Raiffa's Negotiating Tips Neale and Bazerman tips

Raiffa's checklist for negotiators (in Art and Science of Negotiation. 1982)  Preparation  Know yourself.  Consider what will happen if no agreement is reached  (Calulate your BATNA - Best Alternative to a Negotiated Agreement) Come up with a certainty-equivalent value for that alternative. Use that value to come up with the absolute minimum value you would be willing to settle for. (reservation price).  Assemble:  facts  arguments  rationalizations  what's fair possible arbitrated settlements and their expected values and probability of occurring.  Know your adversary.  Come up with a list of alternatives to agreement for your adversary.  Estimate the value of their BATNA.  Think about how well you can guess their reservation price. Take a stab at how uncertain your guesses might be. Evaluate their integrity, believability, credentials, past negotiations.  Know the conventions: How open should you be?  Is unfavorable information often withheld ?  How many rounds of negotiation are normal?  Will negotiations be done in stages?  If so, come up with reservation price for every round of negotiations.  How will the stages effect ongoing relationship with adversary? Know the logistics  Who should negotiate?  Should each player on each side have a role? Do you need help from a professional negotiator? Where to negotiate?  When?  Use simulated role playing Find someone to play your adversary.  Help them figure out tactics to use.  Set up a mock negotiation.  Set a target  Make it above your reservation point.  It's ok for it to waiver during negotiations.  Reservation price will waver less but may also change due to new information.  Opening moves  Too conservative offers lose value.  Too aggressive offers hurt the negotiating atmosphere and may require big concessions.  If adversary is not prepared and you are, then make an offer. It may 'anchor' the negotiations and effect their reservation price.  If they offer first then be aware of the anchor effect. Handling an extreme offer:  Ignore it.  Don't fixate on talking about it.  Don't let it become the starting point for future discussions.  Either break off negotiations or make a quick counteroffer.  When you counter, make the mid-point of the two offers reasonable.  Compare the midpoint with your target level.  Protect your integrity  Avoid disclosing your reservation price but don't lie.  Say things like: "I would like to get ..." instead of "I must get.." when that really isn't true.  The mid game  Concession pattern - Distance between offers should decrease over time. (suggests you are reaching your limit)  The limit may really be adjusted target price.  Pace and link concessions to adversary concessions. Perception reality check: Reevaluate adversary's reservation price.  Try to figure out:  What they think your reservation price is? Why do they think that?  Beware of selective disclosure on their part.  How deceptive do you want to be?  Reassess target levels.  The end game  Making commitments Sincerely (or not) say this far and no farther.  How can you get adversary to believe you?  Threaten to break off negotiations.  Make restarting negotiations vague.  Make statements that limit your future choices (but be careful).  Breaking commitments that didn't work while saving face  Get new instructions from others.  Add new issues. Find new information on your own.  Get replaced by another negotiator. Get help from adversary in breaking commitments. Allow adversary to break commitments.  Maybe say situation has changed when it really hasn't.  Blame your lack of organization earlier so they can change their mind now.  Allow them room to change their absolute top offer by adding other issues.  Instead of breaking off negotiations, bring in a mediator or arbitrator.  Both parties may be more willing to confidentially tell a disinterested third party more than they would tell each other. This additional information can be used to generate more efficient agreements.  If negotiations fail  Add complicated exchanges like contingency clauses.  Add more issues  Neale and Bazerman's tips (from Cognition and Rationality in Negotiations 1991) What are the minimum requirements of an agreement? Find your reservation point. That is, where are you indifferent to negotiating an agreement or not. Most people have a target. Fewer, know their bottom line.  Not knowing your reservation point can result in unprepared intuitive decisions cutting off negotiations.  Interests versus Positions  position = stated demands  underlying interest = real desire  Example - Middle East positions - Both Israel and Egypt want the Sinai underlying interests -  Israel - wants military security  Egypt - wants land ownership  The final agreement satisfied the underlying interests Israel - got a demilitarized zone and new air bases  Egypt - got a return of ownership of the Sinai.  How to cut a big pie:  First find a big pie, then cut it.  Distributive approach - how best to cut the pie, claiming.  How to gain advantage - Gain knowledge.  Try to deduce the other party's reservation point, that point where they are indifferent to signing an agreement or not.  Push all agreements to be just better than that point while maximizing value to you.  But... If one side is too greedy and thinks the other will cave in, and they won't....  