CH-4 Win-Win Negotiation: Expanding the Pie – The mind and heart of the negotiator : Chapter Notes

This document contains Chapters 4 to 6 Chapter 4 Win-Win Negotiation: Expanding the Pie OVERVIEW I assign this chapter after the first integrative exercise that students complete. I like to challenge stu¬dents with an integrative negotiation and then debrief the exercise in terms of undiscovered opportunities (i.e., money left on the table). I challenge students to provide reasons why smart and motivated people (like themselves) leave money on the table. Eventually, someone in the class will essentially describe the fixed-pie perception. This can lead to a lively discussion about what “win-win” negotiation is and the factors that threaten it. I think the best climax to this session/class is working systematically through the “stra¬te¬gies that work” list presented in the chapter. Ideally, it is great to relate each strategy to a real-world instance and/or the negotiation exercise that students engage in. As a homework exercise, I suggest that students diagnose a real negotiation situation (either one of their own or one in the popular press) in terms of the “strategies that work” list. Lecture Outline what is win-win negotiation? Most people think win-win negotiation means one or more of the following: Compromise Even split Satisfaction Building a relationship Win-win really means that all creative opportunities are exploited and no resources are left on the table (integrative negotiation) Telltale signs of win-win potential Does the negotiation contain more than one issue? Can other issues be brought in? Can side deals be made? Do parties have different preferences across negotiation issues? a pyramid model (Exhibit 4-1) Three levels of integrative, or win-win, agreements Level 1: agreements that exceed parties’ no-agreement possibilities or reservation points Level 2: agreements that are better for both parties than other feasible negotiated agreements (situation is not purely fixed-sum) Level 3: agreements that are impossible to improve on from the perspective of both parties (along pareto-optimal frontier of agreement) Less than 25% of executives in negotiation simulations reach level 3 agreements, and of those, 50% reach them by chance most common pie-expanding errors False conflict (also called illusory conflict) Lose-lose effect How to avoid lose-lose agreements Be aware of the fixed-pie perception Avoid making premature concessions Fixed-pie perception Negotiators assume interests are incompatible, that impasse is likely, and that issues are settled one by one rather than as packages Banishing fixed-pie perception is very difficult; many negotiators fall prey to it and throw money away Negotiation is not purely competitive; rather, it is a mixed-motive enterprise: cooperation (parties can reach an agreement and avoid resorting to their BATNAs) competition (parties can claim the largest slice of the pie) strategies that do not really work Commitment to reaching a win-win deal (often parties have an incorrect idea about what win-win is) Compromise (pertains to slicing the pie, not expanding the pie) Focusing on a long-term relationship (establishing a long-term relationship does not translate directly into win-win) Adopting a “cooperative orientation” (often keeps parties from focusing on the right information at the right time) Relational accommodation Taking extra time to negotiate (the quality of the negotiation does not improve with additional time) EFFECTIVE PIE-EXPANDING STRATEGIES Perspective-taking Ask questions about interests and priorities Provide information about your interests and priorities (Exhibit 4-2 and 4-3) Illusion of transparency—negotiators believe they are revealing more than they actually are Unbundle the issues Make package deals, not single-issue offers Make multiple offers of equivalent value simultaneously (Exhibit 4-4) Threefold strategy Devise multiple-issue offers Devise offers that are all of equal value to yourself Make the offers all at the same time Advantages for the negotiator Can be aggressive in anchoring Gain better information about the other party (inductive reasoning) Be persistent and persuasive regarding the value of an offer Overcome concession aversion Structure contingency contracts by capitalizing on differences In valuation (logrolling) In expectations In risk attitudes In time preferences In capabilities Cautionary note on effective contingency contracts Should not create a conflict of interest Should be enforceable and may require a written component Should be clear, measurable, and readily evaluated Require continued interaction among parties Presettlement settlements (PreSS; Exhibit 4-5) Search for postsettlement settlements a strategic framework for reaching integrative agreements (Exhibit 4–6) Resource assessment Specify issue mix Unbundle issues and alternatives Assessment of differences Offers and trade-offs Acceptance/rejection decision Prolonging negotiation and renegotiation do not forget about claiming Not an effective strategy to just focus on expanding the pie; negotiator must also focus on claiming resources Three stages in evolution of integrative negotiator “Old-fashioned” negotiator—comes from the old school of bargaining and adopts a tough, hard stance “Flower child” negotiator—so busy expanding the pie that forgets to claim resources “Enlightened” negotiator—negotiator claims resources and protects own interests while expanding the pie conclusion All negotiators want to reach win-win agreements, however, most fail to do so Negotiators are usually not aware that their outcomes are inefficient Key reasons for lose-lose outcomes are illusory conflict and the fixed-pie perception In attempts to expand the pie, negotiators should not forget about claiming resources Key Terms contingency contracts Agreements wherein negotiators make bets based on their differences in beliefs, forecasts, risk profiles, and interests. enlightened negotiator Someone who realizes both that the pie can be expanded and does not forget to claim resources. equal concession negotiator Splitting the difference or compromising, which is often mistaken for win-win negotiations. false conflict or illusory conflict A situation in which conflict does not exist between people, yet they erroneously perceive the presence of conflict. fixed-pie perception The belief that the counterparty’s interests are directly and completely opposed to one’s own. flower child negotiator Someone who is too concerned with win-win negotiations, they forget to claim resources. illusion of transparency The tendency of negotiators to believe that they are revealing more information than they actually are; i.e., they believe that others have access to information about them when they in fact do not. inductive reasoning The process by which a negotiator unilaterally deduces what the counterparty’s true interests are, and where the joint gains are by listening to their responses in negotiation. issue mix The union of both parties’ issue sets. logrolling The strategy of trading off in a negotiation so as to capitalize on different strengths of preference. lose-lose effect The tendency for negotiators to settle for outcomes that both prefer less, than some other readily available outcome. multiple offers of equivalent value simultaneously A strategy that involves simultaneously presenting the counterparty with two or more proposals of equal value to oneself. old fashioned negotiator Someone who believes one must adopt a tough, hard stance to negotiate successfully. pareto-optimal frontier A situation in which no other feasible agreement exists that would improve one party’s outcome, while simultaneously not hurting the counterparty’s outcome. postsettlement settlements Strategies in which negotiators reach a binding settlement, but agree to explore other options with the goal of finding another that both prefer more than the current one; if one is not found, the current settlement is imposed. premature concessions Making concessions on issues before they are even requested. presettlement settlements (PreSS) Formal, partial settlements that occur in advance of the parties’ undertaking full-scale negotiations, designed to be replaced by a long-term, formal agreement. resource assessment The identification of the bargaining issues and alternatives in a negotiation. substantiation Arguments for one’s own position or against the other’s position in a negotiation. unbundling Division of large, all-encompassing issues into smaller, more manageable ones. Suggested Exercises and other materials EXERCISE: Blue Buggy Buyer by Gaylen D. Paulson This is a two-party deal making exercise with a negative bargaining zone. Nevertheless, 15%–20% of ne¬gotiators reach agreement illustrating irrationality and agreement biases. Another 15%–20% gene¬ra¬te creative agreements that illustrate the limitations of the frames and assumptions negotiators bring to the table. Preparation: 10 min. Negotiation: 15 min. Available from the Dispute Resolution Re¬search Center at the Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: [email protected].. EXERCISE: Cascade Manor by Susan Brodt and Leigh Thompson This is a team-on-team quantified negotiation exercise with integrative potential. It contains distri¬bu¬t¬ive, compatible, and logrolling issues. It also deals with common and uncommon knowledge, as team¬¬mates do not have all the same information. Preparation: 30 min. Negotiation: 45 min. Available from the Dispute Resolution Research Center at the Kellogg School of Management, North¬western Uni¬versity, 2001 Sheridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: [email protected]. EXERCISE: Computron Pharmaceuticals by Leigh Thompson, Victoria Medvec, Wendi Adair, Peter Kim, Kathleen O’Connor, and Janice Nadler This exercise is a two-party negotiation requiring multiple skills