Integrative Negotiations Lecture Notes PDF

Negotiating in Management and Business Integrative Negotiations Dr. Michael Schaerer Associate Professor Lee Kong Chian School of Business Singapore Management University  What have you learnt in the last class? ►Take notes – you’ve g...

Negotiating in Management and Business Integrative Negotiations Dr. Michael Schaerer Associate Professor Lee Kong Chian School of Business Singapore Management University  What have you learnt in the last class? ►Take notes – you’ve got 2 minutes ►Then share with the class 2 © Michael Schaerer  Recap: Distributive negotiations ►Distributive negotiations ▪ Opposing preferences; try to maximize your slice! ▪ But let the other party win something too! ▪ Only reveal strong BATNA but never your reservation price! ►Distributive strategies ▪ Improve BATNA (new ones, improve value, increase certainty) ▪ Ambitious, precise first offers (sets the tone, anchors opponent) ▪ Use qualitative anchors (e.g., highlight pros / cons) ▪ Use decreasing concessions (signals reaching bottom line) 3 © Michael Schaerer  Two fundamental types of negotiations Distributive negotiations Integrative negotiations ► Opposing preferences (my ► Common interests exist (e.g., gain is your loss) both want the same) ► Goal: Maximizing one’s ► Goal: Maximizing individual individual gain and joint gain ► “Slicing the pie” ► “Increasing the pie” 4 © Michael Schaerer  Today’s class 1. Exercise (“Holy Crab”) 2. Introduction to Integrative Negotiations ▪ Debrief “Holy Crab” ▪ Pitfalls in Integrative Negotiations 3. Integrative Strategies 4. Next Class 5 © Michael Schaerer  Exercise “Holy Crab” (G1) Preparation Negotiate Class continues (10 minutes) (30 minutes) (in 55 minutes) 1 Pick up and read 4 Negotiate 6 Take 15 min break role materials 5 Enter your results 7 Be back in class 2 Find your partner in Google Sheet: and location bit.ly/47EwVjy 3 Write down your “BRA” values 6 © Michael Schaerer  Exercise “Holy Crab” (G2) Preparation Negotiate Class continues (10 minutes) (30 minutes) (in 55 minutes) 1 Pick up and read 4 Negotiate 6 Take 15 min break role materials 5 Enter your results 7 Be back in class 2 Find your partner in Google Sheet: and location bit.ly/494xzbk 3 Write down your “BRA” values 7 © Michael Schaerer  Exercise “Holy Crab” (G3) Preparation Negotiate Class continues (10 minutes) (30 minutes) (in 55 minutes) 1 Pick up and read 4 Negotiate 6 Take 15 min break role materials 5 Enter your results 7 Be back in class 2 Find your partner in Google Sheet: and location bit.ly/3Oc6UkH 3 Write down your “BRA” values 8 © Michael Schaerer  Your negotiation partner (G1) 9 © Michael Schaerer  Your negotiation partner (G2) 10 © Michael Schaerer  Your negotiation partner (G3) 11 © Michael Schaerer  Today’s class 1. Exercise (“Holy Crab”) 2. Introduction to Integrative Negotiations ▪ Debrief “Holy Crab” ▪ Pitfalls in Integrative Negotiations 3. Integrative Strategies 4. Next Class 12 © Michael Schaerer  Exercise “xxx” What were your experiences? Debriefing questions 13 © Michael Schaerer  Exercise “xxx” How was the negotiation similar to or different from the previous negotiations? Debriefing questions 14 © Michael Schaerer  Exercise “xxx” What did you learn about the other party? Debriefing questions 15 © Michael Schaerer  What Exercise was “xxx” the maximum the VP Operations was willing to pay? What was the minimum the Restaurant Owner was willing to accept? Debriefing questions 16 © Michael Schaerer  Role information (1/2) VP Operations (buyer) Restaurant Owner (seller) ► $200k to build new ► $140k offer BATNA ► Lose clients ► Dream killed ► Spouse has breakdown Reservation $160k $190k price 17 © Michael Schaerer  Bargaining zone VP (buyer) Owner (seller) Reservation Price: Reservation Price: $160,000 Negative $190,000 bargaining zone $150k $160k $170k $180k $190k $200k How to overcome a negative bargaining zone? 18 © Michael Schaerer  Interests are key! 19 © Michael Schaerer  In negotiations, it is important to distinguish between positions and interests Positions What you ask for Interests Why you ask for it 20 © Michael Schaerer  What are the interests of the Restaurant Owner? Trip of a lifetime! $60k boat $20k ready to sail $50k living expenses 2 years $20k maintenance $40k on return to find a job --------------------------------------------- $190k in total --------------------------------------------- 21 © Michael Schaerer  What are the interests of the VP Operations? ► Restaurant with good location ► Retain customer base ► Managers to support expansion 22 © Michael Schaerer  Role information (2/2) VP Operations (buyer) Restaurant Owner (seller) ► $200k to build new ► $140k offer BATNA ► Lose clients ► Dream killed ► Spouse has breakdown Reservation $160k $190k price ► Rest. with good location ► Good life of rest. owner Interests & little competition ► Sail the world ► Good managers ► Security upon return (job) 23 © Michael Schaerer  Only interests can bridge the deal VP (buyer) Owner (seller) Reservation Price: Reservation Price: $160,000 $190,000 $150k $160k $170k $180k $190k $200k What were your deals? 24 © Michael Schaerer  Your deals (G1) 25 © Michael Schaerer  Your deals (G2) 26 © Michael Schaerer  Your deals (G3) 27 © Michael Schaerer  Potential solutions VP (buyer) Owner (seller) Reservation Price: Reservation Price: $160,000 $190,000 ▪ Job guarantee ▪ Line of credit ▪ Boat sponsoring $150k $160k $170k $180k $190k $200k Why do impasses still occur? 