The Art of Negotiating

The Art of Negotiating : The Art of Negotiating T. Sivasankaran Advesh Consultancy Services Chennai India tss@advesh.com Mobile: 09790971951 1 The Art of Negotiating Advesh Consultancy Services 1/14/2009

Slide 2 : Mastery Skill Knowledge Awareness 2 The Art of Negotiating Advesh Consultancy Services 1/14/2009

BASICS OF NEGOTIATION : BASICS OF NEGOTIATION 3 The Art of Negotiating Advesh Consultancy Services 1/14/2009

Slide 4 : We all negotiate, all the time- at home, with friends, at office, in public These negotiations can be about anything Negotiation is the most effective way of resolving conflicts and securing agreement A two way discussion to agree terms Conferring for the purpose of mutual agreement A process of discussion aimed at reaching agreement Establishing consensus amongst two or more parties 4 The Art of Negotiating Advesh Consultancy Services 1/14/2009

Negotiation Is : Negotiation Is A dialogue between two or more parties, with the intent of coming to a mutually agreed solution, because each party has something the other wants. A communication process between two or more people in which they consider alternatives to arrive at mutually agreeable solutions or mutually satisfactory objectives 5 The Art of Negotiating Advesh Consultancy Services 1/14/2009

Slide 6 : Setting Goals Balancing Outcome and Relationships 6 The Art of Negotiating Advesh Consultancy Services 1/14/2009

Setting Goals : Setting Goals BATNA RESERVATION PRICE ZOPA 7 The Art of Negotiating Advesh Consultancy Services 1/14/2009

BATNA : BATNA Best Alternative To a Negotiated Agreement 8 The Art of Negotiating Advesh Consultancy Services 1/14/2009

WHAT IS BATNA? : WHAT IS BATNA? How do the proposals match your realistic alternative if you cannot come to a deal? The more attractive your BATNA is compared with the proposals you receive, the more POWER you have; the less attractive your BATNA is compared to the deal on offer, the less power you have. 9 The Art of Negotiating Advesh Consultancy Services 1/14/2009

BATNA : BATNA Retain the existing supplier Go to another supplier Strike/Lockout Not an immediate requirement 10 The Art of Negotiating Advesh Consultancy Services 1/14/2009

DEVELOPING BATNA : DEVELOPING BATNA List what you would do if you fail to reach an agreement Convert the most promising options into practical choices. Select the single best option; that is your BATNA Compare your BATNA to all proposals If an offer is better than your BATNA,consider improving or accepting it If an offer is worse than your BATNA, consider rejecting it If they will not improve their offer consider exercising your BATNA 11 The Art of Negotiating Advesh Consultancy Services 1/14/2009

BATNA : BATNA Know your BATNA Work with all the BATNAs Be ready to walk 12 The Art of Negotiating Advesh Consultancy Services 1/14/2009

BATNA : BATNA Developed by Roger Fisher and William Ury 13 The Art of Negotiating Advesh Consultancy Services 1/14/2009

RESERVATION PRICE : RESERVATION PRICE Reservation Price is the least favourable point at which one will accept a deal 14 The Art of Negotiating Advesh Consultancy Services 1/14/2009

ZOPA ZONE OF POSSIBLE AGREEMENT : ZOPA ZONE OF POSSIBLE AGREEMENT ZOPA is the area or range in which a deal that satisfies both parties can take place. It is the set of agreements that potentially satisfy both parties. 15 The Art of Negotiating Advesh Consultancy Services 1/14/2009

EXAMPLE : EXAMPLE Sellers Expectation Buyers Expectation 16 The Art of Negotiating Advesh Consultancy Services 1/14/2009

BATNA Exercise 1 : BATNA Exercise 1 You have a good motor cycle which is 4 years old. It gives good mileage. However you want to replace it with a new one. You have Rs 30000 cash in hand You want the balance to be arranged thru loan You have 12% interest in your mind. The financier is asking for 15% What is your BATNA? 17 The Art of Negotiating Advesh Consultancy Services 1/14/2009

