PRACTICAL BUSINESS

NEGOTIATION

Known for its accessible approach and concrete real-life examples, the second
edition of Practical Business Negotiation continues to equip users with the necessary,
practical knowledge and tools to negotiate well in business. The book guides users
through the negotiation process, on getting started, the sequence of actions, expect-
ations when negotiating, applicable language, interacting with different cultures,
and completing a negotiation. Each section of the book contains one or two key
takeaways about planning, structuring, verbalizing, or understanding negotiation.
Updated with solid case studies, the new edition also tackles cross-cultural
communication and communication in the digital world. Users, especially non-
native English speakers, will be able to hone their business negotiation skill by
reading, discussing, and doing to become apt negotiators.
The new edition comes with eResources, which are available at www.routledge.
com/9780367421731.

William W. Baber is Associate Professor at the Graduate School of Manage-

ment, Kyoto University. He has combined education with business throughout
his career. His professional experience has included economic development in
the State of Maryland, language services in the Washington, DC area, supporting
business starters in Japan, and teaching business students in Japan, Europe, and
Canada. He taught English in the Economics and Business Administration
Departments of Ritsumeikan University, Japan before joining the Graduate
School of Management at Kyoto University where he is Associate Professor in
addition to holding courses at University of Vienna and University of Jyväskylä.

Chavi C-Y Fletcher-Chen is Professor at IÉSEG School of Management, Lille

Catholic University, teaching interpersonal communication applied to negotiation
and e-negotiation and publishing case studies in the area of negotiation. Coming
from an International Business background, she has extensive experience in inter-
national marketing and conflict resolution cases through her years of work in
international patent, trademark, and commercial law firms in the Far East. In add-
ition she has experience in training commercial managers in cross-cultural com-
munication, and she is also specialized in Information Communication
Technologies (ICTs) where she consulted for global companies.
PRACTICAL BUSINESS
NEGOTIATION
Second Edition

William W. Baber and Chavi C-Y Fletcher-Chen

Second edition published 2020
by Routledge
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Visit the eResources: www.routledge.com/9780367421731

CONTENTS

List of figures ix
List of tables xi
List of cases xiii
Acknowledgements xiv
Guide to using this book xv
Introductory comment xvi

1 What do you want to get from negotiations? 1

Distributive and integrative 1
Choosing the strategy 5
When not to negotiate at all 11

2 First connections 14
Gaining and giving information 14
Relationships 17
Empathy 19
Review of relationship building 21
Impression management 23
Satisfaction 24
Negotiation error: how NOT to give a concession 28

3 Core negotiation concepts 30

Anchoring effect 30
BATNA 31
Reserve point 32
vi Contents

Negotiation error: watch your BATNA 35

Understanding and misunderstanding interests 37
Principle based negotiation 39

4 Structure and planning 43

Getting to start 43
Building momentum 44
3D negotiation 46
Basic planning 50
Identifying interests 52
Backward mapping 55
Priority and outcome mapping 57
The sequence of talk at the table 60

5 Some cultural considerations 62

Top down/bottom up 62
Culture and negotiation 64
Weak/strong points of North American negotiators 70
Weak/strong points of Japanese negotiators 73
Weak/strong points of Chinese negotiators 76
Gender 80

6 Talking the talk 81

Designing offers and suggesting tradeoffs 81
Accepting and rejecting offers 86
Summarizing and clarifying 87
Practical verbal signals 88
Deadlock and breaking deadlock 93
Shutdown moves 95
Language choice 97
Use of a foreign lingua franca among the same native language speakers 104
Visual communication 104
Remote electronic negotiations 108
Negotiation error: when to go slow 115

7 Negotiation tactics 116

Tactics at the table 116
Persuasion approaches 130
Humour in the negotiation 132
Ethics 134
Who should you not negotiate with? 137
 Contents vii

8 Win at home before you go 140

Educating the boss and coworkers 140
Back table negotiations 141
The back back table 142
Negotiation error: back table out of synch 142
Problem solving techniques 143
Ishikawa diagram (fishbone) 143
Why-why (five whys) 145
What to do and how to do it 146
Creative solutions 148
War gaming as preparation 150
Red team vs blue team 150
Additional benefit – greater creativity 151
Additional benefit – intuitive thinking 151
Financial modelling 152

9 What kind of negotiator … are you? … are they? 154

How do you resolve disputes? 154
Emotional style 155
Emotional intelligence 157
Comparing 158
Assertive 159
Example of framing 159
Kepner-Tregoe decision-making process 161
High pressure high speed process for negotiators 164
Cross-cultural teams 168
Common language within the team 169

10 Agreements 170
Robust agreements that can survive 170
Control mechanisms often found in negotiated agreements 172
When agreements don’t survive: outside support, mediation, arbitration 174
Draft or binding agreements 178

11 Review from a high altitude 182

Lifecycle of negotiation 183
Example of a negotiation through the phases 183
Practical list of don’ts 186

12 Reflection on negotiation theory 188

Voluntariness 188
Utility 190
viii Contents

Strategy 190
Relationship 191
Relationship and negotiations across cultures 191
Negotiation structure 192
Communication 192
Game theory and negotiating 193

Appendix I: Glossary 194

Appendix II: Case simulations 198
Appendix III: Planning documents 225
Appendix IV: Cultural differences 232
Appendix V: Understanding failure 236
Appendix VI: Stakeholder analysis 241
References 245
Index 250
Notes 253
FIGURES

1.1 What are you trying to get? 2

1.2 Try to get more 3
1.3 Creating new value: gaps and overlaps 4
1.4 Where to find new value opportunities 5
1.5 Choosing a negotiation strategy 6
1.6 Compete or collaborate 7
1.7 Choosing negotiation strategies 8
1.8 Decision not to negotiate 13
2.1 The cycle of sharing 19
2.2 Impact of satisfaction on value sharing 25
2.3 Virtuous cycle of knowing 28
3.1 In too deep – Decision tree 34
3.2 In too deep – Flowchart 34
3.3 Interests – Match vs mismatch 37
3.4 Focus on problems, not positions 40
3.5 Value creation vs Value sharing 42
4.1 Strict ordering of issues 45
4.2 Flexible ordering of issues 45
4.3 Backward planning 56
5.1 Profile comparing two cultures 69
6.1 The messy reality of negotiation progress 88
6.2 Rich and poor context media 108
6.3 Which media fit best 108
7.1 The silent rejection tactic 117
7.2 Start nice or nasty? 125
7.3 Flow chart of the Emotional Client 129
7.4 How the roles changed 130
7.5 Recycle your waste with Capri Sun® and Honest Kids® 136
x Figures

7.6 Ethics as a net gain 136

8.1 Possible sequence of analyses for problem solving 144
8.2 Ishikawa diagram, basic 145
8.3 Ishikawa diagram, train line 145
8.4 Five Whys example 147
8.5 Five Whys: Roots made clear 147
8.6 From Why to What 148
8.7 From What to How 149
9.1 Thomas-Kilmann Conflict Mode Model 155
9.2 Personal styles compared 158
9.3 Steps in Kepner-Tregoe model 162
11.1 Macro phases of negotiation 183
11.2 Negotiation lifecycle 184
12.1 Negotiation outcomes 189
12.2 Satisfaction and completion 189
A2.1 Gas price movements 216
A2.2 Newfoundland, Canada 218
A3.1 Cluster planning 226
A3.2 Cluster planning, blank 227
A3.3 Reserve line planning 227
A3.4 Reserve line planning, blank 228
A3.5 Backward planning 228
A3.6 Backward planning, blank 228
A3.7 Flowchart planning 229
A5.1 Failure matrix 237
A6.1 Central and peripheral stakeholders 242
A6.2 Power interest grid 242
TABLES

1.1 Changeable factors surrounding a negotiation 6

1.2 How negotiation factors change 10
2.1 Constructive sharing of information 15
2.2 Impression management approaches 23
2.3 Creating satisfaction 26
3.1 Mistaken beliefs, ChinAlco and Rio Tinto case 38
3.2 Real interests, ChinAlco and Rio Tinto case 39
3.3 Soft vs hard, Ury and Fisher 40
4.1 Three dimensions of negotiation 46
4.2 HIT list 51
4.3 Expanded HIT list with steps 52
4.4 Simplified interest grid 53
4.5 Brett’s Negotiation Planning Document 55
4.6 Sample Raiffa scorecard 57
4.7 Blank Raiffa scorecard 59
4.8 Sample Raiffa scorecard for evaluating results 59
5.1 Top down, Bottom up 62
5.2 Corporate culture comparison 70
5.3 Awareness: Some weak points of North American negotiators 71
5.4 Awareness: Some strong points of North American negotiators 72
5.5 Awareness: Some weak points of Japanese negotiators 73
5.6 Awareness: Some strong points of Japanese negotiators 74
5.7 Awareness: Some weak points of Chinese negotiators 76
5.8 Awareness: Some strong points of Chinese negotiators 77
5.9 Gender related strategies 79
6.1 Proposals that seem to benefit the other side 82
6.2 Compare the proposals 83
6.3 Best design of proposal 83
xii Tables

6.4 Agenda setting 90

6.5 Sample dialog for setting the agenda 91
6.6 Acceptable and unacceptable threats 92
6.7 Shutdown moves 95
6.8 Words and meaning 100
6.9 Comparing visual media 107
6.10 Business email dos and don’ts 112
6.11 Error: When to go slow 115
7.1 Playing the hard card first 123
7.2 Interests table for the case of the Emotional Client 129
7.3 Stakeholder analysis table for the case of the Emotional Client 129
7.4 Ethics in action 137
8.1 Tools for problem solving 144
8.2 War gaming sheet, Komsel’s Red Team representing Singcell 151
9.1 How to handle others’ emotional styles 157
9.2 Types and impacts of cognitive bias 160
9.3 Framing and re-framing 161
9.4 Improved decision-making process and bias 163
9.5 Preferred team size and composition 168
10.1 Agreement components 179
11.1 Ichthys – highly complex negotiation 185
A2.1 TouchPad, Wushi, Taakto 200
A2.2 Tang and Lee 2nd generation products 209
A2.3 Tang and Lee comparison 210
A2.4 Three party email negotiation: Issues and initial planning 219
A2.5 Three party email negotiation: Value claiming by party 221
A3.1 Planning continuum 225
A3.2 Planning continuum example (Powicki case) 225
A3.3 Brett planning sheet, blank 226
A3.4 Modified Raiffa scorecard 230
A3.5 Modified blank Raiffa scorecard 231
A4.1 Misunderstanding perceived value of time 234
A4.2 Improved conversation about time 235
A5.1 Modified FMEA: During negotiation 239
A6.1 Stakeholder analysis blank 243
A6.2 Stakeholder analysis example 243
CASES

1.1 Choose the strategy I 8

1.2 Choose the strategy II 9
1.3 The incompetent translator 12
3.1 Help! We can’t stop! 33
3.2 The very public offer 35
3.3 ChinAlco Rio Tinto misunderstanding of interests 38
4.1 EuroDisney 1992–1994 43
4.2 The right hotel, the right deal 51
4.3 Professor’s patent 53
7.1 The very emotional client 126
7.2 Ethics makes money for Honest Tea and Capri Sun 135
8.1 Fuji Seiko activity 141
8.2 Not what the boss really wanted 143
8.3 War gaming example 150
10.1 The agreement that needed renegotiation 171
A2.1 Inheritance far away 198
A2.2 Three way Joint Venture 199
A2.3 OVD hosts the foreign investor and the local business 202
A2.4 AP and Shepard Fairey and HOPE 203
A2.5 Ghana Galamsey Gold 205
A2.6 Shoe business competition 207
A2.7 ZawaSoft and Pak-Ton 211
A2.8 Recruit the best! 211
A2.9 Sonde SA strikes a balance 212
A2.10 Cultural IP anime 213
A2.11 Toyota Tsusho and Encana – second round 214
A2.12 Channel-Port aux Basques 217
A2.13 Three party e-mail negotiation – residential real estate 218
A6.1 Sensitive foreign investment 244
ACKNOWLEDGEMENTS

It is important to point out that this textbook owes a debt to a variety of people
who have guided the authors and contributed directly or indirectly to its
development.
Those people include Chavi C-Y Fletcher-Chen, the resourceful co-author
of this textbook; Peter Kesting (Aarhus School of Business) and Remi Smolinski
(HHL Leipzig Graduate School of Management), who encouraged my interest
in negotiation; and Helen Lam of Athabasca University.
Additionally, I want to acknowledge the many students from whom I have
learned over the years. In particular, I would like to thank S. Penn for the use
of the Emotional Client case, D. Zhang for his insistent and persistent question
asking, L. Ipsen and S. Sepstrup for allowing me to quote select data from their
thesis, A. Ridha for his stakeholder analysis example, and of course my numer-
ous MBA students in Japan, Austria, Finland, Canada, and elsewhere.
Lastly I acknowledge the patience and support of my wife and children
through this project!
William W. Baber
First of all I would like to thank William W. Baber for giving me the oppor-
tunity to collaborate with him on this textbook. My greatest appreciation is for
my husband due to his constant support.
Chavi C-Y Fletcher-Chen
GUIDE TO USING THIS BOOK

Reading map for using this book as a negotiation guidance

Get to know Differentiation of negotiation types (Chapter 1)

negotiation
purpose Negotiation key principles (Chapter 2)

How to prepare? (Chapter 3)

Negotiation
essential What to plan? (Chapters 4 & 8)
knowledge
What kind of negotiator are you? (Chapter 9)

How can culture affect negotiation? (Chapter 5)

Challenges on How languages can be an issue? (Chapter 6)

negotiation
encounters How to manage e-negotiation? (Chapter 6)

What are the tactics? (Chapter 7)

How to produce the agreement? (Chapter 10)

What to do with a broken deal? (Chapter 10)

Negotiation skill
reflection What are negotiation steps? (Chapter 11)

What not to do in negotiation? (Chapter 11)

Negotiation
What are the theories applied to negotiation? (Chapter 12)
theory
INTRODUCTORY COMMENT

The purpose of this textbook is to put the practical knowledge and tools that
are necessary to negotiate well in business in the hands of students.
The textbook seeks to answer practical questions like:

• What is the overall process?

• How do you start?
• What is the right sequence?
• What should you expect?
• What phrases communicate the right intention?
• How do you finish it up?
• How do you learn more about it?

The textbook uses plain English, not difficult academic English. The textbook
uses many diagrams to help visually explain the processes. Technical words
(jargon) are explained so that you can use them properly to communicate your
plans and ideas to your team, your superiors, and to companies you do business
with.
The processes and ideas discussed in this textbook are based on the standard
practices of “Western business” institutions – practices we must understand in
order to function successfully in international business. The learning points of
this book will be useful in most kinds of business interactions. However, local
business practices and customs must be respected and understood in order to
achieve local and regional success.
This textbook will teach you basic ideas about business negotiation by read-
ing, discussing, and doing. Each section of this textbook contains one or two
key points about planning, structuring, verbalizing, or understanding negotiation.
 Introductory comment xvii

Using the case studies included, you will learn and practice phrases and jargon
commonly used in negotiation. Additionally, you will learn the importance of
understanding the other side as well as how to understand the other side.
Fundamentally, this textbook teaches that negotiation provides a framework
to create value and business opportunities. Negotiation should not be a fight to
take value from another party. Negotiation should be a constructive conversa-
tion in which all parties take home at least as much value as they need. Some of
that value may be distributed in a zero-sum way, but additional value should be
created to replace value conceded to other parties.
By the end of this text you should be able to:

• Identify and use key negotiating strategies;

• Identify monetary and non-monetary interests of all parties;
• Use various methods to prepare properly, including:
– understanding your counterparts and
– organizing before negotiating
– discovery of interests and perspectives

• Use questions to understand the goals of counterparts;

• Provide and receive helpful information;
• Manage cultural differences;
• Identify and improve a BATNA;
• Identify and manage tactics;
• Build appropriate relationships;
• Resolve problems;
• Create opportunities for new value;
• Make agreements that can survive some common ups and downs when
implemented
• Understand the lifecycle of negotiations;
• Engage in a mutually successful negotiation in which all parties are satisfied,
and you have not unnecessarily given away value.

What kind of negotiation

The kind of negotiation that we will discuss and study in this textbook is business
negotiation. There are other domains of negotiation, for example political negoti-
ation, which we will have nothing to do with. Business negotiation is largely an
interactive experience with both sides mutually and openly seeking money, busi-
ness opportunities, and other forms of value. Political negotiation, on the other
hand, is much less open and often threatened by the actions of individuals and
groups who do not seek common benefit.
xviii Introductory comment

“How to” processes

As a practical textbook, you will learn useful “how to” processes. And here we
need to be a little cautious. Cognitive psychology shows that processes are
useful for simple tasks, but not for complex activities. For example, you can
easily learn to turn a car left or right, to start and to stop, but these do not add
up to the complicated activity of driving a car safely. However, after you learn
turning, starting, and stopping, you are able gain the experience necessary to
drive safely.
In the same way, business negotiation is a complicated procedure that cannot
be put into a cookbook recipe of easy steps. You need to know why and how
the process works in order to become experts. The processes included in this
textbook are therefore useful small steps, and general overall guidelines. They
are not strict kitchen cooking steps. Your first driving lessons are probably on
a safe course or parking lot, not a fast highway. Similarly, this textbook contains
practices, examples, and simulations so that you can learn by doing, even if you
are not at risking of losing money or business.

Contents
Most of this text discusses approaches to resolving problems and difficulties in
negotiations, or “solving problems jointly” as in the book 3D Negotiation by Lax
and Sebenius and other books broadly referred to as Harvard Method or mutual
gains negotiation. Part of this text is devoted to the useful words, phrases, and
practices that will help you become comfortable with the processes of negotiat-
ing. Practical steps for problem solving, researching, and designing agreements
are included. A portion of this text is reserved for tactics, mainly avoiding and
handling aggressive tactics.
1
WHAT DO YOU WANT TO GET
FROM NEGOTIATIONS?

Distributive and integrative

“What are you trying to get?” This is a key overall question to answer before
beginning the planning and talking (see Figure 1.1).
Your answer is likely to be “as much as possible” or “best result for all” or
a combination of these two.
The following two concepts are fundamental to understanding negotiation
and how negotiators think.

Distributive perspective. Negotiators try to dominate the other party

because they believe they are in direct conflict with the other party over
limited resources. Negotiators in a distributive situation fight hard for their
positions (specific prices or amounts) because their loss is the other side’s
gain. The negotiators believe there will be a clear winner and loser, but not
multiple winners.
Adapted from Metcalf and Bird (2004)

Integrative perspective. Negotiators . . . believe that all parties can win

through mutually beneficial solutions. Integrative negotiators take a problem-
solving approach, putting focus on exchanging information in order to identify
underlying issues and interests and to generate outcomes that benefit all
parties.
Negotiators reach agreement by employing creative problem solving
approaches to develop solutions that increase the benefits available to
everyone.
Adapted from Metcalf and Bird (2004)
2 What do you want to get from negotiations?

What are you

trying to get?

As much as
possible of Some of Best result
limited resources both for all parties

FIGURE 1.1 What are you trying to get?

Distributive thinking is useful when you must get a certain amount of

limited resources for your side. In most real world business situations, however,
this kind of thinking will block you from creating and sharing maximum mutual
value.
Integrative thinking is useful in complex situations where you need to con-
nect many issues and when you want to maximize the opportunities for value.

Q1: Which of these negotiations are probably distributive? _____

a. A renter and landlord negotiating the rental price of an apartment.
b. Deciding how Yumi, Ken, and Jun will share the last piece of cake.
c. Developers, manager, and residents considering a new training camp
for a winning, major famous sports team in a rural area.
d. A football star working out a salary with the team’s managers.
Q2: Ichiro is an international baseball star. He is so famous everyone recognizes
him just by his first name! His main advertising contract is with Kirin beer,
one of the three large beer makers in Japan. His negotiator gets a share of
every advertising contract. How do you think the negotiator will approach
negotiations? With distributive or integrative thinking? Why?
_____________________________________________________________
_____________________________________________________________
Q3: Which of these negotiations are probably “integrative”?
a. Buying a car.
b. Arranging a meal and price for your hiking club (40 people).
c. Buying snacks in the outdoor market.
d. Developing the annual financial budget of a city with 2 million inhabitants.
Q4: Write an example of a typically distributive negotiation: ________________
Q5: Write an example of a typically integrative negotiation: ________________
 What do you want to get from negotiations? 3

Q6: Your company is buying a division of Osaka based Kansai Kogyou (KK).
The agreement is complicated, but entirely based on money. Is it distribu-
tive or integrative?
_____________________________________________________________

Once there were two little boys and one old broken bicycle. Each one
wanted the bicycle; they could not agree to share it. Eventually they started
talking … they learned that one wanted the old tires to make a catapult,
and the other wanted the body to make pipes. Integration of their needs
and interests made it possible to distribute everything successfully.

Another basic way to think about negotiation is Claiming and Creating Value.

• When you claim value, you are aiming for the left side of Figure 1.1 as
a distributive negotiator. Claiming value means getting as much as possible
of limited resources.
• When you create value, you are aiming for the right side of Figure
1.1 … and beyond. Creating value is certainly integrative; you must
bring many issues together, even issues not planned for the negotiation, to
create new value.

See Figure 1.2 below for the idea of going beyond “Best”.

Example of creating new value

A manufacturer and a distributor were negotiating a typical limited distribution
agreement. After some discussions, they agreed to have the distributor make
a small change to products sold in one region. Therefore, the manufacturer sold
more products and the distributor gained value-added work. Both sides created
new value together, beyond their plans for “typical distribution”.

What are you

trying to get?

As much as Additional
Both Best for all
possible value for all

FIGURE 1.2 Try to get more

4 What do you want to get from negotiations?

Party A’s
Ability
Party B’s
Ability

Overlaps
Gap
Maybe the parties can
Maybe a new activity must
manage this efficiently
be created to close the gap

Party C’s
Ability

FIGURE 1.3 Creating new value: gaps and overlaps

It is a good habit to think about opportunities for creating new value from
the start of a negotiation, even during the early planning phases.
Movius and Susskind (2009, pp. 180–181) include a checklist for new value cre-
ation such as looking for different ways that the parties value the same issue, joint use
of resources, differences in risk tolerance, and additional issues to add to the core
transaction.
Following the ideas of Movius and Susskind, negotiators should look for opportun-
ities to create new value in the gaps where the parties cannot easily match their abil-
ities, viewpoints, values, or resources. For example, a party which sees no value in
retail sales may be happy to let another party with distribution skills handle some retail
work.
Along the way, parties should look for new value opportunities where skills,
interests, viewpoints, and abilities overlap. For example, if both parties are good
at an activity, they could bring their teams together to share best practices and
gain efficiency.
Figure 1.3 illustrates the gaps and overlaps.
Figure 1.4 provides additional practical ideas about where to search for new
value opportunities in typical contracts and agreements.

Section terminology
Integrate: combine various information, needs, and goals.
Resources: things used to conduct business such as time, money, equipment, staff, etc.
Tangible: physical things you can touch (money, equipment, products, etc.)
Intangible: non-physical things (brand, reputation, feelings, etc.)
 What do you want to get from negotiations? 5

Upgrades
Security Replacement

Tech support Training

Maintenance Cooperative
development

Payment Data
schedule management

Core Many other

Timing transaction services and
products

FIGURE 1.4 Where to find new value opportunities

Section summary

Most negotiations include sharing finite limited resources (distributive) that

are connected with more complex, tangible or intangible issues (integrative).

Choosing the strategy

Five broad negotiation strategies, accommodate, collaborate, compromise, avoid,
and compete are described by Lewicki, Hiam and Olander (1996) in their well-
known graphic (Figure 1.5):
Negotiators use the figure above to decide which approach is best. The figure
only deals with two dimensions: importance of substantive outcome (tangible
and intangible gains that are at the center of a negotiation) and importance of
relationship. These ideas make a useful starting point for considering the whole
negotiation, and each issue within the negotiation. However, in addition to the
relationship and substance, there are many other factors that may have an impact
on choosing the negotiation strategy.
The following list of factors (Table 1.1) is adapted from Lewicki, Hiam and
Olander (1996) as well as Ware (1980). These should be taken into consider-
ation when choosing strategies. They include psychological, social, technical,
and contextual factors. These additional factors are flexible and changeable, so
reassessing these factors as the negotiation develops will help you adjust strategies
to match the situation.
 High
Accommodation Collaboration

Give in to the other side to build Expand the pie for creative
relationship Win/Win solutions

Importance
of Compromise
Relationship Split the pie to satisfy
at least the minimal needs
of each party

Avoidance Competition

Not negotiating; Win at the expense of

Leave things as is the other party
Low

Low Importance of Substance High

FIGURE 1.5 Choosing a negotiation strategy

Source: (Lewicki, Hiam, and Olander, 1996)

TABLE 1.1 Changeable factors surrounding a negotiation

Resources • Scarcity of time, money, manpower, skills, and other resources

needed for execution of an agreement;
• Need to allocate resources precisely.
Among the negoti- • Mutual respect among the negotiators;
ating parties • Personality of the negotiators;
• Empathy among the negotiators;
• Team internal relationships;
• Trust among the negotiators;
• Physical environment;
• Procedural matters;
• Negotiator skill level.
Environment • Complexity of issues;
around the negoti- • Political and regulatory environment;
ating parties • Importance of maintaining a good relationship;
• Relative power of the parties;
• Uncertainty surrounding issues;
• Pressure from stakeholders;
• Limited time for negotiating;
• Importance of outcomes.
 What do you want to get from negotiations? 7

Resources
available
5
4
Time available 3 Complexity

2
1
0
Relationship is Power
important quality

Negotiation Developed
skills trust

FIGURE 1.6 Compete or collaborate

It is helpful to select a few of the factors above to guide your choice of strat-
egy. Since the factors above are relative, and not absolute, we can assess them as
roughly high, low, or medium. Plotting the selected factors on a scale from 0–5
allows a visual determination of the most suitable strategy. For this purpose,
variables such as: time, resources, relationship, power, trust, skills, and complex-
ity can provide an overview of the negotiation. These factors are plotted for
two different negotiations in Figure 1.6.
A negotiation with high scores for many of the factors, such as the one
mapped by the solid line in the figure above, matches well with a collaborative
strategy. A negotiation with mostly low scores, such as mapped by the dotted
line, is best handled with a competitive strategy.

Urgency, stakes, chance of success, and relationship

Another way to choose a strategy is to consider urgency, stakes, and relationship.
Urgency refers to the speed with which the organization hopes to complete the
negotiation. Stakes refers to the importance of the outcome, for example, high
stakes might mean survival or failure of the organization. Low stakes, however,
means little impact on the organization. Relationship refers to the quality of the
existing relationship.
To use the graphic in Figure 1.7, consider the three categories in order from left
to right for each issue or for the overall negotiation. Follow the arrows based on
your evaluation of the urgency, stakes, and relationship. For example, if the urgency
is low and stakes are low, there is no reason to immediately deal with the issue. If
there is enough time (low urgency) and the issue is important (high stakes) and the
quality of the relationship is medium, look for compromises.
8 What do you want to get from negotiations?

Negotiation Strategy Selection

Urgency Stakes Chance of Relationship Starting Strategies

Success
High Good Collaborate
High Medium Compromise
Poor Compete
Low

High Good Collaborate

Issue Medium Compromise
Poor Accommodate
Low
Low
Avoid/Delay

Urgency, Stakes, Chance of Success, and

Relationship as factors in strategy selection

FIGURE 1.7 Choosing negotiation strategies

CASE 1.1: CHOOSE THE STRATEGY I

SamYeong, Co. and HoPha, Inc. are preparing a joint proposal for
a construction project. SamYeong is an engineering services company with
high skills in steel suspension design. HoPha specializes in installation of
complex support systems Both firms are able to organize the general con-
struction work. There is a large amount of money and potential profit in the
general construction work. These profits will improve the projected profits of
the companies from merely acceptable to a much higher level. The compan-
ies do not have a history of cooperation; however, they need to work
together in order to win the contract for this project – there are no alterna-
tive partners. Somehow they will have to manage an agreement regarding
the general construction work. The bid must be submitted in 12 months.

