Negotiation skills and leadership techniques often go hand-in-hand in creating win-win deals for negotiators and their counterparts. In trying to fund the US’ first-ever high-speed rail line in California, Democrat Jerry Brown has employed a variety of different negotiation strategies and leadership styles to bring the parties to the table to work towards an agreement.
best alternative to a negotiated agreement
Or BATNA, describes a negotiator’s best possible outcome if the current negotiations fail.
Learn how to negotiate like a diplomat, think on your feet like an improv performer, and master job offer negotiation like a professional athlete when you download a FREE copy of Negotiation Skills: Negotiation Strategies and Negotiation Techniques to Help You Become a Better Negotiator.
The following items are tagged best alternative to a negotiated agreement.
Courses and Training
It’s often said that great leaders are great negotiators. But how does one become an effective negotiator? On-the-job experience certainly plays a role, but for most executives, taking their negotiation skills to the next level requires outside training. Designed to accelerate your negotiation capabilities, Negotiation and Leadership examines core decision-making challenges, analyzes complex negotiation scenarios, and provides a range of competitive and cooperative negotiation strategies. Whether you’re an experienced executive or and up-and-coming manager – working in the private or public sector – this program will help you shape important deals, negotiate in uncertain environments, improve working relationships, claim (and create) more value, and resolve seemingly intractable disputes. In short, this three-day executive education program will prepare you to achieve better outcomes at the table, every single time.
Perfect your negotiation skills in this free special report, BATNA Basics: Boost Your Power at the Bargaining Table from Harvard Law School.
As you know, gender stereotypes often enter the negotiation process. Women and men are perceived to, and often do, act differently in negotiations. Furthermore, gender-based discrimination—such as less pay, unequal treatment, and sexual harassment—is often a source of conflict. With the resources available through the Teaching Negotiation Resource Center (TNRC), professionals can learn how to fairly and effectively negotiate gender discrimination issues.
Marjorie Corman Aaron and Jim Lawrence
Four-person grievance mediation among counsel for a welding company, a union representative, and a discharged employee over the legitimacy of the discharge, which was based on a positive drug test
Sally Soprano is a distinguished soprano who is now somewhat past her prime. She has not had a lead role in two years but would like to revive her career. The Lyric Opera has a production scheduled to open in three weeks, but its lead soprano has become unavailable. Lyric’s representative has requested a meeting with Sally’s agent to discuss the possibility of hiring Sally for the production. Neither knows much about the other’s interests or alternatives. There is a wide-range of possible outcomes.
How can a negotiator protect herself from bias and influence negotiation strategies at the bargaining table? Knowing one’s best alternative to a negotiated agreement as well as the zone of possible agreement for the deal at hand help prevent bias from leaving value unclaimed.
Jake Erhard, under the supervision of Robert Bordone
Two-party integrative negotiation between agents for a basketball player and a shoe manufacturer over a possible sneaker endorsement deal
Matt Smith under the supervision of Robert C. Bordone, with revisions by Michael Moffitt
Two-party personal injury settlement negotiation between the attorney for the injured plaintiff and general counsel for the defendant toy manufacturing company
A distinguished older soprano, Sally has not had a lead role in two years. However, when another soprano falls ill, the Lyric Opera is eager to hire Sally…but at what price?
Sally Soprano is one of the best-known role-play simulations from the Program on Negotiation’s Teaching Negotiation Resource Center (TNRC). And it’s a classic for good reason.
Sally Soprano boils very complex dynamics down to essential structures. As Daniel Shapiro, Associate Director of the Harvard Negotiation Project, puts it, “Sally Soprano has an elegant structure that more clearly than any other case raises the critical elements of interest-based negotiation.”
Susan Podziba and Lawrence Susskind
Eight-party, multi-issue negotiation among prison administrators, government leaders, criminal justice advocates, and prisoners’ rights advocates to develop recommendations for a comprehensive state policy to alleviate prison overcrowding
What should a business negotiator do when she feels that her BATNA is weak or that the only issues on the bargaining table involve issues of price, or “haggling” scenarios? In this article, the Program on Negotiation offers business negotiation tips for negotiators grappling with a “weak BATNA.”
David Lax, James Sebenius, Lawrence Susskind, and Thomas Weeks
Two-party, multi-issue, scoreable negotiation between a manufacturer and a state environmental agency to reach a settlement over the manufacturer’s pollution of a local river
Six negotiation skills tips for negotiators seeking to creative value during their next round at the bargaining table. Business negotiators are often faced with the complex task of coordinating multiple parties – here are some tips for the individual business negotiator on how to achieve success in her next deal negotiation.
Two-party term sheet negotiation between a venture capitalist and the founder of an aerospace start-up company in which participants are scored both on their substantive performance and on the other party’s perception of the relationship
In negotiation, your best source of power is typically your best alternative to a negotiated agreement, or BATNA. When you are aware that you have an appealing alternative deal to the one you’re working on, you will be less tempted to accept an agreement that doesn’t meet your minimum requirements. A strong BATNA gives you the freedom to walk away from the table with no (or few) regrets. Interestingly, by strengthening your BATNA, you can sometimes improve the deal on the table. Filmmaker George Lucas likely did just that during his 2012 negotiations to sell Lucasfilm—the film-production company behind the spectacularly successful Star Wars film franchise—to the Walt Disney Company.
What’s faster than the pace of technological development? The pace of lawsuits being filed about the adoption of new technologies, patent infringement, and intellectual property rights. In our modern world, professionals must be able to resolve highly challenging technology-related disputes – often before they reach the courtroom. That’s where the Program on Negotiation’s Teaching Negotiation Resource Center (TNRC) comes in.
