1. Conflict and Negotiation Management
( HRM-4704)
Chapter Seven
Negotiation
Reference Book: Managing Conflict in Organization
M. Afzalur Rahim
Corporate Conflict Management concept and skills
Eireen Leela Rout,Nelson Omiko
2. Meaning and Nature of Negotiation
• Negotiation is a give-and-take bargaining process that, when conducted well, leaves all
parties feeling good about the result and commitment to achieving. Negotiation involves
the involvement of at least two parties. All parties must shared some common need, or
else they would not come together initially. They must also have needs that they do not
share with other parties. Each of them is seen as controlling some resources, which the
other desires for. They want to reach an agreement on mutual exchange of the
resources.
• Negotiation is an option for conflict resolution when conflict of interest exists between
two or more parties and there is no fixed or established rule that exist to resolve the
conflict.
• It has typically been conceptualized as a form of decision making that occur under the
condition of mutual interdependence. Within the framework of interdependence, the
respective parties attempt to reach a mutually satisfactory agreement through the
pursuit of different strategies such as concessions, promises or threats.
3. • Negotiation is a dialogue between two or more people or parties intended to
reach a beneficial outcome over one or more issues where a conflict exists with
respect to at least one of these issues. This beneficial outcome can be for all of the
parties involved, or just for one or some of them.
• The degree to which the negotiating parties trust each other to implement the
negotiated solution is a major factor in determining whether negotiations are
successful.
• A negotiation situation is one in which –
i. Two or more individuals must make a decision about their interdependent goals
and objectives.
ii. The individuals are committed to peaceful means for resolving their disputes
and
iii. There is no clear or established method or procedure for making the decision.
Meaning and Nature of Negotiation
4. Types of Negotiation
1. Distributive Negotiations – The Fixed Pie
• The term distributive means there is a giving out or a scattering of things. By the
nature of the business, there is a limited or finite amount of what’s being distributed
or divided. Hence, this type of negotiation is often called “The Fixed Pie.”
• Distributive negotiation is sometimes called positional or hard-bargaining negotiation
and attempts to distribute a "fixed pie" of benefits. Distributive negotiation
operates under zero-sum conditions and implies that any gain one party makes is at
the expense of the other and vice versa. For this reason, distributive negotiation is
also sometimes called win-lose because of the assumption that one person's gain is
another person's loss. Distributive negotiation examples include haggling prices on an
open market, including negotiating the price of a car or a home.
• In the distributive approach, each negotiator fights for the most significant possible
piece of the pie, so parties tend to regard each other more as an adversary than a
partner and to take a harder line.
5. 2. Integrative Negotiations – Everyone Wins Something (Usually)
• The word integrative means to join several parts into a whole. Integration implies
cooperation, or joining forces, to achieve something together. It usually involves a
higher degree of trust and forming a relationship.
• Both teams want to walk away, feeling they’ve achieved something valuable. Ideally, this
means each team gets what they want.
• Integrative negotiation is also called interest-based, merit-based, or principled
negotiation. It is a set of techniques that attempts to improve the quality and likelihood of
negotiated agreement by taking advantage of the fact that different parties often value
various outcomes differently. While distributive negotiation assumes there is a fixed
amount of value (a "fixed pie") to be divided between the parties, integrative
negotiation attempts to create value in the course of the negotiation ("expand the pie")
by either "compensating" loss of one item with gains from another ("trade-offs"
or logrolling), or by constructing or reframing the issues of the conflict in such a way
that both parties benefit ("win-win" negotiation).
Types of Negotiation
6. Distributive versus Integrative Bargaining
6
Bargaining
Characteristic
Distributive
Bargaining Integrative
Bargaining
Goal Get all the pie you can Expand the pie
Motivation Win-Lose Win-Win
Focus Positions Interests
Information Sharing Low High
Duration of Relationships Short-Term Long-Term
7. • Integrative negotiation often involves a higher degree of trust and the
formation of a relationship.
• It can also involve creative problem-solving that aims to achieve mutual gains.
• It sees a good agreement as not one with maximum individual gain, but
one that provides optimum gain for all parties.
• Gains in this scenario are not at the expense of the Other, but with it. Each
seeks to accord the Other enough benefit that it will hold to the agreement that
gives the first party an agreeable outcome, and vice versa.