Please evaluate the following:

Urgency: _____________________
Stakes: _____________________
Success chance: _____________________
Relationship: _____________________
Strategy: _____________________
 What do you want to get from negotiations? 9

CASE 1.2: CHOOSE THE STRATEGY II

In the following example,

SamYeong, Co. is negotiating with Jiffy Job Inc. about interior finishing
and carpentry work. The work requires good skills and high quality control.
The project starts immediately so you hope to hear from Jiffy soon; they
have worked well and quickly in the past. One issue in the negotiation is
cost and another is the delivery date. As for the cost, you have only $1200
in your budget to pay for this. They have asked for more but you are deter-
mined to keep the price down to $1050. This has been a tough season so
you need to be extra careful about your money! Regarding the delivery
date, you are a little more flexible, but the sooner they finish the better. You
will have one extra person on staff from the 14th, so you want to Jiffy to
finish on the 13th. Unfortunately, Jiffy would like to finish on the 16th. They
seem to be very busy with their staff at other job sites.
From SamYeong’s point of view, please evaluate the following for cost:
From SamYeong’s point of view, From SamYeong’s point of view,
please evaluate the following for please evaluate the following for the
cost: due date:
Urgency: ________________ Urgency: _______________
Stakes: ________________ Stakes: _______________
Success: ________________ Success: _______________
Relationship: ________________ Relationship: _______________
Strategy: ________________ Strategy: _______________

Changing your strategy appropriately – staying flexible

A negotiation might move from competitive to collaborative as the parties interact
more. For example, trust might increase, more time might become available, the
importance of the relationship might change and so on. Because integrative, collab-
orative negotiations tend to create more value for all parties, it is best to attempt to
move a negotiation from competitive to collaborative.
However, a collaborative negotiation can break down into a competitive one
as deadlines approach and parties feel the pressure of time.
Many negotiations include issues demanding collaborative/integrative approaches
as well as ones that are more distributive. Therefore, it may be useful or necessary to
switch strategies. Ware (1980) suggests separating the approaches in time and space
with appropriate sequencing and packaging.
Reasons a factor might change from distributive to integrative or reverse appear
in Table 1.2.
10 What do you want to get from negotiations?

TABLE 1.2 How negotiation factors change

Factors Possible sources of change

Resources
• Time, money, manpower, • Deadlines may become more flexible;
skills, and other resources • Labor costs decrease/increase;
needed for execution of an • Highly skilled staff is recruited or lost;
agreement; • Scope and funding change.
• Need to allocate resources
with precision.
Among the negotiating parties
• Mutual respect among the • New staff;
negotiators; • Team dynamic improves or breaks down;
• Personality of the • Counterparties know each other better;
negotiators; • Skills improve;
• Empathy among the • New location/venue is agreed;
negotiators; • Procedures become more comfortable/
• Team internal relationships; difficult;
• Trust among the negotiators; • Negotiators link or delink issues in the
• Physical environment; negotiation to make them more or less
• Procedural matters; flexible.
• Negotiator skill level.
Environment around the negotiating parties
• Complexity of issues; • Regulations become more
• Political and regulatory friendly or more difficult;
environment; • Political support or pressure from
• Importance of maintaining the back table increases/
a good relationship; decreases;
• Relative power of the • New technology simplifies or
parties; complicates matters;
• Uncertainty surrounding • Power changes;
issues; • Knowledge and understanding
• Pressure from stakeholders; increase/decrease;
• Limited time for negotiating; • Time constraints expand or
• Importance of outcomes. contract;
• Stakes increase or decrease.

Handling problem solving first in the overall sequencing of a collaborative or

mixed strategy negotiation is preferable, as discussed in Chapter 4. Without an idea
about the possible solutions before taking on the competitive issue, the chance of
confusing the negotiation partners and souring the communication increases.

Power
There are three kinds of power in a business negotiation, BATNA power, coer-
cive power, and perceived power. BATNA power is described in Chapter 3 and
 What do you want to get from negotiations? 11

it consists of the ability to walk away if a deal is not attractive enough. Coercive
power is rarely experienced in the business world in countries with sound legal
systems. Often this kind of power comes from organizations or individuals in
authority that can demand bribes or threaten serious consequences with no
danger to themselves. Coercive power may also come from organizations that
have a monopoly. Monopoly, or near monopoly, organizations have the unbeat-
able BATNA that counterparties cannot choose to walk away. An example
would be a government monopoly on a natural resource such as Precious Min-
erals Marketing Corporation in Ghana, which is the sole legal purchaser of the
output of small gold mines. There is no legal alternative to compliance with
their demands.
The last kind of power, perceived power, comes from the perception that
one side has a dominant position. One party may promote the idea that they
are powerful, but the “power” can only have impact if the other party believes
it and reacts to it. In other words, this kind of power is only real if others
believe it. Parties with this kind of “power” might include a company that is
dominant in its industry and so well respected that suppliers and partners do
not want to challenge it. An example can be found in the 2014 dispute
between Amazon and some publishers (e.g. Hachette) in which Amazon con-
trols the retail market so well that they can make demands without reacting to
counteroffers.
In some parts of the world, major firms can successfully exercise perceived
power based on their size, history, or position in the industry. The smaller
companies that supply and serve them may make statements like, “We
cannot resist the will of that company because they helped found the coun-
try.” Or, “We must agree with that company because they were founded by
the king’s brother decades ago.” However, it is of course possible to resist
such companies.
In order to fight back against any form of power, a company must show
how its product or services are necessary to the “powerful” company as well
as how they are different from and better than the competition. Another way
to fight back of course is to improve your BATNA so that you create alter-
natives and escape the power of the other party. In the end, a strong
BATNA will be the most help in dealing with any kind of power brought by
a counterparty.

When not to negotiate at all

Some negotiations should not happen. These include for example negotiations
about issues where both sides have low interest and cost is high and there is no
expected value in the relationship (see Figure 1.5 above). Consider the following
case.
12 What do you want to get from negotiations?

CASE 1.3: THE INCOMPETENT TRANSLATOR

Some years ago, a new translation services company in the Washington, DC

area ordered a translation from English into Czech. The translation was not
long and the cost was only about $500. The translator provided the Czech
text on time by email. There was only one problem: the project manager
who received the text immediately recognized that it used none of the spe-
cial characters from the Czech alphabet.
The Czech language uses the Latin alphabet plus several modified charac-
ters for a total of 42 characters. For example, the language uses “c” and “č”
and “a” as well as “á”. These special characters have different pronunci-
ations and carry important grammatical meaning.
The project manager asked the translator to put the characters in, but he
refused. “The text is understandable to a Czech,” he said. “It is good enough.”
This was certainly true; the text was comprehensible to a Czech. However,
no Czech office manager or school teacher would accept any writing lacking
the special characters. Text of that sort would only be usable in a very infor-
mal setting. It was not “good enough”. The agreement with the translator
had not specified any “normal” or “special” purpose or setting or formality.
The project manager, feeling the situation was very clear, refused to pay
the translator. The translator insisted on payment and threatened action in
the California court system. At the same time, he lodged a complaint with the
American Association of Translators (AAT), of which he was a member. AAT
promptly sent a demand to the project manager for payment stating that
they would blacklist the company from their services not only in California
but nationwide. They did not respond to the project manager’s irritated letter
claiming that the text was unusable.
At this point the project manager faced a choice: try to negotiate, fight
a court case 4,000 kilometers away, or give up.

Decision time
Negotiate: The other party in the negotiation, the translator, refused to talk. The
translator had successfully drawn in a powerful ally, AAT, and seemed to have
their full support.
Court: Assembling the evidence against the translator would be easy. How-
ever, judges are specialists in law, not linguistics. An expert witness would cost
an additional $500–1,000. Indeed, a single plane ticket would cost at least $500.
A lawyer’s services would cost $2,000–3,000. Of course, the problem might not
be resolved in just one visit. With experts and AAT weighing in, the court case
could have gone either way, a victory or a loss.
 What do you want to get from negotiations? 13

>$200 + 5 hours; Probability: 1.0

Negotiate
0% chance Pay off: -$500; -5 hours

Court
Project decides
Manager
decides Probability: 0.5
Win: Cost is approx. $5000; 50% Chance
Pay off: -$4500; -100 hours
Possible
Court
actions
Probability: 0.5
Lose: Cost is approx. $500+$5000; 50% Chance
Pay off: -$5500; -100 hours

Probability: 1.0
Give up -$500 and 0 hours; 100% chance
Pay off: -$500; -0 hours

FIGURE 1.8 Decision not to negotiate

Give up: Giving up would cost only $500 and take no time at all. There
would be no concern about losing the court case and paying the costs of the
other side.
The project manager’s choices could be drawn like this.
After considering the situation described in Figure 1.8, the project manager,
with the agreement of the owner of the translation services company, gave up.
The fee was paid despite the fact that the product delivered was worthless.

Do you think the project manager and owner made the right decision? Why?
_________________________________________________________________
_________________________________________________________________
2
FIRST CONNECTIONS

Gaining and giving information

Above we encountered two basic approaches, distributive and integrative. Dis-
tributive negotiators do not need to learn much about the other party – there-
fore they typically ask only a few questions with a narrow focus and share little
information about themselves.
Integrative negotiators on the other hand ask many questions. They share
much (perhaps even all) information about their positions. This section is about
how questions for information may be asked and answered.
Table 2.1 below provides an example: Tanba Agro is negotiating sale and
delivery of eggs to Hyogo Cake factory.

Types of questions
Simon Hazeldine, a UK business negotiator, writes that you will need to use
four kinds of questions: closed, probing, open ended, and summarizing.

Closed questions
These simple questions seek specific answers to specific questions. You can ask
for Yes/No answers (Hazeldine, 2006, p. 63).

Probing questions
In 3D Negotiating, Lax and Sebenius say, “If they don’t like the concept, probe. Ask
why? Why not X instead? What if Y? then, listen actively” (Lax and Sebenius,
2006, p. 77).
 First connections 15

TABLE 2.1 Constructive sharing of information

Dialog Comment

Hyogo Cake: So basically, we need 3,000 eggs “OK!!” means Tanba Agro understands,
per day. not that B has committed to anything.
Tanba Agro: OK!! Tanba Agro knows they cannot
deliver the eggs all at once because of
truck availability.
Tanba Agro: Your factory has an interesting Tanba Agro changes subject without
process … do you use all the eggs at once? showing the difficulty on his side by
asking a general question about the
factory, the process, or other topic
related to the cake business.
Hyogo Cake: No, we have three baking batches Now Tanba Agro knows it might be pos-
per day. Each time we need 1,000 eggs. Batches sible to deliver the eggs at two or
start at 8 AM, 11 AM, and 2 PM. three times during a work day. Tanba
Tanba Agro: I see. Is it difficult to keep all those Agro also now knows that Hyogo
eggs until you are ready? Cake might like to have the eggs
Hyogo Cake: Yes – it takes a lot of space. arrive at three times. Tanba Agro can
use this information to save money …
Hyogo Cake: However the price is too high for … or to offer Hyogo Cake a discount …
us. XYZ Corp. can deliver the eggs all at 8 note that Tanba Agro’s discount does
AM 3% cheaper. not have to be as big as XYZ’s
Tanba Agro: If you can take the eggs at 7:45, 10:45 because the delivery schedule is con-
and 1:45, we can decrease our offer by 2%. venient for Hyogo Cake.

Hazeldine (2006) has this to say about probing questions.

These are used to explore a point the other party has made. They allow you
to drill further into what has been said so that you can understand it in
more detail. Examples include:

“What makes you say that?”

“In what way do you think…?”
“How do you mean?”
“Why did you bring that up?”
A useful probing technique is to use “echo questions”. An echo question is
where you use the last word or few words of what the other party says as
a probing question. An example:
“We need a significant investment.”
“Significant investment?”
In this example, you are probing further to discover how the other party
defines “significant investment”.
Bare Knuckle Negotiating, Hazeldine (2006), p. 64
16 First connections

Why do you think that “echo questions” are effective? ______________________

What do both sides learn from an echo question? ____________________

In the text below, Hazeldine suggests also using broader questions that invite
general exchanges of information.

OPEN QUESTIONS
These are broad, diagnositc questions that encourage the other party to talk
about their situation. Open questions usually start with words such as what,
when, why, how, where, who, which and usually result in a multi-word or sen-
tence answer. Examples would include:
“What do you want to change about your current situation?”
“You have mentioned you have some concerns. What are they?”

Open questions are used to gather information, and closed questions are used
to clarify what you discover and to get specific answers and commitments.
Hazeldine (2006), p. 64

In which situation during a negotiation would you ask an open question?

____ at the beginning of negotiations
____ when you want specific facts
____ when you are unclear about a general idea
____ when you are just finishing up negotiations

What kind of question would you ask after hearing, “Our company can deliver
2,000 units.”?

Closed Open Probing

Write the question you might ask: ___________________________________?

Return to the negotiation between the egg supplier and the cake maker at the
beginning of this section. What additional questions should you ask? Develop
two questions Tanba Agro could ask Hyogo Cake.
_________________________________________________________________
_________________________________________________________________
Asking questions to identify problem points
Use the inconsistency trap to learn about the other side and their understand-
ing of the issues.
How it works: Ask, then listen. Then rephrase the question and ask again.
Compare the answers to each other and to your sources of information to look
 First connections 17

for points that you do not understand. These points may be difficult to under-
stand because information is poorly explained, the counterparties have hidden
the information, or because they have not noticed the need for the missing
information.
Summarizing – see the Verbal signals section of Chapter 6 for more on this.

Section terminology
Probe: to explore and push for deeper, specific information.
Commit: agree to expend money, time, and other resources with full intent to
complete.
Diagnostic question: a question for learning general information.
Inconsistency: information that is not the same as it was when first presented.

Section summary

Ask questions to gain information and build your understanding.

Relationships
In the previous section we saw how a negotiator can ask questions to learn
about the overall situation and the needs of the other person, and find ways to
improve an offer in order to increase the likelihood of agreeing.
Asking questions and answering questions can also help build a relationship. Fun-
damentally, negotiations should lead to a successful business transaction or avoidance
of a bad one. But just completing one transaction is not the greatest success. The nego-
tiation partners could benefit from building a relationship of confidence and mutual
accessibility that leads to more transactions in more areas of business – that is real
success. We can arrive at “real success” through relationships built on reciprocity,
empathy, and understanding interests.

Reciprocity through getting and giving

When someone tells you something, shares information with you, or gives you
something, you should give something in return. This is called reciprocity.
Returning information or some helpful action will build and improve the rela-
tionship among the parties (Cellich and Jain, 2004). Sharing information often
helps build confidence and relationships while providing the information neces-
sary to create a good result.
Sharing information is the most common way of building relationships through
reciprocity when working with companies culturally rooted in the “western” world.
Other parts of the world find reciprocity and build relationships through giving gifts.
18 First connections

The gift may be an item such as expensive wine or a local specialty or by doing the
other parties a favour. In business negotiations, it may be a concession given early in
the talks. Giving the gift or concession or doing the favour places a burden on the
other parties to respond similarly. Just as with shared information, the pressure to
respond appropriately is strong, and failing to respond appropriately may damage the
relationship. This kind of interaction based on gifts and favours is part of the concept
of guanxi in China, ongi and kankei in Japan, and may be familiar to many in the
cultures of East and Southeast Asia in particular.
When dealing with a culture you are unfamiliar with, use very knowledge-
able local people to help you prepare for the kind of reciprocity in that region.
The following quote from Thams, Liu, and von Glinow (2013, p. 466) is on
target:

…although there might be some universal principles governing reci-

procity, people in different cultures embrace reciprocity differently;

RECIPROCITY DECREASES TENSION

An air of tension can also be created by unknown factors. For example, you
may never have met the people you will be negotiating with before, and
this can lead to feelings of uncertainty.
You can reduce the tension by remembering that your key focus … is to
find out what the other party wants, and to communicate what you want.
Hazeldine (2006), p. 60

However, if one party gives a small concession and expects a much better conces-
sion in return, the relationship and the negotiation will deteriorate (Cellich and
Jain, 2004). If you have been given a small concession and feel pressure to give
a larger concession in return, you must either get another concession, or carefully
consider the size and value of the concession you might give. Positive reciprocity
can help the constructive exchange of information and ideas. Negative reciprocity
(i.e. responding aggressively to aggressive actions) results in unequal sharing, dam-
aged relationships, and failed negotiations.
How can you manage reciprocity in order to comfortably share information with-
out losing control or not receiving reciprocal information from the other party?
_________________________________________________________________
_________________________________________________________________

Reciprocity, whether based on exchanging information or placing obligations on

other parties, works because it is a widely accepted “norm”. Under usual condi-
tions, most people and organizations will share information cautiously at first, and
then more openly. The sharing is a process that builds trust and confidence. Be
a little cautious: it is possible for a negotiation partner to abuse the reciprocity
 First connections 19

FIGURE 2.1 The cycle of sharing

process. If the other side does not share, then you should consider a different
approach or a different partner. You must be sure that the other side is sharing
quality information and concessions. If you give too much too soon, you may learn
too late that your negotiation partner is not working with you constructively.
Figure 2.1 shows how the steps of the cycle can build trust.
Let’s go beyond understanding needs to understanding interests. To do so we
need empathy – the ability to recognize feelings and think of others. We can
use empathy to understand the reasons for the choices made by counterparties.

Section summary

Reciprocity helps build relationships and make them deeper. Relationships

improve business outcomes.

Empathy

TOUGH OR WITH FEELING?

Many people feel that they must choose between being assertive and being
empathic – being “hard” or being “soft”. But that’s a false choice. Showing
empathy about your counterparty’s interests, perceptions, and constraints may
make him or her more open to providing you with useful information. The more
empathically you understand your counterparty, the more effectively you can
design value-creating deals and the better positioned you are to claim a full share
of that value.
3D Negotiating, Lax and Sebenius, p. 216
20 First connections

Empathy is a way to improve negotiation outcomes by:

• Understanding the negation partner’s values;

• Increasing mutual gains and satisfaction;
• Avoiding ethics errors.

Understanding leads to improved results, possibly for all sides. Your values
may be different from the values of the other sides in the negotiation. Using
empathy, you can identify the differences and perhaps more easily create solu-
tions that protect your values as well as theirs. If the other sides cannot protect
their values, they are more likely to leave the negotiation or seek new partners
for future projects.
Assertiveness is often an opposite behaviour to empathy. Assertiveness means put-
ting pressure on the other sides to accept your position. Assertiveness of this sort
may damage a negotiation by limiting the opportunities for other or all sides to
make gains together. Assertiveness also means getting your ideas into the conversa-
tion. Failing to get your ideas on the table will not benefit any parties.
As empathy and understanding increases, the negotiation partners will have more
opportunities to maximize mutual gains, not just their own gains. As the gains of all
sides increase, satisfaction is likely to increase.
Importantly, empathy can help you avoid ethical mistakes like improperly
explaining risks or value related to the negotiation or inappropriately taking an
asset that has particularly high value attached to it by one of the other negoti-
ation partners.
Empathy in some cultures may include additional generally positive feelings.
For example, in Japan, businesspeople are often sensitive to the feeling of en
(縁), also called wetto, a notion of compatibility, likability, and vague potential
for good results (De Mente, 2004). This feeling can impact business decisions
including negotiations, contracts, and follow up. The feeling of en is part of Jap-
anese empathy and therefore part of relationship building in Japan. Sensitivity to
creating and building culturally specific kinds of empathy is important for cross-
cultural negotiators.
There are many ways to build empathy, but negotiators must be careful to
do it in ways that match the expectations of the other sides. Nonetheless,
a commonly used approach is to show that you share identities with the other
parties. Some identities that are widely shared including being parents, sports
interests, field of study, employment history, and so on. Research has found
that empathy tends to increase shared gains (Galinsky, Maddux, Gilin and
White, 2008).
In summary, it sounds like empathy is a great thing to develop!
But is it possible for empathy to create too much sympathy? After all, you
might not want to explain to your boss or your shareholders that you left
resources unclaimed out of sympathy for the other side.
 First connections 21

Section summary

Empathy means understanding the interests and values of the other party. It
helps create positive value and improves the outcome of the negotiation. It
is not appropriate however to become too understanding.

Review of relationship building

Please talk to your partner(s) and try to answer these questions:
Why should you try to build relationships?
How can you build positive relationships?

Situation: You are in South America working on an acquisition of intellectual

property. How can you build a relationship and empathy with the other party?
Please write your ideas here:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________

But …
Do not expect all negotiations to result happily in future business opportunities.
Here are examples of negotiations that will probably not lead to repeat business:

1) You buy a house you expect to live in for at least the coming 20 years.
2) You complain about poor products that your company will not need again.
3) You disagree about the cost with a taxi driver in a foreign city.
4) You buy services for a one-time conference overseas that your com-
pany will organize.

In the situations above, is it sensible to spend time and energy to build relation-
ships? Explain your answers:
1. ______________________________________________________________
______________________________________________________________
2. ______________________________________________________________
______________________________________________________________
3. ______________________________________________________________
______________________________________________________________
4. ______________________________________________________________
______________________________________________________________
22 First connections

Why build relationships

“Each side of the relationship should be developing plans that incorporate the
other’s interests into those plans. Without doing so, a long-term relationship
entails the disadvantage of closing off options, without accruing the benefits of
the longer term commitment” (Sheppard, 2003).

Which sentence best summarizes the above paragraph? ___________

a) Long-term relationships must be carefully limited to avoid troubles.
b) Help the other side make their plans successful so that you can keep useful
options available in the future.
c) Be sure to think long term so you can negotiate more in the future.

Sheppard (2003) also wrote, “Without mutual development, long-term relation-

ships have no value.” Do you agree? Please explain:
_________________________________________________________________
_________________________________________________________________

Fill in the blank to react to the circumstance with reciprocal approaches:

When the other party tells you … . You reciprocate with …
… they have new machinery, but it may not work
well for the first month. ____________________________
… they are worried about getting enough workers in
time. ____________________________
… they can speed up delivery to meet your tough
schedule. ____________________________

Lax and Sebenius (2006) also say, “You are empathic when you try to under-
stand the interests and motivations of the other side. You are assertive when
you make your interests and demands clearly known to the other side.” Is it
ever useful to be assertive? Why or why not?
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________

Section summary

Considering a situation from the perspective of other parties is less about

emotional insight than about their material interests, goals, and strategies.
 First connections 23

Impression management
At the start of your relationship with the other parties in a negotiation, and at later
times, you may want to manage or control your relationship. You can manage the
impression that you make in a variety of ways. Communication of your image hap-
pens on three levels: to the organization (macro); to other teams (meso); and to other
individuals (micro). It is of course possible to make a different impression on each
level, and to change your approach as the relationship develops.
Some general approaches to impression management at the team and individ-
ual levels are discussed in Table 2.2.

TABLE 2.2 Impression management approaches

Approach Advantages Disadvantages

Tough Guy Other parties may decrease their Other parties may react with similar
expectations from the start. tough behaviour, leading the negoti-
ations directly into deadlock or poor
outcomes. See the section on Playing
the hard card first in Chapter 7.
Nice Guy Interactions start with a positive May lead the aggressive parties to increase
tone. Positive moves tend to be their demands if they feel the first impres-
rewarded with positive responses. sion or overall image is “soft”.
Technical Shows a willingness to consider If the other parties are not strong on
technical issues and complex technology, they may become less
solutions. comfortable with your side.
Trusting Other parties may share their Counterparties may try to take advan-
information more confidently. tage if they think you are naive.
A better information flow may
help you make strategies and deci-
sions. It may also lead to better
relationships.
Cautious Other sides may be cautious about Other parties may not share information
making high demands. or may not make matching concessions if
they feel you are too cautious.
Corporate A highly professional attitude may Some parties present themselves as anti-
make others feel confident in your establishment and may feel threatened by
abilities. a strongly corporate look.
Professional If you use negotiating terminology Untrained parties may misunderstand
Negotiator like BATNA, reserves, and so on, your terminology or feel uncomfort-
other trained negotiators will iden- able. The result may be poor
tify you as a trained negotiator. communication.
Shared vocabulary will make com-
munication easier and more
successful.
(Continued )
24 First connections

TABLE 2.2 (Cont.)

Approach Advantages Disadvantages

Flexible Being flexible signals that you are May signal that you are indecisive and
willing to solve problems can be bullied.
creatively.
Inflexible No clear advantage. Other parties may not propose creative
ideas if they expect you to reject them.

Presenting yourself and your organization to other organizations, the macro level, is
generally the task of the marketing and public relations specialists in your organization.
If you do not have these people on your staff, carefully coordinate your macro level
impression management with the top managers and partners.
In addition to managing the impression you make on other parties, you will need
to analyze the way your negotiation partners and teammates present themselves.

Section summary

Be aware of impressions and perceptions to manage how others feel toward you.

Satisfaction
In this section we are discussing satisfaction as a feeling or emotion that
a negotiator has gotten a suitable deal, not just the minimal tangible satis-
faction of their requirements.
No sensible party will agree to outcomes that are poor or unsatisfying. How-
ever, intangible satisfaction can range from high to low, or even negative (dissat-
isfaction). Do you think that satisfaction goes up or down in synch with tangible
outcomes of the negotiation – for example, is satisfaction high if a high money
goal is achieved? Your answer:
_________________________________________________________________
_________________________________________________________________

What is the value of satisfaction? If we can show that a negotiator can be satisfied
with a deal that has less value than a “perfect” deal, it means that the negotiator will
trade tangible value for their own intangible satisfaction. Therefore, a skillful negoti-
ator will seek to build intangible satisfaction while keeping some extra tangible
value. Clearly, we can only manage this in integrative negotiations but not in
purely distributive negotiations.
 First connections 25

Here is how it works (Figure 2.2):

Share of Tangible Value Share of Tangible Value

Party A Party B Party A Party B

Party A and Party B share the tangible value of Party A and Party B share the tangible value
a deal equally (half and half). of a deal unequally (60% and 40%).
A does not try to increase B’s feeling of B tries successfully to increase A’s feeling of
satisfaction, and B’s feelings remain neutral. satisfaction and A is completely comfortable
and satisfied with 40%.

FIGURE 2.2 Impact of satisfaction on value sharing

What is the future after satisfaction comes into a deal? According to Curhan, Elfen-
bein and Xu (2006), individuals who were very satisfied just after a negotiation
were more likely later to intend to continue the business relationship. Objective
measures (such as tangible outcomes) had no impact on plans to continue a business
relationship or not!
Therefore, the benefit of making the other sides feel satisfied is not only (pos-
sibly) increased tangible gain, but a greater chance of future deals. The value of
future deals? Possibly unlimited!
Curhan, Elfenbein and Xu (2006) described four ways to view the develop-
ment of satisfaction in a negotiation:

• how the negotiation made us feel about ourselves,

• whether the negotiation process seemed fair,
• whether we’ve developed a productive working relationship with our counter-
parties, and
• measurable gains and losses.