What’s faster than the pace of technological development? The pace of lawsuits being filed about the adoption of new technologies, patent infringement, and intellectual property rights. In our modern world, professionals must be able to resolve highly challenging technology-related disputes – often before they reach the courtroom. That’s where the Program on Negotiation’s Teaching Negotiation Resource Center (TNRC) comes in.
Drawing on a wide-range of disciplines including microeconomics, social psychology, behavioral economics, and management science, the TNRC has developed a wide range of role-play negotiation games designed to help participants work through the complexities of technology-related business negotiations.
Do you ever feel ambushed by strong emotions?
To guard against acting irrationally or in ways that can harm you, authors of Beyond Reason: Using Emotions As You Negotiate Roger Fisher and Daniel Shapiro advise you to take your emotional temperature during a negotiation. Specifically, try to gauge whether your emotions are manageable, starting to heat up, or threatening to boil over.
When you’re getting ready to meet with more than one party, the usual steps of two-party negotiation apply.
When opposing parties cannot come to a satisfactory resolution, a strong mediator can make all the difference. By effectively examining the issues at hand and helping parties identify creative solutions, a well-trained mediator builds consensus where there once was none.
To help professionals learn the art of mediation, the Program on Negotiation’s Teaching Negotiation Resource Center (TNRC) offers a wide range of role-play negotiation exercises.
In business negotiations, our mistakes sometimes end up affecting not only the current deal, but our best alternative to a negotiated agreement, or BATNA, in deals that lie down the road. That’s a lesson that Ann Marie Gardner, the founder and editor of the hip new magazine Modern Farmer, has learned the hard way. After settling in New York’s Hudson Valley, Gardner got the idea of starting Modern Farmer in 2010, Alec Wilkinson writes in a New Yorker profile. The quarterly magazine’s aesthetic – artistic cover shots of animals and articles on topics like growing plants for cocktails – attracts the type of urban dwellers who aspire to raise their own chickens rather than actual working farmers. Gardner calls it a “farming magazine for media professionals.”
What’s one of the best ways to teach the art and science of negotiation? Case studies and articles that spark lively discussion or facilitate self-reflection. Based on real-world examples, these teaching resources are designed to help students envision how to apply what they’ve learned in the classroom and beyond.
The Teaching Negotiation Resource Center (TNRC) at the Program on Negotiation offers negotiation case studies from renowned authors who’ve negotiated trade agreements, aided peace treaties, and handled many other high-stakes deals. By drawing on their own experiences, they’ve crafted negotiation case studies that are authentic, compelling, and enlightening.
Some negotiations end with a plan of action rather than a signed contract – for example, a plumber agrees to fix the tile damage caused by his work. Other negotiations wouldn’t be appropriate to commemorate in writing, such as how you and your spouse decide to discipline your young child. But in virtually all significant business negotiations, parties should put pen to paper after negotiating the terms of their deal. In fact, contract law requires certain types of deals to be in writing for them to be enforceable.
Negotiating power generally comes from one of three sources, according to Adam D. Galinsky and New York University’s Joe C. Magee. Here are three sources of negotiation power that negotiators can use in negotiations.
Imagine that you’re the CEO of a sports clothing manufacturer based in Chicago. You recently traveled to Amsterdam, the Netherlands, to meet with a distributor who has a rich and diverse network in the European sports market.
During the business trip, you both express enthusiasm about the possibility of a joint venture and agree to give the potential alliance more thought.
Back home, you learn that one of your competitors has discussed similar plans with the same distributor.
In negotiation, our success often hinges on our bargaining power—which in turn can depend on forces beyond our control. That truism was highlighted in two recent disputes arising from business negotiations over the pricing of copyrighted material in the digital era, one from the music world, the other from publishing. First, country-music star Taylor Swift injected new life into the stagnating music industry with the October release of her first pop album, “1989.” The album sold 1.287 million copies in the United States in its first week, instantly becoming 2014’s bestseller to date. Amid the win-win-win news for Swift, her fans, and the music industry, there was one clear loser, however: Spotify, the world’s most popular music-streaming service.
The following question was posed to Program on Negotiation faculty member and associate professor of business administration at Harvard Business School in the Negotiations, Organizations & Markets Unit, Francesca Gino.
Articles in Negotiation have highlighted many of the cognitive biases likely to confront negotiators. Work by researchers Russell B. Korobkin of UCLA and Chris P. Guthrie of Vanderbilt University suggests how to turn knowledge of four specific biases into tools of persuasion.
As he entered his second term in office, President Obama set a goal of taking concrete steps to address global climate change. A global agreement on the issue is in sight, but a key obstacle stands in the way: the U.S. Senate. According to the Constitution, a president needs approval from a two-thirds majority of the Senate to enter into any legally binding treaty. Obama is eager to avoid what happened in 1997, when the Senate refused to ratify the Kyoto Protocol, a legally binding U.N. climate change treaty. Indeed, the odds of the Senate passing a similar treaty 17 years later are nil, reports Coral Davenport in the New York Times. In 2012, Republican senators blocked ratification of a U.N. treaty on equal rights that had been modeled on an American law and negotiated by Republican president George W. Bush. With the Senate unable to reach agreement on that treaty, Obama is trying a new strategy on the much more controversial issue of climate change: a workaround.
At some point or another, most negotiators claim that a certain issue is a deal breaker.If you’re trying to sell your business, for instance, you might walk away from talks with a potential buyer who you believe would lay off many of your longtime employees. Or if someone asks you to go in on a venture that violates your moral principles, you might refuse to even consider the prospect.