Types of Negotiation
8. Characteristics of Negotiation
• There are certain characteristics of the negotiation process. These are:
(i) There are a minimum of two parties present in any negotiation.
(ii) Both the parties have pre-determined goals which they wish to achieve.
(iii) There is a clash of pre-determined goals, that is, some of the pre-determined
goals are not shared by both the parties.
(iv) There is an expectation of outcome by both the parties in any negotiation.
(v) Both the parties believe the outcome of the negotiation to be satisfactory.
(vi) Both parties are willing to compromise, that is, modify their position.
(vii) The incompatibility of goals may make the modification of positions
difficult.
(viii) The parties understand the purpose of negotiation
9. Bargaining Tactics and the Bargaining Zone
• Distributive Tactics
– Make an aggressive first offer
– Reveal a deadline
• Integrative Tactics
– Bargain in teams
– Put more issues on the table
– Don’t compromise
9
11. The Negotiation Process
• BATNA
– The Best Alternative To a Negotiated Agreement
– The lowest acceptable value (outcome) to an
individual for a negotiated agreement
• The “Bottom Line” for negotiations
11
BATNA
The Best Alternative To a Negotiated
Agreement; the lowest acceptable
value (outcome) to an individual for a
negotiated agreement.
12. Stages in the Process of Negotiation
Negotiation, in simplified terms, is a five-step process.
1. Preparation and Planning
2. Definition of Ground Rules
3. Clarification and Justification
4. Bargaining and Problem-Solving
5. Closure and Implementation
13. Preparation and Planning
• In the preparation and planning stage, you (as a party in the negotiation)
need to determine and clarify your own goals.
• This is when you take a moment to define and truly understand the terms
and conditions of the exchange and the nature of the conflict.
• You should also take this moment to anticipate the same for the other
party. What are their goals in this negotiation? What will they ask for?
Do they have any hidden agendas that may come as a surprise to you?
What might they settle for, and how does that differ from the outcome
you’re hoping for? This is a time to develop a strategy for the
negotiation.
Stages in the Process of Negotiation
14. Definition of Ground Rules
• After the planning and strategy development stage is complete, it’s time to work
with the other party to define the ground rules and procedures for the negotiation.
This is the time when you and the other party will come to an agreement on
questions like
• Who will negotiate—will we do it personally or invite a third party?
• Where will the negotiation take place?
• Will there be time constraints placed on this negotiation process?
• Will there be any limits to the negotiation?
• If an agreement can’t be reached, will there be any specific process to handle that?
• Usually, during this phase, the parties exchange their initial positions.
Stages in the Process of Negotiation
15. Clarification and Justification
• Once initial positions have been exchanged, the clarification and justification
stage can begin. You and the other party will explain, clarify, bolster, and justify
your original position or demands.
• For you, this is an opportunity to educate the other side on your position and
gain further understanding about the other party and how they feel about
their side.
• You might each take the opportunity to explain how you arrived at your
current position and include any supporting documentation.
• Each party might take this opportunity to review the strategy they planned for the
negotiation to determine if it’s still an appropriate approach.
Stages in the Process of Negotiation
16. Bargaining and Problem-Solving
• This is the essence of the negotiation process, where the give and take
begins.
• You and the other party will use various negotiation strategies to achieve the
goals established during the preparation and planning. You will use all the
information you gathered during the preparation and planning process to present
your argument and strengthen your position, or even change your position if the
other party’s argument is sound and makes sense.
• The communication skills of active listening and feedback serve the parties of a
negotiation well. It’s also essential to stick to the issues and allow for an
objective discussion. Emotions should be kept under control. Eventually,
both parties should agree.
Stages in the Process of Negotiation
17. Closure and Implementation
• Once an agreement has been met, this is the stage in which
procedures need to be developed to implement and monitor the
terms of the agreement.
• They put all of the information into a format acceptable to both
parties and formalize it.
• Formalizing the agreement can mean everything from a
handshake to a written contract.
Stages in the Process of Negotiation
18. Top 10 Negotiation Skills You Must Learn to Succeed
1. Analyze and cultivate your BATNA (Best Alternative to a Negotiated
Agreement). In negotiation, your best power source is your ability and
willingness to walk away and take another deal. Before arriving at the
bargaining table, wise negotiators spend significant time identifying their
best alternative to a negotiated agreement, or BATNA, and taking steps to
improve it.
