THE ART OF NEGOTIATING

The Art of Negotiating : 

The Art of Negotiating T.Sivasankaran Advesh Consultancy Services tss@advesh.com

BASICS OF NEGOTIATION : 

BASICS OF NEGOTIATION SESSION 1 2 Advesh Consultancy Services

Slide 3: 

We all negotiate, all of the time These negotiations can be about anything Negotiation is the most effective way of resolving conflict 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 3 Advesh Consultancy Services

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 4 Advesh Consultancy Services

Slide 5: 

Setting Goals Balancing Outcome and Relationships 5 Advesh Consultancy Services

Setting Goals : 

Setting Goals BATNA RESERVATION PRICE ZOPA 6 Advesh Consultancy Services

BATNA : 

BATNA Best Alternative To a Negotiated Agreement 7 Advesh Consultancy Services

WHAT IS BATNA? : 

WHAT IS BATNA? How do the proposals match your realistic alternative if you can not 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. 8 Advesh Consultancy Services

BATNA : 

BATNA Retain the existing supplier Go to another supplier Strike/Lockout Not an immediate requirement 9 Advesh Consultancy Services

DEVELOPING BATNA : 

DEVELOPING BATNA List what you would do if you fail to reach an agrrement 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 10 Advesh Consultancy Services

BATNA : 

BATNA Know your BATNA Work with all the BATNAs Be ready to walk 11 Advesh Consultancy Services

BATNA : 

BATNA Developed by Roger Fisher and William Ury 12 Advesh Consultancy Services

RESERVATION PRICE : 

RESERVATION PRICE Reservation Price is the least favourable point at which one will accept a deal 13 Advesh Consultancy Services

RESERVATION PRICEEXAMPLES : 

RESERVATION PRICEEXAMPLES Want to shift your office from outskirts to the city. Paying rent @Rs 20 per sq.feet. How much you can pay for moving to the city? You want to eliminate one supplier whose supplies had been erratic. You want to change the supplier but he wants 100% more than what you are paying currently. What is the Reservation price you will decide in this case? 14 Advesh Consultancy Services

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 Advesh Consultancy Services

EXAMPLE : 

EXAMPLE Sellers Expectation Buyers Expectation 16 Advesh Consultancy Services

Exercise 1 : 

Exercise 1 You have a good motor cycle which is 4 years old. It gives good milage. 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 Advesh Consultancy Services

Balancing Outcome and Relationships : 

Balancing Outcome and Relationships DISTRIBUTIVE NEGOTIATION INTEGRATIVE NEGOTIATION 18 Advesh Consultancy Services

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 19 Advesh Consultancy Services

Integrative Negotiation : 

Integrative Negotiation A negotiation in which the parties cooperate to achieve the maximum benefits by integrating their interetsw into an agreement. These deals are about creating value and claiming it. Win-win 20 Advesh Consultancy Services

STAGES OF NEGOTIATION : 

STAGES OF NEGOTIATION Phase 1: Preparation Phase 2: Interacting Phase 3: Agreement 21 Advesh Consultancy Services

Negotiation Process : 

Negotiation Process 22 Advesh Consultancy Services

PREPARATION : 

PREPARATION SESSION 2 23 Advesh Consultancy Services

PREPARATION : 

PREPARATION Understanding one’s own position and interests of the other party or parties the issues at stake, and alternative solutions. 24 Advesh Consultancy Services

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 25 Advesh Consultancy Services

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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 26 Advesh Consultancy Services

CRITICAL ELEMENTS OF NEGOTIATION : 

CRITICAL ELEMENTS OF NEGOTIATION Knowledge or information Time or Deadline Pressure Strength or Power 27 Advesh Consultancy Services

INFORMATION : 

INFORMATION More information you have , the better you will be able to negotiate 28 Advesh Consultancy Services

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 pressure 29 Advesh Consultancy Services

POWER : 

POWER 30 Advesh Consultancy Services

EXERCISE 2PREPARATION : 

EXERCISE 2PREPARATION You are a Company trading in PCs and LAPTOPs fo Repute manufacturers. You are negotiating with a BPO for 500 PCs .You get a margin of 25% .You also get a credit period of 3 months from the Principals. 31 Advesh Consultancy Services

INTERACTING : 

INTERACTING SESSION 3 32 Advesh Consultancy Services

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 Advesh Consultancy Services

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 Advesh Consultancy Services

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 Advesh Consultancy Services

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 Advesh Consultancy Services

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ACCOMODATE 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 Advesh Consultancy Services

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 Counteranchoring Be prepared for concessionary moves 38 Advesh Consultancy Services

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 Advesh Consultancy Services

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Scenes Human Nature Negotiation Tactics Planning Introduction Bargaining Agreement Closure Influence Factors Reciprocity Consistency Commitment Social Proof Likeability Authority Scarcity Observe Rather than Evaluate Express Your Feelings Acknowledge Needs Express Concrete Actions Personal Responsibility Based Communications

The Art of Listening : 

The Art of Listening 41 Advesh Consultancy Services

Challenges & Obstacles : 

Challenges & Obstacles 42 Advesh Consultancy Services

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? 43 Advesh Consultancy Services

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? 44 Advesh Consultancy Services

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,stauts or authority to make a deal? 45 Advesh Consultancy Services

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 46 Advesh Consultancy Services

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Being Confident Being Prepared Being Willing to Walk Away 47 Advesh Consultancy Services

Slide 48: 

Convince Collaborate Create 48 Advesh Consultancy Services

THANK YOU : 

THANK YOU 49 Advesh Consultancy Services