A desire to safeguard your personal integrity, health, or safety, or that of those close to you, may cause you to declare certain issues sacred in your negotiations—completely nonnegotiable under all conditions. Yet a refusal to compromise on key issues can lead to impasse in an otherwise beneficial deal.
Moreover, researchers have long theorized that many of the issues we claim are sacred are actually “pseudo-sacred”—that is, they’re off-limits under some but not all conditions. According to this view, our resolve regarding sacred issues can waver, whether or not we realize it. When do negotiators stand firm on sacred issues? In a recent experiment, a research team led by professor Ann E. Tenbrunsel of Notre Dame University explored this question. In particular, they looked at whether the strength of one’s best alternative to a negotiated agreement (BATNA)—an important source of power in negotiation—affects whether negotiators bend or stand firm on the issues they hold sacred.
A Negotiation reader asked if negotiation without a BATNA is possible. David Lax, Managing Partner at Lax Sebenius and Program on Negotiation faculty member responds in this January 2008 article of “Dear Negotiation Coach.” I am looking for tips on negotiating with sole suppliers who know I don’t have any real outside alternative and who take advantage of this. Without the power of a realistic BATNA, can you really negotiate?
When you’re more tightly bound to an agreement than your counterpart is, trouble could follow. Manage your escalation of commitment—and level the playing field.
Read the following three examples and notice the differing levels of commitment between the two negotiating parties.
Consider these three real-life negotiating scenarios.
On June 18, the board of retailer American Apparel informed the company’s controversial founder, Dov Charney, that it was ousting him from his roles as chairman and CEO. For years, Charney had fended off sexual-harrassment lawsuits and rumors of inappropriate behavior. But only when the company’s creditors grew anxious about its long-term liability did the board decide to take action, citing new and damning revelations, as reported by Elizabeth A. Harris in the New York Times.
As the saga continues to unfold, it has highlighted several dimensions of negotiation that managers and executives would be wise to heed—including the importance of continually assessing your BATNA, or best alternative to a negotiated agreement.
In today’s market, consumers are often the more powerful parties in negotiations with sellers.
To claim the most value in your next haggling experience, use the following six strategies.
In recent months, U.S. President Barack Obama and other world leaders have struggled to find a winning strategy to convince Russian President Vladimir Putin to back away from his aggressions toward Ukraine. In a Wall Street Journal editorial, Ken Adelman, U.S. President Ronald Reagan’s ambassador to the United Nations and arms-control director, writes that recently declassified accounts of negotiations between Reagan and Soviet leader Mikhail Gorbachev offer lessons that could help Western leaders approach their Russian counterpart more effectively.
According to Adelman, on his way to accept the 1980 Republican nomination, Reagan told an adviser that the primary reason he wanted to be president was “To win the Cold War.” Having set this overarching goal, Reagan tenaciously pursued it throughout his two terms in the White House.
Don’t be caught unprepared by hard bargainers, warn Mnookin, Peppet, and Tulumello in Beyond Winning. Here is their Top 10 list of common tactics.
In their training, police and professional hostage negotiators are taught skills that will help them defuse tense situations over the course of long phone calls, such as engaging in active listening, determining the person’s emotions from his or her inflection, and trust building.
These crisis negotiators are being put to the test by young criminal suspects and others in crisis, whose first instinct increasingly seems to be texting rather than talking, according to an Associated Press article.
Red Bank, Tennessee, police chief Tim Christol tells the Associated Press that the usual negotiation skills he teaches don’t translate to texting, such as emotional labeling in the form of a statement such as “You sound angry.” Without verbal cues, Christol says, it becomes much more difficult to understand the emotional state of the person in crisis, and misunderstandings are common. “Words are only 7 percent of communication,” he says.
It’s not difficult for negotiators haggling over seemingly finite resources to become entrenched in their positions. Sometimes the only way to get unstuck is to think appreciatively and creatively about the other side. Rather than trying to determine why a person has taken a particular position, consider what she wants, appreciate it, and try to deliver it.
Sometimes in negotiation we are forced to deal not only with the issues on the table but also with concerns about status.
One famous instance took place in the late 1980s, when Robert Campeau, head of the Campeau Corporation and then one of Fortune magazine’s “50 Most Fascinating Business People,” tried to acquire Federated Department tores, the parent company of the prestigious department store Bloomingdale’s.
A bidding war over Bloomingdale’s escalated between Campeau and R.H. Macy. Campeau won with an irrationally high offer – but had to declare bankruptcy shortly thereafter.
You set up the contract renegotiation with a key client months ago. You had every intention of gathering a range of information to establish realistic goals and assess the client’s needs, but short-term projects got in the way. Suddenly it’s the day before the first meeting. Aside from making a few phone calls and calculations, you’ll have to wing it—but that’s OK. You’ve always worked well under pressure. Right?
We all know we’re supposed to prepare to negotiate, yet we often fail to follow through on these best intentions. That’s a problem because research overwhelmingly shows that underprepared negotiators make unnecessary concessions, overlook sources of value, and walk away from beneficial agreements.
Many observers view Russian president Vladimir Putin’s decision to send Russian troops into Crimea in the wake of violence between protesters and police in Kiev and Ukrainian president Viktor Yanukovich’s abrupt departure as the first gambit in a carefully reasoned strategy.
“Putin is playing chess and I think we are playing marbles, and I don’t think it’s even close,” said Representative Mike Rogers, chairman of the House Intelligence Committee, in criticism of President Barack Obama and his administration. Arguing that Putin’s advance into Ukraine is part of a plan to strengthen Russia’s “buffer zones,” Rogers accused the Obama administration for making too many concessions to Russia and failing to respond decisively to the crisis.