to reach fully integrative agree¬ments. Parties include a potential hiree and hiring officer for a pharmaceutical engineering company. One party’s BATNA is uncertain. Excellent negotiation for teaching advanced negotiation skills, in¬clud¬ing logrolling (trade-offs), compatible issues, contingency contracts, etc. Preparation: 30-60 min. Negotiation: 45-75 min. Available from the Dispute Resolution Research Center at the Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: [email protected].. EXERCISE: El-Tek by Max H. Bazerman and Jeanne M. Brett This is a two-party, quantified negotiation between two divisions of a decentralized organi¬za¬tion. The negotiation concerns the potential transfer of a product from the division that developed it, and plans to use it as a component in its own products, to the division that has lower-cost manu¬fac¬t¬ur¬ing and the corporate charter to market such a product. This case is good for helping students vis¬u¬alize a pareto-optimal frontier. Preparation: 60 min. Negotiation: 90 min. Available from the Dis¬pute Resolution Research Center at the Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: [email protected].. EXERCISE: Les Florets by Stephen B. Goldberg A simplified version of Texoil set in France. Preparation: 30 min. Negotiation: 45-60 min. Avail¬able from the Dispute Resolution Research Center at the Kellogg School of Management, North¬western University, 2001 Sheridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: [email protected]. EXERCISE: MAPO by Mark N. Gordon, Tim Reiser, Elizabeth Gray, Lynn Gerber, Bruce M. Patton, and Valerie A. Sanchez DRRC’s version of this Harvard University Program on Negotiation (PON) case is a multi-issue union management contract negotiation, with integrative potential. It comes with numerous exhibits that provide an opportunity to discuss using fairness standards while negotiating distributive agree-ments. There is also a compatible issue that negotiators often do not discover, but is interesting to dis¬cuss. Preparation: 60 min. Negotiation: 120 min. Available from the Dispute Resolution Re-search Center at the Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: [email protected].. EXERCISE: Moms.com by Ann E. Tenbrunsel and Max H. Bazerman This exercise replaces the popular Working Women exercise. (Please do not continue to use Working Women.) This is a two-party, quantified, deal making negotiation between a film company and a T.V. station over the syndication rights for a T.V. series, Moms.com. The exercise provides a good opportunity to introduce the concept of pareto-optimality. The teaching notes point out the slight differences between the numbers in the old Working Women exercise and this one. Preparation: 60 min. Negotiation: 90 min. Available from the Dispute Resolution Research Center at the Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: [email protected]. EXERCISE: The Multiple Items Game by J. Keith Murnighan These are two, two-party negotiations, quantitatively scored, over three and five issues. The first negotiation displays, quite easily, the value of tradeoffs and the true meaning of win-win agreements. The second negotiation adds a compatible issue (where participants preferences are identical), increasing the complexity of the negotiation due to additional issues, and allows people to sharpen their abilities to share information effectively and discover valuable tradeoffs. Preparation: 10 min. Negotiation: 25 min. each. Available from the Dispute Resolution Research Center at the Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: [email protected]. EXERCISE: New Car by Leigh Thompson A two-party, multi-issue negotiation task, between a buyer and a seller of a new Toyota Camry, which challenges students’ integrative and distributive negotiation skills. Participants are randomly assigned to the buyer and seller roles and provided with information about the various issues, options, and alternatives (e.g., color, financing, warranty, extras, etc.). The goal of each negotiator is to maximize his or her profits. Preparation: 15-20 min. Negotiation: 30-45 min. Available from the Dispute Resolution Research Center at the Kellogg School of Management, Northwestern Uni¬ver¬-sity, 2001 Sheridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: [email protected]. EXERCISE: New Recruit by Margaret A. Neale This is a two-party, multi-issue quantified negotiation over an employment contract. It illustrates pareto-optimality and the differences between compatible, trade-off (or integrative) and distributive issues. Preparation: 15 min. Negotiation: 30 min. Available from the Dispute Resolution Research Center at the Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: [email protected].. EXERCISE: Oceania! by Leigh Thompson Oceania! is a complex two-party negotiation between a theater manager and a New York production company. There are several issues, and reaching an integrative agreement requires various skills. Preparation: 60-90 min. Negotiation: 60-90 min. Available from the Dis¬p¬ute Resolution Research Center at the Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: [email protected].. EXERCISE: The Player by Holly A. Schroth and Rod Kramer This is a scoreable, integrative negotiation exercise. It can be used to teach fundamental integrative skills. Preparation: 30 min. Negotiation: 45–50 min. Available from the Dispute Resolution Re¬search Center at the Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: [email protected].. EXERCISE: Salary Negotiation by Holly Schroth, Gina Ney, Michael Roedter, Adi Rosen, and Michael Tiedman This is a qualitative, two-party salary negotiation that can be used to teach packaging issues, strategic use of compatible issues, and use of objective criteria. Preparation: 10-20 min. Negotiation: 30-40 min. Available from the Dispute Resolution Research Center at the Kellogg School of Manage¬ment, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: [email protected]. EXERCISE: Star by Stephen B. Goldberg This is a two-party, qualitative negotiation with integrative potential. The negotiation occurs between representatives of two record companies about which company is going to produce the first new record of a once-popular rock group that has reunited after 13 years apart. Preparation: 60 min. Negotiation: 90 min. Available from the Dispute Resolution Research Center at the Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: [email protected]. EXERCISE: Student Project by Leigh Thompson This is a two-party, integrative negotiation concerning a class project organized by two students. Each person plays the role of a student assigned to work on a class project with another student; to¬gether, they must reach an agreement about what they will do and how they will complete the project. Students are given a list of issues they must work out concerning the project (e.g., topic to study, type of project, work schedule, method of presentation, etc.). The goal is to work out the terms of the project with the other student in a way that maximizes each student’s objectives. Prep¬ara¬tion: 15-20 min. Negotiation: 30-45 min. Available from the Dispute Resolution Research Center at the Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: [email protected]. EXERCISE: Texoil by Stephen B. Goldberg This is a qualitative negotiation over the sale of some property. The case has no overlapping bargain¬ing zone unless the parties uncover some of each other’s interests. It is a very good case for teach¬ing about interests, what information should and should not be shared, and creativity in ne¬go¬ti¬a¬tions. Preparation: 30 min. Negotiation: 60 min. Available from the Dispute Resolution Research Center at the Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: [email protected]. EXERCISE: Vacation Plans by Leigh Thompson and Terri DeHarpport This is a two-party negotiation in which participants plan a vacation. The negotiators are long¬¬time friends who, nevertheless, have very different preferences concerning how to spend the vacation. Integrative solutions are possible, in which participants maximize their joint gain by log¬roll¬ing and identifying compatible interests. Negotiation: 25 min. Available from the Dispute Reso¬l¬u¬¬¬tion Re¬search Center at the Kellogg School of Management, Northwestern University, 2001 She¬ridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: [email protected].. EXERCISE: WineMaster.com by Guhan Subramanian A two-person negotiation exercise involving the potential sale of a small e-commerce company to a large company. The parties need to negotiate four issues: the number of shares in the deal, the vesting period for the shares, whether the seller will get a seat on the buyer's board, and the ownership of a potential liability against the seller. Learning Objective: To examine several potential sources of value creation in negotiation and the tension between creating and claiming value. Available from Harvard Business School Publishing; phone 1-800-545-7685 or (617) 495-6192; order online at http://www.hbsp.harvard.edu/home.html (product #: 9-800-249). MULTIPLE-CHOICE QUESTIONS Win-win negotiations are also called fair division negotiations equal-concession negotiations integrative negotiations distributive negotiations Which of the following is true about integrative negotiations? compromise is a method for achieving maximum win-win between parties negotiators should reach agreement to prevent an impasse negotiators should reveal their interests negotiators should reveal their positions The first level integrative agreements exceed parties’ no-agreement possibilities, or reservation points do not create value relative to parties’ best alternative are as good as parties’ reservation points are as good as parties’ disagreement alternatives All of the following strategies can potentially increase joint