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Negotiation
Section 01:
Negotiation Fundamentals
Chapter 01:
The Nature of Negotiation
© 2019 McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education.

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Overview
Everyone negotiates, almost daily.
Negotiations occur for several reasons.
• To agree on how to share or divide a limited resource.
• To create something new that neither party could do on their own.
• To resolve a problem or dispute between the parties.
People fail to negotiate because they do not recognize they
are in a negotiation situation.
• Options other than negotiation fail to achieve goals or needs.
• Or, people misunderstand the negotiation process and do poorly.
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LEANING OBJECTIVE
• Recognize negotiation situation
• Understand how negotiation works
• Know how to plan, implement and complete successful
negotiation
• Able to maximize your result
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Style and Approach
First a brief definition of negotiation.
• Negotiation is a form of decision making in which two or more parties
talk with one another in an effort to resolve their opposing interests.
• Bargaining describes the competitive win-lose situation – haggling.
• Negotiation refers to win-win situations – mutually acceptable solutions.
Many assume the “heart of negotiation” is the give-and-take.
• Negotiation is a complex social process, factors may shape the
negotiation before it begins, or shape the context around the
negotiation.
Author’s insights are drawn from three sources.
• Personal experience, the media, and research.
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Characteristics of a Negotiation Situation
Characteristics common to all negotiation situations.
• Two or more parties, individuals, groups, or organizations.
• There is a conflict of needs and parties search for a resolution.
• Parties think they can get a better deal by negotiating.
• In negotiation, a give-and-take is expected.
• The parties prefer to negotiate and search for an agreement.
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WHEN YOU SHOULD NOT NEGOTIATE
• When you would lose the farm
• When you are sold out
• When your demands are unethical
• When you don’t care
• When you don’t have time
• When they act in bad faith
• When waiting will improve your position
• When you are not prepared
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Successful negotiation manages tangibles and
resolves intangibles.
• Intangibles are the underlying psychological motivations that directly
or indirectly influence the parties during negotiation – the need to
“win.”
• Often rooted in personal values and emotions and impossible to ignore.
• Some Examples – The need to win or bear the other party or avoid losing to the
other party.
• The need to look ‘good’, ‘competent‘ or ‘tough’ to the people you represent
• The need to defend an important principle or precedent in a negotiation
• The need to appear fair or honorable or to protect one’s reputation
• The need to maintain a good relationship with the other party after the negotiation
is over primarily by maintaining trust and reducing uncertainty.
Tangibles include the price or the terms of agreement.
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Interdependence
Relationships are characterized in one of three ways.
• When parties have interlocking goals, they are interdependent.
• Independent parties can meet their own needs without others’ help.
• Dependent parties must rely on others for what they need.
Interdependence and the structure of the situation shapes
negotiation processes and outcomes.
• A zero-sum, or a distributive situation is competitive with one winner.
• A non-zero-sum, or integrative situation is a mutual-gains situation.
Interdependence depends on the desirability of alternatives.
• A BATNA is a negotiator’s Best Alternative to a Negotiated Agreement.
• Understand your own BATNA as well as the opponent’s BATNA.
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Mutual Adjustment
As parties influence each other, they engage in a mutual
adjustment – causing changes to occur during negotiation.
• Effective negotiators understand how people will adjust and re-adjust,
how negotiations might twist and turn.
• The best strategy is grounded in the assumption that the more
information available about the other party, the better.
When one party alters their position based on the other
party’s suggestion, a concession has been made.
• Concessions constrain the bargaining range.
• The range of possible agreements between the two parties’ minimally
acceptable settlements.
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Two Dilemmas in Mutual Adjustment
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Dilemma of honesty
Concerns how much of the
truth to tell the other party.
Telling the other party
everything may allow them
to take advantage of you.
Not telling the other party
about your needs may lead
to a stalemate.
Dilemma of trust
Concerns how much to believe
what the other party tells you.
If you believe everything, you
may be taken advantage of.
If you believe nothing, you may
not reach an agreement.
Current trust depends on:
• Their reputation.
• Their past treatment of you.
• Their current pressures.