In negotiation, we are often confronted with the task of dealing with difficult people—those who seem to prefer to set up roadblocks rather than break down walls, or who choose to take hardline stances rather than seeking common ground.
How can you deal with such difficult people?
One tactic you might consider is avoiding the conversation altogether by finding more collaborative negotiating partners, but this is not always an option.
When avoidance is impossible, strengthening your best alternative to a negotiated agreement (BATNA) can help give you the confidence you need to deal with obstinacy among negotiating partners.
As the lead negotiator in 18 months of top-secret talks with Iran over its nuclear program, U.S. State Department Under Secretary for Political Affairs Wendy Sherman found herself negotiating as if through a dark screen. Rather than dealing directly with Iran’s supreme leader, Ali Khamenei, the United States delegation led by Sherman was assigned to interact with Iran’s American-educated foreign minister, Mohammad Javad Zarif, the New York Times reports.
During the course of the discussions, it remained unclear exactly how much negotiating authority Zarif possessed, if any. “We are only going to find out by testing him,” Sherman said. She found the drawn-out process of “signal-sending” with Iran frustrating, the Times reports.
Most of us have had the experience of doubting a counterpart’s ability to make decisions on behalf of his organization. Fortunately, business negotiators typically have more options than Sherman did to improve the situation. Here are three guidelines
Here’s a list of some of the most notable negotiation flops of the past year – from deals that were over before they started, to those that were botched at the table, to those that proved disastrous well after the ink had dried.
2013 witnessed a series of colorful mergers, acquisitions, and other deals. Here are 10 negotiations and negotiation trends from which business dealmakers can learn.
With home sales heating up in some U.S. regions in 2013, homebuyers faced competition they haven’t seen since before the real-estate bubble burst, and it showed up in the form of packed open houses, multiple bids above the asking price, and all-cash offers.
At last, the deal is done. After 18 months of negotiation, eight trips across the country, and countless meetings, you’ve finally signed a contract creating a joint venture with a Silicon Valley firm to manufacture imaging devices using your technology and their engineering.
The contract is clear and precise. It covers all the contingencies and has strong enforcement mechanisms. You’ve given your company a solid foundation for a profitable new business. As you file the contract, a question dawns on you: Now what?
As the U.S. government approaches a potentially catastrophic default on its debt in October, President Obama remains determined to avoid negotiations with Republican leaders on the issue, the New York Times reports, a situation that leaves House of Representatives Speaker John Boehner with an uncertain BATNA, or best alternative to a negotiated agreement.
They say it pays to keep your friends close and your enemies closer, but in negotiation, keeping your enemies—or competitors—close could end you up in court, as Apple’s recent encounter with the U.S. Department of Justice suggests.
The story begins back in 2007 when, unhappy with Amazon’s low, flat price of $9.99 for e-books, five major U.S. pub¬lishers negotiated a new business model for e-book pricing with Apple, which was getting ready to launch the iPad.
Under the prevailing wholesaling model, publishers sold their books and e-books to retailers like Amazon, which could then set whatever price they liked. Apple and the five publishers agreed to switch to a so-called agency model, which would allow the publishers to set their own prices for e-books in exchange for giv¬ing Apple a 30% sales commission. At least one of the publishers then upped the ante by threatening to delay the release of its digital editions to Amazon unless it switched to an agency model. Amazon reluctantly agreed, and e-book prices rose across the industry to about $14.99.
The publishers and Apple claimed that their goal was to increase competition in the e-book market by opening up alternatives to Amazon’s Kindle reader. But the U.S. Department of Justice didn’t see it that way and accused the parties of colluding to artificially raise e-book prices. The five publishers reached a settle¬ment with the government; Apple did not.
Ever win something you wanted, then realize too late you got a raw deal? Here’s how to recognize when backing away is your best bet in a negotiation.
Imagine that while exploring an outdoor bazaar in a foreign country, you see a beautiful rug that would look perfect in your home. While you’ve purchased a rug or two in your life, you’re far from an expert. Thinking on your feet, you guess the rug is worth about $5,000. You decide to make a bid, but a low one. You engage the merchant in some pleasantries and then make an offer of $1,000. She quickly accepts, and the transaction is complete.
How do you feel as you walk away? Pleased with your purchase – which was, after all, far cheaper than you expected – or uneasy about it?
In negotiation, a combination of several negotiation skills and tactics may be needed to break past a difficult impasse. A recent protracted negotiation between North Korea and South Korea provides a case study.
In April, North Korea abruptly removed its workforce from the Kaesong Industrial Complex, a joint venture it launched within its borders nine years ago with South Korea. The complex shut down, and the two nations engaged in seven rounds of negotiations over the course of 133 days to try to reach agreement to reopen it.
With home sales heating up in some parts of the United States, homebuyers are facing competition they haven’t seen since before the real-estate bubble burst, and it’s showing up in the form of packed open houses, multiple bids above the asking price, and all-cash offers.
To take an extreme case, in New York City, low condominium inventory combined with low mortgage rates have driven prices up 12% over the past year, from $829,000 to $930,000, writes Michelle Higgins in the New York Times. Real-estate agents are capitalizing on the frenzy with tactics like one-day-only showings and tight deadlines for bidders to submit their best-and-final offers.
In such an environment, negotiation might seem futile. After all, if a seller has 20 offers, how could you possibly stand out – other than, perhaps, by overbidding? In fact, there are other ways to separate yourself from the pack, while also ensuring that you make smart financial decisions for yourself.