gain, except: downplaying parties’ differences disclosing preferences and priorities negotiating issues simultaneously identifying more than one issue A negotiated agreement is considered the pareto-optimal frontier if both negotiators are satisfied with the outcome the achieved outcome is beneficial to both negotiators it is impossible to improve any negotiator’s outcome without hurting the other party’s outcome it is possible to improve one negotiator’s outcome without hurting the other party’s outcome egotiators who make multiple offers have an edge in all of these critical aspects except: gaining better information about the other party sweetening the deal and offering to make future concessions being more aggressive in terms of anchoring the negotiation favorably signaling one’s priorities more effectively The fixed-pie perception refers to simultaneously improving the outcomes for both parties believing that the counterparty’s interests are directly opposed to one’s own interests fixed alternative agreements that improve one party’s outcome settling for outcomes that exceed parties’ reservation points Lose-lose outcomes most often result from lack of time and effort invested in a negotiation believing that one’s interests are incompatible with the other party’s assumptions we make about our opponent and the negotiation situation bargaining zones that are too narrow A contingent contract generally refers to a contract in which both parties are confident in positive outcomes in any turn of events negotiators agree on the probability of future events terms in the future will differ depending on the realization of some future event lots of room is left for ambiguity Th illusion of transparency refers to which phenomenon? Making predictions when information is in short supply Human judgment and decision-making differ from rational choice Making reasonable estimation based on a single known data point People believe they are revealing more than they actually are Answer key: 1.C; 2.C; 3.A; 4.C; 5.C; 6.B; 7.B; 8.B; 9.C; 10.D. Discussion Questions What are some of the misperceptions about the meaning of win-win negotiation? Why do these misperceptions contribute to leaving money on the table in negotiation situations? What are some of the questions a negotiator should ask when attempting to assess the win-win (integrative) potential of a negotiation situation? What are some of the most common errors made by negotiators who are attempting to expand the pie of resources? What are some of the psychological principles underpinning these errors? How should a negotiator go about presenting multiple simultaneous offers in a negotiation? What advantages are there to using this strategy? What are some of the kinds of differences a negotiator can capitalize on when trying to expand the pie of resources? Suggested answers: Win-win negotiations are erroneously equated with fair division of resources. However, win-win is not compromise. It does not pertain to how the pie is divided, but how the pie is enlarged. Negotiators may compromise, yet leave money on the table. Win-win is also not an even split or satisfaction (in fact, many “happy” negotiators do not expand the pie), or building a relationship. A negotiator should ask whether the negotiation contains more than one issue (as differences in preferences, beliefs, and capacities may be profitably traded off); whether other issues can be brought in; whether side deals can be made; and whether parties have different preferences across negotiation issues. The biggest detriment to the attainment of integrative agreements is the faulty assumptions we make about our counterparty and the situation. Negotiation is not a purely competitive situation, but rather, most negotiation situations are mixed-motive in nature. False conflict occurs when people believe that their interests are incompatible with the other party’s interests when, in fact, they are not. The fixed-pie perception is the belief that the other party’s interests are directly and completely opposed to one’s own interests. The strategy involves presenting the counterparty with at least two proposals of equal value to oneself, that is, devising multiple-issue offers, devising offers that are all of equal value to yourself; and making the offers all at the same time. In short, a negotiator presents “package deals” of offers to the other party and invites a response. Such negotiators enjoy more profitable negotiated outcomes, are evaluated more favorably by the other party, and are more satisfied at the end of the negotiation. Additionally, multiple offers increase the discovery of integrative solutions. A negotiator can capitalize on differences in the valuation of the negotiation issues, in expectations of uncertain events, in risk attitudes, in time preferences, and on differences in capabilities Chapter 5 Developing a Negotiating Style OVERVIEW This chapter marks the beginning of the “advanced negotiation strategies” section. I suggest that students engage in a self- or peer-assessment of the three bargaining style dimensions discussed in this chapter in advance of reading. (This could be done on the first day of class, if students are doing a self-assessment, or following the previous class exercise, if they are doing a peer assessment; Keith Allred’s peer-feedback instrument would be excellent to use.) Students could be given the assigned reading prior to coming to class and then, once in class, the instructor could provide them with their scores on each of the dimensions. I suggest working through each of the dimensions, beginning with motivation and discussing the pros and cons of each style. The instructor could use groups in this class in several interesting ways. For example, people of different styles could be grouped and asked to get advice from stylistically different others. Lecture Outline tough versus soft negotiators Negotiators often choose between two completely different negotiation styles or approaches: being “tough” or “soft” The good news is that being tough or soft is not the negotiator’s only choice. Create a comfortable, effective style to expand the pie, maximize one’s slice, and feel good about the negotiation motivational orientation Basic motivations influence behavior in negotiations Approach (interests-based, rights-based or legalistic, or power-based) affects negotiation Emotions (or lack thereof) are also a type of bargaining style Most people have a dominant or instinctive style Assessing your motivational style (Exhibits 5-2, 5-3, and 5-4) Individualistic negotiator Competitive negotiator Cooperative negotiator Tools for overly cooperative negotiator Avoid concentrating too much on your bottom line Develop your BATNA Get an agent and delegate the negotiation task Bargain on behalf of someone or something else, not yourself Create an audience Say “You will have to do better than that because…”, not “Yes” Insist on commitments, not just agreements Tools for overly competitive negotiator Think about pie expansion, not just pie-slicing Ask more questions than you think you should Rely on standards Hire a relationship manager Be scrupulously reliable Don’t haggle when you can negotiate Always acknowledge the other party and protect his/her self-esteem Strategic issues concerning motivational style The myth of the hard bargainer Do not lose sight of your own interests Social comparison can cause breakdowns in negotiation Use reinforcement to shape behavior The power of reciprocity Anticipate motivational clashes at the bargaining table Motivational convergence Epistemic motivation Interests, Rights, and Power Models of Disputing Three types of approaches when in the process of conflict or dispute resolution (Exhibit 5-6) Interests Rights Power Assessing your approach Interests-based negotiators attempt to learn about the other’s underlying needs, desires, and concerns; attempt to reconcile different interests among parties in a way that addresses parties’ most pressing needs and concerns Rights-based negotiators apply standards of fairness to an analysis of negotiation; may include terms specified by contracts, legal rights, precedent, or expectations based upon norms (adjudication; Exhibit 5-7) Power-based negotiators use status, rank, threats, and intimidation to get their way (Exhibit 5-8) Strategic issues concerning approaches Principle of reciprocity Interests are effective for pie expansion How to refocus your opponent on interests (and move them from rights and power) Personal strategies Do not reciprocate! Provide opportunities to meet Don’t get personal—use self-discipline Use behavioral reinforcement Send a mixed message Try a process intervention Let’s talk and then fight Strategic cooling-off periods Paraphrasing (Exhibit 5-9) Label the process Structural strategies Put the focus on interests Multistep negotiation procedure Wise counselor Multiple points of entry Mandatory negotiations Skills and training Mediation Build in loop-backs to negotiation Looping back from rights Information procedures Advisory arbitration Minitrials Looping back from power conflict Crisis procedures Intervention by third parties Provide low-cost rights and power backups Conventional arbitration Med-arb Final-offer arbitration Arb-med Build in consultation beforehand and feedback afterwards Notification and consultation Postdispute analysis and feedback Forum Provide skills and resources High costs associated with power and rights Know when to use rights and power When the other party refuses to come to the table When negotiations have broken down and parties are at an impasse When the other party needs to know you have power When someone violates a rule or breaks the law When interests are so opposed that agreement is not possible When social change is necessary When negotiators are moving towards agreement and parties are “positioning” themselves Know how