2. Negotiate the process. Don’t assume you’re both on the same page when
determining when to meet, who should be present, what your agenda will
be, and so on. Instead, carefully negotiate how you will negotiate in
advance. Discussing such procedural issues will clear the way for much
more focused talks.
19. 3. Build rapport. Although it’s not always feasible to engage in small talk at the
start of doing so can bring real benefits, research shows. You and your
counterpart may be more collaborative and likely to reach an agreement if
you spend even just a few minutes trying to get to know each other. If
you’re negotiating over email, even a brief introductory phone call may make a
difference. This is one of the most valuable negotiation skills to master.
4. Listen actively. Once you start discussing substance, resist the common urge to
think about what you will say next while your counterpart is talking. Instead,
listen carefully to her arguments, then paraphrase what you believe she
said to check your understanding. Acknowledge any complicated feelings,
like frustration, behind the message. Not only are you likely to acquire valuable
information, but the other party may mimic your exemplary listening skills.
Top 10 Negotiation Skills You Must Learn to Succeed
20. 5. Ask good questions. You can gain more in integrative negotiation by
asking lots of questions—ones that are likely to get helpful answers.
Avoid asking “yes or no” and leading questions, such as “Don’t you think
that’s a great idea?” Instead, craft neutral questions encouraging detailed
responses, such as “Can you tell me about the challenges you’re facing
this quarter?”
6. Search for smart tradeoffs.In a distributive negotiation, parties are often
stuck making concessions and demands on a single issue, such as price. In
integrative negotiation, you can capitalize on the presence of multiple
issues to get both sides more of what they want. Specifically, try to
identify issues your counterpart cares deeply about that you value less.
Then propose conceding that issue in exchange for a concession from
her on an issue you value highly.
Top 10 Negotiation Skills You Must Learn to Succeed
21. 7. Be aware of the anchoring bias. Ample research shows that the first number
mentioned in a negotiation, however arbitrary, exerts a powerful influence on the
following negotiation. You can avoid being the next victim of the anchoring bias by
making the first offer (or offers) and trying to anchor talks in your preferred
direction. If the other side does anchor first, keep your aspirations and BATNA at the
forefront of your mind, pausing to revisit them as needed.
8. Present multiple equivalent offers simultaneously (MESOs). Rather than making
one offer at a time, consider presenting several offers simultaneously. If your
counterpart rejects all of them, ask him to tell you which one he liked best and why.
Then work on your own to improve the offer, or try to brainstorm with the
other party an option that pleases you both. This strategy of presenting multiple
offers simultaneously decreases the odds of impasse and can promote more creative
solutions.
Top 10 Negotiation Skills You Must Learn to Succeed
22. 9. Try a contingent contract. Negotiators often get stuck because they disagree
about how a certain scenario will play out over time. In such cases, try
proposing a contingent contract—in essence, a bet about how future events will
unfold. For example, if you doubt a contractor’s claims that he can finish your
home renovation project in three months, propose a contingent contract that will
penalize him for late completion and/or reward him for early completion. If he
truly believes his claims, he should have no problem accepting such terms.
10. Plan for the implementation stage. Another way to improve the long-term
durability of your contract is to place milestones and deadlines in your
contract to ensure that commitments are being met. You might also agree, in
writing, to meet at regular intervals throughout the contract to check in and, if
necessary, renegotiate. In addition, adding a dispute-resolution clause that calls for
the use of mediation or arbitration if a conflict arises can be a wise move.
Top 10 Negotiation Skills You Must Learn to Succeed
23. Individual Differences in Negotiation Effectiveness
• Personality Traits
– Extroverts and agreeable people weaker at distributive negotiation –
disagreeable introvert is best
– Intelligence is a weak indicator of effectiveness
• Mood and Emotion
– Ability to show anger helps in distributive bargaining
– Positive moods and emotions help integrative bargaining
• Gender
– Men and women negotiate the same way, but may experience different
outcomes
– Women and men take on gender stereotypes in negotiations: tender and
tough
– Women are less likely to negotiate
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24. Unethical Negotiation Tactics
• Lies
• Puffery
• Deception/dishonesty
• Weakening the opponents
• Strengthening Ones Own Position
• Information Exploitation”
• Non disclosure
• Change of Mind
• Disturbance
• Maximization
25. Third-Party Negotiations
• Four Basic Third-Party Roles
– Mediator
• A neutral third party who facilitates a negotiated solution by using
reasoning, persuasion, and suggestions for alternatives
– Arbitrator
• A third party to a negotiation who has the authority to dictate an agreement.
