MGT 459 Negotiation

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MGT 459 - Negotiation

• Instruction 6

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Think about it

• If you wish to make a man your enemy, simply
  tell him, You are wrong. This method works
  every time. Henry Link
• People who fight fire with fire usually end up
  with ashes. Abigail Van Buren

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Inventing Options for Mutual Gain

• Negotiating along a single dimension (e.g., just
  price)
• Limits choices
• Leaves money on the table

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Inventing Options for Mutual Gain

• Obstacles that inhibit inventing options
• Premature judgment
• Searching for the single answer
• The assumption of a fixed pie
• Thinking that solving their problem is their
  problem

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Inventing Creative Options

• Separate inventing from deciding
• Example No evaluation during brainstorming
• Broaden your options
• Multiply options by shuttling betweenthe
  specific and the general

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What Might Be Done
What is Wrong
Step III. Approaches What are
possiblestrategies?What are sometheoretical
cures?Generate broad ideasabout what might be
done.
Step II. Analysis Sort symptoms into
categories. Suggest causes. observe what
is lacking.Note barriers toresolving the prob.
In Theory
Step I. Problem Whats wrong? What are current
symptoms? What are dislikedfacts contrasted
with a preferredsolution?
Step IV. Action Ideas What might be done?What
specific stepsmight be taken to dealswith the
problem?
In the RealWorld
Circle ChartThe four basic stepsin Inventing
Options
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Inventing Creative Options

• Broaden your options
• Look through the eyes of different experts
• Invent agreements of different strength
• Change the scope of a proposed agreement

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Inventing Creative Options

• Look for mutual gain
• Identify shared interests
• Dovetail differing interests
• Ask for their preferences

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Inventing Creative Options

• Make their decision easy
• Ask whose shoes?
• Ask what decision?
• Making threats is not enough

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Insist on Using Objective Criteria

• Deciding on the basis of will is ineffective
• It doesnt produce wise agreements
• It is inefficient
• It damages on-going relationships
• Developing objective criteria is the solution.

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Fair Standards

• Independent of each sides will
• Legitimate and practical
• Should apply to both sides
• More than one possible standard

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Fair Standards

• Market Value
• Precedent
• Scientific Judgment
• Professional Standards
• Efficiency
• Costs

• What a court would decide
• Moral Standards
• Equal Treatment
• Tradition
• Reciprocity

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Fair Procedures

• An alternative to fair standards
• Focus is on the conflicting interests rather than
  on the substantive problem

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Fair Procedures

• One cuts, other chooses
• Taking turns
• Drawing lots
• Letting someone else decide

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Using Multiple Objective Criteria

• Motor Vehicles
• Edmunds
• Kelly Blue Book
• NADA Guides
• Real Estate
• Local realtors for comparative market analysis
• Realty websites
• Salaries
• Salary surveys
• Cost of living calculators

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Market Value

• Market value in its purest form is a theoretical
  concept
• Refers to what the market will bear
• True market value requires comprehensive data
  collection
• Estimated market value calculated from smaller
  samples
• Multiple market value estimates possible

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Negotiating with Objective Criteria

• Frame each issue as a joint search for objective
  criteria
• Ask Whats your theory?
• Agree first on principles before discussing the
  substantive issues

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Negotiating with Objective Criteria

• Reason and be open to reason
• Dont use standards to dig into a position
• Splitting the difference on standards is
  legitimate
• Asking a third party to decide is sometimes best

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Negotiating with Objective Criteria

• Never yield to pressure, only to principle
• Invite them to state their reasoning
• Suggest objective criteria
• Compare giving in to your BATNA and to your
  reputation

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Expected Value

• Example Selling a watch
• Ebay option
• 50 probability sell for 7.00
• 25 probability sell for 5.00
• 25 probability no sale
• Expected value 4.75
• (.50 x 7.00) (.25 x 5.00) (.25 x 0)
  4.75
• Note Probabilities must add to 1.00 (100
  percent)

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Calculating Expected Value

• Example Selling a watch
• Ebay sale expected value 4.75
• Garage sale
• 75 probability sell for 6.00
• 20 probability sell for 3.00
• 5 probability sell for 1.00
• Expected value 5.15
• Choose to sell at garage sale.

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Calculating Expected Values

• Example Determine expected value for average
  score in MGT 459, based on three possibilities
• Average score will be 70
• Average score will be 80
• Average score will be 90

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Calculating Expected Values

• Example You are managing a new beverage company
  and you are considering introducing a new cola
  product in the market. What market share can you
  expect to have in the first year?
• ___ chance youll have 10 market share
• ___ chance youll have 5 market share
• ___ chance youll have 2 market share

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Expected Values

• Do you negotiate expected values?
• No they are simply your expectation of what is
  going to happen.
• Will expected values change the nature of your
  negotiation?
• Yes, since the target negotiator has different
  beliefs about what will happen.
• Dont negotiate expectations negotiate within
  different expectations.