The first three in the list above can only be described as feelings; these are sub-
jective. Because they are subjective and difficult to measure, a skillful negotiator
can actively influence those feelings.
What can you do to develop satisfaction in the other negotiating parties?
Regarding the last item in the table above, measurable issues, it may be necessary to
show that these have been distributed appropriately among the negotiating parties. Be
prepared to demonstrate fairness. However, humans tend to attach emotional value
even to things that are concretely measurable and countable, so it may be possible to
influence feelings about these “facts” despite demonstrating the actual breakdown.
26 First connections

TABLE 2.3 Creating satisfaction

Category Write out some practical ideas for creating feelings of

satisfaction in each of the four categories from Curhan
et al.

How the other parties feel about

themselves during the negotiation process
How fair the negotiation process seems
to the other parties
How the other parties feel about the
relationship with you and your team
Measurable issues in the negotiation

Section summary

Try to build satisfaction into the negotiating process because it is more likely
to lead to future business opportunities than if you simply exchange
concessions.

Relationship building at the table

At the beginning of this Section, we read Lax and Sebenius’ idea that empathy
is almost necessary for creating new value and successful negotiation. Do you
and your partners agree?
But specifically, what can we do at the negotiating table? Someday you may
have the experience of suddenly going into a negotiation situation with counter-
parties you do not know. In that case … .be friendly.

– Smile, but show earnest intent (smiling is not appropriate in all business
cultures)
– Make small talk (choose appropriate topics)
– Listen carefully to their small talk (show respect)
– Learn about them (listen carefully, build empathy, take their perspective)
– Ask them questions (listen to the answers and learn)
– Share information (start the reciprocity process, communicate visually and
verbally)

Swaab et al. (2002) found in their research that using visualizations (graphics,
diagrams, animations) increased satisfaction among negotiating parties, therefore,
communicate using graphic images.
 First connections 27

Active listening is the term widely used for good listening skills. Active lis-
tening requires showing that you are listening by reacting with the appropriate
verbal and body language signals. In some cultures, this might mean the cor-
rect use of interjections, for example ah, uh huh, mm, so? and similar words
when suitable. Body language response might include nodding, leaning for-
ward, eye contact, etc. However, these signals of active listening are a little
different around the world. Try to learn the correct ones for the people you
are interacting with.
To summarize, negotiators need to listen and ask and listen again in order to
build relationships. That process can happen away from the negotiating table
and outside the office experience, before and after the actual negotiating.
Never hesitate to talk to a person and listen to them. With most Europeans,
North and South Americans, and people from many other cultures, you can
walk directly to a person, greet them and talk. In other parts of the world
where behaviour is more formal, adjust your approach to the standard local
behaviours.

Game theory
In the well-known Prisoner’s Dilemma game, there are two strategies: cooper-
ate or defect. If the game is repeated, both sides easily see the value of cooper-
ating. Cooperation leads to greater value for all parties. The same is true in
negotiation – if one side shares information and the other side shares informa-
tion, both will find that sharing information is rewarding. The rewards are:
creation of knowledge and trust as well as increased opportunities to create
new value.
Trust is the expectation that other parties will not defect. Developing trust
means an evolution of events that lead to trust. That evolution can happen in
the pattern of the graphic in Figure 2.3.
Figure 2.3 has no beginning or end. It repeats with better results from greater
repetitions.

Section summary

Actively build relationships because it will help the negotiation and informa-
tion exchange flow smoothly.
28 First connections

Knowing the facts, interests and parties

leads to a virtuous cycle

Understand
goals

Robust Integrate
agreement issues

Create new Build

value relationship

FIGURE 2.3 Virtuous cycle of knowing

Negotiation error: how NOT to give a concession

5 like er * well 2.16 million * an’ because *of the

6 purchasing policies an’ things like this we reduced
7 the price okay we took out some things like the
8 neutral air (-) [cubicle but we]
9 (clears throat)
10 SellerJ didn’t take out much more than 80 thousand [pounds
11 BuyerS mm]
12 SellerJ worth but we give you a 365 k reduction ** to bring it
13 down to this 179|5 …
(part of discussion has been omitted)
14 SellerJ We wanna be partners with you an’ if we can help * so
15 we did it that’s what I’m saying so this 1795 is of our
16 good will without being asked
17 SellerA can I take another (-) to that also in that period we
18 have lost 20%
19 SellerJ Yeah I’ll show you this actually
20 SellerP yeah
21 SellerA on the currency
… (part of discussion has been omitted)
22 BuyerL sorry] sorry that the Finnish mark is getting weaker **
23 SellerA no the Finnish mark is getting stronger
24 SellerP [stonger]
25 SellerJ stronger]
Used with permission. (Vuorela 2005, p. 78)
 First connections 29

Based on the extract above:

What did the sales team give? ______________ Why? _____________________
What did the buyers give?________________ Why? ______________________
What do you think happened to the sales team after this? __________________
Write a sentence or two for the sales team to correctly offer this discount:_____
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________

Negotiator’s Oath according to Simon Hazeldine (2006) In Bare Knuckle Negotiating:

I solemnly promise never to give something for nothing!
3
CORE NEGOTIATION CONCEPTS

Anchoring effect
The anchoring effect is explained by Lax and Sebenius (2006) in 3D Negotiating,
pp. 187–190. They found that experienced professionals receiving the same
information, except for price, would suggest prices close to the first offer from the
other party, even if their previous price info was very different. Therefore, Lax
and Sebenius conclude that the first party to suggest a price gains an advantage.
The authors also say that the price proposed must seem reasonable to the other
parties because an excessive price would make the proposer seem foolish. Add-
itionally, providing a clear compact reason for the price at the time you propose
it may strengthen the anchoring effect.
Practical conclusion: try to be the first party to propose a price, however the
price should not be outrageous and should include some reason or explanation.
Lax and Sebenius (2006, p. 187) say, “…make an offer just above the most they’d be
willing to pay”. Then, you can move down without losing much of the potential
total value.

Example
The author used to work for a business research company that specialized in
Russian (then Soviet) business (in 1989–1992). We had to negotiate prices for
market research and information. If we were expecting a price between $5,000
and $8,000, we were shocked to hear an offer of $14,000. The offering party
seemed foolish to us and we would look for another provider. With time, we
learned to start the conversation with a low, but still reasonable, price, in other
words a moderate anchor.
 Core negotiation concepts 31

Q: What if you cannot anchor the price conversation?

A: Anchoring has its biggest effect on negotiators who are not aware of it. If
you are aware of the anchor, you can re-anchor with your preferred price
range. You can try to re-anchor immediately, or later. You can do it bluntly
or by linking issues that explain why your new anchor is sensible.

Q: What if both sides know about anchoring and try to anchor early?
A: _______________________________________________________________
______________________________________________________________

Section summary

Try to name the price first. This point is not important if the price range is
limited or if price is a low priority issue.

BATNA
The abbreviation BATNA means “Best Alternative to Negotiated Agreement”
and is also called a “No-Deal Option”. BATNA is what you will/must do
because of failing to negotiate an agreement.

Will you go bankrupt? Will the other side go bankrupt?

Will you get fired? Will the other party get fired?
Do you have another possible partner? Do they have another possible partner?
Do you have time to find a new partner? Do they have time to find a new partner?

Can either party do the work/create the product alone?

Before you start negotiating, it is important to know what will happen if the
negotiation collapses:
The answers to the questions above help you to understand the BATNAs of the
parties.
Prepare before the negotiation starts to understand what the negotiation choices
are so you can have the best possible BATNA. A typically strong BATNA could
be having an alternative company to negotiate with.

Example: Company X makes electronic toys and wants a faster chip, but
company Y only sells faster chips for an extremely high price. In this case,
X must walk away. Also, Y must walk away. This is clearly a failure for
both! We hope that X had already started talking with another chip maker.
We hope that Y had already started talking with another electronics maker.
32 Core negotiation concepts

Sometimes there may be more than one possible alternative to negotiating. In

that case it makes sense to consider which alternatives are better or worse. Iden-
tifying your Worst Alternative to Negotiated Agreement (WATNA) may be
helpful in avoiding that result and assessing the importance of negotiating;
another approach is thinking about the Most Likely Alternative to Negotiated
Agreement (MLATNA), Ury and Fisher (1991). The “most likely” result is
more specific than the general notion of BATNA and can help you eliminate
“best” results from your planning that might really be unlikely.

Balance

In any negotiation, you and the other parties involved face a fundamental
and ongoing choice: between staying and walking…
This is the deal/no-deal balance. On one side of the balance you have
the proposed deal; on the other, you have your “walk away option” … or
BATNA.
3D Negotiating, p. 27 (Lax and Sebenius)

It is extremely important to know (or estimate) the BATNA of the other

negotiator(s). Is their BATNA so strong that they can walk away from the nego-
tiating table? Is it very weak? If they have a weak BATNA, you should be able
to improve your negotiating results.

Reserve point
As well as knowing the alternatives to negotiating, it is necessary to know the
point at which you must stop negotiating and use your BATNA. That point
is the reserve point, also called the walk away point. For example, in a simple
sales negotiation, the lowest price the selling party will take is their reserve
point. The highest price the buying party is willing to pay is their reserve
point. Every issue, not just price, should have a reserve point. This is the
point where you must stop talking. Sometimes the reserve point is the same as
an offer from another party (your BATNA). The reserve point is not the
target point – the target is what you would like to get. The reserve point is
something you have to get. Generally, you hope to get a better outcome than
the reserve point.
For example, if you are planning to reserve hotel rooms for a company event,
you need to have a limit to how much you will spend. Your manager or
accounting department may give you that limit, or you may set it yourself. If
you do not have a limit, you may accidentally pay higher prices when you
could have negotiated lower prices.
 Core negotiation concepts 33

The following short case is about a Japanese company that was planning to
buy a division (not all) of an American company. Please read it and consider the
reserve points and BATNAs of the parties.

CASE 3.1: HELP! WE CAN’T STOP!

During a two-year process, negotiations to buy a part of a US company

stopped several times as the Japanese company rebuilt and strengthened
consensus inside their company. When a European firm unexpectedly made
a bid on the entire American business, the Japanese firm suddenly had to
choose to complete the transaction or quit.
At the last moment, … [the American company started to] think again
about the Japanese side’s no-deal option. They quickly reviewed other options
open to the Japanese firm and confirmed their undesirability. Having worked
through a grueling consensus process, virtually everyone at the Japanese com-
pany … was deeply committed to doing this deal.
Now, rather than face the extreme organizational costs of “losing”, the
Japanese firm agreed to pay an extraordinarily high amount for the firm.
Adapted from 3D Negotiation, pp. 89–90

Questions
1. In the short case above, do you think the Japanese company had a good
BATNA?
2. Compare the BATNA of the US company before and after the Europeans
made an offer. How did the US BATNA change?
3. How would you try to improve the BATNA of the Japanese company?
4. What kind of planning did the Japanese company have about their reserve
point?
5. Write in less than 20 words, the key error of the Japanese side.
_____________________________________________________________
6. Should you tell your BATNA? Why or why not?
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________

Consider the graphic in Figure 3.1. Did the Japanese firm in the case above
make this kind of error?
34 Core negotiation concepts

NORMAL ERROR LOSS OF CONTROL OUTCOME

CONTINUE
INVEST Will probably be bad if other
parties have noticed the loss
INVEST Internal controls of control.
(auditors, board,
OPTION whistleblowers), change
of management, or
START CLOSED change of heart by
ABANDON management are the
main possibilities for
regaining control.
ABANDON
Poor decision to
Normal decision continue possibly to
making to continue avoid
or stop based on embarrassment in
quality of expected front of stakeholders
outcomes. because the outcome
is not ideal.

FIGURE 3.1 In too deep – Decision tree

The flowchart in Figure 3.2 shows another way of understanding this error.

Start
First investment

Normal Quit, lose

Decision Point investment, no
further losses

Further
investment

Management
feels investment Normal decision making is
lost, possibly in order to
is high avoid loss of face, or
through fear of firing

Quit and be
Invest more False embarrassed in
time/money Decision Point front of
shareholders

Retreat is not
possible

Outcome
dictated by
counterparties

FIGURE 3.2 In too deep – Flowchart

 Core negotiation concepts 35

Do you agree?

Yoshiaki Fujimori, President and CEI of JS Group Corp was quoted in Nikkei
Weekly May 28, 2012 on negotiation success:
“The key to getting an edge in negotiations,” Fujimori stressed, “is to
remain open to scrapping the deal.”

Your reaction to this statement:_______________________________________

____________________________________________________________________

The notion of not being able to exit a project that is developing poorly is
described in the Japanese context by De Mente (2004, pp. 21–22). According to
DeMente, Japanese organizations may find quitting to be too upsetting and
therefore they feel forced to commit resources even after failure has become
obvious.
For more about strategic negotiation errors, see Appendix IV.

Section summary

Develop a strong BATNA so that you can leave a negotiation that is not
going well.

Negotiation error: watch your BATNA

The following case shows a major US company that could not back out of
a project after a public commitment that damaged their BATNA.

CASE 3.2: THE VERY PUBLIC OFFER

In 2011, Hewlett Packard (H-P), the well-known electronics company that

led Silicon Valley from its earliest days, acquired Autonomy, a leading UK
software and services provider.
In early summer 2011, the CEO of H-P, Leo Apotheker, and his counter-
party at Autonomy, Mike Lynch, discussed the possibilities of an acquisi-
tion. At the same time, other US companies considered making offers to
buy Autonomy. In the following weeks, however, those other companies
rejected acquiring Autonomy. Nonetheless, on August 18th,
H-P announced in a press release that they would attempt to take over
Autonomy paying about $10.25B, a 64% premium to the stock price. The
36 Core negotiation concepts

same press release announced the closing of H-P’s $40B personal com-
puter business, and the WebOS tablet and smartphone division, in order
to refocus on software services. Lastly, the press release disclosed that
H-P held $13B in cash for any and all business use.
Observers and analysts immediately criticized H-P’s plans and their stock
priced dropped significantly, from about $32 to about $23 that week. The
CEO was severely criticized and then fired on September 22nd. On
September 28th, Oracle released a statement that they had found Auton-
omy too expensive at about $6B (Marketwire, 2011). Nonetheless, the
new CEO at H-P, Meg Whitman, approved the acquisition at a premium
greater than 70% on October 3, 2011.
How was it possible for Autonomy to leap in value from $6–7B to about
$12B in a few months in the eyes of H-P even as its CEO was criticized and
fired?
To answer the above question, consider the following questions:

– What was Autonomy’s BATNA? Was it strong or weak?

– What was H-P’s BATNA before the press release of August 18th? And
after the press release?
– What was in the press release that informed the world that H-P could not
reverse course?

Some answers can be found in the H-P press release of August 18th:
www8.hp.com/ba/bs/hp-news/article_detail.html?compURI=tcm:110-
1051736&pageTitle=HP-to-Acquire-Leading-Enterprise-Information-Man
agement-Software-Company-Autonomy-Corporation-plc
And October 3rd:
www8.hp.com/us/en/hp-news/press-release.html?id=1373462

And in these news articles (feel free to search for additional related articles):
www.bloomberg.com/news/2011-08-18/hp-said-to-be-near-10-billion-auton
omy-takeover-spinoff-of-pc-business.html
http://fortune.com/2012/11/30/how-hps-meg-whitman-is-passing-the-buck/

Comments on the H-P autonomy case

Before the announcement of August 18th, H-P had the choice of buying other
software companies, though none had seemed so appealing. However, with
$13B, it could have acquired several smaller companies or looked for other large
companies or chosen other ways to make use of the money. Therefore, it had
a reasonably strong BATNA.
Autonomy had a weak BATNA – they could continue as an independent
company with little organic growth (known to H-P and other companies that
 Core negotiation concepts 37

consider acquiring them) and try to make more acquisitions. They were not
able to find another company to buy Autonomy. After the discussions with vari-
ous companies in early summer 2011, H-P seemed to have the stronger
alternatives.
However, after August 18th, Autonomy’s weak BATNA was better than
H-P’s. The press release of August 18th showed that H-P was betting almost all
its money (more than $10B of $13B total) on one company at the same time as
starting a major restructuring that would end their PC business and its profits.
To Mike Lynch at Autonomy, and most readers of the press release, it seemed
H-P had no choice but continue with the acquisition. H-P had publicly des-
troyed their BATNA.
Unsurprisingly, Autonomy raised its price.
On top of damaging their own BATNA, H-P made it very difficult to stop
the transaction because they had too much momentum in the project (full
restructuring plus acquisition) as well as ego and credibility at risk among board
members.
About a year after the acquisition, H-P admitted an $8.8B loss.

Understanding and misunderstanding interests

Be sure your ideas about the counterparties match the facts about their real
interests. In the graphic in Figure 3.3 we can see the obvious problem when
ideas about the counterparty are incorrect.

Company A Company B Company A Company B

Ideas about Real interests Ideas about Real interests

Company B of Company B Company B of Company B

Combined Combined

Match OK Mismatch

When ideas and reality about interests are correct, there will be a good match.
When interests are misunderstood, the parties will have trouble coming to agreement.
FIGURE 3.3 Interests – Match vs mismatch
38 Core negotiation concepts

CASE 3.3: CHINALCO RIO TINTO MISUNDERSTANDING OF

INTERESTS

A Chinese/Australian business deal that would have seen the creation of

a stable, diverse, multinational mining and metals company failed because
the parties misunderstood some of the interests.
With strong reserves of ore in Australia and a strong market in China, the
deal seemed sensible from a business viewpoint. Moreover, Rio Tinto was
looking for opportunities to get cash in order to decrease its debt. ChinAlco,
the Chinese aluminum processor, already owned 9% of Rio Tinto and was
willing to pay for more. ChinAlco attempted to gain another 9% by quickly
buying shares. They did this discreetly, buying on Friday in European mar-
kets. With the larger share, ChinAlco would have placed two directors on
Rio Tinto’s board.
But the deal collapsed. In the end it was the Australian government, not
Rio Tinto or regulators or shareholders, who blocked the deal for political
reasons (see Table 3.1 and Table 3.2).

Beliefs about interests

TABLE 3.1 Mistaken beliefs, ChinAlco and Rio Tinto case

ChinAlco was incorrectly thinking that … Australian government was incorrectly thinking
that …
• The Australian government is not • ChinAlco wanted to direct Rio
important in this process; Tinto’s resources only into China;
• The Australian government will • The Chinese government made the
not be worried about our breaking decision to gain more shares of Rio
the 15% share limit for foreign Tinto;
ownership;
• The Australian government will not • The quick move to gain shares was
see a threat in the presence of 2 dir- the start of a longer campaign to
ectors picked by a Chinese partner; gain more shares and power;
• The Australian government will • ChinaAlco’s shares would make it
not care that ChinAlco is majority impossible for Rio Tinto to develop
owned by the Chinese as a globalized leading Australian
government; company.
• Rio Tinto can influence govern-
ment enough to protect the deal;
• If we do it quietly but inform
them quickly, there will be no
problem.
 Core negotiation concepts 39

TABLE 3.2 Real interests, ChinAlco and Rio Tinto case

ChinAlco Australian

Diversification of ChinAlco. Strong interest in sticking to the 15% foreign

Gain experience with a respected foreign ownership limit.
business. Strong interest in developing a powerful
Gain some control (but not dominant) over Australian company.
supplies from Australia. Felt it was necessary to discuss such develop-
Summary: Wanted to diversify ments in the public media (the political lead-
ChinAlco from aluminum. ers were very upset by the “secret” attack).
Very sensitive to ownership by a foreign
government.
Summary: Would not consider the deal
without extensive public discussion.

https://money.cnn.com/2009/06/05/news/international/rio_chinalco.reut/index.htm https://www.
ft.com/content/a2ade4ee-51ff-11de-b986-00144feabdc0 https://www.ft.com/content/ab261d34-
56b5-11de-9a1c-00144feabdc0

Exercise:

1. As the Australian or Chinese side, propose some ways that this can become
a win-win situation considering the real interests of both sides.
2. Now try to include some ideas that are more than win-win, ideas that
increase the potential benefits to both sides, again considering the real inter-
ests of both sides.
3. Propose your ideas to your counterparties from the other country.

Section Terminology
Probe: to explore and push for deeper, specific information.

Section summary

Learn what you and the other negotiators really want, and try to satisfy
those needs.

Principle based negotiation

Principle based negotiation is an approach described by Ury and Fisher in their
1991 book Getting to Yes. The approach proposes that all parties focus on prin-
ciple (what they generally need and want) not on positions (specific points that
can or cannot be given away).
Because specific positions are essentially “win-lose”, they result in imperfect nego-
tiations and imperfect results. Compare the left side of the Table 3.3 (positional,
old-style thinking) to principle-based thinking.
40 Core negotiation concepts

TABLE 3.3 Soft vs hard, Ury and Fisher

Problem:
Bargaining based on positions: which approach?

Soft Hard
Friends. Opponents.
Seek agreement. Seek victory.
Make concessions for relationship. Demand concessions in order to start
Be soft on the problem and people. relationship.
Trust others. Be hard on the problem and people.
Distrust others.
Change your position easily. Hold tight to your position.
React to threats. Make threats.
Disclose your bottom line. Lie about your bottom line.
Accepted one-sided losses to reach Demand one-sided gains as the price of
agreement. agreement.
Search for answers they will accept. Search for your best and only answer.
Insist on agreeing. Insist on your position.
Avoid contests of will. Try to win contests of will.
Give in to pressure. Apply pressure.

Adapted from Ury and Fisher (1991), Getting to Yes, p. 13.

Ury and Fisher (1991) show us out-of-date thinking, with only two choices,
neither of which is suitable (see Table 3.3).
Ury and Fisher then show the way handle this Soft/Hard approach to negoti-
ating (see Figure 3.4).

Solution
Negotiate on the merits.
Problem
Bargaining based on positions: which approach? Principled
Change the approach People are problem solvers.
Soft Hard
Friends Opponents. entirely Seek wise outcomes.
Seek agreement. Seek victory. Separate people and problem.
Make concessions for Demand concessions in
relationship. order to start relationship. Be soft on the people, hard on the
Be soft on the problem Be hard on the problem and
and people. people. problems.
Trust. Distrust. Proceed with checks and balances, not
emotional trust.
Change your position easily. Hold tight to your position.
Put the focus on interests.
Disclose your bottom line. Make threats.
Accepted one-sided losses Lie about your bottom line.
to reach agreement. Demand one-sided gains as Discover all interests.
Search for answers they will the price of agreement.
accept. Search for your best and
Insist on agreeing. only answer. Create options for all sides to gain (mutual
Insist on your position. gains).
Avoid contests of will. Try to win contests of will
Give in to pressure. Apply pressure. Use objective and fair standards.
Be open to reason, adjust to principles and
fair thinking, not pressure.

FIGURE 3.4 Focus on problems, not positions

Source: Adapted from Ury and Fisher (1991), Getting to Yes, p. 13.
 Core negotiation concepts 41

Ury and Fisher see a negotiation as “people talking about things they care
about” and a chance to solve problems. This view is a positive starting point for
progress. The opposite view (which we will avoid) is to see a negotiation only
as “a chance to get something”.
Also, Ury and Fisher highlight two points that we have read about already:

• Understanding the interests of the parties.

○ Interests include all sorts of things: money, reputation, future opportun-
ities, relationships, respect, lowering risk, personal feelings, and so on.

• Increasing the potential benefits beyond expectations at the start of

negotiations.
○ Finding a new activity that increases the benefits to all parties: a new
area of business, blocking a competitor, developing new resources, cre-
ating a new product and so on.

Additionally, they tell us to:

• Separate the people from the problem;

• Focus on interests not positions;
• Invent options for mutual gain;
• Insist on using objective criteria.

Game theory
If you like thinking about game theory, you will enjoy this following discussion.
You can see that win-lose and win-win negotiating are similar to the “Prisoner’s
Dilemma” game.
Win-lose negotiating is “imperfect” with poor results for one or all parties but
Win-Win negotiating is also not perfect. Why not? Write your ideas here.
_________________________________________________________________
_________________________________________________________________

Examine Figure 3.4… is “pretty good” the best we can hope for?
It is sometimes possible to improve “pretty good” through synergy and creat-
ing new value. Synergy opportunities allow negotiation parties to get new bene-
fits together that they could not manage alone.
If win-win is not perfect, is win-win + new value creation a better way? Is it
perfect?
_________________________________________________________________
_________________________________________________________________
42 Core negotiation concepts

FIGURE 3.5 Value creation vs Value sharing

Source: Adapted from Negotiation Analysis, Raiffa (2002)

Go to http://money.howstuffworks.com/personal-finance/budgeting/negoti
ation5.htm to see another explanation of this problem.
Thus, you need to look for:

• Common interests • Fair sharing of value creation

• Mutual value creation • Synergy

Synergy sounds nice…what is it? Synergy (syn=together; erg=move) means

moving together in a way that could not be done alone. Try to think of
examples of possible synergy in negotiations that have been discussed previously
in this textbook, such as the ChinAlco case.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________

Section summary

Negotiate about the key goals and principles; do not fight hard for specific
positions because these may lead to dead ends and limited value sharing.
4
STRUCTURE AND PLANNING

Getting to start
If your organization is new or the reasons to talk are not clear, you can expect some
difficulty in getting to the first conversation. You may have to do some prepositioning
in order to get an opportunity to interact (Stein, 1989). Two basic approaches are
useful here:

• Threat, and
• Overwhelming benefit.

Threat works by presenting the other parties with a convincing risk of trouble that
is best solved by negotiation. Overwhelming benefit works by making the possible
gains of talking seem too appealing to walk away from. In both cases, we can say
that you must show that negotiating is better than the other parties’ BATNA.

Threat
Threats are a risky approach and should be used only where the stakes are high and
the relationship is already damaged. Consider the case of Disney in Europe below.

CASE 4.1: EURODISNEY 1992–1994

In a widely discussed business case, Disney started an amusement park in France

near Paris. The park had a disappointing start with low visitor numbers and
numerous difficulties. After some years, Disney found itself in severe financial
trouble. They needed to renegotiate and restructure their debt burden, but the
banks were not interested in negotiating.
44 Structure and planning

Boldly, Disney informed the banks that they would have to renegotiate, or
Disney would default and abandon the park, leaving the banks with a huge,
unpaid, expensive, and nearly useless property. The banks came to the table,
and the interaction started. Eventually all sides agreed to easier repayment
terms, the Disney operation is still in business, and the bank loans were paid.

Based on the case study above, was Disney’s threat successful?_______________

What did Disney’s threat include?_____________________________________
Explain why it was or was not an acceptable prenegotiation move.___________
_________________________________________________________________

Overwhelming benefit
Showing overwhelming benefit is less risky and is likely to start the relationship on
a positive footing. Negotiators can do this by presenting the benefits of their prod-
uct, service, or ideas in a very positive light. Show the maximum benefit in the best
case scenario that applies directly to the parties you want to interact with. In other
words, you have to successfully sell your idea to the other parties before you can
negotiate the details. When showing overwhelming benefit, you must not of course
lie or misrepresent, however you may ethically show “best possible cases”. Later, as
you negotiate, all parties can develop the offers and ideas together in order to agree
suitable services, prices, actions, and so on.

Building momentum
Sometimes negotiations are successful because the parties develop confidence about
dealing with each other. Even negotiators on the opposite sides of difficult issues
can develop trust, confidence, and empathy over time. Having successful agree-
ments helps to build confidence among all parties. But how can you develop confi-
dence the first time you negotiate a deal?
One way is to arrange the parts of the negotiation so that agreement can be
reached on some easy parts early in the process. With early successes, all parties may
feel more comfortable with difficult issues later.
However, it could be a serious error to manage all the easy parts first: all your work
could be lost if the last points in a negotiation cannot be resolved (see Figure 4.1).
Disadvantages: Each part can cause all parts to fail.
Advantages: You can integrate issues and link them together. By the end, both
sides are committed to agreeing, “no-deal” becomes increasingly less appealing.
However, be careful to avoid the error of being “in too deep” as discussed above.
Another approach is to treat some or all issues separately. You might be satis-
fied to resolve some but not all of the issues (see Figure 4.2).
 Structure and planning 45

If there is final agreement only after all

issues are agreed, chance of success
may be lower.

