1 Negotiations in cross-cultural business environmentLecture 6. Negotiations. Basic concepts

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3 What Is Negotiation? The process of two or more parties working together to arrive at a mutually acceptable resolution of one or more issues, such as a commercial transaction, a contract, or a deal of any sort Negotiation is a give-and-take bargaining process that, when conducted well, leaves all parties feeling good about the result and committed to achieving it This joint decision is one that, in the end, is agreeable to and accepted by both parties after each has brought influence and persuasion to bear on the other and, most probably, after both have experienced influence from other sources

4 NEGOTIATION AS A CORE MANAGEMENT COMPETENCYNegotiation skills are increasingly important for managers. Key reasons for the importance of negotiation skills include the dynamic nature of business, interdependence, economic forces, information technology, globalization

5 What Negotiation Is NotIf an outsider is brought in to make a decision between parties using arbitration, the parties are legally bound to follow the arbitrator’s decision. That is not negotiation. When parties are not working together to reach an agreement, negotiation does not take place. It’s important to keep in mind that negotiation is nota competitive sport. This doesn’t mean, however, that we’re never in a contest with other parties.

6 NEGOTIATION TRAPS 1. Leaving money on the table (also known as “lose-lose” negotiation) occurs when negotiators fail to recognize and capitalize on their win- win potential. 2. Settling for too little (also known as “the winner’s curse”) occurs when negotiators make too-large concessions, resulting in a too-small share of the bargaining pie. 3. Walking away from the table occurs when negotiators reject terms offered by the other party that are demonstrably better than any other option available to them. (Sometimes this shortcoming is traceable to hubris or pride; other times it results from gross miscalculation.)

7 4. Settling for terms that are worse than your best alternative(also known as the “agreement bias”) occurs when negotiators feel obligated to reach agreement even when the settlement terms are not as good as their other alternatives.

8 Negotiation styles (strategies)

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10 The competitive style (win-lose). Distributive negotiationsThe competitive style is also referred to as contending, distributive bargaining, or claiming value This negotiation style attempts to gain optimum value at the expense of the other party and is commonly referred to as the “win-lose” approach Losing may be taken as failure, weakness, and a loss of status. When engaged in this style, the parties may use different tactics to win like: persuasion, argument, power, or even threat

11 The pursuit of one’s own unilateral interests can be manifested by extreme demands and other contentious negotiating postures. In trying to force the other to make concessions, competitive bargainers do whatever is necessary to obtain the deal they want by adopting such tactics as bluffing, accusing, intimidating, creating false issues, even cheating and lying. As part of their contentious tactics, parties may release information slowly while making extreme demands to keep an opponent off balance. Naming, blaming, and claiming can be part of difficult negotiation

12 The collaborative style (win-win). Integrative negotiationsThe collaborative style, also referred to as problem-solving, integrative bargaining, or creating value, attempts to reach agreement through creating options that are conducive to achieving or maximizing the goals of both parties thus creating a “win-win” situation A win-win negotiation settlement is an integrative negotiated agreement. In theory this means the negotiating parties have reached an agreement after fully taking into account each others' interests, such that the agreement cannot be improved upon further by any other agreement. By definition, there are no resources or 'gold' left on the table and all creative options have been thoroughly exploited

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14 https://www.youtube.com/watch?v=PO3Mv8dGbJM https://www.youtube.com/watch?v=4CZes9FuM_g

15 Barriers to integrative negotiationsConfirmation bias is the tendency of people to see what they want to see when appraising their own performance. The confirmation bias leads individuals to selectively seek information that confirms what they believe is true Self-reinforcing incompetence is the fact that people are reluctant to change their behavior and experiment with new courses of action because of the risks associated with experimentation. In short, the fear of losing keeps people from experimenting with change

16 Manipulative tactics A frequent shift in expectations and mood (from angry to pleasant and vice versa) is designed to generate uncomfortable feelings and to keep the other off balance A more powerful party may try to exert control over an adversary’s confidence level by attacking their competence and creating doubt about their ability to protect their interests

17 Face saving Image protecting behavior (i.e., the main element of face saving) hinders a person’s ability to make concessions in the process of reaching a final agreement, displaying their need to reconcile with the previous stand (principles, deeds, and words) The devotion of energy to the protection of their images rather than concentration on issues causes parties to get bogged down in trivial issues with irrational comments and acts. Preservation of face may motivate such negotiating behavior as digging in their heels, and stubbornly clinging to positions despite poor odds