In negotiation, your best source of power typically is your “best alternative to a negotiated agreement,” or BATNA. By cultivating appealing options away from the table, you free yourself up to walk away in the event of a disappointing deal.
In all likelihood, Dell Inc. founder Michael Dell found himself facing such a BATNA analysis in recent days. Back in February, Dell and private-equity firm Silver Lake Partners announced a deal to buy the company for $13.65 a share. Since then, the deal has faced one obstacle after another, including the threat of a Dell shareholder revolt, the threat of a higher offer from another private-equity firm, and efforts by billionaire activist Carl Icahn to convince Dell to pony up a higher bid. The overarching question: whether Dell would be getting a steal deal, and whether there was any way to stop him.
Although forecasting errors are extremely common, you can minimize their impact on your negotiations by following these three guidelines.
Social psychologists have described types of power that exist in society, and these types of power emerge in negotiation as well.
Two types of power spring from objective features of the bargaining process.
If your current negotiation reaches an impasse, what’s your best outside option?
Most seasoned negotiators understand the value of evaluating their BATNA, or best alternative to a negotiated agreement, a concept that Roger Fisher, William Ury, and Bruce Patton introduced in their seminal book Getting to Yes: Negotiating Agreement Without Giving In.
When it comes to negotiation, the more choices on the table, the better your outcomes will be – right? Not necessarily. An excess of options can stand in the way off efficient agreements and, moreover, prevent you from being satisfied with the final result.
On May 19, Internet company Yahoo announced that it was purchasing the blogging service Tumblr for about $1.1 billion in cash. The acquisition could put a fresh face on the aging Internet company and provide it with a profitable revenue source—or it could turn out to be another instance of the Web pioneer overpaying for a start-up and failing to nurture it, as was the case after Yahoo bought Flickr and GeoCities.
Our DEAL approach allows you to respond to threats without conveying weakness or escalating the conflict, redirecting talks toward a focus on each other’s interests.
Like other cognitive biases, competitive expectations can be insidious. Fortunately, there are several steps you can take to forestall their negative consequences.
Like a contingency, a condition to a deal is a related though far less common deal-structuring technique. A condition is an ‘if’ statement like a contingency, but, whereas a contingency depends on unknown future events, a condition is entirely within the control of the parties involved.
Here the Program on Negotiation offers a checklist of negotiation design categories. Whether your overall negotiation design is decide-announce-defend (DAD) or full-consensus (FC), or a hybrid of both, raising these issues is usually preferable to falling into a set of important decisions by default.
A recent article in Tufts Magazine by Program on Negotiation faculty member Jeswald Salacuse discusses an oft neglected aspect of negotiation: putting into action what negotiators agree to at the bargaining table.
Normally negotiators focus on the deal-at-hand as well as those present at the negotiation, neglecting other aspects of the negotiated agreement that would not only impact others outside of the room but also require their cooperation for its success.
Professor Salacuse calls this process of putting a negotiated agreement into action “the toughest challenge” in negotiation.
Car salespeople truly understand how to use modest concessions to extract much larger ones.
First, they spend a long time legitimating the sticker price and suggesting that it’s not only fair, but nonnegotiable.
In 1995, a new government came into power in the Indian state of Maharashtra and canceled a 20-year power purchase agreement with the Dabhol Power Company, a joint-venture formed by Enron, General Electric, and Bechtel. Claiming that the deal was improper and even illegal, the government declared publicly that it would not renegotiate.
There are two main reasons the winner’s curse is a common and dangerous trap in negotiations.
On August 2, 2004, Barbara Cox Anthony and Ann Cox Chambers, two sisters who together owned 73% of Cox Communications, announced that they wanted to cash out the minority shareholders of their company. Their initial offer was $32 per share, or a 14% premium to the preannouncement trading price of approximately $28 per share.
Although most Americans treat those they know better than they treat strangers, Chinese behavior towards insiders and outsiders tends to be more extreme than in the United States. A guiding principle in Chinese society is guanxi – personal relationships with people from whom one can expect (and who expect in return) special favors and services. Family ties are paramount, but friends, fellow students, and neighbors can also join the inner circle. As a foreigner, you can cultivate guanxi either by hiring people with close ties to your counterpart or by developing your own relationships with key contacts.
Stewart recently interviewed negotiation expert and Program on Negotiation co-founder William Ury to discuss the aftermath of avoiding the fiscal cliff and the rounds of tough negotiations between Democrats and Republicans still to come.
Sometimes those on opposite sides of a bitter dispute can achieve great gains – if only they can spot the ways in which they are similar.
In 2001, the Metropolitan Intercollegiate Basketball Association (MIBA), an organization of five New York-area colleges best known for staging college basketball’s National Invitation Tournament, filed a lawsuit against the National Collegiate Athletic Association (NCAA). MIBA allege that certain NCAA rules governing team participation in preseason and postseason tournaments restricted school’s participation in MIBA tournaments, in violation of various antitrust laws. After four years of litigation, the two parties announced not only that they would settle a lawsuit but also that the NCAA would purchase the rights to the MIBA preseason and postseason tournaments.
Though Congress and the President were able to reach a deal and avoid the dreaded fiscal cliff, both sides engaged in some tough negotiating which has both bewildered and captivated the United States for months. Given all of the posturing and tough talk, some may ask: Is there a method to this madness?
In late 1999, with its stock in free fall, NCS HealthCare, a provider of pharmacy services to long-term care facilities, began “exploring strategic alternatives” – code in the mergers and acquisitions world that NCS’s board wanted to put the company up for sale.
