The Negotiation Process

00:00 Hi and welcome to the negotiation process.

00:03 Have you been in a situation where you need to talk to somebody? Solve a problem? You have it in your head and you think I'm just going to go and talk to them and it's going to be solved in 2 minutes, and all of a sudden you walk in, you start talking in the person shuts you off and tells you to leave the room, they're not ready to talk to you.

00:20 In this lecture, we're going to talk about how do you design a negotiation process? We're going to identify some common elements in the negotiation.

00:29 We're going to look at different phases in the negotiation.

00:32 And then we're going to learn two major approaches to negotiation.

00:36 In order to frame this lecture, I would like to start with a short case called 'soul food'.

00:41 Maria and Barbara work in the bakery and coffeehouse industry.

00:45 It's a booming industry.

00:47 They both have professional working careers.

00:49 They're working together.

00:51 And they meet once a year to discuss how to improve their cooperation.

00:54 The relationship has both the potential for conflict.

00:58 And at the same time there's a chance that they can increase cooperation.

01:03 On the one side, Maria is a supervisor.

01:06 She works for Soul Food Distributors, a growing industry.

01:09 She's career-orientated.

01:11 She's competitive.

01:12 She knows what she wants.

01:14 She's also the head of customer relations and new acquisitions.

01:17 Coffeehouse and bakeries are her specialty.

01:20 And her main goal is to expand the company.

01:24 On the other side, Barbara is the owner of a small bakery inherited from her father and her grandfather.

01:33 It's called the Coffee Spirits.

01:35 It's in a tourist village where no chains are allowed small traditional attitude is the way people work.

01:43 Avoidance is her main way of negotiating.

01:46 She's a small operator and she needs stability.

01:49 She's the co-owner of The bakery with her sister and her main goal stability.

01:54 Some of the conflicts Maria and Barbara have our last minute cancellations, how to experiment with new goods, and how to make Soul Foods a little more visible in the community.

02:06 Now Maria is interested in profitability.

02:09 She likes high-end products, emerging trends, how to cut the cost.

02:14 She also enjoys making sure that people have their special orders fulfilled within 72 hours.

02:21 She has an interest in the reputation of the company seasonal products and high-end products and visibility are in a way to increase the reputation on the other side, Barbara wants to make profit and she does that through stability, low risk, and making sure her customers have their special orders fulfilled.

02:39 She also has an interest in reputation, traditional types of Bakery items are her specialty and at the same time she likes to fulfill special orders quicker within 24 hours, why? Because in today's world the internet can deliver faster than Barbara can.

02:58 Now Maria has a fleet of delivery trucks.

03:00 She has extra workers.

03:02 They can work overnight. They can do the overnight deliveries.

03:05 She can call on local producers to fulfill orders.

03:08 However, she is constrained by two things, less interest in traditional products and increase profit margin in designer goods.

03:17 On the other hand, Barbara also has some resources she has name recognition, heard Bakery is the best place in the entire Market Square.

03:27 She's also has high end customers who would like to spend a little more money, but she's constrained by two issues.

03:36 Number one, her neighbors want to make sure that she doesn't go too fast, and sales too many things that are not within the village atmosphere and number two, her customers actually enjoy the traditions and like to buy these products more than newer products.

03:55 While all negotiations have different issues.

03:58 There are a few common elements where people can start to develop a strategy Maria and Barbara need to find a way to negotiate once a year.

04:07 Now, if we look at a couple of the issues that you can see now on the screen, number one, Barbara and Maria have an interdependent relationship.

04:16 They need each other to maximize profit.

04:19 Number two, they also both have perceptions and assumptions about how the negotiation should take place Barbara being a traditional Bakery owner, sees the world from a small community perspective.

04:34 Maria working for a larger Urban company would like to assume that people want new products every season.

04:43 Number three, they both need to communicate with each other if they're going to find a way to move forward.

04:50 Number four, we have what's called subjective and objective utility, objective would be something like the profit margin, numbers that people can add and subtract.

05:00 Subjective would be how much value we place on things and each of us value for example modern or traditional things differently depending on the experiences we have.

