Coffee Contract
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Role of seller
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Role of buyer
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Anderson Coffee
Statler Hotel, Cornell University
10 minutes to read materials
20 minutes to negotiate
Slicing the Pie
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How do you get the biggest piece?
Preparation
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Offers
Alternatives
Concessions
Offers
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Folklore says to let the other party
make the first offer
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Is that a good idea?
Anchoring
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People tend to focus heavily on the first
offer
First offer correlates .85 with the final price
Offers (continued)
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What if the other party makes the first
offer?
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Immediate counteroffer
Take away the psychic hold of the 1st offer
Offers (continued)
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How do you feel when the other party
accepts your first offer?
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I should have asked for more
Maybe I just got into a bad deal
Less satisfaction
Do not accept first offers
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They are just that – an opener
Expectation to negotiate
BATNA
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Best Alternative to a Negotiated Agreement
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The lowest acceptable value to an individual for a
negotiated agreement
Develop alternatives so you know at what
point to stop negotiating
Gives you the POWER to walk away
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If we cannot receive an offer of X-amount for the
house, then what will you do?
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Rent it out?
What’s your bottom line?
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“Tell me the bare minimum you would
accept and I’ll try and throw in
something extra”
“Why don’t you tell me the very
maximum you are willing to pay, and I’ll
try and I’ll see if I can shave off a bit”
Concessions
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Need some cushion (Target price versus
reservation price)
Make the first concession
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Why?
Norm of reciprocity
Positive feelings
Magnitude of concessions
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Less and less to signal you are reaching the end
Now What…..
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I want the last remaining orange and so
do you
Principled Negotiation
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Getting to Yes: Negotiating Agreement
Without Giving In
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Principled Negotiation Strategies
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Fisher & Ury
Integrative negotiations
MIND-SET
Mythical Fixed-Pie: Piece 1
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Assume there can only be one winner
and one loser (distributive bargaining
approach)
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Fail to find mutually agreeable trade-offs
“Let’s Compromise”
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The middle ground
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“Let’s split the difference”
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Seems like a good strategy: Isn’t it better than
no deal at all?
However, the middle ground results in
incomplete satisfaction for both parties
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“Leaving money on the table”
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However, only a small percentage of
organizational negotiations are purely
distributive, involving just one resource
or just one issue
Consider:
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Price, delivery date, financing, service,
relationships
Salary, bonuses, flexible scheduling,
location, vacation, moving expenses
Negotiation Approaches
Characteristics
Distributive
Bargaining
Integrative
Bargaining
Available resources:
Fixed amount of
Variable amount of
resources to be divided resources to be divided
Primary MINDSET:
I win, you lose
Primary interests:
Opposed to each other Convergent
with each other
View of relationships: Short term
I win, you win
Long term
Integrative Negotiation
Process and Preparation
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BATNA
Determining & Valuing Interests
Objective Criteria
Sitting down at the negotiation table
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Convey your interests effectively
Emotional Strategy
Where do you start?
Focus on interests, not positions:
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How do interests differ from positions?
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Behind opposed positions lie shared and/or
compatible interests
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Each side likely has multiple interests that
may be valued differently by each party
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Complete satisfaction for
both parties
There may be only one way to satisfy a position, but
there are multiple ways to satisfy interests
Preparation:
Interests, not positions
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Do you know your interests?
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Identify and
value your interests
Ranking process is one way to start
 Consult with team to help valuation
process
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Logrolling Approach
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Trade-off on issues that are valued
differently
Concessions
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Concede on issue that is valued lowest to
you – it may be of higher value to the
other
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Salary versus moving expenses
Mythical Fixed-Pie: Piece 2
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The interests of the other party
conflict with ours
“What’s good for them must be bad
for us”
 Our theories and assumptions about
negotiation and conflict strongly
impact our approaches and behaviors
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SALT (U.S. & Russia)
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“I have had a philosophy for some time
in regard to SALT, and it goes like this:
the Russians will not accept a SALT
treaty that is not in their best interest,
and it seems to me that if it is in their
best interest, it can’t be in our best
interest”
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Floyd Spence, U.S. Congress
Finding Compatible Interests
Can Be Difficult
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Pairs were presented with a negotiation
involving multiple issues regarding a job offer.
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On two of these issues, the opposing sides had
completely compatible interests (similar to an
interest in the orange peel versus an interest in
the fruit)
What percentage of the time did the negotiators
make the trade-offs?
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50%
Left money of the table ½ the time
Ways to find out the other party’s
interests and related values
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Ask questions
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Listen to the response!
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Contingent concessions
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I can give here if you can give on
something
Make multiple offers simultaneously
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Each is different, yet results in the same
level of profitability for you
Neutral Party
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Two students in a library, one wants the
window open, the other wants it closed. A
loud argument breaks out.
How might this be resolved?
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Fixed-pie assumptions
Anger closes our minds to alternative solutions
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Not wanting to “give in”
There may be just ONE way to satisfy a
position, but there are MULTIPLE ways to
satisfy interests.
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Inventing options for mutual gain
Sitting down at the table
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Perceive yourself working side by side
with the other party to resolve the issue
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Separate the people from the problem
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Resist the temptation to “attack” people
Typically sit across from the other
The Same Side
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Try sitting on the same side of the
table
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Together we can attack this problem
Presentation Approaches
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Option 1: “I want that orange because I am
interested in baking an orange cake and I
need the peel”
Option 2: “I am interested in baking an
orange cake and I need the peel, that’s why I
want that orange”
 How are these options different?
 Which one better ensures the other knows
your interests?
Approaching the Issues:
Where do we start?
A. Start with the easy issues first!
B. Start with the most difficult ones first!
C. Either A or B: It depends
D. Start with all of the issues at once
Emotional Strategy
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Poker face
Positive
Tough: Negative, Angry & Forceful
For Integrative Bargaining…
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Positive is best
 More creative, more ideas
 Found most trade-offs for joint gain
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Highest level of value
Detriments of anger
Found fewest trade-offs
 Least value
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Expressing positive emotion
“Put on a happy face”
 Your smile is often reciprocated by
the other side in terms of:
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Positive feelings and behaviors
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Finding trade-offs
Offering concessions
Policy
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“It’s company policy – there is
nothing I can do”
Two volunteers to read an
example?
Insist on objective criteria
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Search for a standard such as
market value, expert opinion, law
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This way, neither party is “giving in”
to the other and a fair agreement is
possible
We are asking for $200,000 in fees
 How did you arrive at that figure?
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Conclusions
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Most negotiations leave money on
the table
Too quick to compromise
 Fixed-pie assumptions are prevalent
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Assume it is all or nothing
 Assume our interests conflict with the
other side
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Reaching agreement
without giving in
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To maximize value for you and the
other party adopt an integrative
mindset
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Interests, not positions
Develop your BATNA
Adopt a problem-solving approach
Short & Long Term Benefits
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A collaborative approach may seem
counter-intuitive, but it is often more
effective
Consider joint gains and positive word
of mouth
Better over the long run