28 © Michael Schaerer  Why do we fail to realize integrative potential? Fixed pie bias Emotions and Escalation ► Perception that the other ► Letting visceral influences party’s interest are take over, which often results completely opposed to one’s in further commitments to own interests failing courses of action ► Believed by most (68%) negotiators …leading to a lack of communication and information sharing! (Thompson & Hastie, 1990) 29 © Michael Schaerer  Today’s class 1. Exercise (“Holy Crab”) 2. Introduction to Integrative Negotiations ▪ Debrief “Holy Crab” ▪ Pitfalls in Integrative Negotiations 3. Integrative Strategies 4. Next Class 30 © Michael Schaerer  Strategies to help you create value 1 Delay first offers 31 © Michael Schaerer  Strategy 1: In integrative negotiations, make late first offers Late first offers Effect on deal making ► Waiting to make a first offer 3 Interests of other party met (1-7 scale) facilitates the discovery of 2.5 creative agreements 2 1.5 ► Reduces early focus on 1 positions and leaves flexibility 0.5 to discuss interests first 0 No Early first Late first ► Allows for greater instructions offer (within offer (after information exchange first minute) 15 mins) between parties Offer condition Draw an E on your forehead with the index finger of your dominant hand… Sinaceur et al. (2013) 32 © Michael Schaerer  Which perspective did you take? Galinsky et al. (2006) 33 © Michael Schaerer  Strategies to help you create value 1 Delay first offers 2 Take their perspective 34 © Michael Schaerer  Strategy 2: Take the other side’s perspective Perspective taking: the act of perceiving a situation from another individual’s point of view. Experiment using similar task ► Control: no instructions ► Empathy: “Try to understand what the other party is feeling…” ► Perspective taking: “Try to understand what the other party is thinking…” Galinsky et al. (2008) 35 © Michael Schaerer  Strategies to help you create value 1 Delay first offers 2 Take their perspective 3 Build trust 36 © Michael Schaerer  Strategy 3a: Being likeable and vulnerable Develop a trust mindset Effect on deal finding Being likeable 40 ► Focus on things that you have 35 in common (i.e., similarities) % integrative deals 30 Being vulnerable 25 Distrust Mindset ► Reveal small pieces of 20 Trust information and see whether 15 Mindset counterpart reciprocates 10 ► Never reveal your reservation 5 price! 0 Huang & Murnighan (2009) 37 © Michael Schaerer  Building trust in politics: National Security Advisor Condoleezza Rice meets her Russian counterpart Sergei Ivanov (2:45) 38 © Michael Schaerer  Strategy 3b: Mimicry Mimic your opponent ► Negotiators mimicking the mannerisms of their opponents created more value. ► They also claimed most of that value. (Maddux et al., 2008; Swaab, Maddux & Sinaceur, 2012) 39 © Michael Schaerer  Negotiators who mimicked their counterpart were more likely to reach a deal (Maddux et al., 2008) 40 © Michael Schaerer  Consider status differences and don’t overdo it! 41 © Michael Schaerer  Strategy 3c: Handshakes signal cooperative intent (Schroeder et al., 2019) 42 © Michael Schaerer  Strategies to help you create value 1 Delay first offers 2 Take their perspective 3 Build trust 4 Ask questions 43 © Michael Schaerer  Strategy 4: Ask questions What should I ask about? E.g., ► Why is this important to you? ► How would this help you? ► Are there other options to achieve this? Benefits of asking questions ► Reveals priorities ► Increases liking (Huang et al., 2017) 44 © Michael Schaerer  Asking questions in practice: Example from former student Negotiation conducted as part of Real-World Negotiation Assignment Haircut at “AfterXroom” @ SMU ► Student decided to get a haircut ► He noticed that most customers are 35+ years old and asked the stylist (Jeff) why ► Jeff mentioned that they have difficulties attracting SMU students because their prices are quite steep ($30-50 range) ► Student offered to promote salon to friends and on Instagram… 45 © Michael Schaerer  Asking questions in practice: Example from former student Negotiation conducted as part of Real-World Negotiation Assignment AfterXroom made him “Salon Ambassador” ► For 2 months with potential for renewal ► Benefits ❑ $15 discount on initial haircut ❑ Free haircuts in the future (depending on # of customers who quote ambassador name) ❑ 10% discount + free hair wash for customers who quote ambassador name 46 © Michael Schaerer  Recap: Integrative negotiations ►Integrative negotiations are different! ▪ Positions do not always overlap (negative bargaining zone) ▪ Interests are more important (look below the surface) ►Roadblocks to integrative deals ▪ Fixed pie bias, emotions, and escalation of commitment ►Strategies that work in integrative negotiations ▪ Late first offers ▪ Perspective taking ▪ Building trust (e.g., being vulnerable, mimicry, handshakes) ▪ Asking questions 47 © Michael Schaerer  Today’s class 1. Exercise (“Holy Crab”) 2. Introduction to Integrative Negotiations ▪ Debrief “Holy Crab” ▪ Pitfalls in Integrative Negotiations 3. Integrative Strategies 4. Next Class 48 © Michael Schaerer  Next session… ► Provide feedback to your negotiation partner ▪ 3 things they did well & 2 things they could improve (be constructive!) ▪ If possible, provide ideas on how your partner could improve ▪ Email to partner and Cc’ [email protected] within 72 hours ► Research / come up with one additional integrative strategy ▪ Give it a name, explain how it works, and why it would be effective, highlight any potential risks or when not to use it ▪ Use template attached to summary email ▪ Email to [email protected] before next class ► Read “Investigative Negotiation” (available on eLearn) 49 © Michael Schaerer Thank you!