Full
Issue A + Issue B = agreement

FIGURE 4.1 Strict ordering of issues

Issue A

Issue B Issue fails Most or all issues in final

agreement; Some may be
delayed or avoided
Issue C

Issue D

FIGURE 4.2 Flexible ordering of issues

Disadvantages: One side may walk away early leaving unresolved issues. Agree-
ment on key issues may fail. All issues may not be integrated as well as possible.
Advantages: Each success creates good feeling and helps the entire project;
flexibility in adapting to the other parties.

To discuss with your partner – the best order

Easy issues first? Helps build momentum, but the last items may be too tough and
process may collapse. You may lose opportunities to integrate.
Easy things last? You may resolve deepest problems early, but there is no chance
to build momentum, confidence, and successes in advance.
Your comments: _________________________________________________
_________________________________________________________________

Is this the best way?

• Put some but not all the easy items in the beginning.
• Link some issues or groups of issues to allow good integrative negotiating.
• Even if you separate some issues, you should generally integrate issues
where possible – do not allow all issues to become separate.
• Be flexible, choose the way most suited to that negotiation.
• Be flexible, unlink and relink issues if necessary.
• Agree to a rough approach (road map) with the other party.
46 Structure and planning

Your comments: ________________________________________________

_________________________________________________________________
_________________________________________________________________

Useful hint: You can of course agree with your counterparties about the order
in which to accomplish the negotiation tasks. Discussing the order and the
reasons for it will help build the relationship.

Process moves
Another way to move the negotiation is to consider process moves (Kolb and Wil-
liams, 2001) that help the parties organize issues, bring problems into the open, dis-
cuss interests, and handle interactions. Process moves have influence on what is
discussed and how. For example, an agenda of points to discuss, encouragement to
speak out, encounters away from the formal discussion table, and expert speakers
are moves that may help a negotiation to progress.

Section summary

Small successes can help build relationships and confidence. Also, after
many successes and much time, all sides may be less willing to give up and
use their BATNA.

3D negotiation
Preplanning is a key teaching of this textbook. No person or team can manage
a business negotiation without planning – lots of planning!
You know that 3D means three dimensions. The idea of “3D” Negotiation is
for negotiators to think on three levels about any negotiation. The three dimen-
sions are described in Table 4.1.

TABLE 4.1 Three dimensions of negotiation

Tactics Deal Design Setup

At the table On the drawing board Away from the table

People and process Value, substance, and outcomes Architecture
Build trust, handle hard- Create agreements that maxi- Determine participants,
ball approaches, bridge mize value for both sides, BATNA, overall
cross cultural gaps… improve on goals, are more sequence, choices…
sustainable…

Source: 3D Negotiation, p. 19
 Structure and planning 47

These dimensions do not come one after the other, they can happen at the
same time or switch on and off. However, the Setup and Deal Design dimen-
sions mostly take place in advance of interacting with the counterparties (the
Tactics dimension). These two dimensions are largely about preparation; how-
ever, the negotiators can work on these dimensions any time.

Tasks to be done in the setup dimension

Determine the participants in the negotiation

Decide on the best team members for your side. Decide who will lead the team –
an engineer, a sales and marketing person, a high-level manager, or another person?
What skills and personalities do you want to have in your team? How many people
should be on your team?
Be sure to consider the expectations of the other side as well as the issues in the
negotiation as you make these decisions. At this point a basic stakeholder analysis is
necessary. List the key people and organizations and their main interests. Later,
complete a more thorough analysis of all stakeholders and their interests.
A thorough stakeholder analysis will be helpful for understanding the immediate
surface issues as well as deeper issues. See Appendix VI for more on this.
In addition to your own personnel, you may be able to pick the people on the
other sides that you will talk with. For example, you may want to approach a key
figure in a company in order to avoid a person with a bad reputation. You may prefer
to deal with someone you already know, someone who is respected in the industry,
someone with a reputation for negotiating well, a high-ranking person, a very skilled
engineer, or other individuals for other reasons. In a very complex negotiation, you
may want to have technical information presented by an expert individual or organiza-
tion that is neutral to the negotiating parties in order to increase the knowledge of all
parties. You may be able to include or exclude some organization or individuals in
advance by setting rules that other negotiation partners must agree to if they want to
participate.

Determine your BATNA

Thoroughly investigate your alternatives to the negotiation. The stronger your
BATNA, the more negotiating room and comfort you will have. As you inves-
tigate your BATNA, try to make it stronger. Even if the making your BATNA
stronger requires a lot of time, start the process.
Suppose that strengthening your BATNA will take more time than the
planned length of your negotiation. Explain why it is a good idea to do it:
_________________________________________________________________
_________________________________________________________________
48 Structure and planning

Determine the BATNAs of all parties

It is not enough to know your own BATNA. As discussed above in the
BATNA section, you will need to know the BATNA of the other side. Now is
the time to learn about it and to weaken it. Why should you try (or not try) to
weaken the BATNA of the other side? ________________________________
_________________________________________________________________
_________________________________________________________________

How might you be able to weaken the BATNA of another negotiation

partner?
______________________________________________________________
_________________________________________________________________
_________________________________________________________________

Overall sequence
During the early planning, you should check whether there any issues that
must be resolved before other issues. For example, it might be necessary to
determine a rough timeline before agreeing to milestones for portions of
a project.
Your early planning and checking might identify some issues to be done in
sequence…however, once the negotiation starts, it is generally best not to
stick to a rigid plan. A good negotiator reacts flexibly as new information
appears.

Approximate timing and timescale of the negotiation

Consider the timing of the start and finish of the negotiation. Some points to
include in the planning:
When
• Calendar year (major holidays or vacation periods to avoid);
• National holidays in your country and the countries of other negotiation
partners;
• Fiscal year (the very end of the fiscal year is usually extremely busy);
• Business seasons (avoid times of year that are very busy for the other
organizations).

How long
• Planning period on your side;
• Estimated number of days, weeks, months, or years to talk;
• Time constraints due to availability of resources;
• Time expectations of the back table.
 Structure and planning 49

The back table

There is a hidden partner in almost every negotiation, the “back table”. This
refers to a boss or coworkers or other group that the negotiators will report to.
Even the CEO reports to someone: the board! The back table (people or
groups) is sometimes called a constituent group (Ware, 1980). The early phase of
planning is the time to be sure that you and your back table are in close
understanding about all expectations, limitations, and issues related to the
negotiation.
One of the limitations you must agree about with the back table is time. Often,
people who are not part of the negotiation have the expectation that everything will
be resolved quickly. The truth however is often very different. In fact, the higher the
quality of communication in the negotiations, the more likely that questions will arise
requiring more research time. Good negotiations usually mean good solutions. Good
solutions, of course, require time to develop. The lesson is clear: you will need lots of
time, maybe more than your peers and bosses expect. Be sure to change their
expectations.
See Chapter 8 for more discussion about the back table.

Research to do list
Develop a list of steps for your research and a list of specific things to learn
about. Your research “to do” list will increase in size as you go on. But the list
should start by fulfilling the phrase, “Know the facts, know the people.” View
the video of Dr. Kurt Biedenkopf at http://bit.ly/1riIzdN for the comments of
this experienced negotiator. If the link does not work, visit the YouTube chan-
nel for “The Negotiation Challenge” and look for the video titled “Kurt Bie-
denkopf on negotiations” there. His summary in the first 25seconds packs
tremendous insight and power.
Biedenkopf’s simple phrase, “know the facts, know the people”, is a proposal to
learn in detail about the negotiation issues and the people and organizations related
to them. This means knowing something about the personalities of the negotiators
on the other teams. It may be possible to learn about them in advance as well as to
learn about them through interactions during the negotiations.
As for the facts…it is up to you to search every possible source, on line or
not, for relevant facts and information. Sources you might include:

• Recent newspaper articles;

• Old newspaper archives;
• Specialist industry periodicals;
• Court records;
• Network of business acquaintances, friends, and family;
• Government contracts;
• And so on…
50 Structure and planning

Checklist
Develop a checklist of the basics that you need to achieve during negotiation.
See the next section for more info.

Section summary

Most of the work in negotiating happens before the negotiation. Use mul-
tiple planning methods to prepare.

Basic planning

When preparing for a negotiation you need to prepare your negotiation shop-
ping list. This is a list of the things you want to get out of the negotiation.
Bare Knuckle Negotiating, Hazeldine (2006), p. 35

Prepare a list of what you want to get from your current negotiation.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________

The simplest form of planning is the shopping list mentioned above, a checklist
of things you reasonably hope to accomplish. A checklist is a good starting
point. But we can expand a checklist easily to make it more useful.

1. Make a list of results that you have to get. These necessary items are ones
that you must accomplish if the negotiation is to be better than your
BATNA.
2. List the results that you would like or intend to get additionally, but that are
not absolutely necessary.
3. List the things that you can reasonably trade away in order to get what you
must have and want.

Use the above three categories to create a HIT list (LaFond, Vine and Welch, 2010):

H – Have to get (must have these reserve point items or you will walk away)
I – Intend to get
T – Trade in order to get H and I items
 Structure and planning 51

Read this short case and create a HIT list for the things you need.

CASE 4.2: THE RIGHT HOTEL, THE RIGHT DEAL

You are seeking a large hotel to host a convention in Singapore. There are
many hotels and the convention will start the year after next, so you have
much time and several choices. Before you talk to the hotel you prefer most,
you must think about the needs.
You expect to have about 1000 attendees over 3 days. The hotel has only 290
rooms so you hope to reserve all or most of them for your attendees until a little
before the event. It would be best to block them until two weeks before the
event, but really, the attendees should plan and reserve four to eight weeks in
advance. The retail cost of a hotel room is $250 US (about 2000 HKD), and this
is certainly too expensive for most of your attendees, so you feel it is necessary to
lower the price to at most $190 per night. You could guarantee some of those
rooms will be filled, but you are nervous about guaranteeing all of them, of
course. Breakfasts at the hotel are quite expensive in addition to the hotel room,
so you would like to secure free breakfasts for your ten staff members and
a 20–50% discount for all conference attendees. You know that the hotel usually
offers free access to the swimming pool, but you have heard the pool is small
and crowded, so it might not really be useful for your attendees. The fitness
room, however, is supposed to be quite good, but is not free.
Now consider the items you need to get, would like to get, and could
trade. List them appropriately in Table 4.2.

Use the simple table (Table 4.2) below for your HIT list.
The HIT list in Table 4.2 is easy to manage and useful, but it is only
a starting point. We can improve on it. One of the improvements will be
adding steps between your starting point and your acceptable minimum reserve
point.

TABLE 4.2 HIT list

Have to get Intend to get Tradable

Issue 1
Issue 2
Issue 3
* Note that “have to get”
includes “have to get rid of”
52 Structure and planning

TABLE 4.3 Expanded HIT list with steps

Have to get (reserve) Steps (intend to get) Don’t need (tradable)

Price at or below: Start by asking for $145; Decide to trade some (or any)
$200/night Accept $155 if free wireless; amenities and conveniences (get
$175 if free wireless and gym, them or give them up) in order
pool and 50% breakfast to attain an intended target or
discount; reserve point.
$190–200 if the hotel has all
of the above and additional
suitable services to offer.

The expanded HIT list in Table 4.2 is a simplified version of the Raiffa
Scorecard discussed later in this chapter. The Raiffa Scorecard is more powerful
and useful, but first we will discuss backward mapping as a way to structure and
plan the negotiation.

Identifying interests
In this section we will go much deeper into the process of negotiation planning.
Understanding the interests of the parties is a vital step in planning. Your notes
should include your interests and what you guess or know about the other par-
ties’ interests and goals.

…what are valid interests to include?

…all sides (you and them)

Please choose some interests that could be included in your notes:

__ your time restrictions __ their time restrictions

__ your maximum price __ their minimum price
__ your most and least important issues __ relationships among their negotiators
__ your long-term hopes __ recent trend of their stock price
__ your _________________________ __ their priorities

How to determine interests

Don’t take your boss’s list of preferred outcomes as the final list of your own
interests, investigate all interests of all parties thoroughly. Most business negoti-
ations involve money, but there may be many more issues and interests. Start
with the ones in the interest grid below and add to the categories.
 Structure and planning 53

TABLE 4.4 Simplified interest grid

Their understanding of this

Interest Category Our understanding of this issue issue

Financial

Reputational

Personal

Staffing

Capacity

Business cycle

Regulatory

Timing

Perspective taking as a way to identify interests

In this approach, negotiators try to understand the goals and difficulties in
a negotiation from the point of view of other sides. However, they concentrate on
the desired targets and goals more than the feelings of other sides. Galinsky,
Maddux, Gilin and White (2008, p. 382) used the phrase, “Try to understand what
they [the other side] are thinking in their situation.” In that research, perspective
taking resulted in greater joint gains and individual gains. Perspective taking is done
with little or no interaction with the other sides, therefore it tends to result in less
relationship growth and empathy. That means there is less chance of developing
a bias such as liking or disliking the other sides.
To use perspective taking effectively, consider the other party and their possible
ideas about issues in Table 4.4, and consider the perspective the other parties may have
on each interest. The result could be a large number of perspectives! Further research
and interaction with the other parties will help you identify whether they are accurate
or not.

CASE 4.3: PROFESSOR’S PATENT

Suppose that you are trying to negotiate use of a patented process for your
startup company. You do not have much money, so you prefer to pay a royalty
as sales develop in the future instead of buying the patent outright. On the other
side of this negotiation is a professor who owns the patent and is near retirement
and currently working at a university in Malaysia. What do you think might be
54 Structure and planning

the perspectives of that professor? Taking his perspective, write down what he
might be thinking about this deal:
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
Compare your ideas with another student and be prepared to discuss with
the group.

Next steps
To dig deeper into interests, Lax and Sebenius suggest these steps in 3D Negotiating,
p. 76:
Four Practices That Help You Get Interests Right

1. Ask, listen, probe

2. Use public sources to map interests
3. Get insight from internal sources
4. Get insight from knowledgeable advisers

We have already discussed the first one, asking and listening. The third one we
can understand as asking people you know in your network or in your company
who might have some insight or information about the other party. The fourth
one we can understand as asking professionals and consultants beyond your cow-
orkers. Let’s consider the second one … “public sources”.
Public sources means looking widely at newspaper articles, special industry jour-
nals, newsletters, internet chat rooms, speeches, YouTube videos, books, blogs,
comments by experts, SEC filings, tax information, and all other sources that are
legally and publicly available.
Important: it is also possible to get information by unethical methods: misrepresent-
ing yourself to people familiar with the other parties and the planning; stealing data;
paying another person to steal data… none of these methods are acceptable in the real
world of business. These methods will damage or destroy business relationships with
negotiating partners and others when discovered. Moreover, they may result in legal
troubles.
Exercise: Discuss with your partners how you will use public sources to learn
about interests for the final team negotiation.
Write down some sources and what you expect to find in them:

a. _______________________________________________________
b. _______________________________________________________
c. _______________________________________________________
d. _______________________________________________________
e. _______________________________________________________
 Structure and planning 55

TABLE 4.5 Brett’s Negotiation Planning Document

Issue Self Other

Investment Position: $3.5 mil Position: possibly $2–4 mil

Priority timing-ASAP Priority High ROI; timing of
Very high payment

Priority Priority

Priority Priority

Source: Brett (2007)

Generally, you should consider all possible interests when planning for the
negotiation. In the end, you should try to make a final list with notes. You can
carry a list like this to the negotiating table with you.
See Appendix III for a planning sheet based on Brett’s planning document.

Backward mapping
In their book 3D Negotiating, Lax and Sebenius suggest “mapping backward” as
a process for crafting the agreement and the negotiating strategy. First, determine
what your final agreement should look like. Next, go backward towards the
point where research starts by understanding the barriers to agreeing (Figure
4.3). As you identify and understand each barrier to the agreement, you can pre-
pare positions and offers that will make a final agreement possible. After that
planning, start interacting and talking with the counterparties and move forward
to the final agreement.

Deal breakers
The processes of investigation, research, planning, and especially, backward plan-
ning, should help you identify problems that are so difficult they cannot be
overcome. These may be deal breakers. It is important to identify possible deal
breakers and confirm whether or not they are unresolvable early in the process
of the negotiation. If the deal breakers cannot be resolved, they will stop the
negotiation. Leaving deal breakers until the end of the talks will result in the
complete loss of time and effort invested.
Deal breakers often are items that one side requires with no options for
adjusting or avoiding. In the ChinAlco Rio Tinto case described above, 18%
ownership by a foreign company was a deal breaker in the eyes of one stake-
holder, the Australian government.
56 Structure and planning

First: BACKWARD PLANNING

B B B B B
a a a a a
r r r r r
Start r r r r r Agreement
positions i i i i i
e e e e e
r r r r r

Last: NEGOTIATION

Work backwards from the targeted agreement when planning

FIGURE 4.3 Backward planning

Sometimes inexperienced negotiators feel they must gain a certain outcome

and therefore they hold tight to a position. If the position is too aggressive and
the negotiator cannot be flexible, it may become a deal breaker, destroying the
opportunity to complete.

Game theory
You may recognize this backward mapping approach from Game theory: back-
ward induction. Game theory shows how powerful a tool this is for choosing
the right path to the outcome you want. The process is the same: identify the
possible outcomes; select the best one you can reasonably attain; understand the
steps necessary to reach that outcome by working backwards through the inter-
ests and needs and positions of the other parties.

Consider your expectations as you develop the “deal you want”. Howard
Raiffa writes that even experienced negotiators generally expect better
results than they really get. Therefore, be sure that the deal you want is
really acceptable to the counterparty.

In the process of mapping backwards, points in the “deal you want” must not
appear in “unacceptable to the other side” nor in “not agreeing”. Compare these
carefully to see if there are conflicts you must resolve before the negotiations start.
 Structure and planning 57

You can find blanks prepared for backward mapping in Appendix III. Appen-
dix III contains various planning documents. Use all of them or only the ones
you feel comfortable with.
Now consider the next negotiation in this class. Please consider the final goal
of your side and your counterparties. Draw a full page “map” approximately fol-
lowing backward mapping from Lax and Sebenius.

Section summary

Backward mapping is a good tool for planning. To use this or any other plan-
ning tool, you must know the interests of all the parties in the negotiation.

Priority and outcome mapping

It can be confusing to track all issues and the possible outcomes. Howard Raiffa, in
his book Negotiation Analysis: The Art and Science of Negotiating offers a practical way
to manage priorities and possible outcomes. He suggests the Table 4.6 to organize
the interests and outcomes and he suggests using points that add up to 100 to evalu-
ate importance of issues and the benefits of the outcomes.

TABLE 4.6 Sample Raiffa scorecard

Issue Outcome
Issue value Outcome value

1 cost 15 a. over $15 mil 15

b. $15 mil 12
c. $10 mill (reserve) 7

2 investment 10 a. $3 mil and shared staff input 10

b. $3 mil 7
c. $1 mil 4
d. none (reserve) 0

3 intangible property 20 a. retain all with full control 20

b. retain key portions 17
c. retain less important items 15
d. sell all (reserve) 10

(Continued )
58 Structure and planning

TABLE 4.6 (Cont.)

Issue Outcome
Issue value Outcome value

4 joint development 30 a. projects Alpha, Beta, and 30

Gamma
b. only project Alpha 15

5 joint access to staff 25 a. share IT and R&D staff and skills 25

b. share IT staff and skills 20
c. share administrative tasks and 10
skills
d. none 2

Total=100 100 Total of selected outcomes

maximum

Adapted from Negotiation Analysis, Raiffa, Richardson, and Metcalfe. (2002, p. 217)

A blank scorecard can be found in Appendix III of this booklet.

How to make and manage a Raiffa scorecard

This scorecard is a helpful way to simplify the issues in a negotiation and easily
understand the choices you might pursue or trade.

Step 1: write down the key issues;

Step 2: weight the issues by importance with points adding up to 100;
Step 3: write down alternative possible outcomes for each issue;
Step 4: set points for each possible outcome, up to the maximum for that issue;
Step 5: consider all the points, you can now see priorities and preferences – use
this information to structure your negotiation and decide what you can trade
or abandon in order to get something more valuable;
Step 6: As you negotiate, track the outcomes that you agree to. Of course, you
must remain flexible and adjust to new value possibilities that you may dis-
cover during the negotiation.
Practice: Fill out the scorecard in Table 4.7 for one of the cases in this course.

Evaluating success
The Raiffa scorecard can also help evaluate success. After a complex negotiation, it
is often difficult to know if you did well or not so well. A glance at the scorecard
TABLE 4.7 Blank Raiffa scorecard

Issue Issue value Outcome Outcome value

Total=100 maximum 100 Total of selected outcomes

Adapted from Negotiation Analysis, Raiffa, Richardson, and Metcalfe. (2002, p. 217)

TABLE 4.8 Sample Raiffa scorecard for evaluating results

Issue Issue value Outcome Outcome value

1 cost 15 a. over $15 mil 15

b. $15 mil 12
c. $10 mill (reserve) 7

2 investment 10 a. $3 mil and shared staff input 10

b. $3 mil 7
c. $1 mil 4
d. none (reserve) 0

3 intangible property 20 a. retain all with full control 20

b. retain key portions 17
c. retain less important items 15
d. sell all (reserve) 10

4 joint development 30 a. projects Alpha, Beta, and Gamma 30

b. only project Alpha 15

5 joint access to staff 25 a. share IT and R&D staff and skills 25

b. share IT staff and skills 20
c. share administrative tasks and skills 10
d. none 2

Total=100 maximum 100 Total of selected outcomes 66

Adapted from Negotiation Analysis, Raiffa, Richardson, and Metcalfe. (2002, p. 217)
60 Structure and planning

would show quickly the overall results. The shaded lines below are the agreed out-
comes, so we can see that the negotiators got 66 out of 100 points for getting 1b, 2b,
3a, 4a, and 5d.
Maybe they should have provided better reasoning for issues 3 and 4! On the
other hand, they were successful with 5a, and that was a very important issue
and the best outcome. Perhaps if Project Alpha goes well, they can renegotiate
in order to extend the agreement to include Beta and Gamma.

Section summary

Outcome mapping is a good tool for planning. To use this or any other plan-
ning tool, you must know the interests of all the parties in the negotiation.

The sequence of talk at the table

After considering the setup and planning that must occur before talks start, we
still need to understand the best sequence of events at the table. What to discuss
first? Is there anything that should be done early on? Or avoided?
Consider the following elements of negotiation. Write a number before each
one to indicate what should come first, second, third, and so on.

__ Major issues, get to the point! __ Small talk

__ Company history __ Rules and protocol
__ Problem solving __ Agenda
__ Information sharing __ Introductions and personal experience

Please write your reason for the item that you chose as #1. ______________
_______________________________________________________________
_______________________________________________________________

Let’s consider the pros and cons of starting with each point.
Agenda: Agreeing to the agenda is an important process that may be quite compli-
cated. Each party may have reasons for starting with certain issues. Because it is
complex, and possibly divisive, it is better not to start with this.
Company history: Each company has its own history that helps define what it is
and how it works. This information is important to understanding interests and
motivation. However, it may be useful to first understand the people.
Information sharing: The process and degree of information sharing develop
with interaction. It cannot be pushed into a first activity at a first meeting.
Instead it will occur over many meetings.
 Structure and planning 61

Introductions and personal experience: This activity is a good way to start any
meeting, especially when participants are new to each other. This activity and
small talk can mix easily together. Some individuals and cultures will make this
longer or shorter based for example on preference, rank, and comfort level.
Major issues: Get to the point! It is best not to start here as parties are likely to
come directly to a conflict or deadlock. It is important to first understand
people, interests, organizations, and details in order to solve possible problems.
Problem solving: This activity requires time and much information. It cannot
be completed successfully in a first meeting.
Rules and protocol: This topic is important to establish early in the relationship
in order to avoid unintended false steps, insults, and bruised egos. Usually this is
best placed after introductions and small talk.
Small talk: A good way to start any meeting. It helps to create a positive atmos-
phere and starts the flow of information sharing. Some individuals and cultures will
prefer more or less small talk. Prepare accordingly with suitable casual topics.

Section summary

Start face to face interactions with introductions and possibly gift exchanges
and small talk. Use these interactions to build rapport and to start the flow
of information.
5
SOME CULTURAL CONSIDERATIONS

Top down/bottom up
Please read about the two approaches in Table 5.1; which feels most comfort-
able to you?
Neither approach is perfect or “correct”. Be flexible and work with your counter-
parties and team members to view negotiations from both approaches. Your counter-
parties may not even realize that they like to progress “top down” or “bottom up”.
Design your negotiation approach(es) in advance. A good negotiator learns to
design the negotiation before starting the actual negotiation meetings. Before means
“long before” because time is necessary to consider, learn, and redesign.

TABLE 5.1 Top down, Bottom up

Top down Bottom up

This means getting the global “large pic- This means dealing with specifics before
ture” goals in order before dealing with coming to a global conclusion. As the spe-
details and specific issues. As the overall cifics are discussed and agreed, they build
picture becomes clear, the logical path to the larger, final picture.
achieving it also becomes clear.
Example: generally including or excluding Example: negotiating the details of an
some areas of activity before working out agreement (order volume, delivery time,
details. unit price, services etc.) before coming to
broader issues.
Does it start from an agreement on general principles and proceed to specific items [top
down], or does it begin with an agreement on specifics, such as price, delivery date, and
product quality, the sum total of which becomes the contract [bottom up]?

Source: Salacuse (2004)

 Some cultural considerations 63

If you can, agree with the other party in advance about which approach to
use in order to avoid misunderstandings.

Top down, bottom up and culture

This dimension [top down/bottom up] captures whether negotiators build
agreement by negotiating specifics, such as product characteristics, price,
and terms of delivery, or whether they start from general principles and
then proceed to specific items.
(Salacuse, 2004)

Finnish respondents strongly preferred a top down approach, with

85% positioned on that end of the continuum … Indian responses
stood in sharp contrast with more than 50% preferring a bottom-up
approach, although once again a sizeable portion (27%) located at
the top-down end. The Turkish response pattern leaned toward
a top-down approach, while Mexican and US patterns reflected no
strong preference.
(Metcalf et al. 2006)

Cultural issues: If possible, establish the mutual starting point (top or

bottom) before you arrive at the negotiating table. In the real world, you
may come to know what to expect from certain people, companies, or
within a country or region. Do people from the western part of your country
prefer to start top down while people from the eastern part of your country
prefer to start bottom up? What about people from different parts of China?
Or Australia? Or your country? What about companies? Does Mitsubishi
(Japan) work top down? Does SingTech (Singapore) work bottom up?
Always try to check first by talking to the other side or talking to people
with experience.
As mentioned above, expectations may vary from country to country or com-
pany to company. Metcalf et al. (2006) have this to say:

• Build momentum with Indians by negotiating agreement on smaller issues.

• Build rapport with Finns and lay out the general themes and principles
behind the negotiations

Warning: In the text above, Metcalf et al. (2006) make it clear that not all
Finns, Indians, Mexicans, etc., react or think the same way. Never stereotype
regarding country and culture!! Be flexible and react to the clues you learn
about your counterparties as you research and as you talk to them. Check
about the individuals in advance if possible. If you cannot check in advance,
discover their preferred approaches at the first encounter.
64 Some cultural considerations

Review
Which is better, top down or bottom up? Neither one is objectively better. How-
ever, it is generally a good idea first to explore some global issues (top down) before
getting into details (bottom up). You might start by generally agreeing the overall
goal, then turn to groups of issues or individual issues.
In your planning phase, long before you talk, you must consider top-down,
global issues. If you know the global picture, you may be able to more successfully
link details and integrate issues.

