The Other Perspective
Chapter 15: Negotiated Decisions
 Relevance
of other perspective
Negotiations – Mutual acceptance of decision with
negotiating partner:
Key: Understand other perspective’s concerns
Ethical – Decision may impact others
Key: Perceive impact
Game Theory –reaction by competitor
Key: Anticipate actions and factor into initial actions
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Activity—Your experience with negotiations
Successful or Unsuccessful,
One time or part of long-term relationship?
 Personal
Purchase
Parent and child
Home contractor or landlord
 Business
Customer problem
Contract
Contract dispute
 Other: volunteer
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organization
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Issues to be Negotiated
 Tangible
Price
Duration
Coverage
 Intangible
– underlying psychological motivation
Fairness
Precedent setting
Reputation
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Types of Negotiations
 Single
issue such as price – very limiting
Distributive “fixed” pie – your increased share comes
from my decreased share
 Multi-issue
– preferred  bigger pie
Issues important to my side are not “as” important to
your side
Job security
Number of jobs
Market opportunities for supplier or reputation
Profits
 Deal
making involves upfront negotiations
 Conflict resolution  emotional
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Interests instead of bargaining positions
 Position
= one party’s solution to negotiations
Argue relative merits of each position
Attack merits of other position and often ignore concerns
Confrontational win-lose: may just split the difference
2011 National debt negotiations and budget deficits
 Interests
= underlying needs
Why is this important to you?
Egypt and Israel in Sinai
Israel security and Egyptian sovereignty
Salary request motivation
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Individual: Financial need or financial security or ego,
Company: precedents, total cost, flexibility
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Frame Issues
 Define
the issue: What is the issue? Why is it
important to us?
What is the current situation?
Who is affected and how are they affected?
What has contributed to making this an issue?
What will happen if nothing is done?
 Identify
stakeholder interests involved: What is at
stake for you and other key stakeholders on this
issue?
Different generations or classes of people!!
Ongoing 2012 US (and European) budget debates
NBA stars vs masses
Retirees, existing workers, and new workers
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Activity – Health care benefits
 Position
of Employer: Employees must pay more
of the cost of health insurance.
Interest of Employer:
_______________________________
 Position
of Union: The employees will not pay
more.
Interest of Union and Employees:
_______________________________
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KEY: Understanding other sides interests
 Problem: Biased
partisan perceptions
I am reasonable and you are not
 Creating
value vs claiming share of value
 Requires sharing information about preferences
and concerns
Openness and trust
 Negotiations
are a dynamic process with biases
Escalation of commitment, confirmation bias, sunk cost,
endowment affect of having something, anchoring,
overconfidence of winning
NBA 2011 strike – negotiate salaries as share of wealth
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Negotiation Process Steps
 Preparation
 Assessment of
Self – Goals to achieve and BATNA
Other party – Goals to achieve and BATNA
Situation: importance of relationship, time pressures, and
differences in power (unions)  Raise cap on national debt
 Value
Creation
Strategies: Solve the other’s problems, beneficial trades and
contingent contracts
Tactics: Ask questions, build trust, share information
 Value
Claiming
 Closure
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of negotiations
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Table 15.2: Negotiating the purchase
of a used car: Information
Seller’s Information
Buyer’s Information
The seller needs a larger vehicle that
will enable him to expand his business,
in which he delivers and sets up
computers for a local computer store.
The buyer, a commuter student at
the local college, has $3,450 to
spend. Borrowing funds from
family and friends is not possible.
The Blue Book retail value of the car is
$4,000 and a dealer has offered $3,350 as
a trade-in on a new car.
A local mechanic has certified that the
car is in good condition except for the
wear on the tires.
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The buyer wants a small, fuel
efficient car for getting to school
and to his part-time job.
The buyer hopes to purchase the
vehicle for $3,100 and have
sufficient money remaining for
insurance.
The seller has advertised the car for
$3,750.