05:12 That leads us to number five, the tangible and intangible issues.

05:16 Tangible issues are things we actually negotiate, price where we're going to put the visibility signs, the adverbs, when I think is going to be delivered, intangibles are things like status, reputation, career, things that we personally need that we get through the negotiation process.

05:36 And lastly number 6, we have what's called constituencies and spoilers and the to work symbiotically.

05:44 Constituencies are the people who actually give us a mandate to negotiate.

05:49 Spoilers are people not necessarily in the negotiation sitting around the table, but actually have a way of making sure you ruin your negotiation.

06:00 Imagine the local villager that fits on the Town Council who isn't sitting at the table but actually makes a lot of noises if Barbara goes a little too far away from what the tradition of villager might think.

06:13 Now all negotiations have what we call a set process which leads us all the way to agreement.

06:20 It has a pre-negotiation, a negotiation and agreement and implementation and then renegotiation stages.

06:29 The thing for Barbara and Maria is how to structure these phases in a way that builds momentum leading towards an agreement.

06:39 In the pre-negotiation, there's a lot of work the Barbara and Maria have to do to make sure when they actually sit at the table and talk to each other that they know what is going to be the agenda how and what order they're going to talk about things.

06:53 What is the ultimate goal and do they even want to negotiate with each other.

06:58 Imagine that Barbara has no need to sit down with Maria once a year.

07:02 She's happy with the relationship.

07:04 They wouldn't even be a negotiation.

07:06 On the other hand, Imagine that Barbara immediately makes an offer to Maria without sitting down and working through the different issues.

07:15 She might actually sell herself short.

07:18 Lastly, Even after you've reached agreement, even after you started to implement your negotiation, you have to think that at some point in the future you're going to come back and you're going to sit down at the table to negotiate.

07:31 Now within the negotiation process, we have what's called the negotiation session.

07:36 This is when people actually sit at the table and face each other and talk to each other.

07:41 And this also has a formula that goes forward we start with the opening of a negotiation.

07:49 This is people begin to sit down and figure out what do people think about each other.

07:55 What do they think about the negotiation.

07:57 In here, you'll find that people will set out their positions and they look at each other to be a little more formal.

08:04 Once the opening session is finished and we have an agenda and people have agreed to the agenda.

08:10 We will move on to what's called The Exchange.

08:13 The Exchange is a place where people can actually spar with each other.

08:18 Yes, and no and I'll give You this and I'll give you that, they'll be able to air out what their interests are they'll be able to figure out what their bottom lines or their point of no return are.

08:29 In this moment, you don't want to have any kind of agreement because you're going to do that in the next phase which is called the formula stage.

08:38 In the formula stage, we want to find out profit plus visibility plus quick high-end products being delivered will reach a winning agreement.

08:50 In stage 4 of the negotiation session, we're going to do what's called the wording, the detail stage.

08:56 We're going to take the formula and we're going to bring it to life and we're going to actually write down on paper what every single agreement means within the comprehensive agreement and finally no agreement is an agreement until you've actually signed the contract or shaken hands or done something to make sure that you have finalized all of the commitments that you have made.

09:21 Now when we're looking at a negotiation, we have to see the negotiation from three perspectives.

09:26 On the one hand, we have what's called the people and the people need to have authority to negotiate and behind those people are the supporters.

09:35 People are not the problem.

09:37 They are key to finding the solution.

09:40 On the other hand, We have the problem and the problem are the actual issues involved.

09:47 Now I said earlier people are not the problem.

09:51 Problem are the problems and here they are is never just one solution to the problem.

09:57 The fact though, when two people come together, they're going to be two ideas and they're going to be two options.

10:03 And on the third side we have what's called the process.

10:06 The step by step approach that makes the negotiation move forward.

10:11 One wrong step can sidetracked a negotiation in a way that can create disincentives to negotiate.

10:18 Now within the negotiation world we have what's called two approaches.

10:23 On the one side, we have what's called distributive negotiation on the other side, we have what's called interest-based negotiation.