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Perceptions and Patterns
Two efforts in negotiation create trust and the belief of
fairness.
• One is based on perceptions of outcomes.
• Shaped by managing how the receiver views the proposed results.
• The other is based on perceptions of the process.
• Enhance credibility of the process with images that signal fairness.
• When people make a concession, they trust the other party and the
process far more if a concession is returned.
The pattern of give-and-take is essential to joint problem
solving.
• Satisfaction is determined as much by the process through which an
agreement is reached as with the actual outcome obtained.
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Conflict
Interdependent relationships have the potential for conflict.
• Negotiation can play a role in resolving conflict effectively.
Conflict is a sharp disagreement of interests, ideas, etc.
• Includes the perceived divergence of interest or a belief that current
aspirations cannot be achieved simultaneously.
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What colours our perception
Age
Culture
Religion
Gender
Education
Background
Position in society
Job/career
Previous experience
Character
Nature/genes
Prevailing external influence

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EARLY PROGRAMMING
YOU
Nature
Inherited
tendencies
Nurture
Physical
Warmth, food,
healthy
environment
Emotional
Unconditional
love, support
and a caring
environment
Intellectual
Mental
stimulation,
education

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Much of our thoughts and
behaviour is based on what
we have learnt so far in life
What has been learned
can be unlearned.

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REINFORCING FAULTY LEARNING
Having/repeating
an experience
Generalizing/drawing
faulty conclusions
Faulty conclusions
affect
mindset/behaviour
Setting yourself
up to repeat the
experience

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Deal with your Emotions
Happiness
Sadness
Anger
Fear
Resentment
Guilt
Hurt
Regret

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CONFLICT ARISES BECAUSE
We feel threatened by someone whom we perceive
• Operates from a different set of values and beliefs
• Invades what we see as our territory
• Takes away something we consider to be rightfully ours
• Is different from us in some way
• Causes us discomfort.

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CONFLICT DEFINED
Conflict is defined as a process that begins when a
party has negatively affected, or is about to negatively
affect something that the first party cares about.
Occurs when different parties perceive a threat to their
needs or interest
Is the struggle to ensure their needs and interest are
met
Includes
Incompatibility of goals
Differences over interpretation of facts
Disagreements based on behavioural expectations
Disagreements

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CONFLICT DEFINED
•Differences in ideas and opinions,
which give rise to tension among
the group members
•A process of social interaction that
involves a struggle over claims to
resources, power and status,
beliefs, preferences and desires.

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ORGANIZATIONAL CULTURE AND CONFLICT
Not walking the Talk- vision and mission, customer
focused, equal opportunity
Mismatch between Individual and company Values
and Beliefs – child labour
The Psychological Contract

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Levels of Conflict
Intra-Personal
Inter-personal
Intra-Group
Inter-Group
Inter- Organization
Inter-national
There are four levels of commonly identified conflict.
• Intrapersonal conflict occurs within an individual.
• Interpersonal conflict occurs between individuals.
• Intragroup conflict happens within a group.
• Intergroup conflict is between groups – the most complex.

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The levels of conflict
Discomfort
Incident
Misunderstanding
Tension
Crisis

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Possible stakeholders of conflict
YOU
Supplier,
department,
team
colleagues
bosses
Members of
team
others
Your
organization,
other
organization
Company
culture
customers

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INDICATORS OF CONFLICT IN AN ORGANIZATION
Communication is increasing in the form of memos
and e-mails
More people working behind closed doors
Meeting that do not achieve anything
‘Them and us’ language
Raised voice and tears
Long lunch hours and poor timekeeping
Low morale, tension
People looking glum and stressed

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Interaction brings differences
Internal Boundaries – role, authority
External boundaries – supplier, consultant
Territorial boundaries – car park
Material goods and resources
Weak/poor management
Lack of professional management training
Leadership/management style
Poor decision making process
Poor interpersonal skill
Poor change management
Inequality among staff

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Causes of Conflict
• Conflict over task
• Conflict over process
• Difficult relationship

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Behaviour that exhibit conflict
Shouting
Insulting/cursing
Humiliating
Making accusations
Bringing up the past
Sulking
Tears
Withdrawing
Physical violence
Avoidance
Pretending it is not happening
Becoming resentful
Bottling up our emotions
Storming off in a huff
Taking revenge

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FIGHT
BEHAVIOUR
FLIGHT
BEHAVIOUR
•Shouting
•Violence
•Slamming the
door
•Name-calling
etc.
•Withdrawal
•Denial
•Giving in
•Crying etc.

