Negotiations

Importance of Negotiation

• core business competency

• most are not effective ones

  • over 80% of corp execs and CEOs leave money on the table

  • many avoid it altogether

Determine your Target Value

Step 1 for Negotations

Your ideal agreement (aspiration price) whether you are the seller (typically higher) or buyer (typically lower than seller)

Assess your Best Alternative to a Negotiated Agreement

Step 2 in Negotiations

• course of action you will pursue if there is “no deal”

Determining your BATNA

• identify your “no deal” alternatives

• calculate the values associated with each

• select which is best, that become your BATNA

Calculate your Reservation Value

Step 3 in Negotiations

Point at which you are indifferent between accepted the deal and walking away

• BATNA analysis helps you determine it

Zone of Possible Agreement (ZOPA)

range where both parties might find an acceptable deal

• reservation value for the seller is the lower end

• reservation value for the buy is the higher end

• target value or aspiration may be outside of this, but at least one of these exist

Distributive Negotiations

(Win-Lose)

• Known as “fixed pie” negotiations

• parties compete for a limited resource

  • one party’s gain is the other’s loss

one party achieves primary objective

Integrative Negotiations

(Win-Win)

• Aim to create value for both parties

• focus on interests rather than positions

  • seek creative solutions that benefit all parties

both parties achieve primary objective

Lose/Lose

(Negotiation outcome) neither party achieves primary objective

No Deal

(negotiation outcome) fail to reach an agreement

Biases in Negotations

Anchoring bias, overconfidence bias, confirmation bias, loss aversion, framing effect, availability heuristic, sunk cost fallacy, reciprocity bias