BATNA EXERCISE 3 : BATNA EXERCISE 3 You are attending an interview for change of job. You are in salary negotiation stage. You are concerned about your child’s education. Currently you are on a transferable job.You are demanding 30% increase. The new company is offering the same salary. What is your BATNA? 18 The Art of Negotiating Advesh Consultancy Services 1/14/2009

Balancing Outcome and Relationships : Balancing Outcome and Relationships DISTRIBUTIVE NEGOTIATION INTEGRATIVE NEGOTIATION 19 The Art of Negotiating Advesh Consultancy Services 1/14/2009

Distributive Negotiation : Distributive Negotiation A negotiation in which the parties compete over the distribution of a fixed sum of value. Key question here is “Who will claim the most value?” A gain by one party is at the expense of the other. Win-lose situation 20 The Art of Negotiating Advesh Consultancy Services 1/14/2009

Integrative Negotiation : Integrative Negotiation A negotiation in which the parties cooperate to achieve the maximum benefits by integrating their interests into an agreement. These deals are about creating value and claiming it. Win-win situation. 21 The Art of Negotiating Advesh Consultancy Services 1/14/2009

STAGES OF NEGOTIATION : STAGES OF NEGOTIATION Phase 1: Preparation Phase 2: Interacting Phase 3: Agreement 22 The Art of Negotiating Advesh Consultancy Services 1/14/2009

Negotiation Process : Negotiation Process 23 The Art of Negotiating Advesh Consultancy Services 1/14/2009

PREPARATION : PREPARATION 24 The Art of Negotiating Advesh Consultancy Services 1/14/2009

PREPARATION : PREPARATION Understanding one’s own position and interests of the other party or parties the issues at stake, and alternative solutions. 25 The Art of Negotiating Advesh Consultancy Services 1/14/2009

PREPARATION : PREPARATION Consider What a good outcome would be for you and the other side. Identify potential value creation opportunities Identify your BATNA and Reservation Price and do the same for the other side. Shore up your BATNA 26 The Art of Negotiating Advesh Consultancy Services 1/14/2009

PREPARATION : PREPARATION Anticipate the Authority Issue Learn All you can About the Other Side Prepare for Flexibility in the Process Gather External Standards and Criteria Relevant to Fairness Alter the process in your favour 27 The Art of Negotiating Advesh Consultancy Services 1/14/2009

CRITICAL ELEMENTS/DIMENSIONS OF NEGOTIATION : CRITICAL ELEMENTS/DIMENSIONS OF NEGOTIATION Knowledge or information Time or Deadline Pressure Strength or Power All the above are inter-twined 28 The Art of Negotiating Advesh Consultancy Services 1/14/2009

INFORMATION : INFORMATION More information you have, the better you will be able to negotiate Information and facts help you to generate alternatives, strategies and convince the other party Information about the other party, market information, trends, technologies Published Standards, guidelines, data equip you to put your points effectively 29 The Art of Negotiating Advesh Consultancy Services 1/14/2009

TIME : TIME Time plays a critical role in Negotiation Pareto’s Law 80/20 80% of results are generally agreed upon in the last 20% of the time Time / Deadline pressure weakens you / builds tension 30 The Art of Negotiating Advesh Consultancy Services 1/14/2009

POWER / STRENGTH : POWER / STRENGTH The ability to influence / control the group and the events Besides the authority of your position, knowledge is your strength The balance of power keeps shifting from one side to the other during the negotiation process Negotiation will end when -The balance of power shifts totally to one side – a Win-Lose situation When the balance of power is shared equally – a Win-Win situation 31 The Art of Negotiating Advesh Consultancy Services 1/14/2009

INTERACTING : INTERACTING 32 The Art of Negotiating Advesh Consultancy Services 1/14/2009