10:32 Now imagine that Barbara wants to take a more distributive approach.

10:36 She wants to go in, she wants to make an offer, she just wants to divide the number of profits and at the same time she doesn't want to sit and talk about anything else.

10:44 That's what we call the distributive negotiation.

10:48 On the other hand maybe Maria wants to look at a long-term relationship and she wants to figure out how they can create mutual gains.

10:56 That's what we call interstates with negotiations.

11:00 Now, let's look at distributive bargaining.

11:04 Distributive bargaining is a process of agreement through concession making.

11:09 To begin, with the perceptions are incompatible and neither side wishes to reduce their expectations without having to be forced to do so.

11:19 What that means is that we're going to have a slow process of conversion leading to somewhere in the middle when both sides cannot move any further in making a concession.

11:31 It's called dividing the pie dividing the resources.

11:35 We see the world through fixed and limited means.

11:39 There's a certain amount of resistance to having to give anything away without having to get something in return.

11:47 And don't forget within a distributive bargaining situation power is central.

11:52 How much do I have to force the other side as close as possible to the resistance point.

11:59 On the other side, there is integrative negotiation.

12:03 Integrative negotiation is where negotiators worked together to find common ground.

12:09 It involves open communication.

12:12 The parties are exploring with each other.

12:15 They're talking they're trying to figure out how to maximize joint gains and create value beyond that little pie that is on the table.

12:26 It emphasizes understanding and it encourages parties to build a constructive relationship.

12:34 Now, we will do this in the next couple of lectures.

12:36 We will go deeper into each of these types of negotiation scenarios.

12:41 I'd like to turn now to what is a good process.

12:44 Design and what is involved.

12:46 I call it the 5-step cycle.

12:49 Number one, We have to go through analyzing what exactly is the negotiation, understand who is involved, what are the issues, what are the Dynamics, what is even the history of the conflict, want to make sure that we have a lot of information about the negotiation so that we can make the best possible choices.

13:11 Once we've collected all that information.

13:13 What we want to do is we want to make sure like a jigsaw puzzle to plan the negotiation.

13:19 What should come first? Should I make an offer early? Should I work on a comprehensive offer? Should I sit down and build the relationship? These are the things that we have to plan, and within planning, we're going to look at administrative goals, how much resources do I have to put into the negotiation? We're going to look at tactical goals.

13:40 How do I reach some of my strategic goals and we're going to try to have some mid term strategic goals.

13:46 Once we've done our analysis and we've done our planning we have to sit down and think is it better at this moment to do a more distributive negotiation professionally? Or is it better to do in more integrative approach which is working on our long-term mutual interest.

14:04 Once I decided the approach.

14:06 I have the information.

14:08 I've planned up my steps then I'm looking at the phases in deeper and I'm going into each phase and I'm thinking when do I know I'm done with the pre negotiations and how do I move from the pre-negotiation to the negotiation.

14:23 I need to put markers for myself so that I know that I'm moving forward.

14:28 Once I've done all of that, I need to think about prioritizing my issues and making sure that I have all the issues on the table that I need to have in order to have a good agreement.

14:40 The funny thing is that once you have an agenda, and once you figured out which issues you want you have to start the process all over again for each issue so that you have a comprehensive process design.

14:54 In the end Maria and Barbara have choices to make.

14:58 Yes, Maria could show up at the bakery in the middle of rush hour, and basically the man that Barbara make some concessions and then be a little surprised when Barbara doesn't have time for her.

15:09 On the other hand, Barbara could call Maria up during a team meeting and tell her she needs to solve this process now and Maria also says no.

15:18 Or they have the choice to first sit down together and plan how they're going to negotiate.

15:25 Each of them doing strategic planning before actually reaching out to each other.

15:32 I hope in this lecture you have been able to identify some common elements in all negotiations that you understand that there are phases in a negotiation and that they have a sequential order.

15:45 Also that you also have choices between two major approaches to negotiations.

15:50 And lastly, that there is a way to design the negotiation that will lead you to success.

15:56 Thank you very much.