Business negotiators often complain that although they try to focus on creating value, they run into far too many people on the other side of the table who don’t believe in value creation. Often, they focus exclusively on trying to claim as much as possible for themselves. How should you handle these negotiations?
The result of cooperative problem-solving skills in a negotiation that uncover joint gains for both parties. Value creation is an aspect of “win-win” or “non-zero-sum” negotiation, in which both parties benefit from the agreement. (David A. Lax and James K. Sebenius, 3-D Negotiation [Harvard Business School Press, 2006], 17). See Also: Negotiation Skills: Four Steps for Changing Negotiation Practices in Your Organization, When Lose-Lose Wins, Conflict Management – Anger, the Good and the Bad.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 value creation.
Courses and Training
This highly interactive semester-length seminar explores the ways that people negotiate to create value and resolve disputes. Designed both to improve understanding of negotiation theory and to build negotiation skills, the curriculum integrates negotiation research from several academic fields with experiential learning exercises.
Individual negotiators are sometimes overwhelmed by the idea of leading organization-wide changes to negotiation practices. In fact,
it doesn’t take much time or effort to set the wheels of reform in motion, write Hallam Movius and Lawrence Susskind in Built to Win. Here
are four simple steps to implement in your workplace.
Courses and Training
We’re sorry, but the September session of Negotiation and Leadership and our one-day session, Winning at Win-Win Negotiations, is currrently sold out.
Does negotiation research promote the creation of joint gain at the expense of relationship building? Jared R. Curhan, Margaret A. Neale, and Lee D. Ross suggest the field is guilty as charged.
To illustrate, the researchers apply author O. Henry’s classic tale “The Gift of the Magi” to negotiation. The short story describes a poor but loving husband and wife who want to give each other the perfect Christmas gift. Della sells her beautiful long hair to buy Jim a platinum chain for his prize possession, a gold watch. Meanwhile, Jim sells his watch to buy a set of tortoise shell hair combs for his wife’s hair.
Most negotiations are “mixed motive” in structure, requiring us both to compete to claim value and to cooperate to create value.
The ability to move back and forth between these two goals is a critical – and difficult – skill to master.
How do emotions affect value creation and claiming?
Researchers Alice Isen and Peter Carnevale found that a positive mood leads to greater value creation.
Emotional flooding – when strong, specific, and often negative feelings overwhelm us – poses obvious hazards to negotiators, who need to be able to think clearly when faced with the complex, strategically demanding task of creating and claiming value.
For this reason, emotional regulation can be an essential component of negotiation.
But different types of regulation create different results.
Most of the existing research on affect in negotiation has focused on emotional experience rather than on emotional expression.
Yet studies have shown that emotional expression can occur independently from feelings, making expression worthy of investigation.
Marwan Sinaceur and Larissa Tiedens of Stanford University found that negotiators made more concessions when facing counterparts who expressed (but did not necessarily feel) anger.
Not only did those who expressed anger benefit by claiming more value, but they also did not lose their ability to create value.
While experienced emotions may direct the way in which you process information, emotional expressions seem to influence your counterpart’s social inferences and subsequent behavior.
No matter how many right moves you make at the table – however skillfully you read body language, frame arguments, make offers and counteroffers – doing so at the wrong table can undercut your results.
Not only should you negotiate right, you should do the right negotiation. Sometimes this means looking with new eyes for a more promising table.
For example, the owners of a niche packaging company that boasted an innovative technology and a novel product were deep in price negotiations to sell the company to one of three potential industry buyers, all larger packaging operations. The owners’ first instinct had been to persuade their bankers of the need for a higher valuation, refine their at-the-table negotiating tactics for dealing with each major player, and try to spark a bidding war.
In negotiation, including a matching right in an agreement can be a classic win-win move.
Suppose you’re a landlord negotiating with a prospective tenant. You want to maintain the ability to sell the apartment to someone else in the future, while your prospective tenant wants a commitment to rent the apartment for as long as she wants.
The solution might be to offer the tenant a matching right – the power to match any legitimate third-party offer. In this manner the tenant gains the opportunity to avoid the disruption of a move and you preserve your flexibility.
Like other cognitive biases, competitive expectations can be insidious. Fortunately, there are several steps you can take to forestall their negative consequences.
By following these steps in your next negotiation, you’ll improve the chances of meeting everyone’s interests.
Not all contracts are created equal. Some maximize joint through creative trades, while others are barely satisfactory. Strategic wariness causes many people to leave untapped value on the bargaining table. Of course, agreements based on incomplete and distorted information aren’t likely to be efficient.