INTERACTING : INTERACTING Getting the other side to the Table Getting off to a good start Power of Anchoring Using Concessionary moves Tactics for Distributive negotiation General Tactics 33 The Art of Negotiating Advesh Consultancy Services 1/14/2009

Getting the other side to the Table : Getting the other side to the Table Offer incentives Put a price for on the status-quo Mobilise Support 34 The Art of Negotiating Advesh Consultancy Services 1/14/2009

Getting off to a good start : Getting off to a good start Express respect for the other side’s experience and expertise Frame the task positively, as a joint endeavour Emphasise your openness to the other side’s interests and concerns. Start with the agenda 35 The Art of Negotiating Advesh Consultancy Services 1/14/2009

Getting off to a good startSome tips : Getting off to a good startSome tips “Breaking Bread” Have coffee, snacks or light drinks available. Use small talk to dispel tension If the other side is very formal, don’t speak casually. If the other side is decidedly informal, speak in a more casual way. 36 The Art of Negotiating Advesh Consultancy Services 1/14/2009

Slide 37 : ACCOMMODATE Build friendly relationship Characteristics: Promote harmony Avoid substantive differences Give into pressure to save relationship Place relationship above fairness of the outcomes COLLABORATE Problem solved creatively, aiming for win-win Characteristics: Search for common interests Problem-solving behaviours Recognising both parties’ needs Synergistic solutions Win-win becomes the main purpose of the negotiator AVOIDTake whatever you can get/Inaction Characteristics: Feeling of powerlessness Indifference to the result Resignation, surrender Take what the other party is willing to concede Withdraw & remove = behaviour of negotiator DEFEAT Be a winner at any cost/Competitive Characteristics: Win-Lose competition Pressure/Intimidation Adversarial relationships Defeating the other becomes a goal for the negotiator COMPROMISE Split the difference Characteristics: Meeting half way Look for trade offs Accept half-way measures Aims to reduce conflict rather than problem solve synergistically LOW HIGH CONCERN FOR RELATIONSHIP CONCERN FOR SUBSTANCE HIGH 37 The Art of Negotiating Advesh Consultancy Services 1/14/2009

Distributive Negotiations : Distributive Negotiations Win-Lose Negotiations Anchoring is an attempt to establish a reference point around which negotiations will make adjustments. When should you anchor Counter anchoring Be prepared for concessionary moves 38 The Art of Negotiating Advesh Consultancy Services 1/14/2009

Integrative Negotiations : Integrative Negotiations Slower and more explorative opening Don’t start with numbers. Making a good start is critical Ask open ended questions Probe the other side’s willingness to trade off one thing for the other. Inquire about the other party’s underlying interests Listen closely Be an active listener Express empathy Work to create a two-way exchange of information Continue relationship building efforts Refrain from personal attacks. Maintain a sense of humour 39 The Art of Negotiating Advesh Consultancy Services 1/14/2009

The Art of Listening : The Art of Listening 40 The Art of Negotiating Advesh Consultancy Services 1/14/2009

Nonverbal Behaviour : Nonverbal Behaviour What is going on in the inside shows on the outside 1/14/2009 The Art of Negotiating Advesh Consultancy Services 41

Face and Head : Face and Head Broken Eye Contact(Hide) Looking pat you(Bored) Piercing(Angry) Steady(Honest) Head Turned slightly(Evaluating you) Tilted Head(Uncertain about what you said) Nodding(In agreement) Smiling(Confident) 1/14/2009 The Art of Negotiating Advesh Consultancy Services 42

Arms and Hands : Arms and Hands Arms folded tightly(not receptive) Arm over the back of the chair(need for dominance or negative reaction) Open palms(Positive) Hands clasped behind head(Need for dominance) Steeling of the fingers(Need to control negotiation) Hand wringling(Nervousness) Self touching(General nervousness) 1/14/2009 The Art of Negotiating Advesh Consultancy Services 43

Legs : Legs Crossing your legs has a devastating effect Out of 2000 videotaped sales meetings, not one sale was made by people who had their legs crossed Source How to Read a Person like a Book by Gerard I. Nirenberg and Henry H. Calero 1/14/2009 The Art of Negotiating Advesh Consultancy Services 44

