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566930269

Institute of Leadership & Management

MANAGING

NEGOTIATIONS

How to negotiate in business


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Institute of Leadership & Management

Contents

••

Click on the headings to be taken to that section.

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Institute of Leadership & Management

Section one:

What is

negotiation?

This workbook will enable you to prepare

for successful negotiations. It will also

help you negotiate, reach agreements

and build good relationships with

counterparts and colleagues.

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copied, reproduced, communicated, or otherwise distributed without the prior written permission of ILM.


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Institute of Leadership & Management

What is negotiating?

Whenever we need or want something from other people to achieve our goal, we

participate in negotiating. It is something that we do regularly whenever we agree a

price for the supply of goods or services.

• • Click on the orange circles in the diagram below to see

examples of negotiation.

Examples of

managerial

negotiation

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A problem-solving process

Being able to negotiate successfully is a key managerial skill, especially as more and

more work gets done through complex networks of individuals.

Negotiation is a problem-solving process in which two parties have conflicting

interests. You persuasively explain your case and the other person (or group) –

your counterpart – explains theirs. Your aim is to achieve maximum benefit from

the discussion whilst being aware of the need to reach agreement. To do this you

bargain by exchanging offers and counter offers, concessions and compromise until

you reach a mutually acceptable solution. Negotiating well requires a careful balance.

Satisfy your own needs

Maintain a good relationship

with the other party

Successful negotiation

Human behaviour is unpredictable and every negotiating situation is unique and

often complex and uncertain. There are no prescribed rules; however, there are

certain principles that generally apply to all negotiations.

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Institute of Leadership & Management

Negotiating strategy

Choosing the best negotiation strategy to match the situation can make a

considerable difference to your success. There are two main strategies for

bargaining.

Competitive bargaining (also called distributive or positional) is about negotiating

over who gets what share of a fixed ‘pie’. The parties are less interested in forming

a lasting relationship or creating a positive impression than winning. Haggling over

the price of a second-hand item is an example of competitive bargaining. You keep

information confidential (for example, you do not let your counterpart know how

badly you want the item), because information is power and the more you know

about the other person’s situation, the stronger your bargaining position. So, for

example, you let your counterpart make the first offer. You can always go lower!

Cooperative bargaining (also called interest-based or integrative) is about

collaborating to find and agree the best win-win solution that meets everyone’s

interests and results in good long-term relationships. All parties feel they have

gained something they want without giving up something important. To succeed

it requires openness, information sharing, willingness to be flexible and trust. This

means you try to make the first offer.

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Institute of Leadership & Management

••

Click the icon to reveal elements of each bargaining style.

Competitive

bargaining

Cooperative

bargaining

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••

Task one: Strategy for negotiating

For a successful agreement you need to think ahead and develop a strategy for your

negotiation.

In your own words, briefly describe the requirements of a negotiation strategy

using the space provided.

A negotiation

strategy

should have...

••

Approaches to negotiating

Lewicki et al (2015) distinguish five different approaches to negotiating.

Click on the buttons to reveal some methods that can be used in negotiation.

Collaborative

problem-solving

Compromising

Accommodating/

yielding

Contending

Delaying/inaction

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Emotions in negotiation

Being an effective negotiator requires a broad range of interpersonal skills such as

effective listening, self-confidence, respect for others, patience, positive attitude,

persistence and the ability to deal with emotions. Emotions play a powerful

role in negotiation; for example, participants often give up too much, against

their interests, just to arrive at an agreement. Be aware of your behaviour, your

emotional reactions to situations and how others see you.

Fisher and Shapiro (2007) have identified five key concerns that trigger people’s

emotions during negotiation. You can use these to encourage positive emotions in

yourself and others without getting overwhelmed by them. This can help you to

transform disagreement into an opportunity for mutual gain.

••

Click on the buttons to reveal each key concern.

Appreciation

is about:

Affiliation is about:

Autonomy is about:

Status is about:

Role is about:

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Know your bargaining range

Knowing your bargaining range helps you to get the best possible deal without

either giving lots of concessions or being pushed into an agreement you might

later regret.

••

Click on the arrows below to reveal the definitions.

What you

hope to

get out of

negotiating

What you

will settle

for

What you

don’t want

to happen

What is

unacceptable

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Your goal in negotiation is to reach an agreement that is closest to the outcome you

had hoped to reach prior to starting the negotiation. Knowing your bargaining range

beforehand will help you to do this.

YOUR

BARGAINING

RANGE

YOUR

OBJECTIVE

YOUR

WATNA

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Anchoring

Anchoring (Tversky and Kahneman, 1974) is the first offer presented and is

important because it influences the final outcome. Your offer should be realistic but

aggressive. You may well need to do plenty of background research to collect the

information to help you decide on an appropriate and realistic anchor. Then, if your

counterpart offers first, try to reanchor using objective information you collected in

your research.