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The Conflict Process
Stage I Stage II Stage III Stage IV Stage V
Potential
Opposition or
incompatibility
Cognition and
Penalization Intentions Behaviour Outcomes
Antecedent
Conditions
•Communic
ation
•Structure
•Personal
Variable
Perceived
Conflict
Felt
Conflict
Increased
Group
Performance
Conflict-handling
Intentions
•Competing
•Collaborating
•Compromising
•Avoiding
•Accommodating
Overt
Conflict
•Party’s
Behaviour
•Other’s
reaction
Decreased
Group
Performance

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Conflict Management Styles
Conflict exists whenever two or more parties are in
disagreement.
Forcing conflict style: user attempts to resolve
conflict by using aggressive behavior.
Avoiding conflict style: user attempts to passively
ignore the conflict rather than resolve it.
Accommodating conflict style: user attempts to
resolve the conflict by passively giving in to the other
party.
Compromising conflict style: user attempts to
resolve the conflict through assertive give-and-take
concessions.
Collaborating conflict style: user assertively
attempts to jointly resolve the conflict with the best
solution agreeable to all parties.
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Conflict
The Offer
Win
Lose

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Functions and Dysfunctions of Conflict
Discussion raises awareness.
Brings change and adaptation.
Strengthens relationships and
boosts morale.
Promotes self-awareness.
Enhances personal
development.
Encourages psychological
development.
Can be stimulating and fun.
Win-lose goals lead to
competitive processes.
Misperception and bias
increase.
Emotionality may increase.
Productive communication
decreases.
Blurred central issues.
Rigid commitments – locked in.
Magnified differences.
Escalation of the conflict.
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Factors When Managing Conflict
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Difficult to Resolve
Issue is a matter of
principle.
Large stakes, big
consequences.
A zero-sum situation.
A single interaction.
No neutral third party
available.
Unbalanced conflict
progress.
Easy to Resolve
Divisible issues.
Small stakes, little
consequences.
A positive-sum situation.
A long-term relationship.
Trusted, powerful third
parties available.
Balanced conflict progress.

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Figure 1.3: The Dual Concerns Model
Jump to slide containing descriptive text.
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NEGOTIATION STRATEGY
Assertive
Unassertive
Assertiveness
Cooperative
Uncooperative
Cooperativeness
Competition Collaboration
Compromise
Avoidance Accommodation
Others’ Need
Self
Need
90
34
5
12
10

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NEGOTIATION STRATEGY
Assertive
Unassertive
Assertiveness
Cooperative
Uncooperative
Cooperativeness
Competition Collaboration
Compromise
Avoidance
Accommodation
Others’ Need
Self
Need
90
34
5
12
10
6
20
3
4

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Effective Conflict Management
Individuals in conflict have two independent levels of concern.
• Concern about your own outcomes.
• Concern about the other’s outcomes.
Five major conflict management strategies are identified in the
dual concerns model.
• The contending strategy is used for trivial issues, not complex issues.
• Yielding is helpful if you were in the wrong, not with important issues.
• Inaction is appropriate for a cooling off period, not when you are
responsible for a decision.
• Problem-solving is needed with complex situations needing commitment
from others for success, not for simple, or timely, issues.
• The compromising strategy is appropriate when power is equal, not when
power is not equal, or when the problem is very complex.
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JOHARI WINDOW
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PERSONAL EFFECTIVENESS
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Self-Disclosure Openness to
feedback
Perceptiveness Personal
Effectiveness
Category
High High High Effective
High High Low Insensitive
High Low Low Egocentric
High Low High Dogmatic
Low High High Secretive
Low High Low Task-obsessed
Low Low High Lonely Empathic
Low Low Low Ineffective