Optimal solutions  What you want is an agreement such that no other agreement is possible that would make anybody better off without making somebody worse off (pareto efficient).  With a pie of any given size, cut it so that people get the parts they want the most.  It's best to come up with a big pie first.  Integrative approach - how to make the pie bigger, enlarging.  Pay attention to underlying interests.  Use creative problem solving techniques to come up with options for each position.  Rank relative importance of the options.  How to get information:  Build trust.  Share information. (up to but maybe not including BATNA)  To break a deadlock.  May be of minor importance to you.  Behavior is often reciprocated.  Ask many questions.  The poor negotiator talks too much and listens too little.  Ask specific questions on how they would rank different options.  Ask how much some option would cost or benefit them.  All questions might not be answered but sometimes you can get information by what they DON'T say. Make many offers at the same time.  Ask which of the offers is most acceptable. The other party can easily say that they are all unacceptable, but this one is more to my liking.  It makes you appear more flexible.  Look for better solutions AFTER you have an agreement (the post-settlement settlement)  Divulge true interests to other party or someone else.  Either party can veto the new agreement.  Both parties share in the increase.  Find a more efficient agreement by finding hidden value. Unclaimed value lies in the different value people attach to interests.  Types of differences:  different probability of future events happening  solution - Create contingent contract. If one party believes that some important event has a high probabilty of occurring whereas the other person believes it either to be of low importance or low probability, then make each event part of on an option.  Make many issues from one.  e.g. - Turn the one issue of payment into many. If the net profit of the company goes up x1% then your bonus goes up y1%. If it goes up x2% the bonus goes up y2%. etc.  e.g. - A confident baseball player gets a clause put in a contract that would pay him or her $X a home run over 70 in exchange for deleting the knee insurance.  difference in risk aversion solution - Give up guarantee to the risk averse party.  Other party gets higher upside potential.  e.g.- risk averse party gets 100% of the profit up to $X and 20% after.  The guarantee helps solve the risk problem and could be a good deal for a more risk seeking person who thinks there is a good chance for high profits.  note: People are generally risk averse when dealing with possible gains and risk- seeking when looking at possible losses. Reframe loss descriptions into gain descriptions. Maximize gain instead of minimizing loss.  difference in time horizon -  solution - Split payoffs for different time periods in the future.  Give early money to impatient party.  e.g. - One party may have cash flow problem and be willing to give up a percent of future profits for current cash. (Give them, say, 100 % of profit for X months, %20 thereafter). Combination e.g. - a reverse mortgage An old person living in paid-for house wants security of income and roof over head for what they hope will be long time. Buyer with positive cash flow wants cheap house they are willing to wait for, especially if they think they won't have to wait that long. Pruitt's five ways of finding integrative solutions: (Achieving Integrative Agreements. In Bazerman and Lewicki 1983 Negotiating in Organizations)  Trade low priority issues for higher priority issues. e.g. - as in above differences of probability of future events, risk aversion , and time horizon.  Nonspecific compensation  One party gets their choice of option on an issue in exchange for compensation on some other NEW issue.  e.g.- "OK, you can have the Lambourghini, but you gotta buy a million dollars worth of life insurance with my cousin Guido here as the beneficiary."  Find more issues to disagree about.  This is like trading issues in a larger definition of the problem.  Cut costs  One party gets their choice of option on an issue in exchange for cost of it to other party being cut or zeroed.  Get more resources  Don't fight over one, get two and trade off.  Bridging  Find hidden assumptions.  Look at each party's true interests.  Reframe issues in a wider context.  Escape the current definition of what the conflict is all about.  Brainstorm.  Find the new non-opposing sub-interests in two opposing options.  Morph a third option from the two existing ones.  Postscript  All these ways require somebody to leap outside the current way the conflict is defined. Find the assumptions behind the logic and emotions that drive the positions.  Helpful suggestions  Don't cut the pie before the ingredients are found. Don't gloat that your slice is so much bigger than you thought it would be.  Things that people value highly that are cheap to give up:  Respect  Validation  Praise  Help  A good joke  Concern for their welfare  Biases  Wrong problem definition.  Comes from acting too quickly without information.  Judgement is needed.  Identify many criteria which you may want to maximize.  Weight those criteria by how important each is.  