Power in negotiating

According to Spangle and Isenhart (2003), power is the degree of leverage or

influence a party has during negotiation. It can come from many different sources

such as their position or role in their organisation, their knowledge about the topic

of negotiation or their counterpart’s needs and wants, or it may come from the

strength of their BATNA. Power may be real or perceived. The relative power a party

possesses influences the outcome of negotiation and so you should assess the

power held by both parties prior to negotiating.

Be aware of the extent of your authority when negotiating. What are you allowed to

agree or commit to before you need to seek higher authority from your manager?

Are you authorised to make agreements with customers or colleagues from other

departments? Are you allowed to spend money or commit people or time, including

your own, on behalf of your organisation? If so, to what extent?

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••

Task two: Extent of my authority when negotiating

In your own words explain the extent of your authority when negotiating.

Type your answer in the space provided.

The extent of

my authority for

negotiating is:

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••

Task three: Use of negotiating techniques

Identify techniques that you can use for negotiating and type them in the first

column below. Then briefly describe the use of each of the techniques in the

second column.

Technique I can use for negotiation

How I would use it

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be copied, reproduced, communicated, or otherwise distributed without the prior written permission of ILM.


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Understanding your counterpart

Finding out about your counterpart might include financial information, details on

competitors or any other information relevant to the negotiation. Questions that

can help you to gather relevant information include:

••

What are their needs and wants?

••

What is the order of their importance to your counterpart?

••

Who does my counterpart need to satisfy?

••

What do I understand to be their objective?

••

How much do they need me/my service?

••

What is not important to them?

••

What negotiation strategy are they likely to use?

••

What arguments might they use in negotiation?

••

What do I believe are their BATNA, WATNA and WAP?

••

Are they likely to be open, willing to share information and value collaboration?

••

Are they likely to use information against me to leverage a better outcome for

themselves?

••

What common interests do we have that might indicate opportunity for mutual

gain?

Knowing what is or is not important to your counterpart may help you make small

concessions appear valuable or gain extra value from items they might give away.

••

Task four: Researching my counterpart in a negotiation

In your own words using the space provided, explain how you can use research

on your counterpart to support a successful negotiation.

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Cultural differences

When there are cultural differences among parties to a negotiation, it is important

to be aware of and sensitive to them. Cultural/linguistic differences can result in

misunderstanding. In some cultures, people value getting to know other people

before discussing technical details of the agreement, while in others, people want

to resolve technical issues first. Cultures may have different concepts of time,

such as taking considerable time to negotiate a deal, whereas others want a faster

pace. In some cultures, disclosure of information is believed to encourage trusting

negotiation, whereas others keep information to themselves. Some cultures believe

periods of silence can offer a chance to think or present ideas but others find silence

uncomfortable. In some cultures, you are encouraged not to disagree with those

who should be respected whereas other cultures consider everyone equal.

You may need to adapt to expectations of negotiators from other cultures. Be open,

flexible and respectful, and communicate clearly with them to maintain rapport and

minimise misinterpretation.

Try to understand what culture the other person believes they belong to as this

will prevent you from making incorrect assumptions about them. Being able to deal

effectively with cultural differences will give you an advantage as you will build good

relationships and ask good questions, and thereby quickly gain a true understanding

of others.

••

Task five: Dealing with cultural differences

In your own words, and using the space provided, explain how cultural

differences might affect negotiation.

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Section two:

How do

I negotiate?

Negotiating takes place in an atmosphere

of uncertainty. This section will show you

how to prepare for the process so that

you are not working in the dark.

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copied, reproduced, communicated, or otherwise distributed without the prior written permission of ILM.


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The four stages of negotiation

In negotiation, neither party knows what the other really wants or is prepared to

accept or concede. There are four stages.

••

Click on the arrows to find out about each stage.

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be copied, reproduced, communicated, or otherwise distributed without the prior written permission of ILM.


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Stage one: Preparation

An effective negotiator makes considerable effort to gather all relevant data. You

need to understand your own offer, concessions and bargaining position. You also

need to find out as much as you can about your counterpart. The information is

often included in an official preparatory document drafted before the negotiation

process.

• • Click on the orange circles to find out what you need to do at the

Preparation stage.

Preparation

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••

Task six: Determining my purpose, scope and objective

Identify a situation where you need to negotiate something at work. Describe

and clarify the topic or issue you need to negotiate by responding to the

questions below. Use the space provided.

What is the topic or issue that you need

to negotiate?

What is the extent of the topic or issue?

For example:

• Who does it affect?

• When does it happen, and to

what extent?

• Who is your counterpart?

Why do you need to negotiate

this issue?

The scope of my negotiation is:

The purpose of my negotiation is:

What is the most you hope to achieve as

a result of your negotiation?

