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Bargaining Chips

We negotiate all the time. Even in the most mundane of situations, negotiation is ever present. We ask people for favors, we buy shoes and clothes, we evaluate others and are evaluated by our boss, we interview for jobs. The situations where we negotiate something are endless, and yet, many of us are little prepared to understand the quirks and cues that are part of negotiation process. Our background and the work we do determine in part how we will negotiate. Some companies place a lot of emphasis on "win-lose"; that is, an aggressive negotiation style where someone has to give so someone else can win. I know now that is called Positional Bargaining (Fisher) and it could lead, for people who master this form of negotiating, to significant gains...in the short term. That is why I was gladly surprised when I began to learn about another approach to negotiation. There could be ways to turn around a "win-lose" into a "win-win" situation. Where differences among negotiating parties, rather than separating them into irreconcilable positions, can actually be used to "complement" them and help them "close the deal".

I am the type of person who shies away from bargaining. That is why I was a little uncomfortable at the beginning of Negotiation Strategy class (MGMT 6004, sec 090, Spring 2013). The hardest and most fun part was the actual negotiation with other students. We were paired by Professor Li into groups of two or more and sent into break rooms at the beginning of each class, so we could practice being in a negotiation representing a company, a group of people or any other role assigned to us. We had to prepare before class so we knew exactly which role we were playing and what our objectives were. What we did not know was the outcome, that was up to us to negotiate.

My first negotiation was with Matt (classmate). I wish I could have been better prepared. The case was designed so that there was no possible agreement (if we followed the constraints imposed to us by our roles); however, we reached one. Out of 20 groups, we were one of the seven that reached a deal. The first lesson was clear: Negotiation is hard; parties have to spend considerable time gathering and analyzing information about the situation and counter-parties to come up with a good outcome for all; the other, easy route is to get stuck into a position and refuse to budge.

I was afraid of being perceived as a "too nice guy", so in my next negotiation I tried to assume a tougher stance. I played the role of a hiring manager and Matt (another classmate) was a new recruit. I used some of the techniques learned in class to my own advantage. For instance, I offered a salary level too low so to have some room if Matt decided to press for more; this is called anchoring. The session went well, I thought, as I ended up hiring him with minimum benefits. During debriefing after class though things were not that simple. Our group ranked very low in terms of "Value of Outcome". Why? Well, I had taken all the chips and my counter-party was left with the barely minimum to survive. That was not a good outcome as a whole. Second lesson: Negotiations are measured for the value created for all parties. The greater the value each party gets, the better. Sometimes this is called "expanding the pie".

Ok, I thought, if in my first negotiation I was too nice and in the second one too tough, maybe the trick was to be tough in some points and nice in others. With that mindset I went into my third negotiation.

I was nervous. I had been paired up with Samantha, a young and nice classmate. To start with a positive note I brought coffee to the break room for both of us, she liked it. The negotiation was complex as it involved events in the future with high level of risk. Samantha represented a TV station looking to buy a good show and I was an agent for a TV Studio trying to sell our new sitcom "Moms.com". I used the whiteboard to clarify some of the numbers and to facilitate communication. At some point we thought we had a good deal and agreed on it. During debriefing with the whole class I was glad to learn we did well compared to other groups; however, there was still room for improvement. Some of the other groups used something call "contingency contracts", which allowed them to add more value to the deal. For instance if "Moms.com" was as successful as the TV studio thought it would be, the studio would get additional money from advertising proceeds. If, on the contrary, the show was a flop, the studio would pay the TV station some money back. Third lesson: Don't be content with just a good outcome; be creative, look for ways to "expand the pie". And also, "Allow negotiators to build on their differences. Don't argue over the future: bet on it." (Professor Li)

In my last two negotiations to date, I represented a biotech company and a fishing association and entered multiparty bargaining sessions with Steve and Vinoth (biotech) and Matt (another Matt), Sidharth, and Chris (fishing agents). Going over the details of these two sessions would take considerable time, so let me tell you two things I learned: In negotiation, everyone, no matter how powerful, is vulnerable. And, when dealing with multiple parties, fairness is key to reach a good deal.

And about fairness, playing by the rules does pay off; not only legally, but ethically. This world gets smaller every day and a "win-lose" attitude sooner or later would come back to hunt anyone who plays tough. Fairness also helps find the best out of our differences and that is the very reason we negotiate; we do it because we lack something the other party has, and vice-versa (Reitz). Our diversity of criteria, needs, background, to name just a few factors, adds value because they generate real options to make the sum of our efforts greater than we could otherwise do alone. Knowing how to negotiate in good faith our differences gives us the opportunity to grow, together.

Alberto Vasquez-Parada


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Works Cited

Fisher, Roger, William Ury, and Bruce Patton. Getting to Yes: Negotiating Agreement Without Giving In. Ed. Bruce Patton. Vol. 11. Penguin Books, 1991.

Reitz, H. JosephWall Jr. "Ethics in Negotiation: Oil and Water or Good Lubrication? ." Business Horizons 41.3 (98AD): 5. Print.

| 1 Comment | tags: Part-Time MBA Student Experience

1 Comment

Very nice article Alberto ! It refreshed my memories of all the interesting and intense negotiations that we performed in this class and all the learnings that I can apply life long.

I can recollect all those moments retrospectively when I used to read the articles and chapters for a particular week and used to wonder how it would fit in that week's case. For instance when I did the case with you, the readings for that week was "Make Your Weak Position Strong". After reading that article, I was not very confident of applying the strategies mentioned in the article. Nevertheless I went ahead with following those tricks and ultimately it worked. I am sure you would remember how much trouble I created for you in that negotiation. Moments like that really increased my interest in the subject exponentially and I feel I now have enough tools and tricks to approach any kind of negotiation confidently.

Lastly, I would say I was able to meet some wonderful people from part-time MBA program and become friends with them (in spite of some of the aggressive negotiations... lol)

-Vinoth.

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