18 The concession style (lose-win)In the concession or yielding style one party reduces their position to the gain of the other party. This is referred to asthe “lose-win” style This style of negotiation is all about the relationship and is the polar opposite of the Competing style. Accommodating negotiators believe that the only way to ultimately get what they want is to give everything to the other party and maybe in time they will do the same or stay. This style, is naturally, well liked by the opposite party https://www.youtube.com/watch?v=Y7DH1moT0bs

19 Actors of negotiationsThe key actors in a negotiation are the negotiators themselves 1) Effective negotiators have the capacity to be flexible on the method to achieve their goals. They establish their goals early on with an idea as to the general nature of the outcome but remain flexible on the means for achieving these goals. 2) Negotiators remain sensitive to “social cues” (interpersonal sensitivity) given off by their counterparts without being over-reactive to these observations. To ignore the cues may be to miss out on important pieces of data. Conversely, to react too strongly risks misinterpreting intentions based on personal bias

20 3) Negotiator’s “inventiveness” or ability to develop creative solutions in order to strive for mutually acceptable agreement 4) Patience is the successful negotiator’s fourth attribute 5) Successful negotiators are tenacious especially in the area of reconfiguring an adversarial relationship into a more collaborative arrangement

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22 (1) Preparation phase During the preparation phase the negotiator(s) become familiar with the facts of the problem, identify and prioritize the goals, attempt to clarify what the other party can and cannot accomplish and investigate the behavioral styles of the opposite parties. This phase is described as “pre-negotiations” and as a “diagnostic phase where the nature of the conflict, possible contract are being established. It includes gathering facts concerning each party’s position, and identifying any precedents that bear on this situation.

23 Five Key Elements of Negotiation Preparation1. Initial points to consider Should I be negotiating? What I need to know? Organize the information 2. Research covers Players and stakeholders The fact base Standards and benchmarks

24 3. Analysis includes Re-organizing data Anticipating what will happen Assessing strengths and risks 4. Identification of your and their interests Positions: goals, most desired outcomes, and least acceptable agreements Best alternatives to a negotiated agreement Concessions

25 5. Know the relationship you want to buildPlan to build trust Prepare for emotional reactions Develop Probes to discover "Don't knows" and test Assumptions

26 (2) Interaction phase (exchanging information)The interaction phase includes activities of trust building, exchanging points of view and perceptions in order to clarify differing perceptions of the issues and identifying areas of agreement and common ground It is “formula phase” that contains the framework for both the criteria for detail resolution and eventual agreement

27 Four critical asessments to be made in the interaction stage1. Trustworthiness – Are they honest and dependable? 2. Competency – Are they credible and able? 3. Likeability – Can you work well together? 4. Alignment of Interests – Are your interests aligned with theirs?

28 (3) Bargaining phase The heart of many negotiations is in bargaining, the adjustment of what is being traded until both parties are satisfied with the arrangement. This is the activity that many view as being what negotiation is all about, although a much better result can be gained with attention to other stages as well. An important part of bargaining is trading, where parties effectively say 'If you give me that, then I will give you this.' Trading may be about individual items or the whole package. It may also include non- material aspects such as support given and when things will be delivered. This stage can become heated and use many competitive negotiation tactics, especially if the parties have a win-lose attitude. In more collaborative negotiations, parties show more concern for one another while vigorously but carefully seeking an equitable deal.

29 (4) Closing and commitment phaseThe closing phase is the point where agreement(s) are codified to include an action plan with timelines and an agreed upon review process to continuously monitor and adjust as necessary the terms of the settlement It is described as the “detail phase” - a discussion on the continuation of the search for agreement to specifically hammer out the details. provides a caution on the risk of working out the details and if care is not taken, it could be possible to undo the “bigger picture” agreements derived during the formula phase The parties must not lose sight of the overarching priorities and goals that were developed earlier in the negotiation process

30 + (5) Execution phase It is implementation of the agreement. This stage may also be viewed as preparation for the next negotiation opportunity. You must ensure that you follow through on promises made in order to strengthen the relationship and to build trust. This will lead to easier negotiations next time around.