The objective of my negotiation is:

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be copied, reproduced, communicated, or otherwise distributed without the prior written permission of ILM.


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Researching my counterpart

What can you achieve by anticipating your counterpart’s interests, needs, goals,

strengths and weaknesses?

••

Click on the arrows to find out.

1. The most appropriate

approach to negotiation

••

Task seven: How I believe my counterpart

is likely to negotiate

Assess the likely objectives and negotiation stances of your counterpart. Use

the spaces provided.

What outcome from

the negotiation is my

counterpart hoping to

achieve?

Why do you think

this is the case?

What attitude do

you believe they

will take during the

negotiation?

What strategy do you

believe they will use?

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••

Task eight: Researching the strengths and weaknesses

of my counterpart

Research your counterpart’s strengths and weaknesses in relation to the topic of

your negotiation by asking other people or doing desk research.

Write your counterpart’s strengths and weaknesses in columns A and B below.

Then give the source of your information in column C.

A. Strength

B. Weakness

C. Source

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Preparing my negotiating strategy

Taking your research into consideration, choose a negotiation strategy with the best

chance of achieving your objective. Your choice will depend on your counterpart,

the relationship you have with them, the level of common interest between you and

how each party is likely to behave while negotiating. It will also depend on what you

are negotiating and the time you have to agree.

When negotiating, act according to your perception of the likely response of your

counterpart. You need to prepare for how you will deal with any situation that may

arise.

••

Task nine: Preparing my negotiating strategy

Is it more appropriate for you to use a competitive or a collaborative strategy?

Why?

Explain and justify your choice of negotiating strategy and identify your

priorities by responding to the questions below.

Which negotiation strategy do you plan

to use?

How do you justify this choice of

strategy?

What issues are important for you in

the negotiation? Please list them in

order of priority to you.

1

2

3

4

5

My priorities are:

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Understanding my bargaining position

Questions that can help you assess the strength of your bargaining position include:

••

How important is my issue?

••

Are there several issues?

••

If so, what is their order of importance?

••

What arguments support my case?

••

Is my case strong enough for me to show little willingness to compromise?

••

Am I willing to make concessions to get an early agreement?

••

What counter-arguments to my arguments is my counterpart likely to make?

If your counterpart needs you more than you need them, you have a good

bargaining position. If you need them more than they need you, ask yourself how

you can build your position.

Neither party is likely to get everything they want, and you will probably need to

make concessions or trade-offs to achieve a successful agreement. You will need

to decide on your bargaining range. You will also need to plan your approach to the

negotiation.

••

Click on the buttons to find out the consequences of each approach.

Approach

Possible consequence

Make high demands early –

then make concessions

Make low demands early on –

then make concessions

Make moderate demands

early – then refuse to give

concessions

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••

Task 10: My bargaining position

Bearing in mind your objective, strategy for negotiation and priorities,

describe below your BATNA, WATNA and WAP, as well as any compromises or

concessions you could make to reach agreement. Type your answers below.

My Best Alternative To a Negotiated

Agreement is:

My Worst Alternative To a Negotiated

Agreement is:

My Walk Away Point is:

Compromises I could make are:

1

2

3

Concessions I could offer are:

1

2

3

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Organisational, legal and ethical

requirements in negotiating

You may well have a handbook containing all the organisational policies and

procedures that apply to your work area. These describe how your organisation

complies with the law and may include how it approaches negotiation. You need to

be aware of, and adhere to them. Ethical aspects relate to moral judgment and so

may be referred to in your organisation’s statement of values or their policies. You

should not do or accept anything that could be construed as bribery, favouritism or

inequality.

••

Task 11: Policies, procedures and legal and

ethical requirements

Explore your organisation’s policies and procedures relevant to negotiating. Describe

how you will ensure that you adhere to these policies and procedures as well as legal

and ethical requirements when you negotiate.

Type your answers below.

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1. Opening

••

Meet in a quiet setting with privacy and sufficient space, without interruptions

••

Establish the relationship with your counterpart before starting the negotiation

••

Adopt a powerful mindset (Neale and Lys, 2015) and speak with authority

••

Be careful of what your body language is saying

••

Begin negotiating by summarising your opening position

‘Negotiation is about finding a

solution to your counterpart’s

problem that makes you better

off than you would have been

had you not negotiated.’

Margaret Neale (2015)

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2. Bargaining

This is a series of exchanges in which one party

makes an offer and the counterpart counter offers.

You need to keep within the limits of your authority.