to use rights and power Threaten the other party’s interests Clarity Credibility Do not burn bridges emotions and emotional knowledge Emotions and moods (Exhibit 5-10) Expressed versus felt emotion Genuine versus strategic emotion (Exhibits 5-11 and 5-12) Negative emotion Emotional intelligence Positive emotion Emotional intelligence and negotiated outcomes Accuracy Self-efficacy Strategic advice for dealing with emotions at the table Understand incidental emotions Beware of what you are reinforcing Re-evaluation is more effective than suppression Emotions are contagious Understand emotional triggers (Exhibit 5-13) CONCLUSION Get in touch with your own style in an honest and straightforward way Know your limits and your strengths Understand the counterparty Expand your repertoire Key Terms adjudication A rights-based procedure in which disputants present evidence and arguments to a neutral third party with the power to hand down a binding decision. advisory arbitration A method whereby managers are provided with information that would likely result if arbitration were to be carried out or the dispute were to go to court. arb-med A hybrid model in which an arbitrator makes a decision and places it in a sealed envelope. The threat of the arbitrator’s decision sits on a table and is destined to be opened unless the parties reach mutual agreement. competitive negotiator A negotiator who prefers to maximize the winning margin or “beat” the other side. cooperative negotiator A negotiator who prefers to maximize equality and minimize the difference between negotiators’ outcomes. distributive self-efficacy A negotiators’ belief in his or her ability to claim resources effectively (e.g., “gain the upper hand;” “persuade others to make the most concessions”). emotional intelligence Ability of people (and negotiators) to understand emotions in themselves and others and to use emotional knowledge to effect positive outcomes. individualistic negotiator A negotiator who prefers to maximize his or her own goals and is indifferent to how much the other person is getting. integrative self-efficacy A negotiator’s belief in her or his ability to create resources (e.g., “establish rapport;” “find tradeoffs”). interests-based approach Focusing on the other party’s underlying needs, desires, and concerns in negotiation and attempting to reconcile differing interests among parties in a way that addresses the parties’ most pressing needs and concerns. med-arb A hybrid model in which the mediator serves as an arbitrator, if mediation fails. minitrials Procedures whereby “lawyers” (high-level executives in the organization who have not been previously involved) represent each side and present evidence and arguments that are heard by a neutral judge or advisor. multistep negotiation procedure A procedure in which a dispute that is not resolved at one level of the organizational hierarchy moves to progressively higher levels. postdispute analysis and feedback A method whereby parties learn from their disputes to prevent similar problems in the future. power-based approach Attempting to resolve disputes by analyzing status, rank, and other types of power; and attempting to coerce the other party to settle on terms that are more satisfactory to the wielder of power. rights-based approach Applying standards of fairness to an analysis of negotiation, including terms specified by contracts, legal rights, precedent, or expectations based on norms. Also called legalistic approach. Suggested Exercises and other materials EXERCISE: Brookside Community Hospital vs. Black Computer Systems, Inc. by Stephen B. Goldberg and Jeanne M. Brett This is a dispute between a hospital and a software and hardware supplier. It is similar in structure to Rapid vs. Scott. It can also be used by management or law students alone or working in teams. It can be used to teach interests, rights, and power approaches to dispute resolution as well as advanced dispute resolution concepts like linked BATNAs and redirection of negotiations from rights or power to interests. Preparation: 60 min. or more. Negotiation: 75-90 min. Available from the Dispute Re¬solution Research Center at the Kellogg School of Management, Northwestern University, 2001 She¬ridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: [email protected].. EXERCISE: Chestnut Drive by Mark N. Gordon and Bruce M. Patton This DRRC version of a Harvard Program on Negotiation (PON) case is a dispute between a group of neighbors and the company that is building a condominium development at the end of their street. The case provides a good opportunity to introduce dispute resolution concepts of interests, rights, and power. It is also a vehicle for discussing credible threats. Preparation: 60 min. Negotiation: 90 min. Available from the Dispute Resolution Research Center at the Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: [email protected]. EXERCISE: Club West by Craig Fox and Alan Fox Club West is a lawsuit, illustrating setting reservation prices in legal disputes, egocentric bias, and re¬ac¬¬tive devaluation. Preparation: 30-60 min. Negotiation: 30 min. Available from the Dispute Re¬so¬-lution Research Center at the Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: [email protected].. EXERCISE: College Town Apartments by Leigh Thompson This is a qualitative dispute resolution exercise between two college roommates. The dispute con-cerns the timely payment of rent; the exercise has a large variety and range of mutually acceptable outcomes. It involves perceptual differences regarding one's own behavior as well as the other party's. Since the two parties live together and share common interests, relational, emotional, and social issues also factor into the dispute. Preparation: 45 min. Negotiation: 60 min. Available from the Dispute Resolution Research Center at the Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: [email protected]. EXERCISE: Data Printer by Leonard Greenhalgh This is a qualitative dispute resolution negotiation between a party who had a printer repaired and a par¬¬ty who repaired the printer. It can be used to discuss issues of interests, rights, power, and fair¬ness in the context of the resolution of disputes. Note: The technology referred to in the case makes it dated. Preparation: 30 min. Negotiation: 60 min. Available from the Dispute Resolution Re-search Center at the Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: [email protected].. EXERCISE: Eazy’s Garage by Bruce M. Patton This DRRC version of a Harvard Program on Negotiation (PON) case is a two-party, qualitative, dispute resolution exercise with some limited opportunities for integrative potential. The parties are a dentist and a garage station owner, and the dispute is over a repair bill. It can be used to teach con¬cepts of interests, rights, and power, but the teaching notes do not present that approach. Pre¬pa¬ra¬tion: 10 min. Negotiation: 60 min. Available from the Dispute Resolution Research Center at the Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: [email protected]. EXERCISE: The Performance Interview by Leonard Greenhalgh This two-party simulation involves an interaction between a boss and a subordinate. The simulation evokes participants’ normal styles of dealing with an interpersonal problem: whether to directly or in¬directly address the problem, or avoid dealing with it. Preparation: 30 min. Meeting: 30 min. Available from Creative Consensus, Inc., P.O. Box 5054, Hanover, NH 03755. Phone/fax: (603) 643-0331. EXERCISE: The Quickstop Mall by Lynn P. Cohn The Quickstop Mall is a mediation simulation that presents the challenge of a dispute that does not lend itself to an economic resolution. The mediator must focus on interest-based solutions and lead the parties to recognize and respect each other's interests. This exercise is ideal for the mediation or negotiation instructor trying to encourage students to acknowledge emotions and identify key needs and interests and to discourage them from quickly seeking a financial settlement. Preparation: 15 min. Negotiation: 60-90 min. Debrief: 60 min. Available from the Dispute Resolution Research Center at the Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: [email protected].. EXERCISE: Rapid Printing vs. Scott Computers by Stephen B. Goldberg and Jeanne M. Brett This is a contract dispute negotiation. It is very good for teaching interests, rights, and power approaches to resolving disputes and introducing alternative dispute resolution (ADR) concepts to management students. There are three different versions of the case: CEO only (for two management students), CEO with lawyers (for a joint law/management class), and Mediation (for two managers plus a neutral mediator). Preparation: 60 min. Negotiation: 90 min. Available from the Dispute Re¬solution Research Center at the Kellogg School of Management, Northwestern University, 2001 She¬ridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: [email protected].. EXERCISE: Rooftop Deck by Vanessa Seiden and Jason Seiden This is a decision that must be made jointly between three interdependent condominium owners. It can be used to teach interests, rights, and power. As not all parties have the same information, it is also useful to teach the value of searching for unique information. Preparation: 60 min. Negotiation: 60 min. Available from the Dispute Resolution Research Center at the Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: [email protected]. EXERCISE: Squabbling Authors by Katheryn M. Dutenhaver Two anthropologists have finished a book manuscript and are having trouble deciding whose name should go first. Squabbling Authors can be used as a mediation exercise or it can be used to demon¬strate the difference between mediation and arbitration. Preparation: 5 min. Arbitration: 10-15 min. Mediation: 15-20 min. Available from the Dispute