In 2001, Omnicare, a larger provider in the same general industry, offered to buy NCS for $270 million, a number lower than the value of the company’s debt. The deal would have left the company’s stockholders with nothing, and talks broke down when NCS demanded a higher price. In June 2002, Omnicare’s fierce rival Genesis HealthCare came to the table with an offer for NCS. Fearful of having its deal stolen away by Omnicare, which had just beaten Genesis in a bidding contest for another company, Genesis proposed a condition on the deal. It would make an offer only if NCS’s chairman and president, who together held a majority of the voting shares, committed to the Genesis deal and rejected any competing offer from Omnicare. NCS accepted this condition, and the merger was announced on July 28, 2002.
In 1986, the investment bank Goldman Sachs was a $38 billion business owned by more than 100 active and retired partners.
While the partnership structure had insulated the company from the vicissitudes of the stock market and given the company a strong culture of teamwork, it had some significant disadvantages, particularly an unstable capital base and an inability to grow by making acquisitions with stock.
On November 28, dozens of employees at several fast-food restaurants in New York City walked off their jobs and demanded better pay and unionization. In doing so, they launched what is believed to be the largest coordinated campaign in the United States to unionize fast-food workers from different restaurants, reports Steven Greenhouse in the New York Times.
These stories offer a clinical definition of negotiation success and failure
The standoff between recently re-elected Democrat President Barack Obama and congressional Republicans has focused attention on the negotiation styles employed by the two parties as they seek to secure their interests while also working toward the resolution of the current budgetary battle.
For decades, General Electric and the Environmental Protection Agency (EPA) sparred over who would pay for the removal of PCBs, or polychlorinated biphenyls, that GE had discharged into New York’s Hudson River, a cleanup project that is expected to cost hundreds of millions of dollars. The two sides finally came to an agreement in October 2005.
Due to deeply ingrained gender stereotypes, women may find it easier to negotiate their time instead of their financial compensation.
Consider that men and women are likely to rely on gender-stereotypic arguments to support their demands in negotiation. For women, the gender-stereotypic notion of being caregivers is readily available and likely to be well received. By contrast, men, who generally are expected to be the primary family breadwinner, have less difficulty negotiating financial issues than women do.
Great Negotiator Award winner and former United States trade representative (1997-2001) to Japan and China, Ambassador Charlene Barshefsky visited Harvard Law School to speak with students in HLS Clinical Professor Robert Bordone’s Advanced Negotiations Workshop course on October 3.
The case of Jordan and Israel shows how even countries at war can negotiate a water agreement if it is framed in non-zero sum terms and trust continues to be built over time. And that is not the only case of a treaty that has succeeded against all odds to bridge conflicting water interests; the Indus Waters Treaty between India and Pakistan and the Ganges Water Treaty between Bangladesh and India are other examples.
Zero-sum thinking emerges when people conceive of water as a fixed resource – one provided by nature in a given quantity that is either static or diminishing. Based on these assumptions, diplomats often focus on what share of the existing water will be given to each entity. Negotiations of this type typically involve decision makers who are political leaders focused on preserving sovereignty and maintaining state security. They are often unprepared to think about improving the overall efficiency of water use, which, in effect, can “create” more water.
Scientific and technical knowledge is important in water negotiations, but not in the ways it has often been used. It is counterproductive to use scientific information to justify arbitrary (political) decisions. For example, scientific information about water has increased dramatically over the last several decades, but our ability to manage water resources has not improved proportionately.
When two parties are attempting to resolve a contentious dispute, the most effective peacemakers may be those at the highest levels. That’s the lesson from recent productive talks between President Obama and Afghan leader Hamid Karzai on the issue of rules for detaining terrorism suspects.
When countries face contending water claims, one of the biggest obstacles to reaching an agreement is uncertainty. Specifically, there are three types of uncertainty: uncertainty of information, uncertainty of action, and uncertainty of perception. In part 2 of this 5 part series, Program on Negotiation faculty member Lawrence Susskind explains the uncertainties facing negotiators trying to make agreements.
Negotiators often choose to resolve their conflicts through mediation, arbitration, and other alternative dispute resolution methods because of the privacy these methods promise. Unlike the public nature of litigation, mediation and arbitration typically give parties the freedom to hash out sensitive issues without the fear that their discussions and agreement will become public knowledge. Two new cases in the news, however, show that privacy is a nuanced issue in some alternative dispute resolution contexts.
What happens in negotiations between two individuals who care little about each other’s outcomes? Suppose an engineer and an industrial designer are arguing over the design of a car bumper. The designer only cares about whether the bumper matches the style of the vehicle; the engineer is concerned only about how the bumper connects to the front. After describing the trouble he’s having with the existing design, the engineer presents a solution that the designer deems “ugly.” The designer threatens to involve her boss if the engineer doesn’t revert back to the prior design.
Recently, executives at the Silicon Valley-based internet giant Google noticed a disturbing trend: the company was having difficulty hiring and retaining female employees, from engineers to senior executives, Claire Cain Miller writes in the August 22 issue of the New York Times. Women were dropping out during the job interview process and were not being promoted at the same rate as men. In addition, women have lost ground in top leadership positions since Larry Page took over as the company’s CEO in 2011. The issue at Google reflects a larger trend, as the percentage of women working in professional computing jobs fell from 25% in 2011 to 16% in 2010. In many cases, women have been leaving large computer companies for jobs in the public sector or with start-ups.
Another option for dealing with difficult negotiations is to craft what Harvard Law School professor Robert C. Bordone calls a “workaround” – a strategy for meeting your current goals without the involvement or support of your adversary. You might be able to induce a yes with a tempting concession on a key issue, according to Bordone. Offering a concession can be a risky strategy, as it may only encourage someone to push for more. But if a concession would allow you to move beyond that person once and for all, it may be your best option.
