Basics of Negotiation

BCN 4712
Leading & Managing Construction
Operations
Overview
„ Importance of negotiating skills
„ Types of negotiation
„ Four Key Concepts
„ Preparation
„ Negotiation Tactics
„ Barriers to Agreement
„ Mental Errors
„ Building Organizational Skills
Importance of Negotiating
Skills
„ Personal
„ Homes, cars, everything you buy
„ Your job, salary, working conditions
„ Your spouse and kids!
„ Professional
„ Clients
„ Design teams
„ Subcontractors
„ Suppliers
„ Employees
 References on Negotiation

Negotiation, Harvard Business School Press, 2003.

Getting to Yes: Negotiating Agreement Without

Giving In, Roger Fisher and William Ury & Bruce
Patton, 2nd Edition, Houghton Mifflin, 1991

Getting Past No: Negotiating with Difficult People,

William Ury, Bantam Books, 1991
 Basic Types of Negotiation

™ Distributive negotiations
™ Involve win–lose, fixed-amount situations
wherein one party’s gain is another party’s
loss

™ Integrative negotiations
™ Involve joint problem solving to achieve
results benefiting both parties
Distributive Negotiation
„ Win-lose, zero sum, constant sum
„ A dollar more to one side is a dollar less
to the other
„ Carpet sale where buyer and seller have
no relationship
„ Wage negotiations between business
owners and union employees
„ Cards are played close to your vest
Integrative Negotiation
„ Both sides work to increase the value of
the solution
„ Goals are to:
„ Create as much value for yourself and the
other side
„ Claim value for yourself
„ Open about information and
circumstances
 Positional Negotiating

„ When negotiators bargain over

positions they tend to lock themselves
into those positions.

Modified from material obtained from the Harvard Negotiation Project.

Copyright 2000 by the Presidents and Fellows of Harvard College. All rights reserved.
 Positional Negotiating

„ The more you clarify your position and

defend it against attack, the more
committed you become to it.

Modified from material obtained from the Harvard Negotiation Project.

Copyright 2000 by the Presidents and Fellows of Harvard College. All rights reserved.
 Positional Negotiating

„ The more you try to convince the other

side of the impossibility of changing
your opening position, the more difficult
it is to do so.

Modified from material obtained from the Harvard Negotiation Project.

Copyright 2000 by the Presidents and Fellows of Harvard College. All rights reserved.
 Positional Negotiating

„ The result is frequently an agreement

that is far less satisfactory to each side
than what it could have been.

Modified from material obtained from the Harvard Negotiation Project.

Copyright 2000 by the Presidents and Fellows of Harvard College. All rights reserved.
 Positional Negotiation

Pros Cons
„ Easy to understand „ Rewards stubbornness
„ Simple communication and deception
„ Can be quick and „ Discourages exploration
efficient of interests and options
„ Very operational „ Promotes arbitrary
„ Requires little outcomes
preparation „ Takes longer in complex
„ Universally understood situations
„ Often expected

Modified from material obtained from the Harvard Negotiation Project.

12/1/2005 Copyright 2000 by the Presidents and Fellows of Harvard College. All rights reserved.
Principled Negotiation:
The Method
„ Separate the people
From the problem
„ Focus on interests,
Not positions
„ Invent options
For mutual gain
„ Use objective criteria
Modified from material obtained from the Harvard Negotiation Project.
Copyright 2000 by the Presidents and Fellows of Harvard College. All rights reserved.
 Separate the people
from the problem
Relationship Issues: Substantive Issues:
„ Emotion/reason „ Money
„ Understanding „ Terms
„ Communication „ Conditions
„ Reliability „ Concessions
„ Coercion/persuasion „ Promises
„ Acceptance/respect „ Dates/numbers
 Focus on Interests
not Positions
Interests = desires and concerns that
underlie positions
„ Prepare for negotiation:
„ Clarify interests
„ Understand the interests of the other side
„ Focus the negotiation discussion on:
„ Interests – not positions
Modified from material obtained from the Harvard Negotiation Project.
Copyright 2000 by the Presidents and Fellows of Harvard College. All rights reserved.
 Invent Options
for Mutual Gain
To invent creative options:
„ Separate inventing from judging.
„ Broaden the options on the table,
rather than look for a single answer.
„ Search for mutual gains.
„ Invent ways to make their decision
easy.
Modified from material obtained from the Harvard Negotiation Project.
Copyright 2000 by the Presidents and Fellows of Harvard College. All rights reserved.
 Insist on using
Objective Criteria

„ Frame each issue as a joint search for

objective criteria.
„ Reason and be open to reason as to
which standards are most appropriate
and how they should be applied.
„ Never yield to pressure, only to
principle.
Modified from material obtained from the Harvard Negotiation Project.
Copyright 2000 by the Presidents and Fellows of Harvard College. All rights reserved.
Starting Point
„ A successful negotiation must have a
basic framework
„ The alternative to negotiation
„ The minimum threshold for a negotiated
deal
„ How flexible a party is willing to be, and
what tradeoffs it is willing to make
Four Key Concepts
„ BATNA
„ Reservation Price
„ ZOPA
„ Value Creation through Trades
Know your BATNA!
„ Best Alternative to a Negotiated Agreement
(BATNA)
„ Typical example: negotiate or go to court
„ Example of Louis XI in 1475 (p. 16)
„ Improving your situation
„ Improve your BATNA
„ Identify the other side’s BATNA
„ Weaken the other party’s BATNA
Reservation Price
„ The least favorable point at which one
will accept a deal
„ The “walk-away”
„ Example: you are looking for larger
office space. You set your BATNA at
$20/SF and your Reservation Price at
$30/SF
 ZOPA
„ Zone of Possible Agreement (ZOPA)
„ The difference between the Seller’s
Reservation Price and the Buyer’s
Reservation Price
„ What happens if positions below are
reversed?
$250k $275k
ZOPA

Seller’s Buyer’s
Reservation Price Reservation Price
Value Creation through Trades
„ Trade things you value less to the other
party
„ Examples:
„ For a supplier the greater value may be not
price but an extended delivery time
„ For a customer, extended warranty versus
price
„ For an employee, working at home versus
salary
Preparing for a Negotiation
„ BATNA: yours and theirs, know them
„ Identify value creation opportunities
„ Determine negotiation authority levels
„ Understand the people and their culture
„ Prepare for flexibility
„ Show fairness in your position
„ Alter the process in your favor
 Nine Steps to a Deal
1. Know what would be good outcomes
2. Identify value creation opportunities
3. Identify BATNA and RP’s
4. Shore up your BATNA
5. Anticipate the authority issue
6. Learn all you can about the other side
7. Prepare for flexibility
8. Gather external standards and criteria for fairness
9. Alter the process in your favor
Getting Off to a Good Start
„ Express respect for the other side
„ Frame the task positively, as a joint
endeavor
„ Emphasize openness to the other side’s
interests and concerns
„ Start by ‘breaking bread’
For Win-Lose Negotiations
„ Anchoring: an attempt to establish a
reference point around which negotiations
will make adjustments
„ The first offer is often important
„ Studies show that outcomes correlate to the first
offer
„ Counteranchoring: what you do if the other
side sets the anchor
„ Be prepared for Concessionary Moves: avoid
the impulse to make them, may indicate
weakness or additional flexibility
Closing the deal
„ Signal the end before you get there
„ Allow flexibility if you anticipate going
beyond the final round
„ Discourage the other side from seeking
further concessions
„ Write down the terms