– Conciliator
• A trusted third party who provides an informal communication link between
the negotiator and the opponent
– Consultant
• An impartial third party, skilled in conflict management, who attempts to
facilitate creative problem solving through communication and analysis
25
26. Mediation
• The term "mediation" broadly refers to any instance in which a third party helps others reach
agreement. More specifically, mediation has a structure, timetable and dynamics that
"ordinary" negotiation lacks. The process is private and confidential, possibly enforced by
law. Participation is typically voluntary. The mediator acts as a neutral third party and
facilitates rather than directs the process. Mediation is becoming a more peaceful and
internationally accepted solution in order to end conflict. Mediation can be used to resolve disputes
of any magnitude.
• Mediation is a dynamic, structured, interactive process where a neutral third party assists
disputing parties in resolving conflict through the use of specialized communication and
negotiation techniques. All participants in mediation are encouraged to actively participate in the
process.
• Mediation is a "party-centered" process in that it is focused primarily upon the needs, rights,
and interests of the parties. The mediator uses a wide variety of techniques to guide the process in
a constructive direction and to help the parties find their optimal solution.
• A mediator is facilitative in that she/he manages the interaction between parties and facilitates
open communication.
27. The benefits of mediation include:
Cost
• While a mediator may charge a fee comparable to that of an attorney, the mediation
process generally takes much less time than moving a case through standard legal
channels. While a case in the hands of a lawyer or a court may take months or years to
resolve, mediation usually achieves a resolution in a matter of hours. Taking less time means
expending less money on hourly fees and costs.
Confidentiality
• While court hearings are public, mediation remains strictly confidential. No one but the
parties to the dispute and the mediator or mediators know what happened.
Confidentiality in mediation has such importance that in most cases the legal system cannot
force a mediator to testify in court as to the content or progress of mediation. Many
mediators destroy their notes taken during a mediation once that mediation has finished.
The only exceptions to such strict confidentiality usually involve child abuse or actual or
threatened criminal acts.
Benefits of Mediation
28. Control
• Mediation increases the control the parties have over the resolution. In a court
case, the parties obtain a resolution, but control resides with the judge or jury. Often,
a judge or jury cannot legally provide solutions that emerge in mediation. Thus,
mediation is more likely to produce a result that is mutually agreeable for the
parties.
Compliance
• Because the result is attained by the parties working together and is mutually
agreeable, compliance with the mediated agreement is usually high. This further
reduces costs, because the parties do not have to employ an attorney to force
compliance with the agreement. The mediated agreement is, however, fully
enforceable in a court of law.
Benefits of Mediation
29. Mutuality
• Parties to a mediation are typically ready to work mutually toward a
resolution. In most circumstances the mere fact that parties are willing to
mediate means that they are ready to "move" their position. The parties thus
are more amenable to understanding the other party's side and work on underlying
issues to the dispute. This has the added benefit of often preserving the relationship
the parties had before the dispute.
Support
• Mediators are trained in working with difficult situations. The mediator acts
as a neutral facilitator and guides the parties through the process. The
mediator helps the parties think "outside of the box" for possible solutions to
the dispute, broadening the range of possible solutions.
Benefits of Mediation
30. The Role of the Mediator
• Unlike a judge or an arbitrator, the mediator won’t decide the outcome of the case. The
mediator's job is to help the disputants resolve the problem through a process that
encourages each side to:
• air disputes
• identify the strengths and weaknesses of their case
• understand that accepting less than expected is the hallmark of a fair settlement, and
• agree on a satisfactory solution.
• The primary goal is for all parties to work out a solution they can live with and
trust. Because the mediator has no authority to impose a decision, nothing will be
decided unless both parties agree to it. The process focuses on solving problems in an
economical manner—for instance, taking into account the cost of litigation rather than
uncovering the truth or imposing legal rules.
31. Stages of Mediation
Stage 1: Mediator's opening statement.
• After the disputants are seated at a table, the mediator introduces
everyone, explains the goals and rules of the mediation, and encourages
each side to work cooperatively toward a settlement.
Stage 2: Disputants' opening statements.