Dominance/Power : Dominance/Power Making piercing eye contact Putting hands behind head or neck Placing hands on hips Standing while counterpart is seated Steepling 1/14/2009 The Art of Negotiating Advesh Consultancy Services 45

Submission/Nervousness : Submission/Nervousness Fidgetting Making minimum eye contact Touching hands to face , hair etc Using briefcase to “guard” body Clearing throat 1/14/2009 The Art of Negotiating Advesh Consultancy Services 46

Disagreement/Anger : Disagreement/Anger Getting red Pointing a finger Squinting Turning body away Crossing arms or legs 1/14/2009 The Art of Negotiating Advesh Consultancy Services 47

Boredom and Lack of Interest : Boredom and Lack of Interest Failing to make eye contact Playing with objects Staring blankly Picking at clothes Looking at watch/door 1/14/2009 The Art of Negotiating Advesh Consultancy Services 48

Uncertainty/Indecision : Uncertainty/Indecision Cleaning glasses Looking puzzled Putting fingers to mouth Biting lip Tilting head 1/14/2009 The Art of Negotiating Advesh Consultancy Services 49

Suspicion/Dishonesty : Suspicion/Dishonesty Touching nose while speaking Covering mouth Avoiding eye contact Crossing arms/legs Moving body away 1/14/2009 The Art of Negotiating Advesh Consultancy Services 50

Evaluation : Evaluation Nodding Maintaining good eye contact Tilting head slightly Stroking chin Touching index finger to lips 1/14/2009 The Art of Negotiating Advesh Consultancy Services 51

Confidence, Cooperation and Honesty : Confidence, Cooperation and Honesty Leaning forward Keeping arms and palms open Maintaining great eye contact Placing feet flat on floor Sitting with legs uncrossed Smiling 1/14/2009 The Art of Negotiating Advesh Consultancy Services 52

Challenges & Obstacles : Challenges & Obstacles 53 The Art of Negotiating Advesh Consultancy Services 1/14/2009

TACTICS REGARDING PRICE : TACTICS REGARDING PRICE Should I ever state my acceptable range? Should I ever tell the other side my bottom line? Suppose that the other side opens with an incredibly unreasonable number, should I counter with an equally unreasonable number, or decline to counter at all? 54 The Art of Negotiating Advesh Consultancy Services 1/14/2009

TACTICS REGARDING PROCESS : TACTICS REGARDING PROCESS Is it acceptable to make two moves at a time? Is it smart or fair to bluff? In a complex deal, is it better to reach agreement issue by issue or wait until the end? Is it better to deal with difficult or easy issues first? 55 The Art of Negotiating Advesh Consultancy Services 1/14/2009

TACTICS REGARDING PEOPLE : TACTICS REGARDING PEOPLE Collaborative negotiator vs. positional hard bargainer? How should I react if the other side seeks to change something in its offer after a deal has been reached? What should I do when the negotiator on the other side has a temper tantrum? I don’t believe in what the other side says. Is it essential to negotiate face to face? How should I react when the other side challenges my credentials, status or authority to make a deal? 56 The Art of Negotiating Advesh Consultancy Services 1/14/2009

CLOSURE : CLOSURE 1/14/2009 The Art of Negotiating Advesh Consultancy Services 57

Closing : Closing Be Prepared to Concede Begin with those of Low Priority and seek High Priority Items Never Concede on More than possible by your Brief Use your Concessions Wisely Don’t just give these away expect and receive something in return 58 The Art of Negotiating Advesh Consultancy Services 1/14/2009

Slide 59 : Being Confident Being Prepared Being Willing to Walk Away 59 The Art of Negotiating Advesh Consultancy Services 1/14/2009

Slide 60 : Convince Collaborate Create 60 The Art of Negotiating Advesh Consultancy Services 1/14/2009