of asymmetric differences,
  commonly exhibited in a hierarchical ordering of
  status and precedence
• Examples include
• Subordinates to bosses
• Soldiers to their commander
• Negotiators to their constituents

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Equality Matching Relationships

• 3. Equality matching
• A one-to-one correspondence relationship in which
  people are distinct but equal, as manifested in
  balanced reciprocity (or tit-for-tat revenge)
• Examples include
• College roommates

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Market Pricing Relationships

• 4. Market pricing
• Based on metrics of valuation by which people
  compare different commodities and calculate
  exchange and cost/benefit ratios
• Examples can be drawn from all kinds of
  buyerseller transactions

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Four Key Dimensions of Relationships
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SBS Model Emphasizes Cont

• Subordinative strategies are not necessarily a
  reflection of weakness and may be most valuable
  when party is strong
• Avoiding negotiating can actually be a strategy
  and is probably underused.

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SBS ModelUnilateral Strategies
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Interactive Strategy

• I don't like that man. I'm going to have to get
  to know him better. -- Abraham Lincoln

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SBS Model Emphasizes Cont

• Your strategy must be adapted to the anticipated
  strategy of the other party
• Be prepared with a back up or secondary strategy,
  if your primary one is not working

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SBS ModelInteractive Strategies
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First Key Element in Managing Negotiations within
Relationships

• Reputation
• Perceptual and highly subjective in nature
• An individual can have a number of different,
  even conflicting, reputations
• Influenced by an individuals personal
  characteristics and accomplishments.
• Develops over time once developed, is hard to
  change.
• Negative reputations are difficult to repair

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Second Key Element in Managing Negotiations
within Relationships

• Trust
• An individuals belief in and willingness to act
  on the words, actions and decisions of another
• Three things that contribute to trust
• Individuals chronic disposition toward trust
• Situation factors
• History of the relationship between the parties

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Trust and Honesty Dilemmas

• Dilemma of honesty
• Concern about how much of the truth to tell the
  other party
• Dilemma of trust
• Concern about how much negotiators should believe
  what the other party tells them

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Types of Trust

• Two different types of trust
• Calculus-based trust
• Individual will do what they say because they are
  rewarded for keeping their word or they fear the
  consequences of not doing what they say
• Identification-based trust
• Identification with the others desires and
  intentions. Trust exists because the parties
  effectively understand and appreciate each
  others wants mutual understanding is developed
  to the point that each can effectively act for
  the other.

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Third Key Element in Managing Negotiations within
Relationships

• Justice
• Can take several forms
• Distributive justice
• The distribution of outcomes
• Procedural justice
• The process of determining outcomes
• Interactional justice
• How parties treat each other in one-to-one
  relationships
• Systemic justice
• How organizations appear to treat groups of
  individuals

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Observe Other Partys Tactics

• You can observe a lot by just watching. Yogi
  Berra

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SBS Model Emphasizes Cont

• Negotiations go through relatively predictable
  phases
• Be aware of where you are in the negotiation
  process
• Also be aware of whether you have gone backwards
  during a specific episode
• Be sure your tactics are consistent with your
  strategy
• Observe the tactics reflected in the behavior of
  others to determine what strategy they are
  followingdo not need to read their minds.

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SBS ModelTactics and Phases