The following checklist will help you to maximise the

opportunities that arise during negotiation:

••

Be polite, respectful, firm and calm

••

Present your key commitments

••

Empathise with your counterpart’s point of view

and assert your own

••

Question them for information

••

Emphasise common ground

••

Argue about interests (issues) not positions

••

Be flexible and anticipate compromise

••

Treat your counterpart as you would want to be

treated regardless of how you are treated during

the negotiation

••

Be open to creative solutions that may lead to

agreement

••

Keep focus on your key issues and their

importance to you

••

Be prepared to concede wisely – things that cost

you little but have value to your counterpart

••

Always expect something in return – ‘if I give you

this, then will you give me that’

••

Make sure everything you offer is within your plan

••

Summarise arguments and seek acceptance

••

Have the confidence not to settle for less than

you feel is fair

••

Make sure you are not beaten down below your

WAP

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The key to successful negotiation

‘Always ask for the things you

want, even if you think you

won’t get them.’

Margaret Neale, 2015

Research on the Harvard Negotiation Project (Fisher and Shapiro, 2007) has

identified seven interconnected elements that are key to successful negotiation.

••

Click on the buttons to reveal more information about each element.

1. A good negotiating

relationship and rapport

2. Good communication

3. Interests

4. Options

5. Legitimacy

6. Commitment

7. Conclusion

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Institute of Leadership & Management

••

Task 12: Optimising opportunities when negotiating

Carry out your negotiation and identify the opportunities that arose.

List these in column A below. Then, in column B, describe in your own words

how you optimised each of them.

A

The opportunities that arose

during my negotiation were:

B

I optimised these

opportunities by:

How I kept within the limits of my own responsibility

while optimising these opportunities:

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Staying flexible

Negotiations are often complex and uncertain. Negotiators are continuously trying

to make sense out of the discussion and order the information. They may find it

difficult to access relevant information rapidly or critical data may not be available.

This means you need to remain flexible and open to new issues, information and

opportunities to improve the quality of your agreement or add value to it as the

negotiation proceeds. As cases are presented and arguments are worked out, the

interests and power bases of the parties become critical.

••

Task 13: Adapting the conduct of my negotiation

Identify the changing circumstances that occurred during your negotiation

and describe how you adapted your conduct accordingly. Type your

answers below.

The changing circumstances that

occurred during my negotiation were:

I adapted my conduct by:

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Closing

For a successful negotiation resulting in action, the details should be written

down and signed by both parties at the end of the negotiation. This will ensure

commitments are kept and things happen as a result of your agreement.

••

Task 14: Making an accurate record of outcomes

and agreements

In your own words, respond to the questions below. Use the space provided.

1

2

3

4

5

1

2

3

What were the outcomes of your negotiation?

What agreements were made?

What will be done as a result?

Who by?

When?

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References

Collins, P. (2009) Negotiate to Win: Talking Your Way

to What You Want. Sterling Publishing Co. Inc., NY.

Diamond, S. (2011) Getting More: How You Can

Negotiate to Succeed in Work and Life. Penguin Books,

London.

Fisher, R. and Shapiro, D. (2007) Building

Agreement: Using Emotions as You Negotiate. Random

House Business Books, London.

Grant, A. (2013) Give and Take. Weidenfeld and

Nicolson, London.

Hames, D. S. (2011) Negotiation: Closing Deals,

Settling Disputes, and Making Team Decisions. Sage,

Thousand Oaks, CA.

Lewicki, R. J. Saunders, D. M. and Barry, B. (2015)

Negotiation. 7th ed. McGraw Hill Education, NY, USA.

Neale, M.A. and Lys, T.Z. (2015) Getting More

of What You Want: How the Secrets of Economics

and Psychology Can Help You Negotiate Anything in

Business and Life. Profile Books, London.

Spangle, M. and Isenhart, M.W. (2003)

Negotiation. Communication for Diverse Settings.

Sage, CA. USA.

Thompson, L.L. (2006) Negotiation Theory and

Research, Psychology Press, Hove.

Tversky, A. and Kahneman, D. (1974) Judgment

Under Uncertainty: Heuristics and Biases.

Science, 185, 1124-1131.

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be copied, reproduced, communicated, or otherwise distributed without the prior written permission of ILM.


34 Institute of Leadership & Management

••

Task checklist

Below is a list of all the practical exercises in this workbook to

help you record your activity. Completing these will give you

the practical skills you need to have successful negotiations.

Strategy for negotiating

Extent of my authority when negotiating

Use of negotiating techniques

Researching my counterpart in a negotiation

Dealing with cultural differences

Determining my purpose, scope and objective

How I believe my counterpart is likely to negotiate

Researching the strengths and weaknesses of

my counterpart

Preparing my negotiating strategy

My bargaining position

Policies, procedures and legal and ethical requirements

Optimising opportunities when negotiating

Adapting the conduct of my negotiation

Making an accurate record of outcomes and agreements

Copyright © The Institute of Leadership and Management 2015. These materials may not, in whole or part, be

copied, reproduced, communicated, or otherwise distributed without the prior written permission of ILM.

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