Resolution Research Center at the Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: [email protected]. EXERCISE: The Summer Interns Program by Roy Lewicki and Blair Sheppard This is a dispute between the heads of engineering and personnel. It can be used to teach interests, rights, and power in multiple cultures. It has good comparative culture data in the teaching notes. Preparation: 60 min. Negotiation: 60 min. Available from the Dispute Resolution Research Center at the Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: [email protected]. EXERCISE: Telepro by Holly A. Schroth and Gary Riding This is a dispute between a supervisor and an employee in which a third party, the supervisor's man¬a¬ger, becomes involved. The exercise can be used to teach mediation in the management context. It also illustrates how power and status differences between parties can be managed in a mediated con¬ext. Preparation: 15-20 min. Negotiation: 70 min. Available from the Dispute Resolution Research Cen¬ter at the Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: [email protected].. EXERCISE: The Ultimatum Game by J. Keith Murnighan This is a market exercise for medium or large groups (i.e., 16 or more) that is played twice, with discussion between and after the two plays. One party is given information and power; the other party must deal with a position of relative weakness. Discussion raises issues of fairness, the use of strategic power, equality, and justice. Preparation: 5-10 min. Negotiation: 10 min. each. Available from the Dispute Resolution Research Center at the Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: [email protected]. EXERCISE: Viking Investments by Leonard Greenhalgh This complex multi-issue, two-party negotiation of a dispute between a real estate developer and a sub¬contractor emphasizes escalation of commitment, and the effects of focusing on rights or interests in dispute resolution. Preparation: 60 min. Negotiation: 60 min. Available from Creative Consensus, Inc., P.O. Box 5054, Hanover, NH 03755. Phone/fax: (603) 643-0331. MULTIPLE-CHOICE QUESTIONS The “cooperative” negotiator prefers to avoid conflict help others in need maximize joint interests always see the positive side of things The interests-based negotiator attempts to put aside the question of who is right and wrong and focuses on the issues seeks to understand the power base of the parties uses threats only in late stages of negotiation never uses threats When it comes to using power and making threats, all of the following are true except: power tends to be reciprocated with power by using power it is easy to expand the pie a credible threat may restart negotiations it often produces a “winner” and a “loser” The competitive negotiator prefers to maximize his or her own gain maximize the difference between his or her own profits and those of the other party minimize the difference between negotiators’ outcomes legitimize counterparty’s needs Which of the following statements is true regarding social comparison in negotiation? People compare their outcomes (e.g., salaries) to others because they want to feel superior People will sometimes refuse a larger salary if they see it as unfair and prefer a smaller salary Men are more likely to engage in social comparison than women Women are more likely to engage in social comparison than men Which of the following is true about the exchange of interests, rights, and power in a negotiation? Power and rights usually emerge first Negotiators cycle through all three types of statements Using interests too early in a negotiation can backfire Rights-based strategies precede power-based strategies When a cooperator negotiates with a competitive person, he/she starts behaving competitively does not change the negotiation style cooperates with greater frequency or intensity resists to reciprocate the motivational orientation of the other party The rights-based negotiator is characterized by addressing parties’ most pressing concerns applying rank and status to negotiation having expectations that are based upon norms learning about underlying needs Adjudication is a procedure in which parties determine who is right when contradictory standards apply present arguments to a third party who hands down a binding decision formalize their rights by law or contract reach an agreement on further negotiation procedures All of the following are effective strategies fora negotiator to attempt to move a rights- or power-based negotiator towards interests except: reciprocating interest-based moves suggesting process intervention (e.g. “Let’s talk”) building in some cooling-off periods acquiescing to power-moves Answer key: 1.C; 2.A; 3.B; 4.B; 5.B; 6.A; 7.A; 8.C; 9.B; 10.D. Discussion Questions What are the fundamental differences between tough and soft negotiators, and what are the disadvantages of adopting either stance? Assess your own motivational orientation by completing the questions in Exhibit 5-4. Given that a key to self-insight is recognizing the external factors that shape your motivational orientation (following Richard Shell’s list), what tools do you need to help you become more effective at pie-slicing and pie expansion? What are some of the strategic issues that are involved in the application of your motivational style? Consider your own motivational style. What strategies will best complement your style? What are some strategies for dealing with emotions at the bargaining table? Assess your own emotional style by taking the test in Exhibit 5-11. What are the advantages and disadvantages to each emotional style? Suggested answers: 1. Neither negotiator is particularly effective in simultaneously expanding and slicing the pie. The tough negotiator is unflinching, makes high demands, concedes little, holds out until the very end, often rejects offers that are within the bargaining zone, often walks away from potentially profitable deals, and gains a reputation for being stubborn. The soft negotiator offers too many and too-generous concessions, reveals his or her reservation point, gives away too much of the bargaining pie to the other party, and agrees too readily. Assessing one's own motivational orientation is crucial for honing negotiating skills effectively. Utilizing Exhibit 5-4 from "The Mind and Heart of the Negotiator" offers a structured approach to gaining this self-insight. Richard Shell's framework further emphasizes the significance of recognizing external factors that mold our motivational orientation. To enhance effectiveness in both pie-slicing and pie expansion strategies, several tools are indispensable: 1. Self-awareness tools: These can include personality assessments such as Myers-Briggs Type Indicator (MBTI) or Emotional Intelligence (EQ) tests. Understanding one's own strengths, weaknesses, and tendencies lays the foundation for strategic negotiation. 2. Communication and active listening skills: Improving communication skills helps in conveying needs effectively while actively listening aids in understanding the motivations and desires of the other party. Tools like role-playing exercises or communication workshops can facilitate this development. 3. Negotiation simulations: Engaging in realistic negotiation simulations allows for practice in different scenarios, enhancing adaptability and responsiveness during actual negotiations. Simulations provide a safe space to experiment with various strategies and learn from both successes and failures. 4. Conflict resolution techniques: Learning techniques for managing and resolving conflicts constructively is essential for maintaining positive relationships and achieving mutually beneficial outcomes. Tools such as mediation training or conflict resolution workshops can provide valuable insights and strategies. 5. Cultural competence resources: In a globalized world, understanding cultural nuances and differences in negotiation styles is crucial. Resources like cross-cultural training programs or cultural sensitivity workshops aid in navigating diverse negotiation settings more effectively. 6. Mentorship and coaching: Guidance from experienced negotiators or mentors can provide personalized feedback and insights tailored to individual strengths and weaknesses. Working closely with a mentor or coach fosters continuous growth and development in negotiation skills. By leveraging these tools, negotiators can enhance their effectiveness in both pie-slicing, where the focus is on claiming value, and pie expansion, which involves creating value. Ultimately, developing a well-rounded negotiation style requires a combination of self-awareness, communication proficiency, conflict resolution capabilities, cultural competence, and ongoing mentorship. Navigating strategic issues in negotiation requires a deep understanding of one's motivational style and how it influences the negotiation process. Assessing the application of your motivational style involves recognizing its strengths and potential limitations and devising strategies to complement it effectively. Consideration of strategic issues pertinent to your motivational style entails: 1. Understanding personal drivers: Identifying the core motivations that drive your negotiating style is crucial. Whether you are motivated by competition, collaboration, achievement, or other factors significantly impacts your approach to negotiation. 2. Recognizing limitations: Each motivational style comes with its inherent strengths and weaknesses. For instance, while a competitive style may be effective in claiming value, it may strain relationships if overused. Conversely, a collaborative style may foster goodwill but might risk conceding too much value. 3. Adapting to different situations: Recognizing that no single motivational style fits all situations is essential. Flexibility is key to adapting your approach based on the context, the other party's style, and the specific negotiation dynamics. 