Generate alternative options for each issue.  Weight those options on each of the criteria.  Compute the best solution. Sum up the value of each option times the weight of each criteria to get total value of the option. Select the option with the highest value.  Framing bias Is your adversary looking a possible gains or possible losses? People are risk-averse (tending to settle) if they are looking at possible gains.  They are risk-seeking (tending to hold out for better deal) if they are looking at possible losses.  Therefore, try to frame your offers by showing how much the other party will gain, not how little they will lose.  Emphasize that opponents are in a risky position but that a guaranteed profit is available.  This may be tough for a mediator.  Private discussions with each party may be needed. Anchoring bias People judge the possible value of unknown things or events by adjusting their estimates from some starting anchor point.  That anchor point highly affects the estimates of real value. Example Joyce & Biddle (1981 Anchoring and adjustment in probabilistic inference in auditing. In Journal of Accounting Research, 19)) asked Big Eight accountants two questions: whether corporate executives practiced accounting fraud more or less than X%; and what was the actual % of fraud. When X was 10 they guessed on average 16.5%. When it was 200 they estimated 43%.  Advantageous anchoring is accomplished by high early demands.  Availability of information  Vividly recallable incidents are deemed more frequent than equally frequent boring events.  Any discussion of possible hazards of any event increases the perceived likelihood of that event. So... emphasis possible downside by recounting dramatic past events where that happened. How recent the event was also increases the perceived likelihood.  Overconfidence  As questions become harder, people do not change their confidence levels to reflect that.  People consistently overestimate the probability that their offer will be accepted in final offer arbitration.  To combat overconfidence:  Ask yourself why you might be wrong, to get yourself to see contradictions in your logic.  Get feedback.  Ignoring the law of small numbers  Extrapolating from limited experience leads to errors of judgement.  Extreme average values on any metric are much more likely in smaller groups.  Confirmatory evidence bias People ignore evidence that contradicts their beliefs.  They attempt to confirm their current beliefs, not challenge them. Expectation influences observation.  This is closely related to the overconfidence bias, by curtailing the search space for solutions.  Each side tends to have only one method of negotiating that they assume will work.  Cause and effect biases  Reordering the sequence in which evidence is viewed affects the causes determined.  Fixed-size pie bias  People assume that their interests are exact opposites of the other party.  They assume they have no common interests, which leads to less than optimal resolution on issues where no incompatibility exists.  Even when the optimal solution is found, they assume that they came out ahead of the other party, which can lead to overconfidence in their negotiating skills.  They also assume that their relative ranking of the issues is the same as the other party.  All this restricts the possible solution search space.  Competition often prevails in a mixed cooperation/competition situation. This results in a win-lose mentality that hinders finding of integrative win-win solutions.  Solving the easy issues first bias  This is a common misconception. The start of negotiation may be easier but deadlock is more probable at the end.  The big problems are delayed until after easy trade-offs are settled. If an issue is settled, it does not often get unsettled in order create better joint gains later.  Conflict increases irrationally  Latter decisions are biased in a direction that justifies earlier ones, even if the earlier decisions turn out to be erroneous. e.g. - "Don't let them die in vain. Keep fighting."  Another e.g. - Auction off a $20 bill where top 2 bidders have to pay up.  Like the confirmatory evidence bias, people notice evidence that confirms their earlier decisions.  One solution to this is to have different parties negotiate each stage.  The framing bias adds fuel to this fire by not letting parties accept a certain loss.  So... try not to develop rigid public stances.  This is often difficult to do if one is negotiating for others who reward a strong public statements.  Not paying attention to the other party's thinking  In a complex situation with many possibilities, people often use simplifying assumptions about the other party's interests.  Put yourself in the other party's position, and see what your alternatives are. e.g. - the $20 bill auction above.  Devaluing concessions  Concessions by the other party are devalued simply because they made them.  Solution: get the other party to rank their preferences before an offer is made.  Not learning from experience.  Get feedback.  Sign at Boys' Town: "Good judgment comes from experience. Experience? That comes from bad judgment."   Back to Top The Mediator is copyright 1997-9 by Ronald Surratt, all rights reserved. Contact us [an error occurred while processing this directive]