Your comments:_____________________________________________________

_________________________________________________________________

Section summary

Before the negotiations, plan starting with the big picture (top down) and
again starting with the details (bottom up). Adapt flexibly to the approach
the other side uses.

Culture and negotiation

In the section above, we learned from Salacuse (2004) and Metcalf et al. (2006)
that negotiators from some countries have preferences in how they negotiate.
What preferences do people in your country or region have for negotiating?
_________________________________________________________________
_________________________________________________________________

Interview: Ask three people in this class all of the questions below noting their
home country or region. When you answer other students, avoid answers like
“both”.

Which do you think is more important for a successful negotiation team?

Highly skilled members High level figure as a member

(i.e. engineers) Person (i.e. CEO)

1
2
3
 Some cultural considerations 65

Should a negotiator represent an organization or his/her own self?

Only “self” – show your quality Person Only the organization – your pres-
as a negotiator tige has no importance

1
2
3

Which is better for you?

It is good to mix all the issues Person It is much easier and less confusing to
together to get all the opinions at handle issues one by one.
once.

1
2
3

How do you prefer business negotiations to proceed – casually or quite formally?

Casual is best, we can discuss in con- Person Formal arrangements are best so we
ference rooms or at dinner, no one can easily know when we are “talk-
should feel pressure about position ing business” or relaxing and know
and roles. the other person’s role.

1
2
3

How do you prefer business negotiations to proceed – quickly or at a slower speed?

Fast is best, we should come to Person Slower is best, we should use time to
a conclusion quickly in order to learn about the projects and
decrease the cost negotiation and so opportunities.
we can get on to other business.

1
2
3
66 Some cultural considerations

What do you think is the point of negotiation?

The overall purpose is to discuss busi- Person The point is to complete a suitable
ness issues. deal.

1
2
3

Which idea about contracts feels best to you?

A contract is a fixed document that A contract is a starting point for

you must follow exactly. Person immediate and future business.

1
2
3

Questions developed partly based on concepts from Trompenaars and Hampden-Turner (1998), Hof-
stede and Hofstede (2005)

The questions above are not easy because the answers are limited and you may
not propose your own ideas. The questions and answers are designed to help you
understand that people might think in ways that are very different, approaching the
same problem from different directions. Knowing that approaches might be very dif-
ferent helps you adjust constructively instead of being surprised and upset.

Expectations
Culture is deeply connected to, even defined by, people’s expectations of each
other. With experience, a negotiator from one cultural background can learn
the expectations of another cultural group. With that knowledge, the negotiator
can adjust behaviour to come closer to the expectations of the other side.
A 2013 interview with an American business negotiator showed that Japanese
businesspeople, in his experience, were more formal than Americans, and he
adjusted his behaviour appropriately for them.

Interviewer: How do you usually, ehm, how do you usually address your
[Japanese] negotiating counterparty? Very formally or informally?
Interviewee: Yes, yes, very formally. To me it just comes naturally that you
need to be formal.
Interviewer: mhmm, what about the Americans?
Interviewee: They don’t give a flip, haha.
Sepstrup and Ipsen, 2013, p. 76
 Some cultural considerations 67

The negotiator in the example above expects to behave more formally with
Japanese businesspeople because of his ideas about Japan and his experience
there. However, Japanese businesspeople might be even more formal with
each other or with other East Asians than with Americans. Japanese business-
people generally consider Americans to be “more casual” and they prepare
themselves to act accordingly toward Americans. The difference this author
has seen in various encounters involving North Americans and Japanese is
striking: in meetings, Japanese individuals may smoothly transition between
friendly smiles and handshakes for North Americans and formal bows and strict
greeting formulas appropriate to the relative age and rank of other Japanese
businesspeople.
The above example from Sepstrup and Ipsen shows Americans adjusting to
their ideas about Japanese people and Japanese people adjusting to their ideas
about Americans. It seems that all sides in cross-cultural encounters often mutu-
ally adjust to the behaviours they think the others prefer.
In the end, expectations, cultural behaviours, and actions of real people in
real situations are very fluid.

Consider a country or region that you know well. What kind of negotiation
behaviour can you expect in that country? Would it be the same in the east and
west? North and south?
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________

What kind of behaviour can you expect from an individual, maybe someone
named Paul Tomlinson, from San Francisco, US?
_________________________________________________________________

Write your very brief conclusion about culture and negotiation:

_________________________________________________________________

Culture and stereotyping – not a reliable approach

…individuals and groups within cultures may be united on some dimensions
(Indians on direct communication), deeply divided or split on others (Indians
on attitudes), and uncommitted on others (Finns on risk-taking). It is no longer
acceptable nor is it accurate or useful – if it ever was – for, say, an American
negotiator to expect a Mexican to be relationship-oriented or an American
compatriot to be contract-oriented. Our findings point to the inherent inaccur-
acy of what Osland and Bird (2000) have referred to as ‘sophisticated
stereotyping’.
(Metcalf et al. 2006)
68 Some cultural considerations

Short version
People from one country may have some similarities … and maybe not. You
can learn about general styles and cultural preferences from “Doing Business in
_____” guidebooks. These guidebooks can help you to acquire practical infor-
mation about gifts, general behaviours, and values.
But you cannot safely apply that general information to individuals. Do not
stereotype!
What to do: learn about the individuals and their companies in addition to
learning the general behavioirs of the appropriate cultural groups.

Culture and language

When you are negotiating with a group from another country with a different
language, you will probably interact in English. In this situation, is it a good
idea for you to speak in your own native language with your negotiation
team? Yes / No
Please explain your answer: __________________________________________
_________________________________________________________________

Browaeys and Price in their (2011) textbook Understanding Cross-Cultural Man-

agement compare cultural approaches to common management issues. They
compare five areas of management: planning, organizing, staffing, directing,
and controlling to eight dimensions of culture. The dimensions are relative
scales of how strongly a culture may prefer behaviours. The relative positions
of a person or a group or company on the dimensions highlight areas where
people may work well together or not, in part because their expectations are
met or not.
The eight dimensions of culture they discuss include:

• High versus low-context;

• Doing versus being;
• Polychronic versus monochromic;
• Future versus past orientation;
• Hierarchic versus equality;
• Public versus private;
• Collectivist versus individualistic;
• Competitive versus cooperative.

Mapping one’s own expectations to those of teammates or counterparties may

show how you can cooperate or where you might conflict. If conflict is on the
horizon, planning and learning and adjusting may help to avoid the conflict or
even create opportunities to create a new mutually agreeable approach.
 Some cultural considerations 69

Polychronic
5
4
Doing Future
3
2
1
High‐context 0 Public

Competitive Hierarchy

Collectivism

FIGURE 5.1 Profile comparing two cultures

A comparison of cultures might look like this one from Browaeys and Price
(Browaeys and Price, 2011, p. 137).
In the radar chart in Figure 5.1, we can see large differences between ideas about
time scheduling (polychronic), competitiveness, individualism, hierarchy, and public
space. On the other hand, both sides may have similar ideas about future planning.
With these points in mind, the sides can prepare to learn about the differences in detail
looking for ways that they can complement each other or resolve conflicts. Even if
only one side conducts this kind of cultural mapping and comparison, they can prepare
appropriately and communicate their findings and concerns to the other parties.
In the end, negotiations across cultures may be more time consuming than
comparable negotiations within the same culture. Brett and Okumura in Brett
and Okumura (1998) showed that mutual gains were significantly lower when
negotiating teams were from different cultural backgrounds.
See Appendix V for more insights on culture and negotiating.

Corporate culture
You must also learn about the culture and beliefs of the businesses you will interact
with. Some business sectors have a corporate culture that sets them apart from other
areas. For example, the world of IT is known for late nights, flexible hours, casual
clothing, and working intensively as projects come to a head. On the other hand, the
world of banking is better known for regular hours, working at a reasonable pace, and
sticking closely to the rules of banking imposed by government or international
standards.
However, inside a business sector, not all the organizations and companies
may share a culture.
For example, within Japan’s finance sector, Mitsui Sumitomo Bank and
MUFJ have very different corporate cultures with different levels of power and
70 Some cultural considerations

TABLE 5.2 Corporate culture comparison

Samsung Lucky Gold

Emphasizes individual merit and personal Emphasizes team success over indi-
skills over the team. The person is number vidual ability. Harmony is number
one. one.
Empowers individuals to work fast. Requires individuals to work within
the system and company hierarchy.
Large portion of pay is based on personal per- Personal bonuses are not usual.
formance (bonus).
Product development and marketing are Product development and marketing
highly integrated. are more independent.

flexibility given to workers. In Korea, Samsung and Lucky Gold have very dif-
ferent cultures, despite being in the same industry (see Table 5.2).

Section summary

Be aware of cultural preferences and behaviours in teams from other regions

or countries, but never expect specific behaviour, always be flexible and sen-
sitive towards your counterparties.

Weak/strong points of North American negotiators

Understanding some common failings or strong points among a group of people
might help you avoid communication errors, deadlock, and failed negotiations. In
addition to gaining some insight into another group, the tables below may help
describe yourself and your coworkers and counterparties within your culture. After
reading about the cultures broadly described below, try listing some strong and weak
points of your cultural background with appropriate comments that will help you and
others work together.
Broadly, it is possible to list some common strengths and weaknesses of negotiators
from a culture. Do not apply this data to all people from those places! That sort of
stereotyping will most likely lead a negotiator into errors. However, it is possible to set
your general expectations using this data. The next step is to compare the reality of the
people you interact with to determine if they are as described below or as described in
other sources. You can only cautiously apply the ideas about weaknesses and strengths
once you understand the people involved. As discussed elsewhere in this textbook,
know the people, know the facts!
TABLE 5.3 Awareness: Some weak points of North American negotiators

Typical Weak Points Comments for North American negotiators

Impatience • Increase travel time and travel flexibility – deals outside of

North America often require significantly more time for
interruptions, relationship building, and back table
negotiations.
• Let the other sides know you are not under time pressure
and can continue the discussion remotely or on another
visit.
• Propose that the finalizing meetings be held in North
America to decrease the time pressure on your side.
• Train your boss; if your organization is not aware of the
extensive time commitment necessary in many cases, you
will have to train key staff regarding reasonable
expectations.
Outcome over • Use the negotiation process to build the relationship and
process create new opportunities.
• Laser focus on a single driving deal or issue is not appreciated
in much of the world. (It is appreciated in some places!)
Poor sensitivity • Learn to identify key parties, including those not directly
regarding involved in the negotiation. Be aware that a government
relationships agency or senior industry partner may be standing in the
wings with significant power over decisions.
• Identify patterns in context that reveal background informa-
tion. This is sometimes called high or low context. Low context
cultures need all details spelled out explicitly; high context
cultures quickly see relationships that seem invisible to others.
• North America is usually rated middle/low context.
People from this background may be uncomfortable with
the bluntness of North Europeans and the indirect com-
munications of East Asians.
Profit over process • Learn to accept lower profit if it means making your sup-
plier/partner stronger and more valuable in the long term.
Overuse of remote • Your partners may not appreciate the low cost and speed
media of telephone, email, video conference, and other media.
Face-to-face work may be necessary, at least until the
relationship has developed.
Short term • Trapped by budgets and quarterly reports, North Ameri-
thinking can negotiators may feel they have to agree and move on.
• Train your organization to expect delayed paydays in
comparison to dealing with local organizations.
Detail orientation • North Americans tend to place great value on detail in nego-
in contracts tiations and contracts. Some parts of the world may view this
as wasteful and indicative of an untrustworthy partner.
• It may be necessary to let some detail go entirely or move it
from the main document to addenda and follow-up
documents.
(Continued )
TABLE 5.3 (Cont.)

Typical Weak Points Comments for North American negotiators

Contract is written • Countries with strict legal systems tend to see contracts as
in stone fixed documents with little room for interpretation.
Other parts of the world expect the contract to serve as
a starting point for serious details and discussions.
• It may be necessary to accept a “loose contract” as a first
step to concrete work and as an invitation to work out
specifics.
Face • Most North Americans are sensitive to their own loss of
face, but not to protecting the face or building up the face
of others. North Americans should try to learn how to
better manage face in negotiations.

Source: Used with permission. Copyright © 2013 Athabasca University, Faculty of Business.

TABLE 5.4 Awareness: Some strong points of North American negotiators

Typical Strong Points Comments on North Americans

Agility • North American organizations, especially for-profit busi-

nesses, tend to have quick decision making. They can
change approaches and accept new ideas speedily. This
helps them adjust to changing business environments,
technologies, and partners.
Speed • North American businesses tend to deliver products
quickly with short turnaround time, and often with the
willingness and ability to assign additional resources.
Attitude • A healthy can-do attitude often helps overcome social and
political barriers that may seem impossibly difficult in
more traditional societies.
Moderately • Affective refers to the degree to which emotions are
affective expressed. North Americans tend to be in the middle of
the scale, neither extremely poker-faced nor extremely
expressive. This allows them some ability to react appro-
priately to more or less affective counterparties.
• Research in advance about what is appropriate and
expected will benefit the negotiator.
Contract writing • Detailed contracts seem to be a hallmark of litigious
North American thinking. The potential benefit is that
proper management of contingencies written in the con-
tract can benefit both sides if explained and developed sat-
isfactorily to both sides.

Source: Used with permission. Copyright © 2013 Athabasca University, Faculty of Business
 Some cultural considerations 73

Section summary

American negotiators generally are direct and result oriented. They are usu-
ally meticulous about contract contents. Adjust carefully to the style of the
American individuals and groups you work with.

Weak/strong points of Japanese negotiators

TABLE 5.5 Awareness: Some weak points of Japanese negotiators

Typical Weak Points Advice for Japanese Negotiators

Excessively patient • Other parties may misunderstand patience as

a failure to understand the proposals or
external pressures such as time limitations.
Be sure to exhibit active listening in a way
that your counterparties can understand. It is
best to show your listening skills by fre-
quently summarizing and paraphrasing.
Poor communicators • Build up communication skills not only in
speaking but also in graphical representation.
Learn to collaboratively develop a joint
image of a project.
Develop trust slowly • Learn to share information and give infor-
mation at a similar rate and scale to informa-
tion received from other parties.
Slow decision making • Accelerate internal team communication,
communication with back table, and de-
centralize decision making.
• Learn to quickly consider and offer ideas
without taking time for detailed
development.
Bound to Japanese business • Clarify to other parties those periods (i.e.
calendar end of the fiscal year) when you cannot
work on the negotiation.
Prefer detailed resolution of • Consider proposals at a general level without
plans and outcomes in high detailed analysis of all inputs and outcomes.
detail (bottom up) Complex proposals can be broken into chunks
that can be accepted or rejected without detail-
ing all issues.
Formal processes • Often Japanese teams prefer formal processes
such as using a junior team member as spokes-
person, seating arrangements and so on. These
steps may be comforting to the Japanese side,
but alienating or confusing for counterparties.
(Continued )
TABLE 5.5 (Cont.)

Typical Weak Points Advice for Japanese Negotiators

Intransigence • When rejecting a proposal, explain (a) why

it is being rejected; (b) how it could be
made acceptable; and (c) alternatives that
correct the problem.
• Negotiators from other cultures may not know
when the Japanese side is embarrassed or con-
cerned about protecting face. Explain to those
counterparties how to help you save face.
Major decisions not made • Major decisions are often not made by the
at the table negotiators, but by the headquarters (back
table). Work to make this process move
quickly with frequent communications and
well-designed recommendations to the back
table. One experienced Japanese negotiator
explained that he brought his boss to the
negotiation table physically when the deal
was very close to completion (last meeting)
in order to speed the closing steps.

TABLE 5.6 Awareness: Some strong points of Japanese negotiators

Typical Strong Points Comments on Japanese Negotiators

Patient • A benefit to all parties – however counterparties may

not know the Japanese parties are patient because of
poor use of active listening skills appropriate for the
other language and culture.
Long term thinking • Let the other side know early in the process about
the timescale regarding agreement terms, ROI,
breakeven, renegotiation, etc.
Prefer detailed reso- • The final result of preference for high detail is a well
lution of plans and out- designed product or process. The time required,
comes in high detail however, may harm the negotiation process. Learn to
(bottom up) move quickly through details.
Good at understanding • Let the other side know that you are considering how
relationships to they interact with their shareholders. In some cases you
stakeholders may understand their relationships better than they do!
Very closely synchron- • This close synchronization and understanding saves
ized with the back table time and trouble for all parties. However, the counter-
parties may not understand that major decisions will
not happen in the negotiation team, but at the head-
quarters. Be sure to make the process move quickly.
(Continued )
TABLE 5.6 (Cont.) Some cultural considerations 75

Typical Strong Points Comments on Japanese Negotiators

Willing to take time for • Increases the understanding of the aspects of

site visits, research, and a complex negotiation. Cost and time are not con-
preparation sidered “wasted”.
Insightful • Japanese teams tend to be good at whole-picture
intuitive thinking. But not fast – intuition does not
come in leaps, rather it comes in small steady steps.

Common behaviours
It is also wise to look for current behaviours and expectations among negoti-
ators from a certain culture. Research done during the writing of this text-
book by the authors, shows that a large percentage (77%) of experienced
business negotiators in Japan rarely or never experience haggling with other
Japanese negotiators. Therefore you might want to avoid haggling in order
not to disturb a positive relationship.
Other findings regarding Japanese ̶ Japanese business negotiations (data gath-
ered in 2013 and 2014):

– Large teams are common, i.e. four or more members (87%);

– Common to develop new value during the negotiations (80%);
– Positive emotions are clearly demonstrated (82%);
– Progress is often made outside of the normal, formal work environment
(62%);
– Indirect logic, rather than direct logic is normal (100%);
– Often a rush to complete before the end of the fiscal year (61%);
– Threats are rarely or never made (100%);
– Great care is given to the seating of the participants based on their relative
rank (90%).

Part of your preparation before dealing with people from another culture should
be to look for information similar to the above points by reading, talking to
experienced people, and communicating with people from the other culture.

Section summary

Japanese negotiators may be indirect in communication, seeking to under-

stand layers of issues before coming to specifics. They are often highly
patient in negotiation and well-informed about issues. Adjust carefully to the
style of the Japanese individuals and groups you work with.
76 Some cultural considerations

Weak/strong points of Chinese negotiators

TABLE 5.7 Awareness: Some weak points of Chinese negotiators

Typical Weak Points Advice for Chinese Negotiators

Prefer to conform to • Show your foreign partners how other organizations

existing conventions conform to conventions and how this will benefit them.
• However, as non-Chinese partners become increas-
ingly sensitive to price, prepare to allow some flexibil-
ity regarding wage rates, other costs, and procedures.
Overinvesting in amic- • Chinese teams may sometimes rate relationship as more
able relationships important than pursuing value. They must be careful not
to exchange too much value for relationships – the stron-
gest relationships are based on mutual problem solving.
Disputes resolved • Complex disputes may arise or the partners, especially
informally foreign partners, may not be able to participate in
creating solutions. Therefore, Chinese organizations
should include mutually agreeable language in the
initial agreement to help resolve disagreements.
Very dependent on • Chinese teams generally feel they have to obey their
a superior figure superior staff – even if that person makes a snap
decision.
• To counteract this, Chinese teams should agree in
advance that major decisions will not be made with-
out consultation within the team that includes input
from specialists.
Paying insufficient • The negotiating teams, especially in State Owned
attention to detailed Enterprises, may have different staff than the executing
and specialized contract team allowing for problems that are difficult to solve.
clauses Negotiation teams should include key staff who will
execute the work, not only business and sales specialists.
Time pressure in com- • Chinese organizations are not immune to time pressure,
plex negotiations especially where negotiations are complex and have taken
a long time. Time pressure may not be seen in a rush to
complete an agreement as much as in a rush to approve
it. Contracts should therefore not be hurried by the nego-
tiation team nor by top management.
One sided info sharing • Non-Chinese teams, especially from Europe and North
America, build relationships through sharing informa-
tion. The Chinese team should share its information and
insights, not limit itself to gathering information only.
Face saving • Foreign teams may not be sensitive to face saving issues
such as the exact decision-making power of a negotiator
or personalities behind the negotiation. Chinese teams
should see these issues as problems to be explained and
mutually resolved.
 Some cultural considerations 77

TABLE 5.8 Awareness: Some strong points of Chinese negotiators

Typical Strong Points Advice for interacting with Chinese Negotiators

Establish relation- • The Chinese side may offer small concessions or favours early
ships with favours/ in the negotiation to build the relationship. Foreign partners
concessions should respond appropriately – but care must be given not to
give too much or too little in response.
Disputes resolved • Allows low cost joint problem solving while improving the
informally relationship. Non-Chinese may not be comfortable with
this process or may not have the language and culture skills
to join. They should develop the skills and staff necessary
to join in the process.
• Chinese partners may be willing to commit resources in
order to satisfy a need not covered explicitly in the con-
tract in order to complete a project amicably.
Easy to establish • Chinese negotiating teams generally do not have
good relationships a standoffish nature. It is not too difficult to build up profes-
sional and personal connections. Doing so is likely to ease
the negotiations in general and to support the kind of infor-
mal problem solving that is usual in China.
Lasting • Generally, Chinese teams will prefer to work with known
relationships companies. Thus, once a successful satisfying relationship is in
place, it may create much more value in coming years.
In depth review • May work through repeated lines of questions to sound out
the bottom line of the other sides. With time, teams are able
to gather significant insights into the business questions of
the negotiation and use this to their advantage.
Tough on price • Chinese teams have a reputation as being tough on price.
However this is not always to the joint benefit of all parties.
The non-Chinese sides should point out how avoiding min-
imal profit margins can benefit all parties in the long term.

Section summary

Chinese negotiators tend to value exchanges of favours, which is a flexible act

of mutual benefit and leads to relationship-building and flexibility in negoti-
ation. Exchanging information may not lead to good relationships. Adjust care-
fully to the style of the Chinese individuals and groups you work with.

Choose a partner from your culture to work with. Take some time to write down
some strong and weak points that you see among negotiators in your culture. Then
write out comments about the strong points and advice regarding the weak points.
78 Some cultural considerations

Some strong points of negotiators from your culture ___________

Typical Strong Points Comments on _______________

Some weak points of negotiators from your culture ___________

Typical Weak Points Advice for “us”

TABLE 5.9 Gender related strategies

Strategy How it works

Start with a serious issue • Start communication with a technical issue or

a philosophical issue to establish your credibility.
The founder of JBond in Tokyo, Ms. Saito, used
this approach, instead of the usual small talk, when
she was starting in the business world. This way
she could signal to upper level managers that she
was a serious part of the process.
Start with a display of • Show that you are not soft and easy to deal with. Do
toughness not, however, start with a very aggressive or negative
style (see the section on Playing the hard card first in
Chapter 7).
Schedule casual events in • Avoid late nights and distasteful entertainments by
advance scheduling the events and locations. If you allow
others to choose the restaurant or club, you may
find they have picked unpleasant places.
• Avoid extra drinking of alcohol by choosing juices
or other non-alcoholic cocktails as much as pos-
sible. Make a habit of immediately asking the
waiter for something you like without alcohol
(good advice for male and female negotiators!).
Persistence • Some older managers may not take women, espe-
cially younger ones, seriously. A good approach is
to try repeatedly to get your ideas and information
out. This may mean carefully stepping into the
conversation or following up after a meeting with
email, written documents, or phone calls.
Formal stance • Maintain a highly professional profile using language
and gesture to create an atmosphere of respect. You
can dress formally (but not fancily) and use formal
posture and gesture. Be careful, however, not to
create a barrier of formal behaviour – it is also
important to be appropriately accessible for informa-
tion sharing and joint problem solving. Deputy US
Trade Representative in Japan, Wendy Cutler, says,
“Women must present themselves as firm yet pleas-
ant.” Handover (2014, p. 23).
Name your strategy here: • Explain how it works here:

Name your strategy here: • Explain how it works here:

80 Some cultural considerations

Gender
Women may find themselves in a different situation than men in a business negoti-
ation. In some cultures, women are not taken seriously, and in some places they may
be excluded from casual business events, for example events with alcohol.
Women interviewed in the course of developing this textbook had various strat-
egies for participating in business negotiation. Some of these are included here:

Section summary

Gender may play itself out in a negotiation in many ways that are continuously
evolving. Female and male negotiators should remain sensitive to current think-
ing and constantly learn about changes in current thinking on these issues.
6
TALKING THE TALK

The phrases you will use as you negotiate in business will be mainly related to
the functions listed below. Generally, you will do more relationship building at
the beginning, much clarifying and summarizing throughout the talks, and more
information sharing before and during problem solving. Accepting, agreeing,
proposing, and rejecting will occur in smaller bursts at various times.
Functions include:
• Relationship building;
• Problem solving;
• Accepting, agreeing, proposing, and rejecting offers;
• Summarizing and clarifying;
• Breaking deadlock;
• Sharing information.

The first of these, Relationship building, is discussed in Chapter 2 and Problem solv-
ing is discussed in Chapter 8. Setting the agenda, offers, summarizing, clarifying,
and sharing information are discussed in this chapter. Additionally, some prac-
tical items like setting the agenda, sharing information, handling threats, and
rude language are discussed in the section Practical verbal signals.

Designing offers and suggesting tradeoffs

Regarding negotiating with Chinese people and organizations, we learn from
various authorities including Irl Davis of Global One that you should …

… try to form your negotiations with the Chinese in terms of social bene-
fits to the Chinese.
www.globalonepro.com
82 Talking the talk

TABLE 6.1 Proposals that seem to benefit the other side

Example of how not to do it… Tomo: Hey, give me 1000 yen!

Hiro: No!
A better way… Tomo: SuperMiniPizzas cost 3 for 1000 yen, but 9
for 2000 yen today only! If you give me 1000 yen,
I will run to the shop and get a lot!
Hiro: OK! I love SMPs!! Here, take my money!
…even better, Tomo can try to get Tomo: SuperMiniPizzas cost 3 for 1000 yen, but 9
a little more for himself… for 2000 yen today only! I see you are busy with
your special project. If you give me 1000 yen, I will
get them, but I’ll keep the 9th SMP.
Hiro: Sure, four instead of three is a great deal. And
I can save time and get my project done before class.
I am happy to give you the 9th one.

This idea may be generally true regarding China and Chinese people due
to their feelings about the country and culture, sometimes called guanxi.
However, the idea is not important only to Chinese people. Let’s expand it:
always show how your offer is good for the other negotiators and their interests. You
do not always need to show what is good for a whole city or country, but
with any counterparty, you must demonstrate that your proposal is good for
the individuals, good for the organization they represent, and good for their
interests (see Table 6.1).
Make your offers appealing – give the other side an incentive to accept your
offer.

Now it’s your turn, work in pairs

First, student A
Student A: You have already agreed that Student B will buy 10,000 units
from you for $10,000 including delivery and labels. Now try to get a higher
price for changing the label to include B’s photograph, it will cost you five
hundred dollars, so try to get more than a 5% increase in total price.
Make an offer using a sentence that shows it is good for Student B.

_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
 Talking the talk 83

Now, student B
Student B: You just learned you can deliver the 10,000 units efficiently for only
$1,000 and you know delivery will cost A $1,500. Try to get a discount from
Student A of at least $1,000 on the existing $10,000 agreement.
Make an offer using a sentence that shows it is good for Student A.

_____________________________________________________________
_____________________________________________________________
_____________________________________________________________

Offer design: ask for specific things, offer less specific

things in exchange
Keep your flexibility when you make an offer. Ask the other side to do some-
thing clearly so you can be sure of what you are getting. But make your conces-
sion less clear so you can change a little.