4. Leveraging strengths: Identify strategies that align with your motivational style's strengths. For example, if you lean towards a collaborative style, emphasizing problem-solving and relationship-building strategies can enhance outcomes. 5. Mitigating weaknesses: Develop strategies to mitigate the weaknesses associated with your motivational style. If you tend to avoid confrontation, practice assertiveness techniques to ensure your interests are adequately represented without damaging relationships. 6. Seeking complementary styles: Surround yourself with individuals whose motivational styles complement your own. Collaborating with others who bring different perspectives and approaches can enrich the negotiation process and lead to more comprehensive solutions. 7. Continuous learning and adaptation: Stay open to feedback and continually refine your approach based on lessons learned from past negotiations. Embrace opportunities for personal growth and skill development to enhance your effectiveness over time. In summary, navigating strategic issues in negotiation involves a nuanced understanding of your motivational style, its implications, and the development of tailored strategies to maximize effectiveness. By leveraging strengths, mitigating weaknesses, adapting to different situations, and collaborating with others, negotiators can navigate complex negotiations more successfully and achieve mutually beneficial outcomes. Do not acquiesce negative behavior, re-evaluate rather than suppress emotions, convey positive emotions because emotions are contagious, and understand emotional triggers. Individual answer. Assessing one's emotional style through the test in Exhibit 5-11 from "The Mind and Heart of the Negotiator" is a valuable exercise in understanding how emotions influence negotiation dynamics. Each emotional style carries its unique advantages and disadvantages, which shape the negotiation process in significant ways. 1. Assertive Style: • Advantages: Assertive individuals are adept at advocating for their interests and asserting boundaries. They often command respect and may effectively drive negotiations towards desired outcomes. • Disadvantages: However, excessive assertiveness can lead to perceived aggression, hindering collaboration and damaging relationships. Assertive negotiators may struggle to empathize with others' perspectives, risking impasse or resentment. 2. Empathetic Style: • Advantages: Empathetic negotiators excel in building rapport and understanding the emotional undercurrents of a negotiation. They can foster trust and create a conducive environment for open communication and joint problem-solving. • Disadvantages: Over-reliance on empathy may result in prioritizing harmony over asserting one's interests. Empathetic negotiators might struggle with assertiveness, potentially conceding too much or failing to advocate effectively for their own needs. 3. Analytical Style: • Advantages: Analytical negotiators excel in evaluating information objectively and making rational decisions. Their attention to detail and logical reasoning often leads to thorough preparation and strategic thinking. • Disadvantages: However, an analytical approach may come across as detached or impersonal, leading to difficulty in connecting with others on an emotional level. Moreover, a focus on data and logic might overlook the emotional dimensions of negotiation, risking suboptimal outcomes. 4. Intuitive Style: • Advantages: Intuitive negotiators possess a knack for reading between the lines and anticipating hidden motivations. Their ability to quickly adapt to changing circumstances and trust their gut instincts can lead to creative solutions and seizing opportunities. • Disadvantages: Yet, relying too heavily on intuition without empirical evidence may lead to misjudgments or overlooking critical details. Intuitive negotiators may struggle to articulate their decision-making process, leading to skepticism from counterparts. In conclusion, each emotional style offers distinct strengths and weaknesses in negotiation. Recognizing these attributes allows negotiators to leverage their strengths while mitigating potential pitfalls. Integrating diverse emotional styles within a negotiation team can foster a balanced approach and enhance overall effectiveness in achieving mutually beneficial outcomes. Chapter 6 Establishing Trust and Building a Relationship OVERVIEW This chapter makes good assigned reading for students involved in repeated-play negotiations in the course, in e-mail negotiations, or in some situations where relationship issues come to the forefront. As a homework assignment prior to this class, students can be asked about how they build trust with others and how they respond to breaches of trust. The instructor can provide summaries of the class responses, and then introduce the basic 33, relationship  trust grid (that forms the basis of this chapter) as a starting point for the lecture. The instructor can work through each type of relationship and the inherent rules in each of the relation¬ships. Then the instructor can work through the three types of trust. Following this, the instructor can make the point that trust is built through deliberate, cognitive, rational mechanisms, as well as implicit, psycho¬logical, and largely preconscious factors. Time permitting, students can be asked to brainstorm what these different approaches are (prior to the instructor working through them). Lecture Outline The people side of win-win Successful negotiation is not just about money or economic value; true definition of win-win is agreements that allow negotiators to fully maximize whatever they care about, including: Money Trust Security Happiness Peace of mind Relationships Types of resources exchanged in negotiation (Exhibit 6-1) Subjective Value Inventory (Exhibit 6-2) trust as the bedrock of relationship Three types of trust in relationships Deterrence-based trust (Exhibit 6-3) Difficult to develop and maintain systems Backfiring effect (reactance) Knowledge-based trust Identification-based trust Building trust: rational and deliberate mechanisms (Exhibit 6-4) Transform personal conflict into task conflict Personal conflict or emotional conflict: personal, defensive, and resentful; rooted in anger, personality clashes, ego, tension Task conflict or cognitive conflict: largely depersonalized, can often stimulate creativity Agree on a common goal or shared vision Capitalize on network connections Find a shared problem or a shared enemy Focus on the future Building trust: psychological strategies Similarity-attraction effect Mere exposure (Exhibit 6-5) Physical presence Propinquity effect Functional distance Reciprocity Schmoozing Flattery Mimicry and mirroring Self-disclosure What leads to mistrust? Breaches or defections Miscommunication Dispositional attributions Focusing on the “bad apple” Repairing broken trust (Exhibit 6-6) Arrange a personal meeting Put the focus on the relationship Apologize Let them vent Do not get defensive Ask for clarifying information Test your understanding Formulate a plan Think about ways to prevent a future problem Do a relationship check-up Reputation Negotiator needs to protect his or her reputation Impressions of others are formed quickly, and are often more extreme and polarized than the person they represent: judgmental, consistent, immediate, and inferential Halo effect Forked-tail effect Repairing a tarnished reputation is as hard as rebuilding trust; important to act, not just talk, in a trustworthy fashion Relationships in negotiation Negotiating with friends Why people are uncomfortable negotiating with friends Communal norms Exchange norms Friends are less competitive with each other Friends may not reach level 3 integrative agreements (Exhibit 6-7) Friendship and the mismanagement of agreement (Abilene paradox) If we have to negotiate, we should divide it down the middle Equality rule Equity rule (merit-based rule) Negotiating with businesspeople Market pricing We choose our friends, but not our coworkers (Exhibit 6-8) Business relationships often have status and rank issues associated with them The need for swift trust The myth of the one-shot business situation When in business with friends and family: embedded relationships Emotional potential is higher Internal value conflict Myopia Bottom line on relationships conclusion Social outcomes are just as important as economic outcomes; establishing trust and building relationships are essential for effective negotiation Three types of trust: deterrence-based, knowledge-based, and identification-based Trust-building and trust-repairing strategies include transforming personal conflict into task conflict, agreeing on a common goal, capitalizing on network connections, recognizing a shared problem, and focusing on the future Psychological strategies that engender trust: Similarity, mere exposure, physical presence, reciprocity, schmoozing, flattery, and self-disclosure Three common types of relationships in negotiation: business-only, friendship-only, and multiplex relationships that involve both Key TermS affective route In building trust, based on highly subjective, emotional factors. breach or defection The act of maximizing one’s own interests at the expense of another person or group. cognitive route In building trust, based on rational and deliberate thoughts and considerations. communal norms Norms that operate in personal relationships, prescribing that we should take care of the people we love and are close to, respond to their needs, and not “keep track” of who has provided what in the relationship. deterrence-based trust A type of trust that sustains behavioral consistency through threats or promises of consequences that will result if consistency is not maintained. dispositional attribution An attribution that