Negotiation

1: Gurn Alan McCarthy:

Do not negotiate
Don't. (Negotiate) unless you need to. Always evaluate
your needs honestly and buy/sell hard; never, if at all
possible negotiate, as it always requires compromise,
which costs. Some people are tempted to negotiate too
soon, just because the other party says this is the
negotiation phase - doesn't make it so. Work out your
ideal position and don't be afraid to state it straight away
Never negotiate with yourself
People regularly try to second guess the other party and in doing so
minimize their own expectations i.e. Ideally I want to be paid
10,000 for this, but maybe they don't have that much. If I ask for
10k or nearest offer, it might sound less aggressive - this is the
start of negotiating with yourself. If you start reducing your
expectations From your ideal before you even see the whites of
their eyes, you Will always end up with a lesser, over-compromised
deal. Start out with your ideal and wait for the other party to ask for
a lower figure.
Never except the first offer
There is almost always a different (better) offer behind it. Don't forget they

will be instinctively (or professionally) trying not to break use 2 - so their

opening stance will obviously be leaning towards their ideal (perfect)

position - with probable room for manoeuvre. Also, be aware, that you can

sometimes annoy the other party by accepting

their first offer; if you accept too quickly they will think they should have

asked for more, resulting in their perception of a lose/win

conclusion (they lost, you won).

Never make the first offer

Listen more & talk less
 No free gift
Watch out for the salami effect
Avoid the Rookies regret
Never make a quick deal
Never disclose your bottom line

2: Debunking negotiation myths

Myth 1: Negotiations are fixed-sum
Probably the most common myth is that most negotiations
are fixed-sum or fixed-pie, in nature, such that whatever is
good for one person must ipso facto be bad for the other
party, the truth is that most negotiations are not purely
fixed-sum; in fact most negotiations are variable-sum in
nature.

Myth 2: You need to be either tough or soft

The fixed-sum myth gives rise to a myopic view of the
strategic choices that negotiators, most negotiators
believe they must choose between either behaving in a
tough or being. Effective negotiators follow an
enlightened view of negotiation and correctly recognize
that to achieve their own outcomes they must work
effectively with the other party but must also leverage
their own power and strengths.

Myth 3: Good negotiators are born

A pervasive belief is that effective negotiation skills are
something that people are born with, not something that
can be readily learned, this notion is false because most
excellent negotiators are self-made, in fact, and naturally
gifted negotiators are rare.

Myth 4: Life experience is a great teach

It is only partly trueq that experience can improve
negotiation skills; experience in the absence of feedback
is largely ineffective in improving negotiation skills. Casual
experience as an effective teacher has three strikes
against it. Therefore, in the absence of feedback, its
nearly impossible to improve performance, and its also
our memories tend to be selective, meaning that people
are more likely to remember their success and forget their
failure.

Myth 5: good negotiators take risks

A pervasive myth is that effective negotiation necessitates
taking risks and gambles, in negotiation, this approach
may mean saying things like this is my final offer or
using threats and bluffs, therefore, this is that we call a
tough style of negotiation.

Myth 6: Good negotiators rely on intuition

An interesting exercise is to risk managers and anyone
else who negotiates to describe their approach to
negotiating. Many seasoned negotiators believe that their
negotiation style involves a lot of gut feeling. Excellent
negotiators do not rely on intuition, rather, they are
deliberate planners, as a general rule, do not rely on your
intuition unless you are an expert.
3: When negotiating for a job there are
additional
Extra vacation days
Flexible scheduling
Telecommuting
Personal days and parental leaves
Tuition reimbursement
Public transportation reimbursement
Increased family benefits
Increased job training
Supplemental insurance coverage
Gym memberships
Food delivery
Concierge service
Education grants
Adoption assistance
Company supplied cars
Life insurance
First chance for promotions
Delaying your start date to have time off between
jobs
Flexible scheduling
Gas reimbursement

Negotiation Tactics are more than just having a set of

tools. The great negotiator is aware of the negotiation
tactics being employed by the other party. Sometimes the
person you are dealing with will use a number of
Negotiation Traps, the purpose of which is to trip you up
and make you concede more than you had intended.
The thing that separates great business negotiators from
good business negotiators is their ability to avoid serious
mistakes. If you can eliminate negative risk you feel more
confident about exploring positive risk and push for deals
that meet your goals and objectives. Below are seven of
most important mistakes negotiators make and need to
avoid. Sometimes turning a learning opportunity upside
down or looking at it backwards helps us learn quicker
with deeper insight. Heres hoping you avoid our
magnificent seven and become a great negotiator!