How can you figure out the motives behind someone’s seemingly stubborn position? Begin by questioning her about the problem she is trying to solve. Deal blockers may be held back by financial, legal, personal, or other constraints you don’t know about, according to Harvard Business School professor Deepak Malhotra. A tough stance could also communicate a psychological need that isn’t being satisfied.
What can you do when a difficult person is the main obstacle to a promising deal? There are a number of strategies you can use to bring the deal back from the brink of failure. In a series of posts, the Program on Negotiation will offer ten suggestions.
In negotiation over a limited pool of resources, conflicts often spring up over what constitutes a fair agreement. If two business partners are going their separate ways, they might have different ideas about how their shared assets should be divided, for example. Currently, such a dispute is playing out between China and four of its Southeast Asian neighbors over claims to the South China Sea. According to a report issued by the research organization International Crisis Group (ICG), recapped by Jane Perlez in the New York Times in late July, the disputes have reached an impasse that could lead to an open conflict.
According to conventional wisdom, you should always hire a real estate agent when you’re trying to buy a house. The broker’s market expertise will help you decide what moves to make and what price to pay. Because the seller usually has his own broker, the motto “fight fire with fire” applies as well. Perhaps most important, home buyers don’t even have to pay their brokers; the seller’s broker splits the commission with your agent. Hiring a buy-side broker splits the commission with your agent.
Advice seeking is a versatile negotiation tool, as long as you project the right image and tone. Here are three guidelines:
Negotiation preparation is as much an organizational task as an individual one. For example, when determining their best alternative to a negotiated agreement or BATNA (the point at which the negotiators ought to walk away from the table), executives should check in with key organizational leaders. If senior managers are unwilling to invest time in such a conversation – or if they offer less-than-helpful advice such as, “Whatever you do, don’t lose that account!” – an executive can’t be held responsible for poor negotiation preparation.
Just before a meeting with her boss, Cindy peeks into his secretary’s office and whispers, “How’s his mood today?” When the secretary gives a thumbs-up, Cindy decides the time is right to ask for a big raise.
Have you ever won an auction only to realize later that you overbid for the prize? In competitive bidding situations, it’s easy to get carried away in the heat of the moment and overpay.
On June 5, another casualty in the European debt crisis emerged, as Spain announced that it soon would be unable to borrow in the bond market without assistance from other European Union nations. Emilio Botin, the chairman of Banco Santander, said about 40 billion euros, or $50 billion, in European funds would be needed to repair Spain’s banking sector, according to Bloomberg News.
Many negotiation experts recommend that you try to take the other party’s perspective, particularly when attempting to resolve disputes.
Recent research by Nicholas Epley of the University of Chicago and Eugene Caruso and Max Bazerman of Harvard University suggests a dark side to this generally sound negotiation advice. The researchers ran a series of experiments in which they asked participants to determine the fair division of a scarce resource. Half of the subjects (the “self-focused condition”) were asked how much would be fair for them to take. The other subjects (the “other-focused” condition) were asked to think about what would be fair for others to take and then write down how much would be fair for each party (not just themselves) to take.
The power of anchors in negotiation has been demonstrated time and again. Sellers who demand more tend to get more. Indeed, the initial asking price is usually the best predictor of the final agreement.
A trio of researchers may have found an important exception to this rule, however; lower starting numbers set by the seller in an auction can lead to higher ultimate prices. Professors Gillian Ku of the London Business School and Adam D. Galinsky and J. Keith Murnighan of Northwestern’s Kellogg School of Management found this result both in laboratory experiments and from data taken from online eBay auctions.
In past issues of Negotiation, we’ve reviewed the anchoring effect – the tendency for negotiators to be overly influenced by the other side’s opening bid, however arbitrary. When your opponent makes an inappropriate bid on your house, you’re nonetheless likely to begin searching for data that confirms the anchor’s viability. This testing is likely to affect your judgment – to the other party’s advantage.
Psychologists Amos Tversky and Daniel Kahneman identified the anchoring effect in 1974. Participants watched a roulette wheel that, unknown to them, was rigged to stop at either 10 or 65, the estimated the number of African countries belonging to the United Nations. For half of the participants, the roulette wheel stopped on 10. They gave a median estimate of 25 countries. For the other half, the wheel stopped on 65. Their median estimate was 45 countries. The random anchors dramatically affected judgment.
Going to trial, it’s said, is like rolling the dice. That proved true when an exasperated federal judge, the Honorable Gregory A. Presnell, ordered litigants to play a game of Rock Paper Scissors if they could not privately resolve their differences over a procedural issue. The lawyers were stalemated on where to depose a witness in the case, despite the fact that their offices were located just four floors apart in the same building. The judge didn’t want to waste public resources resolving such a trivial matter.
Many took the order as yet another exhibit in the case against shortsighted lawyers – and an attempt to shame them and their clients into more constructive behavior. Judge Presnell’s ruling also established a new best alternative to a negotiated agreement, or BATNA, for the parties: The matter would be decided by chance rather than on its merits, an unsettling prospect if each side was convinced of the righteousness of its position.
During his years as George H.W. Bush’s Secretary of State, one of James A. Baker, III’s, goals was to encourage the free-market reforms that Communist Party of the Soviet Union General Secretary Mikhail Gorbachev had launched in the late 1980s. One day during his tenure, a high-level Bush administration official commented in the press that Gorbachev’s efforts were sure to fail. Baker called Bush to complain. “I said, you can’t have other people pontificating about these major foreign policy matters when this is one of our goals, and it’s totally contrary to our policy,” he said. “So they cut the knees off of this particular individual, and we didn’t hear that anymore.”