TABLE 6.2 Compare the proposals

Version A Version B

Tomo: SuperMiniPizzas are 3 for 1,000, but Tomo: SuperMiniPizzas are 3 for 1,000, but
9 for 2,000 yen today only! If you give me 9 for 2,000 yen today only! If you give me
1,000 yen, I will run to the shop and get 1,000 yen, I will run to the shop and bring
a lot! half for you!
Hiro: OK! I love SMPs!! Here, take my Hiro: OK! I love SMPs!! Here, take my
money! money!
Which offer above is better designed for Tomo? Why?

Compare again below.

TABLE 6.3 Best design of proposal

Version A Version B

XinFab: We can decrease the price by 5% if XinFab: We could decrease the price a few
you would consider improving our delivery percentage points if you let us deliver after
schedule. March 10th instead of at the end of February.
OtsuTech: That sounds OK. We can let you OtsuTech: That sounds OK.
deliver at the start of March instead of the end
of February.
Which offer above is better designed for XinFab? Why? Write your ideas here.
84 Talking the talk

Even better – show what is good for OtsuTech and ask them for a specific
point leaving some flexibility for yourself.

XinFab: We can save you some money! We will decrease the price a few per-
centage points if you let us deliver after March 12th instead of at the end
of February.
OtsuTech: That sounds OK.
XinFab: How about 2.5%?

Core language of offers

If you give us (specific thing), we will consider giving you (not very specific thing).
Note: This is a review of the same point of language you can find in the section
on counteroffers.

Write a sentence or two making offers that are a little better for you,
but acceptable for the other side:

1. Offer your hotel event services at a price 5% higher than normal to the
conference planning committee of IBM Japan.
___________________________________________________________
___________________________________________________________
___________________________________________________________

2. Offer a power conversion technology for 5% more than the usual price
for such technology.
___________________________________________________________
___________________________________________________________
___________________________________________________________

Offers and counteroffers

“How about…” “We can do it for $6,000 per month.” “We can’t do it for less
than $6,000 per month.” “We’d like to suggest….” “Would you be interested
in….” “We propose…”
A good counteroffer includes an idea about changes or exchanges, but not
a detailed exchange. Let the details develop as you learn more about what you
can give and receive.

Good:
If you agree to grant us exclusive rights for the United Kingdom, then we will
re-think our promotional calendar for the forthcoming year.
 Talking the talk 85

Bad:
We will give your product lead feature every month in our promotional calen-
dar for the next year if you give us exclusive rights for the United Kingdom.
Adapted from Bare Knuckles Negotiating (Hazeldine, 2006, pp. 77–78)

TRY TO DO IT LIKE THIS

If you give us (specific thing), we will consider giving you (less specific thing)
If your side is willing to provide the product 2% cheaper on the last day
of the month, we might be able to increase our total order. Is that possible
for your side?
Examples:

“If you _____, I will rethink…”

“If you _____, we will reconsider…”
“If you _____, I can look at…”
“If you _____, I can rethink…”
“If you _____, we can explore…”

In the example above, notice that the “good” version allows the offerer to
give more (and receive more). The “bad” version allows no chance for expan-
sion because something specific is being confirmed with no future opportunity
for developing or sharing or retaining that specific point.

Package and repackage your offers

As you make offers, bring together parts of the whole deal in different ways.
This effort at packaging and repackaging will help you and your counterparties
to find the best fitting deal. This process is very important in complicated inte-
grative deals. Talking through the choices and scenarios is likely to increase
trust, satisfaction, and value.

Section summary

1. Help the other parties understand why your proposal is good.

2. Ask for something specific, but carefully offer something less specific,
then continue negotiating.
86 Talking the talk

Accepting and rejecting offers

Firm acceptance
“Sounds good!” “We agree.” “That looks like a fine idea.” “Let’s do it.” “We
have no problem with that.” “That’s a green light.” “That works for us.” “I can
do that.” “I’ll go for that.” “Good idea.” “I can manage that.”

Tentative acceptance
“That may be alright…we will have to check with headquarters.” “That sounds
like it is in the right range, but let’s talk about it more.” “That’s a starting
point…” “We may be able to agree with …” “Now we are in the ballpark.”
[the price is close to the target]

Firm rejection
When you hear these, you should carefully get more information but be pre-
pared for no agreement on the issue. Notice that some of these seem tentative
but are firm. Examples:
“That’s not possible for us.”
“No way.”
“No can do.”
“That would be a deal breaker.”
“That’s a show stopper from our point of view.”
“The cost is much too high.”
“I don’t think so.”
“That’s not quite what I was thinking.”
Referring to causes outside the company usually shows that there can be no
change or discussion about a topic. Examples:
“The end users have made it clear they will not buy a product this color.”
“The government has recently changed the regulations and all our products will have to
be 10cm wider.”
A firm rejection may show the “reserve” position of that topic. Probe a little
more to be sure.

Poorly designed rejection

Notice that this following rejection is much weaker because the rules are inside
the company:

…we’ve got a problem with these because our [internal] rules have changed
again since….
(Vuorela, 2005)
 Talking the talk 87

This is a weak rejection because it is almost certainly possible to suggest that the
negotiators return to their company for permission to change the situation.
They could even make a phone call right away. If they refuse, it might be that
they were faking and do not have any rules about this. Or they might make the
rejection firmer (and more clearly real).
A weak rejection might mean that they are playing for time because they need to
discuss or rethink their position. If this seems to be the case, propose taking a break.

Tentative rejection
When you hear these, you should explore more ideas, get more information
and hope for an agreement. Examples:
“We would like to consider about that and discuss it more at our next meeting.”
“The cost is a little higher than we were expecting…”
“We’ll have to ask headquarters about it.”
“Our budget really can’t handle that.”
“I don’t think my boss will like it.”
“We will have to look into it….”
“I think there might be room to maneuver on that…”
“I will have to check with my boss…”
“My idea is a little different”
These tentative rejections usually suggest that you will be able to agree with
more discussion, understanding, and maybe concessions.

Summarizing and clarifying

Summarizing/confirming
In his book Bare Knuckle Negotiating Hazeldine (2006) says “summarize fre-
quently” so that all parties are clear about the details and what they agree and
disagree about. Frequent summarizing helps all parties maintain a good relation-
ship and clear ideas about the process. Here are some examples:
“So that’s $32,000 for each delivery, payable one week in advance by bank transfer,
right?”
“If I got it right, you mean delivery on the last day of the month and payment on
the first Monday of the month, right?”
“To review, we are looking at a decrease of 10% over the first five months in equal
steps, right?”
Also,
Q…I gather that your position is that even if a UNE were ordered….
A. No, that’s not what I said. I said that if….
(p. 148 of arbitration transcript, Ohio State)
88 Talking the talk

FIGURE 6.1 The messy reality of negotiation progress

Summarizing, confirming, and reviewing means that a negotiation usually goes

in circles and loops. It does not usually move forward on a straight line. The
graphic in Figure 6.1 gives a reasonable view of the messy real world of
negotiation.

Clarification
“Do I understand that you are willing to complete the work early?” “What do
you mean?” “Can you meet our technical standards this year or only
next year?” “Can you explain that in a little more detail?” “I see, how would
that work with the larger product?”
Q. …being requested is technically feasible; is that correct?
A. I don’t know if I understood that correctly.
Q. Oh, okay. All right. Let me….[speaker rephrases the point]
(p. 125 of arbitration transcript, Ohio State)

Practical verbal signals

How do you know if the other side is interested in knowing more or has no
more interest in agreeing? Understanding the meaning of certain words and
 Talking the talk 89

phrases may help. This section includes examples of words and phrases that
signal feelings.
Earlier in this chapter we saw how to make offers using words and phrases
that are positive sounding and flexible. In this section, we see that careful verbal
signals can show that you or the other side are willing to negotiate a point.

…it is important to structure your signal so that the hint of movement on

your part is conditional on the other party responding positively. … You
imply a willingness to negotiate, but only if the other party reciprocates.
…“Our normal price is X.” This could be a signal that although the
normal price is X, under certain circumstances, the possibility of a different
price exists. (p. 66)
Bare Knuckle Negotiating (Hazeldine)
“It would be incredibly difficult for us to accept an agreement of less than
five years in duration.” This signals the possibility of movement. You are
indicating that there is the possibility of flexibility. You are not saying that
you will agree to an agreement of less than five years – you are signaling
that you are prepared to discuss it. The use of the word “difficult” implies
that the other party will need to provide some incentive for you to make
some movement. … You are inviting the other party to move the negoti-
ation forward.
…encourage them to expand … “Under what circumstances would you
be able to alter the specification?”
“How could I make it easier for you to agree to the proposed fee?” (p. 72)
Bare Knuckle Negotiating (Hazeldine, 2006)

To summarize, the best signals invite a concession from the other side before
you have made a clear offer.

Playing for time

These phrases are useful when you need a little time to think.

“I see.”
“Could you explain that to me in a little more detail?”
“Could you repeat the first part of that idea?”
“It sounds like an interesting idea, could you run through the main points for
me again?”
“Let’s take a break.”
“I'd like to sleep on that.”
90 Talking the talk

The most useful phrase for getting time, of course, is, “We’d like to discuss that
internally – how about if we take a break?”
Too expensive
“This is above our budget.” “Our expectations about cost were very different.”
“We are feeling some sticker shock.”

Better than we expected

Immediate agreement to a price usually indicates that the other side was worried
about a worse price. “OK!” It may be difficult to improve the price (from your
point of view) after an answer like this.

We are interested in this issue

Echo questions (see Chapter 2) usually indicate strong interest or a desire to
learn more about that topic.

Setting the agenda

Negotiators must agree about the first general topic and its subtopics when they
begin to talk. They must agree to an agenda. This can be done face-to-face or
in the days ahead by phone, email or other method.
Follow Table 6.4 to see how agenda setting works after the greeting,

TABLE 6.4 Agenda setting

Action Say Comment

Set the general I’d like to talk about GB Joint Agree to what you will start with.
topic Venture. Be flexible, if they want to start
We think the Joint Venture is with a different issue, it is OK
a good starting point to make some unless the sequence is very illogical.
positive agreements, is that alright?
Specify topics In that case, let’s discuss the own- Briefly agree what you will include
ership structure, the decision in this conversation (subtopics).
making balance, and ….
State position(s) We think the price of _____ Also quickly start the price conver-
should be about ______ sation (high side if selling, low side
because….(it is good for you) if buying). Always give a reason
with a price – a reason that sounds
and feels good for them.
Link or delink That sounds good, but we would If you do not want to include
like to talk about the 3rd one, a particular point, suggest handling it
_______, later because _____. Is later.
that OK?
(Continued )
TABLE 6.4 (Cont.)

Action Say Comment

Discuss positions We agree about ___, but we think Talk openly and freely. Listen
____. closely to understand what they
want. Work on details.
Summarize So if I understand right, we all Summarize frequently and finally
think the price should be _____ agree.
and include ______, ______, and
______.
Move to next Let’s move on to _____________
topic
Repeat all of above

TABLE 6.5 Sample dialog for setting the agenda

Blue: Hello – we are glad to meet again regarding our Greeting (Blue even sets the topic
successful JV! We have some fresh ideas about making here)
our cooperation even better.
Red: Yes, glad to see you all again. Greeting
Blue: We would like to talk first about the JV – that is Topic, subtopics
a set of issues we can easily manage together. Let’s (Blue sets the topic/agenda)
include restructuring ownership, decision making, and
expanding the JV. Is that alright?
Red: Yes, but what about the decision making, we Subtopics
don’t see how that is a question…
Blue: We will explain – it’s a small issue that fits well Subtopics (confirmed with reason)
with everything. First we understand that Red will
benefit from a 60/40 ownership ratio. That will save
you a lot of taxes, and a little for us too. Basically – we
agree! But because we don’t want a simple “technol-
ogy transfer” operation (we want a real JV), we would
like to share decision-making power 50/50.
Red: That is a little unusual. Can you explain what Question for info
you are thinking?
Blue: Sure, we…(explains) Explanation, discussion
Red: I see. We can agree to that, though it is a little Counter offer with reason
difficult and will generate some legal costs so we pro-
pose $350,000.
Blue: We can agree to a reasonable discount for the Back to high price and explanation
trouble. But we admit our initial price was high – for
a reason. The reason is that ….
92 Talking the talk

This conversation could go a different way…Red could push a little more

and get their topics on the agenda first.

Moving to a new topic

Let’s turn to Issue 174, please. The issue here is whether…
(p. 120 of arbitration transcript, Ohio State)

OK. And I’m not exactly a cost expert either, so we’ll move on.
(p. 144 of arbitration transcript, Ohio State)

Responding to threats
In a negotiation you may hear a range of threats to your position. Some are
acceptable and some are unacceptable (Table 6.6).
Your counterparties probably do not really want to end the negotiation, so you
do not have to give in to threats in order to save the deal. If the other side really
wants to end the negotiation, let them end it; remember, their BATNA must be
good enough that they can walk away. If your BATNA is strong enough, you can
walk away and find a new negotiation partner that does not make threats.
For more on tactics and responding to negative tactics, see Chapter 7.

Making threats
Don’t make “unacceptable” threats at all. Even “acceptable threats” should be
kept to a minimum by companies engaged in productive talks that will lead to

TABLE 6.6 Acceptable and unacceptable threats

Acceptable Unacceptable

“We will have to compare your offer to “If you don’t agree to this, we will go dir-
your competitors.” ectly to your competitor and you will never
“Your timing does not suit us. We might survive in this business.”
give that part of the contract to XY Corp.” “We’ll damage your relationship with your
main customer, if you don’t agree to this.”
Comment
Acceptable threats do not suggest any signifi- Unacceptable threats reach beyond the
cant danger to the business or personal immediate business talks and suggest serious
trouble to the other party. These are accept- damage, even personal damage, to the other
able and within the range of normal party.
business.

Note: the best way to react to a threat is to respond directly with facts. A direct response will show
clearly that you can react and continue the conversation instead of giving in to the demand. Alterna-
tively, you can respond with silence while waiting for the threat-making side to make the next move.
When you respond with silence, your silence is a signal that you are not satisfied with the offer or threat.
 Talking the talk 93

greater future cooperation. “Acceptable threats” are not good tools for building
relationships.

Rude, vulgar, taboo

These words may be used casually and can even help to relax a formal or tense
atmosphere. However, generally you should avoid words that are considered
rude, vulgar, and taboo. This is especially good advice for non-native speakers
of English who may not be able to use the words correctly. If your counter-
parties use these words, try to determine whether they are intentionally being
casual, or whether they are genuinely upset. If they are truly upset, look for
ways to decrease the tension.

Deadlock and breaking deadlock

Sometimes parties in a negotiation cannot agree. This situation is called deadlock.
If deadlock happens to you, you have a few possible actions:

1. Leave the topic temporarily and come back to it later;

2. Take a break to rethink, relax, and reset. This can include socializing with
the other parties;
3. Cut the issue out of the negotiation permanently;
4. Link the topic creatively to another topic, action, or concession;
5. Make a new try with other contacts (different people at the counterparty’s
organization, different staff on the negotiation teams, removing yourself
from the team, etc.) while considering personality, and emotional style of
participants (Thompson, 2012);
6. Develop a backchannel contact – a person in the organization who is not
directly related to the topic matter (warning, this may be seen as under-
handed or tricky, especially in business);
7. Agree to an independent fact finder who can decide on a specific problem
such as a price evaluation;
8. Review the deep interests of the parties;
9. Joint creative or problem solving work to refresh the relationship;
10. Agree to a set of rules that can be used impartially by all sides;
11. Consider alternative dispute resolution (ADR) methods such as mediation
or arbitration. See Chapter 10 for more on the subject of ADR;
12. Review the interests of the other side to find a motivation you can
strengthen to restart; for example, playing on an interest to avoid court bat-
tles by using an ultimatum or mild threat such as, “We could go to
court…”;
13. Review the BATNA of the other sides for weak points to attract them
back to talking;
94 Talking the talk

14. Suggest that each party submit a “final best offer” to be evaluated by an inde-
pendent party. Final Offer Arbitration, for example, requires a judge to pick the
most reasonable offer without bending or compromising. In this system, unrea-
sonable offers will lose in favour of more reasonable ones. This approach means
that the parties will submit reasonable offers in order to not block themselves
from winning.
(Bazerman and Kahneman, 2016)
Of course, if the deadlock cannot be broken and the issue cannot be abandoned,
you or the other side may have to use your BATNA. Wade (2006) gives
a slightly different view of the above options in the context of family disputes.

What to say when deadlock occurs

– I think we are becoming stuck on this topic, let’s move on to ….
– Seems like we are stuck, how about a break before we continue with
another issue?
– It seems like we can’t agree about this, so let’s talk about another topic and
come back to this later. Is that OK?
– After two hours we still disagree, how about removing this from the negoti-
ations and asking an independent party to decide?
– We clearly disagree about who made the mistake, let’s find a judge who
can decide clearly about it. In the meantime, let’s continue talking about…
– We frankly cannot pay more than $12,500 for the equipment. However,
we could pay a little more for the installation if you allow us to select the
work team…what do you think?
– Is it possible to do that work under some limited or special conditions?

Another approach – consider the points in the problem issue

that you can understand
Fisher and Shapiro (2005) suggest that a negotiator take a neutral position temporar-
ily while communicating with the other parties about a troublesome issue. If there
are points in the issue that you can understand, it may help the other side to appre-
ciate your points after you have demonstrated that you understand their points.

Deadlock 1
Think about the following deadlock situation and suggest how the negotiators
could manage. Write out the sentences they could use.
Company A wants to sell Company B’s motorcycle tyres, but not their accessor-
ies. Company B strongly wants A to sell both tyres and accessories. After 20
minutes, they are deadlocked.
_________________________________________________________________
_________________________________________________________________
 Talking the talk 95

Deadlock 2
Recall the Case of the Incompetent Translator in Chapter 1. What could the
project manager have done to bring the translator into a negotiation? Would it
be worth the time and cost?
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________

Section summary

Creative ideas and links to other issues are best for breaking deadlocks, but
it is not always possible. Identifying unresolvable deal breaking deadlock
issues in advance will save time and cost.

Shutdown moves
How can you bring a negotiation to an end at the right time?
In his 2010 book Negotiauctions, G. Subramanian of Harvard Business School
describes shutdown moves as a way to prevent the other side(s) from finding
better deals with competitors. Subramanian also points out that timing is import-
ant – shutdown moves must appear when the other side is close to accepting
and delay would result in their reconsideration of alternatives. Wade (2006) pro-
vides a list that includes deadlock breaking moves as well those designed to
finish a negotiation. Selected shutdown moves from Subramanian and Wade are
in the table below.

TABLE 6.7 Shutdown moves

Move Language example Comment

A spoonful of If we sign off now, I will make These shutdown moves can create
sugar sure that your logo is at the value and convenience for all par-
entrance all week – free. ties. It is possible to make these too
Appealing release If we agree now, we will release restrictive or even negative (spoon-
terms you from the agreement if oil ful of vinegar). Design these moves
prices rise 5% more than expected carefully.
this year.
Acceptable You can break the agreement by
penalty clauses paying a 5% fee any time in the
first 4 weeks.
A spoonful of If we don’t agree today, the prices
vinegar will go up by 10%.
(Continued )
96 Talking the talk

TABLE 6.7 (Cont.)

Move Language example Comment

Direct appeal It looks like we have covered all If the parties are basically satisfied,
the issues well, can you agree with this move can bring a close to the
the deal as it is? deal with no more time lost.
Compare Let’s review the proposal in detail. This move appeals to negotiators
benefits (List the benefits to all parties in who appreciate rights and fairness.
detail, possibly in spreadsheet If a party has a win-lose mindset,
format.) emphasize the “better” value they
are getting.
Extra strong If you agree now, we can deliver This kind of shutdown move is
moral position these medicines immediately, and unreasonable. Do not rush into an
help those people! agreement. Avoid using this kind
of shutdown move.
Split the We have come so far, how about This move catches tired negoti-
difference we meet in the middle? ators who may have lost track of
where the “middle” really is.
Instead, share resources or repack-
age until both sides have satisfying
benefits.
Defer an issue Looks like we agree about every- If the agreement is workable with-
thing else, so let’s cut out the prob- out that problem issue, this may be
lem issue and worry about it useful for the parties.
next year.
Time restrictions Our offer is only open until the These are ultimatums. Do not
stock market starts on Monday accept, just coolly reevaluate. See
morning – we must have an agree- the section on tactics. Avoid using
ment by then. these because of the risk that the
Ultimatum Agree now or we will withdraw other party will walk away agree-
the offer! ing that progress is impossible.

You may have to attempt these moves more than once – Subramanian (2010)
tells us that only 20% of attempts are immediately successful.

Section summary

Time your shutdown moves carefully to complete phases of a negotiation or

the whole thing. Polite persistence may be necessary.
 Talking the talk 97

Language choice

Choice of language in negotiation

This textbook is in English and provides practical advice about choice of words
and phrases in English. But much of the advice will be useful in situations that use
only a little English or no English at all. In business negotiations with more than
one culture, the participants may pick a common language that some or all know
well, and they may mix one or more other languages with the common one.
Negotiators can choose the language to match the agenda. An interview
quote from cross-functional team representatives from MNEs in the IT industry
(Chen, 2008) shows the process.

Huang, a Chinese native language speaker in Vancouver, B.C. Canada, uses Eng-
lish as a foreign … and as a corporate language within her firm. She describes
the dilemma of using languages while managing tasks and social-relations.

International companies rely on multilingual speakers to find the best solu-

tion for both parties… language is not a big problem when we only talk
about logistic issues… but when a work problem becomes personal, using
a foreign language to deal with relational problem becomes a major issue.

Two points are of interest: First, multilingual negotiators choose between

a native and a foreign language to negotiate with the same native language
speakers. Second, the choice of language impacts the message receiver’s own
perception. The choice of language can be a tool for maintaining or removing
old divisions or for creating new ones during collective actions.

Use of multiple languages in negotiation

Negotiating with those who share the same native languages

Multilingual negotiators from the same native language background should con-
sider the effects of language choices when prioritizing task-based negotiation or
relational-orientation negotiation. When negotiators are grounded in a common
environment (e.g. nation, culture, institution), their language options can
include local and corporate languages (or native and foreign languages).
The examples below show how this happens in day to day work.

Kao, a Chinese native language speaker, uses her corporate language, Eng-
lish, as a foreign common language in a firm based in Taipei, Taiwan where
the local languages include Mandarin and Taiwanese. She describes how
negotiators use language socially while coordinating tasks. Her statement
98 Talking the talk

shows how negotiators use their native language and how they react to
a foreign LF.

I use Chinglish, it is a mixture of Chinese and English … I like to add ‘ah,

la, oh’ these kind of sound in English … to be more expressive. When my
Taiwanese counterparties speak in English only, it occasionally makes me
feel they have some kind of attitude, snobbish or demanding … maybe
distant.

Ma, a Chinese native language speaker in Vancouver, Canada, uses a foreign

language – English. He describes how common native language speakers
use a foreign language to conceal cognitive implications and present appro-
priate social actions in negotiation. He describes how language choice is
a trade-off.

It’s hard to use a foreign language to show feelings with my fellows… no

emotion exchange, it’s easier to make progress when I make a point about
company policy, but things may become personal and damage relation-
ships… for a long-term work project, bad relationship makes our team
lose… whole project would be jeopardized.

Switching between different languages to create a multilingual context can be

a negotiation strategy. Negotiators choose languages to develop aspects of the
negotiation such as relationships and joint understanding.

Negotiations when there is no shared native language

Negotiators from various countries may or may not share a common native lan-
guage. Yet, in a single-language environment, a foreign common language
requires greater demands than using a native language. The sole use of a foreign
language causes difficulties in sharing information and impacts relationship pro-
cesses through adding to complexity (Salk and Brannen, 2000).

Liang, a Chinese native language speaker in Vancouver, Canada, uses a foreign

language, English. He describes how he uses it to negotiate with Canadians
and how the choice of a foreign language can influence value-claiming.

My Canadian counterparties know that I am Chinese and English is not my

mother tongue. The good thing of negotiating in English is that English native
language speakers will be more tolerant of my directness. Sometimes I can be
rude and strongly express my opinion. They could simply interpret my style or
attitude is more like a cultural barrier. So, they are more likely to focus on how
to get the work done.
 Talking the talk 99

Multiple language choices give negotiators strategic alternatives. Negotiators

may select and switch and mix languages to transfer information, build relation-
ships, or show their intentions.

Lin (in Xiamen, China) explains how multilingual negotiators utilize a foreign
common language even when they communicate with their counterparties
who speak the same native language to prioritize task-oriented issues.

In negotiation, we manage different conflicts, such as issues relating to

tasks or issues jeopardizing relationship. English is like a tool to focus on
work, such as a firm’s policies, task requirements, subject titles as well as
a way to detach my personal feelings to be assertive.

The quote suggests that multilingual actors are sensitive to the choice of lan-
guage in a negotiation. When negotiators choose a foreign language over their
common native language to express their feelings, they may experience difficulty.
In the example below a native English and a native Chinese speaker switch
between the languages. They use Chinese and English to build up the relation-
ship, but mainly English for the technical issues, except for one offer.

Both Go-si and Grant work in different firms. Go-si is Chinese, based in Bei-
jing, China and Grant is Canadian, based in Shenzhen, China. They both
switch between native and foreign languages – Chinese and English.

GO-SI: Grant! I need to discuss something with you. Are you available now?
GRANT: She me shi?
(TRANSLATION: What to discuss?)
GO-SI: You know that we need to quickly despatch our products to your sides,

however, due to the budget issues, we would like to change to courier

delivery instead of using flight cargo. Is it okay? I will despatch the prod-
ucts 2 days earlier but it will be 4 days late if that is okay with your side?
GRANT: hmm…. let me check…. I am not sure about it. We have other dead-

lines to catch here. What’s the problem?

GO-SI: We had some problems on one of our operational lines. So, we need to

re-do some work. However, if we can change the delivery method, we

may be able to reduce extra financial costs. Anything you can suggest?
GRANT: yi ban huo chen yi ban kung yun? what do you think?

(TRANSLATION: half delivery by courier and half by flight cargo?)

GO-SI: Great! Xie le :D

(TRANSLATION: Thanks for that!)

GRANT: bu ke qi

(TRANSLATION: You are welcome.)

100 Talking the talk

The Canadian (Grant) uses his counterparty’s native language (Chinese) to

benefit his counterparty. This approach indicates a clear intention to deepen
social relations with the other business person. Even though the Chinese native
language speaker (Go-si) prefers the foreign language to actually process the task,
he responds to Grant by switching to Chinese. In this way Go-si recognizes his
counterparty’s attempt to deepen their social bond. A negotiator can use his/her
counterparty’s native language in order to socially connect and develop a closer
bond.

Section summary

When negotiation participants are from different language backgrounds, or

even the same language background but operating in a foreign environ-
ment, choice of different language will have important impact.

Use of language in communication

When negotiators use certain words and expressions, the choices can create feelings
for the message receiver, and trigger certain functions as psycho-linguistic reactions.

Use of language between the same native language speakers

For negotiators who speak the same native language, the choice of words may
require greater attention and sensitivity to the communication context.
A common native language between communicators functions as an indicator of
cultural norms and social values due to the context that language carries. The
collaborative development of wording and selection of common phrasing and
style in the communication likely accelerates the information-sharing. Table 6.5
lists some examples where the use of a word causes a certain semantic interpret-
ation between the sender and the receiver.