calls into question another person’s character and intentions by citing them as the cause of a behavior or incident. embedded relationship A relationship between parties that is both personal (e.g., friends or family) and business related. equality rule A principle for allocating resources that prescribes equal shares for all. equity rule or merit-based rule A principle that prescribes that distribution of resources should be proportional to a person’s contribution. exchange norms Norms that operate in relationships, concerning the giving and taking of benefits and resources. forked-tail effect A tendency to see people as having other undesirable characteristics in completely unrelated domains once we have identified one negative trait. functional distance The effort involved in crossing a physical distance and how it corresponds to communication (e.g., two offices separated by 10 feet of space are easier to make contact between than are two offices separated by a one-foot-thick, solid brick wall). halo effect The assumption that if people possess one socially desirable characteristic, then they also must possess other attractive traits. identification-based trust A type of trust that develops based on empathy for another person’s desires, values, and intentions. knowledge-based trust A type of trust grounded in behavioral predictability, occurring when a person has enough information about others to understand them and accurately predict their behavior. market pricing A method of putting value on things in which everything is reduced to a single value or utility metric that allows for the comparison of many qualitatively and quantitatively diverse factors. personal conflict or emotional conflict Defensive, personal conflict rooted in anger, personal friction, personality clashes, ego, and tension. propinquity effect The strong tendency for people to like, and become friends with, people that are physically and/or geographically closer to them. reactance theory A psychological principle stating that people often have a negative reaction when they perceive that their freedom is being limited or their behavior is being controlled; hence, they will engage in the opposite of the behaviors that surveillance is either attempting to ensure or control. reciprocity principle A situation in which we feel obligated to return in kind what others have offered or given to us. similarity-attraction effect The tendency for people who are similar to each other to like and be attracted to one another. sticky ties Relationships that emanate from ingrained habits of past social interactions. swift trust The mechanism that allows people who have had little or no previous interaction to build trust quickly. task conflict or cognitive conflict Largely depersonalized conflict consisting of argumentation about the merits of ideas, plans, and projects. Suggested Exercises and other materials EXERCISE: Brookside Community Hospital vs. Black Computer Systems, Inc. by Stephen B. Goldberg and Jeanne M. Brett This is a dispute between a hospital and a software and hardware supplier. It is similar in structure to Rapid vs. Scott. It can also be used by management or law students alone or working in teams. It can be used to teach interests, rights, and power approaches to dispute resolution as well as advanced dispute resolution concepts like linked BATNAs and redirection of negotiations from rights or power to interests. Preparation: 60 min. or more. Negotiation: 75-90 min. Available from the Dispute Resolution Research Center at the Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: [email protected]. EXERCISE: Bullard Houses by Ron Karp; revised by Mox Tan, David Gold, Andrew Clarkson, Paul Cramer, Douglas Stone, and Bruce M. Patton DRRC’s version of this Harvard Program on Negotiation (PON) exercise is excellent for raising issues of ethics in negotiation. It is a one-on-one, qualitative negotiation between agents over a piece of prime real estate. It emphasizes the role of agents, lying, misrepresentation, and trust. Preparation: 60 min. Negotiation: 60 min. Available from the Dispute Resolution Research Center at the Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: [email protected]. EXERCISE: Chestnut Drive by Mark N. Gordon and Bruce M. Patton This DRRC version of a Harvard Program on Negotiation (PON) case is a dispute between a group of neigh¬bors and the company that is building a condominium development at the end of their street. The case provides a good opportunity to introduce dispute resolution concepts of interests, rights, and power. It is also a vehicle for discussing credible threats. Preparation: 60 min. Negotiation: 90 min. Available from the Dispute Resolution Research Center at the Kellogg School of Management, Northwestern Uni¬ver¬¬sity, 2001 Sheridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: [email protected].. EXERCISE: Club West by Craig Fox and Alan Fox Club West is a lawsuit illustrating setting reservation prices in legal disputes, egocentric bias, and reactive devaluation. Preparation: 30-60 min. Negotiation: 30 min. Available from the Dispute Resolution Research Center at the Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: [email protected]. EXERCISE: College Town Apartments by Leigh Thompson This is a qualitative dispute resolution exercise between two college roommates. The dispute concerns the timely payment of rent; the exercise has a large variety and range of mutually acceptable outcomes. It involves perceptual differences regarding one’s own behavior as well as the counterparty’s. Because the two parties live together and share common interests, relational, emotional, and social issues also factor into the dispute. Preparation: 45 min. Negotiation: 60 min. Available from the Dispute Resolution Research Center at the Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: [email protected]. EXERCISE: Data Printer by Leonard Greenhalgh This is a qualitative dispute resolution negotiation between a party who had a printer repaired and a party who repaired the printer. It can be used to discuss issues of interests, rights, power, and fairness in the con¬text of the resolution of disputes. Note: The technology referred to in the case makes it dated. Preparation: 30 min. Negotiation: 60 min. Available from the Dispute Resolution Research Center at the Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: [email protected]. EXERCISE: Eazy’s Garage by Bruce M. Patton This DRRC version of a Harvard Program on Negotiation (PON) case is a two-party, qualitative, dispute resolution exercise with some limited opportunities for integrative potential. The parties are a dentist and a garage station owner, and the dispute is over a repair bill. It can be used to teach concepts of interests, rights, and power, but the teaching notes do not present that approach. Preparation: 10 min. Negotiation: 60 min. Available from the Dispute Resolution Research Center at the Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: e-mail: [email protected]. EXERCISE: El-Tek by Max H. Bazerman and Jeanne M. Brett This is a two-party, quantified negotiation between two divisions of a large, decentralized organization. The negotiation concerns the potential transfer of a product from the division that developed it, and plans to use it as a component in its own products, to the division that has lower-cost manufacturing and the corporate charter to market such a product. This case is very good for helping students visualize a pareto-optimal frontier. Preparation: 60 min. Negotiation: 90 min. Available from the Dispute Resolution Research Center at the Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: [email protected]. EXERCISE: The Player by Holly A. Schroth and Rod Kramer This exercise is a two-party, 11-issue, scorable negotiation exercise between a producer and a director. The purpose of this exercise is to help students learn some of the key techniques for integrative negotiation and allow them to assess their skills on both the integrative and distributive dimensions. The exercise should be used following the introduction of such fundamental concepts as BATNA, Resistance Point and Aspiration Point. The exercise requires students to learn the importance of trust and building a relationship, how to share and elicit information, prioritize issues, and look for logrolling solutions. Preparation: 30 min. Negotiation: 45-50 min. Available from the Dispute Resolution Research Center at the Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: [email protected]. EXERCISE: Rapid Printing vs. Scott Computers by Stephen B. Goldberg and Jeanne M. Brett This is a contract dispute negotiation. It is very good for teaching interests, rights, and power approaches to resolving disputes and introducing alternative dispute resolution (ADR) concepts to management stu¬dents. There are three different versions of the case: CEO only (for two management students), CEO with law¬yers (for a joint law/management class), and Mediation (for two managers plus a neutral mediator). Pre¬paration: 60 min. Negotiation: 90 min. Available from the Dispute Resolution Research Center at the Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: [email protected]. EXERCISE: Rooftop Deck by Vanessa Seiden and Jason Seiden This is a decision that must be made jointly between three interdependent condominium owners. It can be used to teach interests, rights, and power. As not all parties have the same information, it is also useful to teach the value of searching for unique information. Preparation: 60 min. Negotiation: 60 min. Available from the Dispute Resolution Research Center at the Kellogg School of Management, Northwestern Uni¬ver¬sity, 2001 Sheridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: [email protected].. EXERCISE: Strategic Alliances: Selling to the Pentagon by Leonard Greenhalgh