Possible area of tradeoff – Payment schedule: less money upfront but more
in total
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Figure 15.1: Zone of Possible Agreement (ZOPA)
Target Price
($3,750)
Reservation Price
($3,350)
Seller
ZOPA
Buyer
Target Price
($3,100)
Reservation Price
($3,450)
BATNA = Best Alternative To No Agreement
ZOPA = Zone Of Possible Agreement: Overlap Region
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Job Offer & Assessing other needs
 Initial
offer an anchor?
 Company
 Salary scale or signing bonus?
 Immediate need to fill position
 Location (jobs in Detroit)
 Financial situation: short term vs long-term
 Uncertainty of performance
 Worker
 Has current job? Or out of work 6 months?
 Financial stress and debt (student loans)
 Willingness to relocate
 Need for security
 Spouse status
 External
 Job market for skills
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Solve other sides problem
 Face
saving gestures
 Job security for workers
 Health care coverage for seniors
 Day care for younger people
 Provide stable and predictable costs for
company
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Contingent contracts: If-Then
 Differences
in forecast and understanding
Royalties on sales
Performance of athlete
Growth in cost of living or cost of health care
Profitability or revenues
Sports team and union contracts share of revenues
Car market and plant closings
Length of productive performance
 Differences
in attitude towards risk and time value
How much for sure and how much contingent on
uncertain developments in economy or performance
Money now or later
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Table 15.4 Planning Document for each issue
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Long-term relationship & negotiations risks
 Use
of Power to impose solution
Threat of overseas outsourcing (American Axle)
Threat of bankruptcy
Threat of no new business to supplier
 Post
settlement negotiations – changes only if
both benefit from better solution
US budget – imposed automatic deficit reduction if
no alternative reached
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Sports: negotiation a deal
A
major league catcher, nearing the end of his
career, is hoping to negotiate a contract with a
major league team in his hometown. Looking
for a career after playing career ends
 The same team finds itself in need of an
experienced catcher. because of injury
 How should the parties prepare for these
negotiations? What issues are likely to arise?
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Sports Player – Interests & Goals
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Sports Player – Interests & BATNA
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Team & Catcher Perspectives: Creative Solutions
 Uncertainties, Interests and concerns
 Fitness of catcher and performance
 Return of injured player  one-year contract
 Team performance and revenue
 Career after baseball playing
 Broadcasting career in his hometown,
 Contract eases him into doing color commentary on television.
 Working with the catcher to sponsor baseball camps
 Set up speaking engagements in the community
 Contingent contracts
 Uncertainty of fitness –games played, team success
 Salary: base plus partial linked to performance
 Salary fairness
 Separate salary for his work as a broadcaster
 self-image: salary be appropriate to his status
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Baseball and Free Agency
 More
and more players are seeking long-term
contracts in their mid-20s as they are in the
early prime years and a couple of years from
free agency.
Want to stay in one city
Willing to give up free agency which would maximize
salary but carries risk
Number of years of salary guaranteed
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Chelst & Canbolat
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Hospital and IT Contractor Dispute
 Hospital
dispute with IT supplier over the
implementation of electronic record system.
Failure to resolve this dispute will cost the hospital
several million dollars
Hospital is on the verge of bankruptcy.
 Without
resolution, IT company will
Damage its credibility in a rapidly growing market and
Lose much of the money it has invested in the project.
 Lawsuits
 How
Chapter 15
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and counter suits
should the parties proceed?
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Ethical Issues
 Deception
vs integrity
 Claim that impossible to…
 I have no choice but to…
 Puffing – bragging about capabilities
 NO fraudulent claims – misrepresentation of material fact the other
party relies upon
 Three
frameworks
 Poker school – game with rules but everything else is OK
 Idealist – element of social life: candid but still do not reveal
everything, do not volunteer information
 Pragmatist – concern about questionable behavior that affects
reputation
 Research
Chapter 15
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your bargaining partner’s reputation
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Hospital and IT Contractor Interests
Hospital
Computer Co.
 Working
 Profitability
system
 Increased net revenue
 System in place quickly
 Reputation
 Staff acceptance and use
of system
Chapter 15
Author: Hal Stack
Chelst & Canbolat
Value Added Decision Making
 Future
sales to health
systems
 Tested generic data
entry software
 Reputation
 Staff acceptance and use
of system
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Chapter 15
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