TABLE 6.8 Words and meaning

Message sender’s
expression Perception from the decoded messages Function

I want to… Imply self-interests Positioning

I need to… Request for help Priority clarification
Why can’t I have it? Argumentative question Competitiveness
How can I have it? Solution-request Suggestion
What should we… Joint problem identification Information
exchanges
How can we… Joint input request Resource exchanges
 Talking the talk 101

In addition, misinterpretation is a taboo between the common native language

speakers and misinterpretation may be perceived as a form of manipulation.
Hence, the circumstance of misinterpretation between native language commu-
nicators might not easily be tolerated or forgiven. When misinterpretation hap-
pens, it is likely to jeopardize the relationship-building of same language
speakers. Semantic misinterpretation may lead to hostility or even conflict with
impact on the longer-term relationship. Continuous misinterpretations may
cause the relationship to suffer through loss of trust.

Use of language between native and non-native language speakers

Between a native language speaker and a non-native language speaker, language
interpretation in a foreign lingua franca may result in a failure of information
delivery due to a lack of understanding. Native language speakers may simply
perceive the intent mistakenly, or the message can be lost in translation due to
cultural norms. The social mannerisms and cultural expressions can be embedded
in the use of language and accordingly result in behavioural misinterpretation or
information miscommunication. See the following examples:

When a Chinese language speaker communicates with a native English lan-

guage speaker in English foreign lingua franca, the aspect of language com-
petence likely affects the interpretation.

Scenario A: Insensitive or Rude?

ENGLISH-SPEAKER: Would you like some tea?

CHINESE-SPEAKER: I want tea. (A direct translation from Chinese to English.).
ENGLISH-SPEAKER: You are so rude! (The English speaker feels upset due to the
Chinese speaker’s phrasing. It appears to be a demand instead of a polite
request.)
CHINESE-SPEAKER: Why rude? I answer your question. (Confused by the English-
speaker’s accusation.)
ENGLISH-SPEAKER: Do you mean, “I would like to have a cup of tea”?
CHINESE-SPEAKER: Yes, tea.

Scenario B: Yes or No?

ENGLISH-SPEAKER: You don’t think that taking an advantage of others is good for
relationship-building, do you?
CHINESE-SPEAKER: Yes. (Yes means, I agree with your whole substance)
ENGLISH-SPEAKER: What? You tend to take an advantage of others when you intend
to develop a relationship?
CHINESE-SPEAKER: No.
ENGLISH-SPEAKER: So why you say YES?
CHINESE-SPEAKER: YES means that I agree with what you say.
102 Talking the talk

Scenario C: Friend or Stranger?

ENGLISH-SPEAKER: Could you please kindly make me a cup of tea?

CHINESE-SPEAKER: No.
ENGLISH-SPEAKER: Why can’t you?
CHINESE-SPEAKER: I thought you asked me a question and I answered.
ENGLISH-SPEAKER: Actually, it’s a request framed politely.
CHINESE-SPEAKER: Oh, okay. Will do, but why don’t you just tell me what you need?
ENGLISH-SPEAKER: I can’t “TELL” you, but I can “ASK” you if it’s me who asks for
a favour.
CHINESE-SPEAKER: We are friends, you just TELL me and you don’t ASK. If you ASK
this kind of small thing, you are treating me as if I were a stranger.

Scenario D: Romance or Conflict?

ENGLISH-SPEAKER: Thank you for your help, love.

INDONESIAN-SPEAKER: What? Are you in love with me?
ENGLISH-SPEAKER: Oh, no no no…. It’s an expression. It doesn’t mean THAT kind of
“love”.
INDONESIAN-SPEAKER: You made me feel very uncomfortable. Don’t call me, love.
You confuse me.

Language competence in a foreign lingua franca comprises social value and cul-
tural norms as well as proficiency. Due to a lack of language competence,
encounters with miscommunication and misinterpretation in a foreign lingua
franca may more commonly arise between native and non-native language
speakers and between different native language speakers (e.g. Thai and Japanese).
Negotiators who use their native language as a lingua franca in communication
can be in an advantageous position in terms of fluency. In a cross-cultural or
cross-national negotiation, negotiators who use their native language as a lingua
franca should be more aware of the other parties’ social and cultural perspectives.
The convenience of using a native language for a lingua franca can, however,
lead to cultural expressions indicative of a specific region (i.e., colloquialism, dia-
lects, idioms; etc.). Such cultural expressions can confuse people other than the
local.
Here are some more examples. The literal translation of “negotiation” in
Chinese is “coordinate the differences” or “discuss and decide”. The literal
translation of the Chinese word to English appears collaborative for task dif-
ferences and approachable for relationships. The use of the word “negoti-
ation” however has a hostile sense in Chinese, which insinuates the message
“I win, you lose”. If an English-speaking negotiator initiates the negotiation
by using the words, “negotiate a deal”, to a Chinese negotiator, the message
may be misunderstood and interpreted as an aggressive gesture. The percep-
tion of hostility may arise unintentionally before the actual negotiation begins.
Hence, the intention embedded in the words may not be fully delivered,
 Talking the talk 103

which results in further misunderstanding, which may jeopardize the negoti-

ation itself.
An awareness of cultural and social perspectives toward a non-native language
speaker helps us understand how to avoid potential conflict. Negotiators who
lack cultural awareness may be more likely to encounter frustration in the pro-
cess of communication. The emotional frustration tends to distract negotiators
from being objective.

Use of a foreign lingua franca between the non-native language

speakers or in multilingual nations
Negotiators who use a foreign lingua franca in communication (e.g. English
used between a Chinese language user and a Korean language user) may be less
sensitive toward wording. The behaviour and attitude of negotiators can affect
comprehension more than the wording in a foreign lingua franca. When the
cultural distance (West and Graham, 2004) and linguistic distance (Hofstede,
1980) between a foreign lingua franca and a native language is at a high level,
translation can become literal and implications and nuances may be lost. The
communication may take more time merely to render something useless, or at
best, cost time for clarification of a point.
In addition, a foreign lingua franca can impact the negotiation when the lan-
guage distance between two national languages is not equally distant to the foreign
lingua franca. For example, take the choice of English as the lingua franca between
Japanese and German negotiators. Japanese language speakers who use English may
encounter bigger challenges than German language speakers who use English
because of deep differences in their native languages (Brannen and Salk, 2000).
A common background or shared experience may make non-native language
speakers more aware of the use of a foreign lingua franca. In those cases, the
level of competence in that foreign lingua franca will be crucial. When a foreign
lingua franca is required in a multilingual environment, it can be an easy option
if the shared foreign language is the same among the participants. The choice of
words will nevertheless need additional attention among the non-native language
speakers who are equipped with a high level of language competence. See the
following examples of using a common lingua franca in two different situations:

– From the perspective of multinational connections:

– English is used typically by negotiators who are educated in English lan-
guage institutes and nations. French is a frequent choice by negotiators from
the countries once colonized by France; e.g. Morocco, Laos, some regions
of Cambodia, and much of West Africa. Kiswahili is used in several coun-
tries of east central Africa. A shared lingua franca may be the easiest option
to bridge communication in regions where a language is widely taught as
a second or third language in addition to the home language(s).
– From the perspective of multilingual environments:
104 Talking the talk

English may be used by negotiators who are based in the same countries when
encountering different ethnicities or as one of multiple national-official lan-
guages. Examples include using English in Singapore as well as in Malaysia;
English in Belgium as an alternative to the three official national languages of
Flemish, German, and French. English is at a similar linguistic distance to
Chinese, Malay, or Tamil (all are distant to English) whereas English is simi-
larly close to Flemish, French, and German. In these examples, the negotiators
choosing English all experience a similar level of difficulty as their
counterparties.

Use of a foreign lingua franca among the same native

language speakers
Negotiators who share the same native language and are from a high-context
culture highly value relational connections. Those who intentionally use
a foreign lingua franca and avoid using their own native language in negotiations
may create distance in terms of the shared social values or cultural norms by
putting focus on business. When negotiators avoid using the common native
language, the relational connection may be intentionally minimized, for example
to avoid closeness or reject any similarity of origin.
The same native language can be associated with

– a national language; e.g. Chinese Mandarin language speakers between

China and Taiwan; Turkish language speakers between Cypriot Turkish ter-
ritory and Turkey; etc.
– a local dialect or a regional language; e.g. Cantonese language speakers in
Hong Kong, Macau and Canton province in China or other overseas Can-
tonese speakers. Hokkien language speakers in Taiwan, Singapore, Malaysia,
the Philippines, Indonesia, Hokkien province in China. Tamil language
speakers in India, Malaysia, Sri Lanka; etc.

There are some exceptions when choosing a foreign lingua franca over
a common native language. For example, Arabic language speakers among the
Arab countries may adopt a foreign lingua franca such as French due their high
skill level resulting from colonization. Chinese Mandarin language speakers who
originate from former British colonies, such as Singapore, Malaysia, and
Hong Kong, may prefer English for official negotiation due to governmental
influence to unite a multilingual environment.

Visual communication
It is not necessary to communicate by speaking and writing only. A business
negotiation can be an opportunity for very broad communication, especially
 Talking the talk 105

during problem solving discussions. Using visual communication can support the
ability of the parties to communicate and create solutions.
Q. What is visual communication?
A. Using pictures, diagrams, sketches, models, skits, charts, etc., to share ideas
and solve problems. These things can be casual or professional, prepared in
advance, or created on the spot. They can be made by one person, or all
parties. Innovations in information communication technology, such as
cloud IT, can offer improved information exchange and storage. The shar-
ing of materials this way is a gesture that may start a trusting interaction
process in addition to allowing collaboration which in turn can lead to
more trust.
Q. Why should we bother with visual communication? After all, speaking works
well and drawing bad pictures does not seem very professional.
A. Visual communication improves on spoken communication in three aspects
of negotiation according to Swaab et al. (2002):

• Understanding;
• Relationship;
• Satisfaction.

Further, joint creation of images can lead to joint problem solving which also
supports understanding, relationship, and satisfaction.
Q. Which do you think is better for a face-to-face negotiation, whiteboard or
computer and projector? Why?
A. Your answer: ____________________________________________________
_________________________________________________________________

Presentations: Presentations are for delivering information in one direction. Nego-

tiations however combine input from all parties. Therefore, a presentation is
usually not appropriate for a negotiation. If you feel an introductory presentation
is useful, keep it short and simple. The slides should be uncluttered, but not
black and white. Use animations, images, diagrams, maps, video, graphs, and
tables more than words. Warning: animations must be simple, not complicated,
not distracting and not overly cute. In any case, bring the presentation on paper
in case of technical problems.

Handouts: Handouts are much more suitable for a business negotiation than pres-
entations. Handouts can be reviewed in any order at any time by all parties. All
parties can contribute their ideas to the handout simply by writing on it. Each
handout can focus on a single point. More information can be delivered and
developed by use of handouts than through presentations.
106 Talking the talk

How to make useful drawings and diagrams on paper

or whiteboard
Dan Roam in his book The Back of the Napkin suggests that you consider five
dimensions when you want to visually communicate. These dimensions are:

• Simple vs Elaborate
• Quality vs Quantity
• Vision vs Execution
• Individual vs Compare
• Change vs As-is
Roam (2010)

Understanding these five issues will help you quickly decide what kind of image to
draw and what the focus of your communication should be and how to draw it.
Use a Simple picture to communicate only about that object, but draw an Elabor-
ate picture to show the object in its context (use, origin, users, transportation, etc.).
Draw a Quality picture to discuss a detailed characteristic of an object. Quantity
pictures include graphs, charts, and numbers.
If you want to communicate about the final outcomes of a new business
activity, draw a Vision picture that shows things as they will be. A Vision pic-
ture might show the customers using the product that solves their problems. If
your idea is about the processes necessary to create a new business activity, draw
an Execution picture showing the steps. An Execution picture might be
a process diagram or flow chart with lines and arrows.
Individual pictures show one object, but in order to compare you should
draw more than just that object. With several drawings, you can point out indi-
vidual differences, for example the meaning of quality in apples (size, shape,
bites, bruises, etc.)
Your drawing might show Change or the As-is situation. As-is pictures show
the object or idea as it works (or does not work) now. The Change picture
shows how the system would be in the future.
Summary: choose the picture or short series of pictures that will be most
useful for you. Make simple drawings because they are quick and effective. You
will improve your communication ability with practice, but the goal is not to
draw nice pictures, just to communicate!
As an answer to the earlier question whether a whiteboard or computer is
better suited for a situation, consider Table 6.9.
With only one plus point on the computer side, the advantages are heavily in
favour of doing the work by hand. Cloud-sharing and collaborative technologies
however could make computers and related equipment more accessible to all
participants in the negotiation.
 Talking the talk 107

TABLE 6.9 Comparing visual media

Whiteboard Computer, tablet, etc.

Many can access it simultaneously Only one person at a time

Easily used and modified May not be easy to draw complex ideas
Skills widely available Slow typing or weak graphics skills will harm the
process
Promotes co-creation Blocks joint use
Builds relationship Tends toward struggles for control of machine
Not hard to save (photograph and Easy to save and distribute
process later)

Advice to co-create with counterparties:

• Share the paper and pens;

• Use a whiteboard;
• Stick figures and non-beautiful drawings are OK;
• Bring a few coloured pencils/markers (too many colours will lead to
confusion);
• Keep it Simple Short (KISS);
• Practise a little to improve your skills, but don’t worry too much!

Conclusion
Use whiteboards, prepared graphics and diagrams, photos, video, animations, sticky
notes, notepaper, even paper napkins, or collaborative electronic tools. Visual com-
munication supports problem solving, idea sharing, and relationship building.

Remote and electronic negotiations

But not all negotiations are face to face. Email and teleconferencing may make it
impossible to share the use of a whiteboard or paper. In that case, it is possible to
encourage joint problem solving by sharing documents through collaboration soft-
ware. See below in this chapter for more information on remote negotiations.

Section summary

Use visualizations of all sorts to facilitate communication of ideas in negoti-

ation – these support the verbal negotiation and are generally accepted as
serious.
108 Talking the talk

Remote electronic negotiations

Increasingly the business world negotiates partly or entirely by remote media: video,
phone, email. These tools are convenient and accessible – a smartphone might be
enough for all of these. The advantages of remote electronic talks include conveni-
ence and speed. The disadvantages include having less context around the talk:
facial expressions, voice tone, gestures, and so on. These clues are minimized or cut
out completely in remote negotiations, and it becomes easier to miscommunicate.
We can describe media on a scale between Rich (lots of context and information)
to Lean (little information other than the core message), as in Figure 6.2 below.
Lean media is helpful to build information certainty and avoid vagueness –
use lean media for simple messages and content. Using email features wisely can
be efficient, by attaching self-explanatory files such as figures, images and illus-
tration. Use poor media more with established relationships where meanings and
intent are already established and clear.
Use rich media for complex discussions, emotional content, and new relation-
ships. Figure 6.3 suggests which form of communication to choose depending
on the relationship and the complexity of the issues.

FIGURE 6.2 Rich and poor context media

FIGURE 6.3 Which media fit best

 Talking the talk 109

When we negotiate, we often use multiple communication channels to

exchange information, such as phone, email, face to face, video and so on. How
can we pick the best channel for a specific moment? Understanding types of infor-
mation helps negotiators select the most appropriate communication channel.
There are two information processes to consider: information conveyance and
information convergence (Dennis and Valacich, 1999; Dennis, Fuller and Vala-
cich, 2008).

Information conveyance process

Information conveyance focuses on distributing divergent and uncertain infor-
mation including objective data and analytical information. The data and infor-
mation help develop new, diverse, and concrete ideas jointly. Information
conveyance occurs to clarify general routines and standard circumstances and
gain common broad understandings.

Information convergence process

Information convergence focuses on gaining common results such as defining
problems and resolving understanding. The convergence process involves sub-
jective ideas and individual thoughts to provide familiar, distilled, and deep
thoughts in order to comprehend unique situations and help the group react to
unexpected situations.
In addition, communication channels include various capabilities for informa-
tion conveyance and information convergence. Channel capabilities include fea-
tures such as:

– Transmission clarity which enhances the clues for immediate comprehen-

sion. E.g., physical presence, visual enhancement, verbal delivery, written
approaches, graphical support, dialectical interaction, and analytical tools.
– Reusability which allows users to re-process and repeat the information.
– Procedure rehearsability which makes it possible to store information and
resume the information development before the actual delivery.
– Symbol variety which lets users offer various types of verbal, non-verbal and
para-verbal communication.
– Multi-tasking which allows users to simultaneously communicate and evaluate.
– Access control which allows enabling and disabling private and public access.
– Relational quality which develops relational connections and nurtures the
depth of relationships.

Q. How can you optimize the use of information communication technologies in

negotiation when the interactions cannot be held face-to-face?
A. Your answer: ___________________________________________________
__________________________________________________________________
110 Talking the talk

Email advantages
According to the graphics above, email and text messaging are the media that
carry the least context information. Email, unlike text messaging, does not even
tell the users if a person is available or not. With so little context, there are
some advantages to be exploited:

• No instant response needed (asynchronous)

Email does not require an immediate response, it can wait for minutes or
days at your convenience. After opening an email, you can take time to
gather information and consider alternatives before answering.
• Language skills
If the negotiating parties do not share the same native language, email allows for
slow responses with time to create and revise in the foreign language. This slow
process is much more comfortable (and more grammatically accurate) than the
immediate give and take of live communication. Language learners benefit from
email’s low-pressure format.
• Low barrier
Some people feel more comfortable proposing an idea when it is not face
to face or not using live media. Email provides the feeling of insulation
from a poorly promoted proposal (author research, Chen).
Additionally, low power individuals may communicate more and more
successfully using email or messaging (Thompson, 2012).
• Manage emotions
Email does not necessarily show emotions, especially if you take time creat-
ing and revising it. You can manage your display of emotions to make the
recipient think you are happy, angry, satisfied, etc. On the other hand, it is
easy for recipients to misread email because they project their own emo-
tions or worries onto the email. Therefore, extra care in writing, careful use
of emoticons, follow up calls, and visits is wise.

Define a clear purpose for your email

If your email’s purpose remains uncertain, the message may be misunderstood or
even remain unread. Therefore, the person responsible for writing the email needs to
explicitly and clearly address the key points during the introduction to motivate the
recipient(s) to carry on reading and get the point. However, if the introduction is
overly long or unclear, the reader may lose focus or skip passages of text and miss or
overlook one or more key points. Therefore an informative subject line and brief
introduction are the best combination.
Don’t waste your time writing something that people won’t read. Make it easy for
your recipient(s) to know what you require and expect from them. A clear and con-
cise indication respectfully phrased can help an email recipient understand the key
points.
 Talking the talk 111

Types of email
Five kinds of email can be generalized. You should clarify the type as early in
the email as possible to help the reader(s) quickly identify the nature of the text
and whether it is of interest. The five types of email are:

– Information sharing: conveying information without the need for

a response. Such as, sales advertisement, reminders; etc., but avoid
lengthy, excessive texts. Be explicit – help the reader understand who,
what, where, when, etc. Identify the topic clearly and share the informa-
tion concisely.
– Inquiries: requesting advice or providing answers to questions. Responding to
inquiries helps the sender gather information which may be advantageous to all
parties. Number the questions to encourage a thorough response. Do not ask
many questions in one email. Limit or avoid open ended and vague questions.
– Required actions: taking an action towards an issue is required to move an
agenda forward. Such as: forwarding an email, linking to a webpage, receiv-
ing/checking attached files, etc.
– Open ended discussion: Having a dialogue to keep the communication
active, for the purpose of a mutual benefit or a future interaction. Such as:
brainstorming, project development, etc.
– Advice: if a sender requests advice on a problem, replying with a vague or
an irrelevant comment (e.g. complaints) is likely to delay matters. It is
important to offer concise suggestions. Generally, it is a good practice to
include links to supporting sources. Because advising and problem solving is
a complex process, it is good to propose a phone call or face to face
conversation.

Structure of successful email

Subject line – never send an email without an informative subject line. Six or fewer
words is best. The topic and your general feeling or opinion should be clear.
Greeting – always start with the name(s) of the intended recipient(s). For example:
“Dear Bob”, or “Bob”, or for a group, “Bob, Tom, and Susan”. You can also
start “Dear Team”, “Dear All”, etc.
Lead to the next communication – In successful business, one activity leads to another.
Finish up with phrases like “…please send me your response…” “…let me know
your opinion about…” “…I will call tomorrow to talk about the details…” “…please
review the attached document and send it…” “…I’ll be in your district on Thursday,
let’s discuss this further over a coffee…”. Assertively and politely stating the date and/
or time when a response needed is most likely to result in a timely reply.
112 Talking the talk

Closing – close with a polite ending. “Best regards, Tom” is a good general pur-
pose ending, or “Thank you, Tom”. Avoid “Sincerely, Tom” or overly warm
closings. “Thanks” is acceptable for an internal email in an established business
relationship. After your name, a business email should include a few lines (about
four) with your organization and contact information.

TABLE 6.10 Business email dos and don’ts

Content Do Don’t

Abbreviations Use only business abbreviations Do not use casual abbreviations like
known to the email users. Explain “CUL8er” (see you later).
new abbreviations as necessary.
Animation Do not use distracting animations.
Attachments Yes if format is important. Do not send attachments that are not
Yes if the communication is long. directly related to the topic.
Yes if you need to send graphics/ Do not include company logos as
images, etc. attachments – put them in the body
of the email if required only.
Clipart Avoid.
Complex Make a phone call or a face to face Do not use email for complex issues.
issues visit.
Emoticons Use sparingly. Use emoticons only No animated emoticons.
to show an upbeat feeling, No unusual emoticons.
a concern, or other very clear simple No emoticons for complicated
feeling. These are generally OK in nuanced feelings.
an established business relationship: Be careful, these are common in East
☺ :-) :) Asia but are not yet common else-
☹ :-( :( where in business:
> < (^o^)
Social- Western: in the social encounter, In some countries, certain alphabet
cultural tend to use the letter x to conclude letters may insinuate a quite different
symbols informal texts. The letter x stands in gesture than in others. For example,
for body language (kisses) and sug- the letter x indicates a censored dirty
gests closeness. word in Taiwan.
Grammar Keep it simple. Do not show off your grammar
skills.
Humour Avoid.
Irony Do not use.
Length Good email is short, 5–20 lines if Do not fail to provide enough
possible. Keep it short, simple. context.

(Continued )
 Talking the talk 113

TABLE 6.10 (Cont.)

Content Do Don’t

Persuasion Try to include only two support Don’t make it long and bothersome.
points. Generally, one point gets
through, two might get through,
more never get through.
Rude/taboo Never.
words
Sarcasm Do not use.

Completeness – help the reader understand who, what, where, when, etc. In face
to face communication or in other situations, it is easy to gather related informa-
tion to the core message. However email lacks this additional context, and may be
read much later when the surrounding details are no longer fresh. Therefore,
identify yourself and the topic clearly. When responding to an email, keep any
previous email(s) in your response.

Clarity – avoid complicated grammar. Keep it simple.

Simplicity – Avoid complicated and delicately nuanced ideas. Keep it simple. If
you have much to communicate, do it face to face, by phone, or in a longer
attached document with supporting info.
Only one main subject – discuss only one main topic in one email. Send a new
email for any new topic.
Try to include only two or three support points, if possible. Why? The reader
may not have time or focus to manage more. The authors’ experience is that
“one point gets through, two might get through, more rarely get through”.
This is especially true for high level managers who often simply do not have
time for more than minimal and clear communications.
Length – keep it short.

Casual abbreviations
As a rule, do not use casual abbreviations even in casual email. These change
frequently and therefore may easily be misunderstood. Some are funny…but
some are quite rude! Never use a rude one in your emails or other writing.
From the list below, ASAP, COB, and FYI are widely used in business. You
must recognize some of these but avoid them in general.

ASAP – as soon as possible

COB – close of business (usually means 5 pm)
FYI – for your information
114 Talking the talk

LOL – laugh out loud

OMG – oh my god
ROFL – roll on floor laughing
W84it – wait for it
IMHO – in my honest opinion
IIRC – if I recall correctly
FUBAR – damaged beyond all repair

Some last points of email etiquette

• Use common business acronyms and jargon with other professionals who
know them – it will show that you are also professional.
• Do not use slang and local abbreviations in business email at all.
• If you are forwarding or re-posting a message you’ve received, do not
change the wording. You may shorten the message and quote only
relevant parts, but be sure to properly identify the source.
• In order to ensure that people know who you are, be sure to include
a line or two at the end of your message with contact information …
keep it short, no more than four lines.
• A single address may go to a group even though the address looks like
it is just one person. Know to whom you are sending!
• Be careful about cc’s when replying. Do not accidentally exclude
people. Also, do not continue to include extra people if the messages
have become a two-way conversation.
• Do not write with all capital letters. IT LOOKS AS IF YOU’RE
SHOUTING ANGRILY. This is true for email and all writing. Do
not use all capitals for brand names like TOYOTA.
• Never write anything in an email that you would not write in a letter
or memo … foolish words may return to you!
Adapted from: www.rfc-editor.org/rfc/rfc1855.txt

Section summary

Select the means of communication based on the contents; choose the best
method for the level of expression and complexity. Carefully design your
email from the subject line to the closing to get the right content to your
audience in the right way.
 Talking the talk 115

Negotiation error: when to go slow

TABLE 6.11 Error: When to go slow

Nonaka: Let’s start with the price, is Nonaka should now realize that $5.50 was
$5.50 per unit OK? very favourable for Tanaka. Nonaka should
Tanaka: Sure! Now let’s talk about delivery have opened higher to gain value for his
time. company.

What can Nonaka do? The opportunity to get a higher price has gone. The opportunity to
get a concession for coming down has gone. Nonaka can try to be more careful on another
issue and link it to the price.
Nonaka: OK time delivery, this is difficult Now Nonaka has made an offer and found
for us because of the busy season. We are out more about what Tanaka needs.
scheduling the work for the end of October. Nonaka’s offer is well structured, getting
Tanaka: We need to get the work somewhat plus $0.75 but not committing to an exact
sooner … time.
Now, Tanaka has a reason to consider
Nonaka: Sooner? Do you mean September?
paying more and the two parties can explore
Tanaka: Actually, early August would be the
the situation constructively.
best.
In the end, Nonaka can drop the price
Nonaka: We could manage that but set up again, but only if there is a gain in some tan-
and preparation will not be as efficient. If gible or intangible way that is important.
you are willing to pay a little more, $6.25,
we would be able to manage around the first
week of September.
Tanaka: Well, in that case …
But let’s think about Tanaka’s quick answer, “Sure!” What did that quick answer signal to
Nonaka?
By answering so quickly, Tanaka let Nonaka know that the price was too low. As a result,
Nonaka knew to try to increase the price. Nonaka is a smart negotiator who got good
value for his company without damaging the other company.
7
NEGOTIATION TACTICS

Tactics at the table

This chapter contains a few points about tactics used at the negotiating table.
Tactics means actions you take during negotiation. First, we will consider distribu-
tive tactics. These have the purpose of improving your outcome regarding
resources you need to get. Distributive tactics are tactics that match well with
a competitive strategy and will not help to build good relationships. In fact, the
opposite is usually true – these tactics damage relationships.

Distributive tactics
Flinch. To flinch means to draw back in pain or surprise. In a negotiation, a person
might flinch in reaction to a demand or proposal that seems extreme. A very strong
flinch might include showing anger. A flinch can cause the other party to give
a concession, but it may also damage the relationship as shown by Fassina and
Whyte (2013). Their research also explained that a flinch may be natural or fake.

Higher authority. Sometimes a negotiator will refuse to agree to a proposal that is

entirely possible. In order to get more concessions, the negotiator might insist on
getting approval from the boss. This negotiator may go out of the room and pretend
to call the boss, hoping it will seem as if it is not possible to give a small concession.

