Minor Understanding and influencing decisions in business and society
Managing negotiations: Getting to Yes
Part I: Rational and strategic aspects of negotiations
Lecture 1: Introduction & Essentials of negotiating | October 2020 | Christina Rott
BARGAINING = onderhandelen
“Let us never negotiate out of fear. But les us never fear to negotiate” – John. F. Kennedy
“I am a negotiator. I’ve done very well over the years through negotiation” – Trump
Both differ a lot in terms of personality, leading styles et cetera, but both know the
importance of negotiating. It has a big impact on outcomes.
Negotiation is very important! There is dramatic (and disturbing) evidence that most people
do not live up to their negotiating potential (Thompson, 2015).
Negotiating can be learned
Naturally gifted negotiators are rare
Effective negotiation requires practice and feedback
We are going to learn about theory of negotiating (lectures, book and articles) and we are
going to practice in the tutorials with role-play stimulations
This course is not about outsmarting or tricking the other. It is ideal if you ‘opponent’ is also
trained in negotiation. Best outcome is when both negotiators are experts. The course is
about becoming better in negotiating.
This course consists of three parts:
I. Rational & strategic
a. Try to make predictions, assuming rationality. Predicting negotiation
outcomes
II. Emotional & psychological
III. Cross-cultural differences
a. What cross-cultural factors play a role?
As the course develops, we add more complexity, approaching reality better!
Basics of negotiations: Everyone is a negotiator
Buying a house, buying a car, going out or not, job salary, job conditions et cetera…
,Importance of negotiation in career:
• Average person stays 4.4 years in a job. After this you negotiate new conditions of a
job. This has a great impact on your personal well-being for years
• Decentralized decision making in businesses: less hierarchy means continuous
negotiations effort required. More room for negotiations, so more important to be a
good negotiator.
• Freelance economy: many negotiating for every gig/project!
• Entrepreneurial environment: negotiating many deals!
What is negotiating about? It is about integrating interests
There actually is a big part that overlaps. It is about finding this
overlapping interest. And trying to transform them into an
agreement.
Dr. C. Rott’s experiences:
Starting as a junior: First experience on job-market, salary negotiation, afraid to say no,
many work hours.
Becoming more senior: Further experience on job-market, not only salary negotiation but
also resource negotiation (time, money), taking on more challenging roles (admin,
supervision), administer work activities independently (mix of employee and self-employed)
& better work-life balance.
Definitions of negotiation: ‘A process in which two or more parties exchange goods or
services and attempt to agree upon the exchange rate for them” (Robbins, 2001)
→ Focus on exchange rate
More broad definition: “Negotiation is an interpersonal decision-making process necessary
whenever we cannot achieve our objectives single-handedly” (Thompson, 2015)
→ More global view as interpersonal decision-making process
Scope of negotiations can vary a lot
• One-on one <> multiparty
• Few dollars <> billions of dollars
• Few minutes <> years
• Single encounter <> long-term relationship
• Single issue <> multiple issues
Types – examples of different dimensions of negotiations
• Between two persons or multiple persons
o Salary negotiations, division of tasks within a team
• Between two organizations or multiple organizations
, o Mergers and acquisitions, joint ventures
• Between two countries or multiple countries
o Border-conflicts, EU negotiations (e.g. Brexit)
• Between an organization and a social movement
o Shell versus climate activist
• Between an organization and a state
o UN vs Israel
Negotiation situations can be very complex: a simplified negotiation: Single issue,
distributive negotiation
→ This basically about the price for the exchange of goods/service. One party’s gain is the
other party’s loss.
• Example: Sneakers
o Negotiation about the price of the pair of sneakers:
o Target points, reservation points & Bargaining zone
▪ Target/ aspiration point of the buyer: Price you would be happy with.
You want to pay a low price, e.g. $50
▪ Reservation point buyer: Price at which you are indifferent between
getting the dal or not getting the deal (worst acceptable outcome).
Maximum price you want to pay is e.g. $70
▪ Target/ aspiration point of the seller: Price you would be happy with.
The price the seller ideally would get (e.g. $80)
▪ Reservation point buyer: Price at which you are indifferent between
getting the dal or not getting the deal (worst acceptable outcome).
The minimum price the seller wants to sell for is e.g. $60
▪ Bargaining zone/ zone of possible agreements: Range between
reservation points of both negotiators
o We have to define target point/ aspiration point for both buyer and seller and
we have to define a reservation point for both buyer and seller in order to
know what the bargaining zone is (where the negotiation takes place).
, How to determine the aspiration point?
Determining target point/ aspiration point might sounds straightforward, but three
problems might arise:
1. Under aspiring negotiator: Settles for too low; often, first offer is accepted
immediately
2. Over aspiring negotiator: Wants to settle for too high; refuses to make concessions
3. Grass is greener negotiator: Doesn’t know what s/he wants to settle for, only that
it’s more/different than what the other party is willing to offer (reactive negotiator
type)
How to determine the reservation point? (= worst acceptable outcome)
Before you start negotiating, you should determine your reservation point (price at which
you are indifferent between getting the deal or not getting the deal).
• Consider the consequences of failing to reach an agreement and know your
alternatives. What is the value of the alternative to getting a deal → Determine your
BATNA (your Best Alternative To a Negotiated Agreement) and quantify it
• Example of a BATNA: Getting a job
o MBA student looking for a job → $60.000 job offer from company A. Student
is interested in getting an offer from company B. Then, your BATNA is the
$60.000 from company A. So, the best alternative to a job at company B is a
salary of $60.000 from company A.
o This is a simplified negotiation, just about the salary
• Example of a BARNAL Selling a house
o Your aspiration point is $350.000
o What is your reservation point? (what is the lowest offer that you would
accept?)
▪ Think about your alternative if you don’t sell the house (by a certain
time)?
▪ Can you rent the house? Can you tear it down and sell the land? Can
you keep the house on the market indefinitely?
▪ BATNA = your best alternative to not selling the house
What is the purpose of a BATNA?
You BATNA protects you against:
• Accepting an agreement, you should reject
• Rejecting an agreement, you should accept
→ Super important concept in all kinds of negotiation situations!
Characteristics of the BATNA:
• Determines lowest value acceptable
• If you don’t reach agreement, settle for you BATNA