• Each party is invited to describe the dispute and its consequences, financial
and otherwise. The mediator might entertain general ideas about resolution, as
well. While one person is speaking, the other is not allowed to interrupt.
Stage 3: Joint discussion.
• The mediator might encourage the parties to respond directly to the opening
statements, depending on the participants’ receptivity, in an attempt to further
define the issues.
32. Stage 4: Private caucuses.
• The private caucus is a chance for each party to meet privately with
the mediator. Each side will be placed in a separate room. The mediator
will go between the two rooms to discuss the strengths and weaknesses
of each position and to exchange offers. The mediator continues the
exchange as needed during the time allowed. These private meetings
comprise the guts of mediation.
Stage 5: Joint negotiation.
• After caucuses, the mediator might bring the parties back together to
negotiate directly, but this is unusual. The mediator usually doesn’t
bring the parties back together until a settlement is reached or the time
allotted for the mediation ends.
Stages of Mediation
33. Stage 6: Closure.
• If the parties reach an agreement, the mediator will likely put its
main provisions in writing and ask each side to sign the written
summary of the agreement. If the parties didn’t reach an agreement, the
mediator will help the parties determine whether it would be fruitful to
meet again later or continue negotiations by phone.
Stages of Mediation
34. Different Approaches to Mediation
Facilitative Mediation
• Facilitative mediation is the original mediation approach, based on the
mediator facilitating the negotiation between parties with the aim of reaching
a long-lasting agreement. In facilitative mediation, the mediator asks questions,
summarizes positions and generally assists the two parties in coming to a
resolution based on the information available. The mediator leads the process,
but the parties are responsible for agreeing the outcome with the mediator’s help
Evaluative Mediation
• In evaluative mediation, the mediator has a much greater part to play in
determining the outcome of the mediation and the primary focus is to reach a
quick deal. The mediator may make recommendations to each party, and the
mediation approach is based much more on evaluating the legal position of each
party.
35. Transformative Mediation
• Transformative mediation is a relatively new approach based on the concept that the
two parties’ relationship may be transformed during the mediation process. Like
facilitative mediation this approach also empowers the parties to come to their own
resolution, however parties also structure the mediation process (as well as the
outcome) in this approach.
Narrative Mediation
• Narrative mediation is a relatively new style of mediation that centers on creating
a new ‘story’ or ‘narrative’ to understand and reshape the conflict. This helps both
parties to create distance from themselves and the events that provoked their dispute.
The parties should then see the causes of their conflict with greater detachment
and a fresher perspective. Narrative mediation is a very specific method of mediation
so one must be certain to ask if their mediator has training in the narrative style if this is
the style they prefer. Often narrative mediators will have a mental health background.
Different Approaches to Mediation
36. Med-Arb
• Med-Arb is a blend of mediation and arbitration practices. Contrary to
traditional mediations parties normally agree at the outset of the process that
the outcome will be binding. The parties then attempt to negotiate a resolution
through the help of a mediator. The usefulness of having such a written
agreement is to assure that if the mediation ends in impasse, the process isn’t
over and the parties can be confident that their conflict will be resolved. There
upon the parties will move on to arbitration. The mediator will then take on the
role of an arbitrator and formulate a binding decision quickly based on his or
her judgments. In the case that a mediator is unqualified to proceed, a qualified
practitioner may take over the case after meeting with the meditator.
Different Approaches to Mediation
37. E-meditation
• E-mediation, or otherwise called Online Dispute Resolution (ODR) has
many benefits for those with busy time schedules. In e-mediation, a
mediator provides mediation services to parties who are located at a
distance from one another or whose conflict is so strong that they
cannot be in the same room. It can even be a completely automated
online dispute resolution system with no human intervention. However,
more often than not, e-mediation is more likely to resemble facilitative
mediation, only delivered from afar.
38. • E-mediation is both cost-effective and convenient. However, it has its
drawbacks.
• Firstly it may not be suitable for those lacking in computer skills; Accessibility
to e-mediation may present difficulties in lesser-developed countries, and it must
be taken into account that lack of accessibility to technology is often paired with
a distrust of online services.
• Secondly cyber space is prone to cyber crime. Consequently confidential
information is less secure. With this in mind, business disputes in which the
parties are concerned about protecting their trade secrets e-mediation may not be
a suitable option.
E-meditation