Baker shared this story on March 29 while receiving the 2012 Great Negotiator Award from the Program on Negotiation at Harvard Law School and the Future of Diplomacy Project at Harvard Kennedy School. In discussion with Harvard faculty at the Great Negotiator event, Baker elaborated on his greatest challenges as Secretary of State and shared negotiation lessons learned over the course of his long, successful career as a lawyer, campaign manager, and diplomat.
Going to trial, it’s said, is like rolling the dice. That proved true in June 2006, when an exasperated federal judge, the Honorable Gregory A. Presnell, ordered litigants to play a game of Rock Paper Scissors if they could not privately resolve their differences over a procedural issue. The lawyers were stalemated on where to depose a witness in the case, despite the fact that their offices were located just four floors apart in the same building. The judge didn’t want to waste public resources resolving such a trivial matter.
For many people, thinking about the role of power in negotiation can be paralyzing. In fact, the same people who are anxious about negotiating in general tend to be anxious about exerting their power during negotiation. Why? Perhaps because most of us realize that power, even when not explicitly discussed, is often the precipitating and driving force of negotiation processes and outcomes. Obviously, power can generate competition and conflict. But when channeled effectively in negotiations, it can be a catalyst for win-win outcomes.
How can you negotiate the best possible price for a new car? This is a common negotiation question, and naturally so. A car is one of the most significant purchases you’ll ever make—and the price is almost always negotiable. Here are a few tips to improve your performance:
When negotiators sign on the dotted line, they sometimes worry about the wrong concerns. “Did I overpay?” wonders the buyer as he inks the sales agreement. Across the table, the seller is thinking, “I bet if I’d pushed a little harder, I would have gotten more.”
Parties in litigation are often overly optimistic about their chances of winning in court. This tendency reduces the bargaining range for settlement because one or both parties perceive their walkaway alternative (namely, letting the courts decide) to be more attractive than it actually is. According to conventional wisdom, lawyers can help their clients overcome this overoptimism bias by providing an objective assessment of a case’s merits and encourage acceptance of a deal.
According to conventional wisdom, small talk builds rapport and gets both sides a better deal in the end. But in fact, the question of whether to engage in small talk can be highly context-specific. New York City investment bankers, for example, tend to be far less likely than Texas oil executives to engage in small talk at the outset of a negotiation.
So, you’ve decided to use an agent in your next negotiation. Now what?
It’s important not to rush headlong into the process of choosing an agent—picking the first one you speak to, for example, and sending him off to talks the next day. You need to choose your agent carefully, then establish a clear, detailed understanding of each other’s responsibilities and expectations. The following are critical steps in picking an agent and negotiating his contract.
Ron McAfee, a carpenter and roofing expert, spent considerable time working with a condominium association on the design of a new roof deck. After gaining agreement on the proposed layout, design, and materials, McAfee submitted a written bid of $12,500. One of the board members subsequently showed McAfee’s plans to another roofer, who offered to do the job for $10,250. The condo association voted unanimously to go with the cheaper roofer, and McAfee was left with nothing to show for his time and effort.
Ford vs. GM. Coke vs. Pepsi. Oxford vs. Cambridge. These famous rivalries remind us that the top two achievers in a given realm often compete fiercely with each other. Researchers Stephen M. Garcia and Richard Gonzalez of the University of Michigan and Avishalom Tor of the University of Haifa have produced a useful series of studies on when competition between entities will exist—with findings that are relevant to all negotiators.
For decades, General Electric (GE) and the Environmental Protection Agency sparred over who would pay for the removal of PCBs, or polychlorinated biphenyls, that GE had discharged into New York’s Hudson River, a cleanup project expected to cost hundreds of millions of dollars. In October 2005, the two sides came to an agreement.
How often have you heard a friend or colleague refer to a contract as being “in the bag,” only to find out later that the deal didn’t go through? There always turns out to be a good reason a negotiation fell apart. Yet the fact remains that most negotiators are overconfident about their chances of reaching agreement. A common cognitive bias, overconfidence causes us to have unrealistically high expectations of success, in negotiation and in many other aspects of life.
This past November, in an unusual move, Costco, the largest wholesale club in the United States, removed Coca-Cola products from its shelves and posted messages telling shoppers that Coke products would not be available until the company lowered its prices.
The question above may seem silly. Getting more of what we care about seems the obvious answer. Yet negotiators often don’t know how to accurately assess a good outcome; instead, they rely on outside indicators to determine their satisfaction, for instance by comparing their outcomes to those of others. Your negotiated annual salary of $100,000 appears quite different if you learn that others in your position are earning $110,000.
Top executive pay attorney Joseph Bachelder was representing a client who’d just been chosen as a company’s next CEO. After a first session with the board’s representative to hammer out a compensation package, Bachelder took his client aside and informed him that he would get everything he wanted from the negotiation, according to the Wall Street Journal.
The benefits of hiring an agent are well known. Yet negotiation experts often overlook the ways in which you can use the other side’s agent to your advantage.
Many negotiators understand the importance of estimating the other side’s reservation price—the worst deal he would accept from you. However, despite the fact that such estimates often are based on hints, clues, and speculation, negotiators are frequently overconfident that their estimates are accurate.
Think about what your house, condominium, or some other valuable asset might be worth in today’s market. Did the price you paid for it affect your answer?
“Ignore sunk costs,” accounting professors and economists tell us. The amount of money and effort we’ve invested in the past, they say, is irrelevant to our future investments.