4: The Four traps for negotiation

Leaving money on the table (lose-lose
negotiation)
It occurs when negotiators fail to recognize and
capitalize on their win-win potential

Setting for too little (the winners curse)

It occurs when negotiator make too lager
concession, resulting in a too small share of the
bargaining pie

Walking away from the tablewhen negotiator

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)
 Setting for terms worse than your
alternative (the agreement bias) it occurs
when negotiator feel obligated to reach
agreement even when the settlement terms are
not as good as their other alternatives
5: Sunk cost
A cost that has already been incurred and thus cannot be
recovered. A sunk cost differences from other, future costs
that a business may face, such as inventory costs or R&D
expenses, because it has already happened. Sunk costs
are independent of any event that may occur in the future.
Its just what they sound like money you have invested
that is, for all practical purposes, gone. Economic theory
asserts that only future costs and benefits should affect
decisions, however, people have a hard time forgetting
the past, and they often try to recoup sunk costs. One
type of sunk cost is the purchase price that home sellers
paid for their house. Sellers and buyers in a simulated real
estate negotiation were given the same Multiple listing
service sheet describing a house. However negotiators
were given different information about their previous
purchase price. Buyers offered significantly higher
amounts for a condominium with larger sunk costs,
indicating that the sellers sunk costs influenced the
buyersbehavior.
Sunk costs should not be considered when making the
decision to continue investing in an ongoing project, since
you cannot recover the cost. However, many managers
continue investing in projects because of the sheer size of
the amounts already invested in the past. They do not
want to "lose the investment" by curtailing a project that
is proving to not be profitable, so they continue pouring
more cash into it. Rationally, they should consider earlier
investments to be sunk costs, and therefore exclude them
from consideration when deciding whether to continue
with further investments.
An accounting issue that encourages this adverse
behavior is that capitalized costs associated with a project
must be written off to expense as soon as the decision is
made to cancel the project. When the amount to be
written off is quite large, this encourages managers to
keep projects running.

Here are several examples of sunk costs:

Marketing study. A company spends $50,000 on a
marketing study to see if its new auburn widget will
succeed in the marketplace. The study concludes that
the widget will not be profitable. At this point, the
$50,000 is a sunk cost. The company should not
continue with further investments in the widget project,
despite the size of the earlier investment.
Research and development. A company invests
$2,000,000 over several years to develop a left-handed
smoke shifter. Once created, the market is indifferent,
and buys no units. The $2,000,000 development cost is
a sunk cost, and so should not be considered in any
decision to continue or terminate the product.
Training. A company spends $20,000 to train its sales
staff in the use of new tablet computers, which they will
use to take customer orders. The computers prove to
be unreliable, and the sales manager wants to
discontinue their use. The training is a sunk cost, and
so should not be considered in any decision regarding
the computers.
Hiring bonus. A company pays a new recruit $10,000 to
joint the organization. If the person proves to be
unreliable, the $10,000 payment should be considered
a sunk cost when deciding whether the individual's
employment should be terminated.
6: Team on team negotiation

Step 1: individual preparation

Identify the issues
Identify your BATNA
Determine what you believe to be your teams worst-
case scenario
Write down these scenario and be prepared to share
them with the members of your team
Step 2: As a team, decide on your procedures for
running the preparation meeting
Who is going to run the meeting (i.e. who is going to
summarize, synthesize, etc)
What materials do you need to be effective (calculator,
flipcharts, computer etc.), and who is bringing them?
What is your timeline, and who will enforce it so that
the team arrives at the negotiation table prepared and
refreshed?

Step 3: As a team, clarity facts and information

(Note: you are not discussing strategy yet!)
Develop a positions and interest chart
Prioritize your issues; understand the reasons for your
priorities
Identify what you think the other partys priorities are.
Identify what information you need from the other
party.
Determine your BATNA
What do you know about the partys BATNA?
Identify your worst-case scenario (reservation price)
Identify your best-case scenario (target)
As you complete the preceding tasks, make a list of
questions to research.
Identify information that is too sensitive to reveal at
any point under any condition
Identify information that you are willing to share with
the other team if they inquire/

Step 4: strategy
 As a team, plan your opening offer
Choose a lead negotiator
Choose a lead strategist
Choose an accountant to run the numbers
Choose a scribe to keep track of offers, decide on a
signal to adjourn for a private caucus