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.
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.
How can you uncover additional value, make useful trades, and put together a package that exceeds your party’s expectations? Here are four value-creating moves that all negotiators should add to their toolkit.
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.
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.
Before launching a workaround, run through this list of skills-based strategies adopted from Getting Past No: Negotiating Your Way from Confrontation to Cooperation by William Ury (Bantam, 1993). Only attempt a workaround if you’ve tried them all without success:
In negotiation, different types of reputations serve different purposes. When you’re haggling over just one issue, such as the price of a used car or a computer installation, one party’s win is typically the other’s party’s loss. In such distributive negotiations, where each party is trying to claim the biggest piece of a fixed pie, having a reputation as a tough bargainer can be an effective means of undermining a competitor’s confidence and power.
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.
Many people consider negotiations to be stressful and threatening. Others view them as challenges to be overcome. Do these different attitudes influence the outcomes that people reach? New research by professors Kathleen M. O’Connor of Cornell University and Josh A. Arnold of California State University sheds light on this important question.
It’s an article of faith in negotiation that expanding the pie of value enhances the parties’ welfare. When there’s only one issue on the bargaining table, the size of the pie is fixed. If one party gets more, the other party gets less. But when multiple issues exist, negotiators can expand the size of the pie by engaging in give-and-take trading that leaves everyone better off. The more issues that are to trade, it would seem, the happier negotiators should be.
Work by Charles Naquin, who teaches at the University of Notre Dame’s Mendoza College of Business, challenges this conventional wisdow. Naquin found that subjects who negotiated a four-issue simulation were significantly more satisfied with their outcomes than those who worked with eight issues. Although the latter group created demonstrably more value, they were less pleased with their results.
Imagine that you are buying a used car from its original owner. Of course, you want to get the best deal you can for your money, while your counterpart wants to maximize the value of his asset. After haggling with one another, each side finally arrives at a price point acceptable to both parties.
The above scenario is common in many transactional negotiations: you play your cards close and share as little information as needed to achieve the end goal.
If you’re in the middle of talks that seem to be going well, here’s a warning: consider the impact of the agreement on those who aren’t at the table, or suffer the consequences. That’s a lesson that Apple and some of the largest U.S. book publishers are currently learning the hard way.
On April 12, the U.S. Department of Justice (DOJ) sued Apple and five major U.S. publishers for colluding to raise the price of e-books during secretive, anti-competitive negotiations. Three of the publishers have settle the suit; two others and Apple have so far been unwilling to settle.
On April 9, the hearts of internet entrepreneurs everywhere must have skipped a beat at the news that Facebook was paying $1 billion in cash and stock to buy Instagram, a San Francisco-based start-up.
Less than two years old, Instagram offers mobile apps that allow users to add effects to their smartphone photos and share them with friends. Though the company has no revenue and employs only about a dozen people, it has experienced a meteoric rise and enjoys an “almost cult-life following,” according to the New York Times. Its 30 million users upload more than five million photos a day, though the app was only available on Apple devices recently.
When life becomes routine we are more likely to overlook details or, conversely, we cannot see the forest for the trees. In both instances, what we may lack is a creative outlook on the situation at hand. In negotiations, creativity can lead to value-creation for both parties. Coming up with innovative ideas in the middle of the collaborative process can be difficult so how does the skillful negotiator change her mindset to become more creative? The March 2012 issue of the Negotiation newsletter offers three practical tips for obtaining more creative deals with your counterpart in negotiation.
Kathy, a serial entrepreneur, was negotiating the acquisition of a boutique software-development firm when a dispute arose regarding the valuation of one of the software firm’s assets. Specifically, the firm owned the rights to a technology patent of uncertain value. The firm’s owner argued that this patent was worth millions. Kathy agreed that the patent had potential, but there was a problem. The technology potentially infringed on existing patents, and the holders of these patents would almost certainly challenge the firm’s patent in court. If the patent could withstand these legal challenges, it would indeed be worth millions. If not, it might be worthless.
Suppose you work for a specialty bicycle manufacturer and have negotiated a one-year contract to buy 500 headlamps per month from a supplier for $10 each, with payment due 30 days after receipt. The seller makes five deliveries; you promptly pay $5,000 after each shipment. The seller fails to make the sixth delivery, however, and announces it will not be able to make any of the remaining shipments because of a production glitch that has made the headlamps extremely expensive to produce. What recourse do you have?