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PERSONAL EFFECTIVENESS CATEGORY
41
21%
4%
10%
3%
40%
22%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
0
5
10
15
20
25
30
35
40
45
50
Effective Ineffective Insensitive Lonely Empathic Secretive Task-obsessed
PERSONAL EFFECTIVENESS

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Types of negotiation
Distributive – compete over the
distribution of fixed sum of values
Integrative – negotiation in which parties
cooperate to achieve maximum benefits
by integrating their interest into an
agreement.

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DISTRIBUTIVE NEGOTIATION
No relationship
All that matter is the price
Each side haggle for the best deal
Gain by one party represent the loss to
the other.
• Example
• Sales negotiation
• Wage negotiation

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Relationship and reputation mean little in this tug of
war
Seller is a total stranger – and remain so after the
transaction takes place.
The less the other side knows about your weakness
and real preferences, and the more it knows about
your bargaining strength, the better will be your
position
DISTRIBUTIVE NEGOTIATION

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The first offer becomes a strong psychological anchor
point , one that sets the bargaining range.
Negotiation outcomes often correlates with the first offer.
Do not disclose any significant information about your
circumstances.
• Why do you want to make a deal?
• Your real interest or business constraint
• Your prefernces among issues or options
• Point of walk away
Let the other side feel that you have good option if the
deal falls through.
HOW TO ACHIEVE SUCCESS IN
DISTRIBUTIVE NEGOTIATION?

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Learn as much as possible about the
other party
• Other side’s circumstances and
preferences
• Why they want to make a deal?
• Their real interest and business constraint
• Their preferences among issues and
options
HOW TO ACHIEVE SUCCESS IN DISTRIBUTIVE
NEGOTIATION?

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Exploit what you learn about the other side in setting
your first offer or demand
Don’t overshoot
If you claim aggressively or greedily the other side
may walk away.
You might loose the opportunity to make a deal.
HOW TO ACHIEVE SUCCESS IN DISTRIBUTIVE
NEGOTIATION?

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INTEGRATIVE NEGOTIATION
The parties cooperate to achieve maximum benefits
by integrating their interests
Create value and claim it
Think more about the relationships and less about
winning
Example - original equipment manufacturing –
collaborate on quality control and product
development
Few suppliers – long term relationship orientation

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It might be win-win
Trade –off to get things you value most
Go beyond price – delivery date, quality etc.
Creative options – understand each other’s key
interest
INTEGRATIVE NEGOTIATION

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Provide significant information about their
circumstances
Explain why they want to make a deal
Talk about their real interest or business constraints
Reveal and explain their preferences among issues
and options
Additional capabilities or resources which can add
value to the deal
Find creative options that will meet the interest of
both parties.
HOW TO ACHIEVE SUCCESS IN INTEGRATIVE
NEGOTIATION?

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Value Claiming and Value Creation
The purpose of distributive bargaining is to claim value.
• Using whatever necessary to claim the reward or gain the largest part.
The purpose of integrative negotiation is to create value.
• Or find a way for all parties to meet their goals and share the reward.
Most negotiations combine claiming and creating value.
• Negotiators must recognize when to use one approach or the other.
• Negotiators must be versatile and comfortable using either approach.
• Negotiators see problems as more competitive than they really are.
Coordination of interdependence has the potential for
synergy.
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Creating Value Through Differences
There are some key differences among negotiators.
• Differences in interests.
• Finding compatibility is often the key to value creation.
• Differences in judgments about the future.
• How parties see what is possible creates opportunities to get together.
• Differences in risk tolerance.
• A company with a cash flow problem can assume less risk.
• Differences in time preference.
• The seller wants to close the deal but the buyer may not be ready.
Value is often created by exploiting common interests, but
differences can also serve as the basis for creating value.
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End of Chapter 01.
© 2019 McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education.