This exercise involves a series of negotiations between three teams over a pot of money, created by contributions from each participant. We recommend team sizes of less than 10 and having a second exercise administrator. Teams will need caucus rooms that are out of earshot of each other, in addition to the negotiating room. Learning points include multilateral communication, group process (intra-group negotiation), group decision-making, contracts, and intergroup and interpersonal relationships. Exercise: 60 min. Available from the Dispute Resolution Research Center at the Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: [email protected]. EXERCISE: Texoil by Stephen B. Goldberg This is a qualitative negotiation over the sale of some property. The case has no overlapping bargaining zone unless the parties uncover some of each other’s interests. It is a very good case for teaching about interests, what information should and should not be shared, and creativity in negotiations. Preparation: 30 min. Negotiation: 60 min. Available from the Dispute Resolution Research Center at the Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208. Phone: (847) 491-8068; e-mail: [email protected]. EXERCISE: Viking Investments by Leonard Greenhalgh This complex, multi-issue, two-party negotiation of a dispute between a real estate developer and a subcontractor emphasizes escalation of commitment and the effects of focusing on rights or interests in dispute resolution. Preparation: 60 min. Negotiation: 60 min. Available from Creative Consensus, Inc., P.O. Box 5054, Hanover, NH 03755. Phone/fax: (603) 643-0331. MULTIPLE-CHOICE QUESTIONS Win-win agreements are those that maximize money and wealth whatever negotiators care about social status and relationships fairness and trust Deterrence-based trust is based on reverse psychology behavioral predictability the principle of carrots and sticks emotional connection Identification-based trust results from seeing another person as a role model having complete empathy with another party being able to accurately predict what another person will do reciprocating another party’s behavior In social psychology, propinquity refers to the risk associated with trusting someone turning down favors and rewards from others the physical or psychological proximity between people returning in kind what others have offered us All of the following are effective strategies for transforming personal conflict to task conflict, except: focusing on the future hiding anger and frustration finding a common node in parties’ social networks join forces to compete against a common enemy With regard to repairing broken trust it is impossible to fully recover from breach only time can heal a rift between parties letting the injured parties express their feelings is an important step hire a professional third party In a communal relationship, parties live in a social collective respond to each other’s needs without expectation of being repaid do not reciprocate with outsiders always ignore use of rights or power Reputations in negotiations are very complex and nuanced, usually counting favorable as well as unfavorable pieces of information formed quickly as a result of firsthand, as well as secondhand experiences built slowly over several experiences only important to consider if one is a leader or CEO In contrast to negotiating with friends, businesspeople are much more likely to use self-organizing arrangements compromise agreements affective routes exchange norms When friends and family do business, what is likely to be true? Emotions are more intense People build trust swiftly People use threats more often Conflicts can last for generations Answer key: 1.B; 2.C; 3.B; 4.C; 5.B; 6.C; 7.B; 8.B; 9.D; 10.A. Discussion Questions What are some of the things people might care about maximizing in a negotiation that are not necessarily monetary in nature? Generate some examples of embedded relationships (personal or historical). What were some of the pitfalls associated with these relationships? What are some of the advantages and disadvantages to the ways in which we assign reputation to others? What are some of the ways that repairing a ‘bad reputation’ is similar to repairing broken trust? What are some of the reasons that people are uncomfortable negotiating with friends, and what are some of the advantages and disadvantages to negotiating with friends? What are some of the advantages and disadvantages to negotiations between businesspeople and how do they differ from purely personal negotiations? Suggested answers Nonmonetary things can include trust, security, happiness, peace of mind, relationships, love, services, goods, status, information, or whatever negotiators care about. Embedded relationships, whether personal or historical, are intertwined connections that influence negotiation dynamics. Examining examples of such relationships reveals common pitfalls that negotiators must navigate: 1. Family Businesses: • Example: In a family-owned business, negotiations often involve relatives or longstanding business partners. These relationships are deeply embedded due to shared history and familial ties. • Pitfalls: Conflicts arising from familial dynamics can spill over into negotiations, complicating decision-making. Emotions such as sibling rivalry or parental authority can impede rational decision-making and strain business relationships. 2. Long-term Supplier Relationships: • Example: A company that has worked with the same supplier for decades develops a deeply embedded relationship. Both parties understand each other's preferences, capabilities, and limitations intimately. • Pitfalls: Despite the familiarity, there's a risk of complacency or over-reliance on the relationship. Negotiators may overlook potential improvements or fail to explore alternative suppliers, leading to missed opportunities for innovation or cost savings. 3. Political Alliances: • Example: Political parties or nations often form alliances based on shared ideologies, historical alliances, or strategic interests. These embedded relationships shape diplomatic negotiations and international agreements. • Pitfalls: Shifts in political landscapes or changes in leadership can disrupt established alliances, leading to mistrust or breakdowns in negotiations. Additionally, historical conflicts or grievances can resurface, hindering progress in resolving disputes. 4. Community Networks: • Example: Negotiations within tight-knit communities or social circles involve embedded relationships based on shared cultural norms, values, and traditions. • Pitfalls: While community networks provide a sense of belonging and support, they can also exert pressure on negotiators to prioritize group interests over individual needs. This groupthink mentality may stifle creativity or limit negotiators' autonomy. 5. International Trade Partnerships: • Example: Bilateral trade agreements between countries establish embedded relationships that govern economic cooperation, tariffs, and trade regulations. • Pitfalls: Disputes over trade practices, currency manipulation, or geopolitical tensions can strain these relationships, leading to trade wars or retaliatory measures. Failure to address underlying grievances can escalate conflicts and disrupt global supply chains. In conclusion, embedded relationships play a significant role in negotiations, shaping perceptions, expectations, and decision-making processes. Negotiators must be mindful of the pitfalls associated with these relationships, including emotional biases, complacency, and external pressures, to foster trust and build mutually The reputations assigned to others tend to be immediate, often automatic, highly evaluative, based on limited information, and highly internally consistent. Advantages: A good reputation affects how others deal with you. Disadvantages: The halo effect (the propensity to believe that people we trust are also intelligent and capable), and the forked-tail effect (once we form a negative impression of someone, we view everything else in a negative fashion). Repairing a bad reputation is similar to repairing broken trust—people will look at your behavior more than your words, so it is important to act in a trustworthy fashion. The reason for following the motto “friends should not do business” is defined by the fact that we should take care of people we love, respond to their needs, and not “keep track” of who has put in what, but in negotiation we are trying to maximize our own interests. Advantages: Friends are less competitive, exchange more information, make more concessions, make fewer demands, and are more generous with one another. Disadvantages: Friends are too willing to compromise or to engage in the firm flexibility maxim that is often required to reach level 3 integrative agreements. When friends compromise quickly because they want to avoid conflict and minimize threat of impasse, they are likely to leave value on the table. The need for friends to maintain the illusion of agreement means that important differences in preferences, interests, and beliefs are often downplayed or buried. In contrast to friendship negotiation, businesspeople are much more likely to use an exchange norm by which everything is reduced to a single metric allowing for comparison. Advantages: Businesses are generally organized around rank and status, but being in a hierarchical relationship may help to expand the pie. Disadvantages: We like our friends, but we do not necessarily like the people we do business with and have to negotiate with. Levels of cooperation decrease as social distance increases and when reaching agreement is important, negotiators who have a relationship are more likely to reach a win-win agreement. Instructor Manual for The mind and heart of the negotiator Leigh L. Thompson 9780132543866, 9781292023199, 9780132827669, 9780135198582