Negotiation Genius
by: Deepak Malhotra and Max H. Bazerman
Abstract: This is a very good book on the topic of negotiation. Written by Harvard
Business School faculty, it takes a very structured approach to teaching negotiation: from
value claiming, value creation, investigative negotiation, and various cognitive biases that
affect negotiation. A number of real-life examples are used effectively to explain
negotiation concepts and research knowledge is used to back up the insights and methods
presented. All in all, a great read on the topic of negotiation.
Summary of Content
Chapter 1. Claiming Value:
Step 1: Assess your BATNA (Best Alternative to No Agreement)
Step 2: Calculate your Reservation Value (walkway price)
Step 3: Assess the other party's BATNA
Step 4: Calculate the other party's Reservation Value
Step 5: Evaluate the ZOPA (Zone of Possible Agreement)
When should you make the first offer?
Benefit: strong effect of anchoring
Caveat: make the first offer when you have sufficient information about the other side's
reservation value.
Responding to the first offer:
1. Ignore their anchor
2. Separate Information from Influence:
i.e. "We have received a better offer from Company X. As a result, we think your initial
offer is low. We would like you to increase it to $7 million" vs "As you know, there are other
companies with whom we do business. We have spoken with them. As a result, we think
your initial offer is low. We would like you to increase it to $7 million."
3. Make an anchored counteroffer, then propose moderation
i.e. "based on your offer, which was unexpected, it looks like we have a lot of work ahead of
us. From our perspective, a fair price would be closer to $X [your counter-anchor]. I will
explain to you how we are valuing this deal, but it appears to me that if we are to reach any
agreement, we will both have to work together to make it happen."
What should the first offer be?
1. Keep the entire ZOPA in play.
2. Provide justification for your offer. (i.e. think photocopier example)
3. Set high, but realistic aspirations (i.e. anchor aggressively)
Haggling strategies:
1. Focus on the other party's BATNA and Reservation Value
2. Diminishing rates of concessions (tapering)
3. Responding to an offer you love, consider your options
a. immediate acceptance
b. counter-offer anyway
c. Einstein's story: Princeton asked Einstein how much he wanted to be paid. He said
"$3000/yr". Princeton said "We'll pay you $15,000".
d. did you mis-calculate the ZOPA?
Chapter 2: Creating Value
Preparing:
1. Identify multiple interests
2. Create a scoring system (think game theory, utility function)
3. Calculate a package reservation value
4. Identify other party's multiple interests
Executing:
1. Negotiate multiple issues simultaneously (there has to be a winner and a loser if you only
negotiate 1 issue. Not so with 2 or more issues)
2. Make package offers
3. Leverage differences of expectation to create value (via contingency contract)
Post-negotiation value creation:
1. acknowledge the process was already made in reaching the initial agreement
2. suggest there are aspects of the deal that you wish could be improved; acknowledge that
they probably feel similarly
3. suggest you may have already conceded everything that you can afford, but you are
willing to think "outside the box" if that will help the other party
4. state that it is important for both of you to realize that you are not looking for a new
agreement, but for an improved agreement that both parties prefer to the current
agreement
Chapter 3: Investigative Negotiation
1. Don't just ask what, ask why.
2. Seek to reconcile interests, not demands.
3. Think creatively: create common ground with uncommon allies, interpret demands as
opportunities
Five strategies for eliciting information
1. Build trust and share information. Build trust even when you're not negotiating.
2. Ask questions, especially if you're surprised or skeptical
3. Give away some information. Tit for tat (implicit).
4. Negotiate multiple issues simultaneously
5. Make multiple offers simultaneously
Chapter 13: When Not to Negotiate
1. When your BATNA stinks, and everyone knows it (consider giving up all your and use not
negotiation, but other methods: i.e. appeal to fairness, and willingness to help)
2. When negotiation sends the wrong signal
3. When relationships might suffer
4. When your BATNA beats their best possible offer