Silence. With some individuals, and even some cultures, silence feels uncomfortable
at the negotiating table. If one side feels uncomfortable with silence, it may be pos-
sible to get a concession simply by looking thoughtful. Example: “How about
$10,000?” (no answer). “Well, then $9,000?” In this example the silent party does
not need to give a concession in order to get a concession. While it may be effect-
ive, it is not a helpful tactic for building relationships and trust (see Figure 7.1).
 Negotiation tactics 117

Offer by Silence by Improved offer

Party A Party B by Party A

FIGURE 7.1 The silent rejection tactic

Experienced negotiators will not drop their price, instead they will wait or ask
questions in order to understand what the silent party can agree to.

Information overload. This tactic involves providing large amounts of detailed

information, spreadsheets, analyses, numbers, statistics, and so on. The intent is
to confuse the other party so that they will make a mistake or simply become
lost in the information.

Decoy/red herring/misdirection. In this tactic, one party does not reveal the true
priority of their most important issue. For example, they may want a red car but
only ask about green cars. When no green car is available, they unhappily (it
seems) accept the red car if it is discounted. The people who use this tactic most
successfully are able to gently introduce a bias in the counterparty toward the
thing that they don’t want.

Stalling. It is quite common to create a little extra time for your own thinking
during a negotiation by asking for details or explanations that might not be
really necessary. This kind of delay is called stalling. Generally, negotiators
understand and are comfortable with a little bit of stalling as one party or
another thinks and plans. However, it is not considered acceptable to intention-
ally expend large amounts of time hoping to pressure another party into acting
unwisely at the last moment.
If the counterparty stalls a lot, you should be prepared for them to give you
sudden, complex offers shortly before the deadline for finishing the negotiation.
You should be prepared to say no, to extend your negotiating time, and to use
your BATNA. You can use the time in which the other side is stalling to learn
about them through questioning and other research methods. As time runs out
you should resist the pressure to agree. Instead, it may be possible to ask to
work with another negotiator, possibly even moving up the hierarchy to work
with the boss of the negotiator!
Another response is to move your schedule forward, inform the other team
that you have very little time remaining thus putting the same pressure on them.
This is an aggressive approach, and not advisable, just as extreme stalling is not
advisable. Last minute decisions and agreements may contain significant errors
and result in agreements that are poor for one or all parties, or which lead to
expensive renegotiation or collapse.
118 Negotiation tactics

In the past, US businesses, seeking to quickly close a deal, have been easy
victims of stalling and have agreed to unfavourable terms shortly before leaving
for the airport. However, smart US businesses are ready to quickly change part-
ners or to allow much extra time for concluding negotiations.
If you choose to stall, you should be aware that the other side may use its
BATNA and break off negotiations.

Last minute demands. Some negotiators will make a request for a concession very
late in the process, even as documents are prepared for signing. This tactic intends to
catch the other side off guard or off balance, with the hope of getting an easy conces-
sion. Best reaction: don’t agree immediately, but make it clear that you have the time
and willingness to renegotiate the entire package and all the related linked issues.
Some negotiators will ask for a concession even after signing. Best reaction:
don’t agree immediately, but make it clear that you have the time and will-
ingness to renegotiate the entire package and all the related linked issues.
You may however grant the extra concession…why? Because it could help
to build a relationship. In some regions, including much of east Asia,
a negotiation party may expect to give or expect to request “a little” in the
comfortable belief that business partners can do “a little” extra if they are
serious about the relationship. If this expectation is accepted and known by
all parties, the relationship may improve. However if one of the parties
comes from a different cultural background, the request may be damaging to
the relationship. In conclusion, negotiators who are comfortable with making
demands after signing should first consider whether the other parties are
comfortable with accommodating those demands and not make the demand
if the other side is unlikely to appreciate it.

Retracting an offer
Many people consider it unreasonable or even unethical to retract an offer
after making it. But is it so bad? An offer is not an agreement. And
a whole agreement is not finished until all the parts have been completed
and formalized.
On the other hand, if people generally do not expect offers to be retracted,
someone who does it regularly may be socially ill – pathological. However,
behaviours that seem very wrong among one group of people may seem quite
acceptable in another group.

How would you feel if an offer was retracted a day or two after having agreed
it during negotiations?
_________________________________________________________________
_________________________________________________________________
 Negotiation tactics 119

One person famous for retracting offers and other aggressive negotiation tactics was
Steve Jobs, founder and sometime CEO of Apple. A Sony executive commenting
in W. Isaacson’s (2011) biography of Steve Jobs had this to say about Jobs.

“In classic Steve fashion, he would agree to something, but it would never
happen,” said Lack. “He would set you up and then pull it off the table.
He’s pathological, which can be useful in negotiations.”
2011, p. 401

Jobs’ success at business negotiation, and his belligerent behaviour are well known.
Does that make it a best practice for Apple? Or best for all companies? Write your
thoughts here: ________________________________________________________
_________________________________________________________________

What are some reasons not to retract an offer after it has been made?
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________

What are the reasons to retract an offer after it has been made?
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________

The result for Jobs and Sony was that they did agree to a deal, but only after
much time and with fewer of the joint benefits than they might have received.
Jobs’ behaviour alienated and upset his counterparty. The negotiations almost
broke down. If another party had revealed similar technology, Apple might have
lost the chance to get the Sony music.

False concessions
It is not uncommon to offer a false concession, allowing the other party to struggle
to get something that you would give them anyway. Your HIT list, discussed above,
includes things you Have to Get. It might also include things you Have to Get Rid
Of. If your Have-to-Get list includes something you must get rid of, it might be
possible to trade it for a concession, as if you wanted to keep it. See the example
of a false concession below (sometimes these are called “padded concessions”).

Let’s say that in the course of negotiations, Mr. A [of AMPO] demands in no
uncertain terms that Commissioner Daniels be dismissed. Ms. C [of City]
protests equally strenuously that her side will never agree to such a move.
This is a strategic misrepresentation: City indeed wants to get rid of Daniels,
120 Negotiation tactics

but AMPO doesn’t know it. Ms. C later “reluctantly” backs down … and
gets Mr. A to make some concessions in addition.
Negotiation Analysis: The Science and Art of Negotiation,
Raïffa et al. (1982, p. 142)
Comment:
Please notice that “strategic misrepresentation” is a polite way to say “lie”.
This tactic is usually only effective in gaining small improvements and may
damage the overall relationship. It is best not to lie, but it is also important
not to give something for nothing. In this example, Ms. C perhaps could
have openly given away the Commissioner and gained improved relation-
ship without misrepresenting her position.

False concessions are not uncommon, so you should be aware of them. Avoid
giving something for a false concession. Make false concessions carefully. If you offer
a false concession, you must never reveal that you were planning to give it anyway!

Disinformation stratagem
The quote below is from Howard Raiffa’s (2002) book on negotiation. He describes
a disinformation tactic that he punished, but which of course is used in the real world.

One student, let me call him X, playing against Y, excused himself to go

to the bathroom and left behind his written confidential instructions.
Y couldn’t resist noticing X’s confidential RV and took advantage of
X. Or so Y thought. Y did not know that X…put in a false number.
Y lost mightily and X was triumphant. Y complained to the instructor of
the unfair practices of X. The instructor docked points from both.
Raiffa, 2002, p. 271

Of course, in a real world negotiation, there is no professor to enforce fairness or eth-

ical behaviour. Clearly, it is ethically unacceptable to trick a business negotiation part-
ner. In fact, if the result is very bad for one side, they may be able in some legal
systems to annul the resulting contract legally, if the trick is discovered. Even if there is
no court proceeding, discovery of the tactic will probably damage the reputation of
the party that managed the trickery. In addition, there may be the cost of lost time and
money as a contract broken or terminated must be replaced using other partners.

Ultimatums
An ultimatum is an aggressive offer usually like this one: “Accept the offer by 1
PM or we are finished.” An ultimatum usually damages the relationship and the
negotiations in general. Therefore, you should avoid making ultimatums.
 Negotiation tactics 121

How to manage an ultimatum

If another party gives you an ultimatum, you can follow these guidelines:

– Do not react quickly, even though there is pressure to react quickly.

– Play for a little time (see Chapter 6 for useful phrases).
– Coolly compare the ultimatum to your BATNA,
○ … walk away from the negotiation if necessary.

– Play for longer time:

○ Propose value creating ideas;

○ Make counteroffers;
○ Link existing ideas and goals to the ultimatum.

Trashing the product (buyer tactic)

Sometimes a buyer will attack the product that is at the heart of a sale. The
purpose is to show that the buyer is only barely willing to accept the product
and therefore the price must come down to their estimation. The process of
“trashing the product” can be quite long and thorough, particularly in negoti-
ations with Chinese teams. An individual famous for starting negotiations with
extensive trashing of the other parties’ products was Steve Jobs, the founder and
CEO of Apple.
Less experienced teams, especially from Western cultures, have found themselves
shocked, upset, bored, and irritated after listening to this process for hours or days.
However, the best response to this process is to quietly listen, learn if possible how
to better satisfy the customer, and not give more than a symbolic concession.
Therefore, you should have some symbolic concession prepared in advance!
The worst way to react is to get upset or lower the price significantly.

Lies and detecting lies and reacting to lies

It is generally wise to check for lies and deception, though without showing
mistrust for the other parties. Cellich and Jain (2004) suggest following these
three strategies to catch a lie.

1) Test the consistency of the other party’s statements by comparing statements

and by asking questions to confirm accurate information. This process is
also called the “inconsistency trap”. However, an inconsistent negotiator
may not be trying to deceive. The negotiator may not be aware of the
inconsistency. In such cases the “inconsistency trap” can help to clarify
logical errors to the benefit of all parties.
122 Negotiation tactics

2) Communicate in several ways (speaking, writing, email, fax, etc.) because it

is harder to lie consistently in numerous formats. When speaking face to
face, look for non-verbal cues such as gestures, eye and facial movements
that reveal nervousness and possible deception.
3) Ask for tangible proof of issues that are in question (regulations, legal agree-
ments, previous contracts).

If you think the other party is lying, you can follow one of these strategies.

– React with silence until the other side clarifies the issues (not helpful if the
other party does not understand why you are silent).
– Express concern politely about the possible lie and wait for the other party
to clarify it suitably.
– Review your BATNA and decide if you should end the negotiation
because it is unwise to work with a party that might lie.
– Increase your efforts to learn about the other party and their interests.

Why you should not lie

You should not lie because:

– If discovered, the relationship will be badly damaged.

– A contract made based on a lie (or other fraud) can be voided in many legal
systems including UNIDROIT, an international contract law accepted and
enforced in many countries. After voiding the contract due to a mistake
based on a lie, the liar may have to pay damages according to UNIDROIT
(Art. 3.2(2) UNIDROIT Principles, 2010).
– Your reputation among other businesses may decline.

What to do if the other party …

… wants a price too high or low for you: ask questions about the specific
points they expect. Break down the costs item by item. See if you can add
or remove expensive or unnecessary items.
… delivers a final demand or request (an ultimatum) that you dislike such
as “$x is my last offer.” Don’t accept or reject it immediately. Gain time and
information by asking more detailed questions about the offer. If this is
a fixed BATNA position, you may have to choose to agree or to leave the
negotiation. If it is not a fixed point, the other side will eventually allow
some concessions or cooperation.
… offers a great price at the beginning. Do not immediately accept it, even if it is
good. Learn more about it so that you can either improve the price or develop
a more complex and valuable business relationship with the other party.
 Negotiation tactics 123

… uses a “sad song” to play on emotions. This tactic makes a heartfelt request
for significant concessions. In North America or Europe, a “sad song” might
come at the beginning or middle of negotiations; pay no attention to it. In
some parts of the world, the sad song may require some sympathetic reaction
including perhaps minor concessions. However, do not give large concessions
for it. In Japan this tactic (called naniwabushi) is sometimes used successfully
against non-Japanese companies that do not expect or understand it, though
research done for this textbook suggests it is less common than in the past.
Ignoring the sad song and giving nothing may damage the relationship – it
may be part of cementing the relationship for some organizations in some
cultures.

Discuss with your partners: which of the above tactics are too aggressive?
Which are acceptable? Do you think people from different cultures might have
different answers?

Avoiding unethical negotiation tactics

Please visit this useful article by Roger Dawson on identifying and avoiding
unethical tactics.
http://reiclub.com/articles/real%20estate%20negotiating
Additional reading: “B2B negotiation tactics in creative sectors” by Sigurdar-
dattir, Ujwary-Gil and Candi (2018), identifies categories of tactics and discusses
how they are used in arts, entertainment, and other creative businesses.

Playing the hard card first (Table 7.1). Some negotiators like to start with an
aggressive stance even though they plan to be flexible and even soft during the
negotiations. This is sometimes called playing the hard card. This tactic is a kind
of impression management, see that discussion in Chapter 2.

TABLE 7.1 Playing the hard card first

Party A: First of all, I want to let you know Comment: Party A tries to show that they
that we have cancelled several contracts simi- are tough negotiators. They hope to
lar to your proposal because they were not decrease Party B’s expectations about results.
profitable enough.
Possible response from Party B: I see, maybe Here, Party B seems to be impacted by this
we should improve our offer to accommo- approach.
date you.
Possible response from Party B: I see. Well, In this response, Party B shows no impact
we have a great product and offer, so let’s and changes the focus of the aggressive
talk about how we are better than those opening to good qualities of the offer.
other companies.
124 Negotiation tactics

Why would a negotiator start with a hard approach like this? Write what you
think are the advantages of playing the hard card first.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________

What kind of negotiators would be most likely to play the hard card when start-
ing negotiations?

1. Male 6. From a little known company

2. Female 7. From a dominant culture
3. Experienced 8. From a subordinate culture
4. Inexperienced 9. Respected
5. From a well known company 10. With no reputation

If you chose the even numbered selections from the list above, you would usu-
ally be right. These negotiators may feel it necessary to start with an aggressive
approach because of their own insecurity. Handle these individuals by listening
carefully and working through their concerns while showing respect for them and
their offers. If a person fitting the odd numbered selections plays the hard card
first, you may be wise to consider finding a different partner, whether in that com-
pany or in a competitor company. Switching to a person who uses more construct-
ive and synergistic approaches may lead to improved mutual gains.

Why might a negotiator not play the hard card first? Write what you think are
the disadvantages of playing the hard card first.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
A very aggressive or negative start may immediately lead to a similarly negative
response. As we know from the Prisoner’s Dilemma game mentioned in Chapter
3, it is most common (and wise) to punish aggressive or other “bad” behaviour by
returning the same. The most likely series of events are shown in Figure 7.2.
In short, a negative move provides no incentive for a positive response. There-
fore, it is generally best to avoid negative behaviour throughout a negotiation.

Defense against the dark arts: calm and experience

With time you will learn to quickly identify aggressive tactics as they happen.
Simply, you will become more sensitive to tactics. When you identify the tactic,
you will know how best to react.
 Negotiation tactics 125

Positive Negative Moves

st nd
1 Turn 2 Turn 3rd Turn

Positive

Positive
Negative

Positive Negative

Unlikely to get a
Start Positive move
Negative
Unlikely to get a Negative
Positive move
Negative

FIGURE 7.2 Start nice or nasty?

Generally, the best reactions combine further communication and managing

the relationship. But do not change your position because of the tactic – only
change your position based on negotiated concessions and joint problem solving.
In many cases your most powerful defence against aggressive negotiation tac-
tics will be time. The more time you have, the more flexibly, carefully and con-
structively you can react during the negotiation. Time allows you to react
calmly and reject pressure tactics in general. Make it clear to all parties (your
boss, the other negotiation parties, your coworkers, and other important stake-
holders) that you need and will use as much time as necessary to get a result that
maximizes gains for all sides.

Section summary

Use distributive tactics carefully – these are essentially not frank negotiation
approaches. Avoid aggressive negotiation tactics and the people who use
them.
A broadly successful defence against all negative tactics is to keep a cool
head and work patiently forward based on the mutual interests of the parties.
126 Negotiation tactics

Integrative tactics
Trading information Give the other side information about your business activ-
ities and plans while asking about theirs. Allow the counterparties to lead the
conversation if they want to. When asked, you should provide information as
long as it is not sensitive or secret. The ideas about trading info are included in
more detail in the section on Reciprocity.
Which information is too sensitive to share? That depends on your opinion.
You may decide that it is OK to reveal all details (FOTE or Full Open and
Truthful Exchange) or that some details should be kept secret such as your
reserve price (POTE or Partial Open and Truthful Exchange).

Asking questions to develop understanding This integrative approach shows posi-

tive interest and helps both sides to declare, explain, and discover their interests.
See the section in Chapter 2 called “Gaining and giving information” for more
about these questions.

Trading concessions (logrolling) This approach can help to end a deadlock or dis-
agreement. When trading, try to give up issues that are low priority for you and gain
issues that are low priority for the other side (but high priority for you). While trad-
ing and compromising can never be completely satisfying, it is sometimes the only
way to resolve disagreements. If the parties can agree on trading, they may improve
their relationship enough to manage value creating ideas and problem solving.

Section summary

Use integrative tactics to build up relationships and to improve outcomes.

Avoid integrative tactics when the issue or the whole negotiation is clearly
distributive and there is no relationship to maintain or improve.

CASE 7.1: THE VERY EMOTIONAL CLIENT

Real life is a complicated and messy thing. Your plans may not last long after
making a contact with the other sides in a negotiation. Flexibility is the answer! In
the case below we will see how a negotiation party acted and reacted to the
behaviour of another party at the table. This example, from the experience of
a construction industry manager in Alberta, Canada, shows how one party recon-
sidered and redesigned its goals, strategy, and tactics as the interaction pro-
gressed. At the same time another party in the negotiation redefined their role
radically. The third party in the negotiation did not react flexibly and had to col-
lapse in the end.
Background: This project was difficult from the beginning. It was a hard-bid,
small TI project in a shopping mall with a very short schedule. We (the con-
struction company) ended up with some poor suppliers and had to work long
 Negotiation tactics 127

hours and nights to meet the schedule. The Client also made some changes
during the course of our work. With ten days to go, we realized we were going
to miss the deadline by four days. Our management and consulting team were
made aware of this and the Client planned accordingly. Meanwhile, the mill-
worker was put on notice and was to be held accountable for costs incurred as
he was at fault for the delays.
Issue: After the Client moved in, he made us aware that he was going to
charge us for lost earnings for the four days. We disagreed with him, as there
was no penalty clause in the contract and he had made the changes that
delayed the project. Because we worked with the Consultant a lot (an import-
ant relationship) and the millworker was responsible for the costs, we wanted
to try to negotiate to compromise. We asked the Client for a written claim of
damages; however, the Client avoided us and delayed providing the costs. Nor-
mally, we would have placed a lien against the project, but we couldn’t due to
the fact that it was in a mall. After 46 days, we received a claim from the Client
in the amount exactly equal to the holdback fee (10% of the agreed project
fee), including notice that he had no intention of releasing the holdback.
1st Negotiation: Our walk-away was 3%, as this is what the millworker offered
us to make this problem go away. So this was offered to the Client to avoid
further negotiations or legal options. It was rejected. The Client had no interest
in budging on his win-lose perspective. Our compromise strategy changed to
a competition tactic due to the negotiation style of the Client (“competition”).
Our Position: Our new target was zero percent loss, as we were quite protected
by the contract. We were aware that the Client and his agent (the Consultant)
did not communicate well, and that the Consultant was sloppy at reviewing
paperwork.
2nd Negotiation: The Client started the meeting very emotionally, stating
that by opening four days late we ruined his reputation and cost him exorbi-
tant profit. Our team was well prepared and did not get personal or emo-
tional. Our first question was “Please provide documentation supporting
your claim”. He refused, stating that he didn’t have to provide this because
his gut told him this was the correct amount and he came to this number
from all his years of experience. We disagreed and explained that he needed
to prove his number or we would move to legal options as his “gut” would
not be supported by the court (we were confident to use a Threat as our
tactic, because our documentation exceeded his). He got very frustrated and
aggressive. The Consultant called for a quick break to advise their Client.
After the break the Client agreed to provide supporting documentation.
We thanked him for changing his position. At that point we asked the Client
why we were meeting, as from our review of all documentation we were not
late but, in fact actually one month early. This stopped all conversation for
a minute or so. The Consultant spoke up asking us to clarify this, as we missed
the contract date by four days. We responded by pointing out that there were
numerous changes to the project and we added time to each change order
and the Consultant signed them. There was conversation between the
128 Negotiation tactics

Consultant and the Client. They produced four approved change orders total-
ling a three-day extension. The Client then argued that all of his losses hap-
pened on the fourth day and that if we would have completed within the
three days he would not be looking for damages.
We then reminded the Client that we had another change order approved
that added 30 days to the contract. This caused lots of commotion as the Con-
sultant could not find the change order. The PM produced the signed paper-
work proving our claim. The Client was raging at us and his Consultant,
specifically when he realized that the change order was approved a couple of
days before the original contract completion date. We responded by stating
that contract law supported us and we expected to be paid in full. The Client
sat in his chair with a very defeated look on his face and the Consultant called
for a break. After the break the Consultant stated that they were willing to
negotiate and accept our original offer of 3%. We declined and stated that we
would seek an Alternate Dispute Resolution (ADR) or legal means to collect all
outstanding monies. We agreed to park the issue and end the meeting.
We soon received a call from the Consultant stating that the Client agreed
with our position, mostly. It was made clear that the Client needed a token
to release payment or he would find other ways to drag out payment,
including the legitimacy of the approved change orders. Satisfied that
a small token would end this and receive payment, we offered 1% to the
Client and it was accepted (his strategy changed from compete to accom-
modate or compromise). We then got an agreement with the millworker to
cover this cost, which he was glad to do as it was less than his first offer
(3%). We were quickly paid by the Client, just 24 hours later.

Questions for discussion:

What were some tactics used by the Emotional Client?

_________________________________________________________________
_________________________________________________________________

Which of the Emotional Client’s tactics were…

successful: ________________________________________________________
unsuccessful: ______________________________________________________

Was the negotiator able to strengthen their BATNA against the Emo-
tional Client?
_________________________________________________________________
_________________________________________________________________

What role did the Consultant play in this negotiation?

_________________________________________________________________
_________________________________________________________________
 Negotiation tactics 129

What were some of the errors of the Emotional Client?

_________________________________________________________________
_________________________________________________________________

How well do you think the negotiator knew the Consultant?

_________________________________________________________________
_________________________________________________________________

Flow chart process:

Start

Court
No
Decide to
negotiate
Strategy reset from Offer of 3%;
Compromise to Complete; Rejected
Yes due to relationship Reset reserve from
with Consultant 3% loss to 0%
Letter offering a token
Assess situation payment;
develop BATNA, reserves, 1% agreed
positions Negotiation restart

Emotional, high claims Payment made

End by Client
First exchange of offers Round 1
(3% loss) and positions
Rejection of claims, threat of
court

Rejection. Claim arrives by

Facts raised, documents
mail. Claim rejected
presented

FIGURE 7.3 Flow chart of the Emotional Client

TABLE 7.2 Interests table for the case of the Emotional Client

Party Issue 1 Issue 2 Issue 3

Client
Constructor
Consultant

TABLE 7.3 Stakeholder analysis table for the case of the Emotional Client

Rights Responsibilities Wants Needs Comment

Client
Constructor
Consultant
130 Negotiation tactics

FIGURE 7.4 How the roles changed

In Figure 7.4, we can see that the first round of the negotiation put the client
and consultant in a position against the constructor. As the negotiation moved
into the second round, the consultant stopped supporting the client and moved
to a position where he could support both sides somewhat and mediate the con-
flict to a successful end. The consultant showed insight and flexibility in chan-
ging their position.

Persuasion approaches
Negotiators can use several approaches to influence the thinking of the other
sides. Li and Sadler (2011) summarize nine varieties of influence strategies, sev-
eral of which we will discuss here.

Legitimating
This approach may be effective with parties that place high importance on rela-
tive rank and prestige of individuals and organizations. The legitimating
approach links proposals to respected people and institutions to increase the
respect for the proposal. For example, the proposing side may point out that it
is similar to the work of a famous person familiar to the other parties. Suggesting
that your proposal has been accepted in the past by a famous person like Bill
 Negotiation tactics 131

Gates or Jack Ma might influence the other side to accept it. To be effective,
the choice of legitimating person or organization must match well to the know-
ledge and thinking of the other parties.

Rational persuasion
This approach relies on thinking that seems logical and sensible to the other par-
ties. Presenting data about industry standards or the expectations of people in
a certain region may help a party to agree to a proposal that is in line with that
data. For example, offering salaries that are 5% better than the local standard
instead of paying each individual according to their specific merits. This
approach may be most effective with negotiators who are rational in style as
described in Chapter 9.

Inspirational appeals
This approach relies on transmitting emotional involvement and commitment to
the other parties. Showing how a proposal would benefit a large number of
people or a specific group might make the proposal more appealing. For
example, a member of an ethnic minority may be swayed by a proposal that
benefits other members of that community. This approach may be effective
with parties that have a strong sense of community and collective action, see the
comment on guanxi in Chapter 6.

Ingratiation
This approach is a way to build relationships, however it is insincere. Flattery
may be effective in the short term, however long term relationships are best
when built on mutual success and satisfaction. Ingratiation is a process to urge
the other sides into positive thinking before asking for high demands that they
might not otherwise accept.

Strategic exchange
This approach calls on previous interactions where one side has made conces-
sions and would now like the other parties to make concessions. This integrative
tactic can only work where there is a strong relationship that has survived several
transactions and will probably continue to survive for many more. If the party
receiving the strategic exchange proposal does not foresee a long term positive
relationship, it will have no motivation to agree.
Other approaches described by Li and Sadler include coercive threats, dis-
cussed in Chapter 6 of this textbook, as well as jointly consulting to solve prob-
lems, a topic which is discussed in several places in this textbook.
132 Negotiation tactics

Section summary

Use various persuasion approaches depending on the nature of the situation

and what you know about the counterparty.

Humour in the negotiation

Appropriate humour has at least three useful functions in a negotiation:

– to decrease tension;
– to build rapport; and
– to devalue a proposal.

In a negotiation you can use humour carefully to relax the groups. At the same
time, humour builds rapport and positive feeling among the negotiating parties
and can be used systematically to manage the relationship (Vuorela, 2005).
Humour therefore has a similar positive effect and value as small talk. Humour
requires the participation of all parties to be successful, so it is fundamentally
cooperative (Vuorela, 2005). Any jokes should be easy to understand, simple
and only gently distracting. Jokes that distract too much from the atmosphere
and the topic will seem unprofessional and will not build rapport.

Devaluing a proposal
Read the example, and give your reaction to the question:

His negotiation partner had suggested a much higher dollar allocation for
sand. The first negotiator responded:
“Yeah, we need to get some sand, but we’re not trying to build Malibu Beach
here, man.”
Halpern and McLean, 1993

What do you think the “second negotiator” felt when hearing this response?
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________

Used this way, humour is a tactic that can make a proposal you want to reject
seem bad to all parties. Careful and gentle use of humour like this can make
a proposal seem weak without damaging the relationship. Slightly stronger use
of such humour may seem mocking and will probably damage the relationship.
 Negotiation tactics 133

Here is the above example of devaluing humour and the result as reported in
an academic journal.

As an example, one of the male participants did not want to spend a lot of
money on sand for ground cover. His negotiation partner had suggested
a much higher dollar allocation for sand. The first negotiator responded:
“Yeah, we need to get some sand, but we’re not trying to build Malibu
Beach here, man.”
With this joke, he made the other negotiator’s request for more sand look
ridiculous.
They ordered less sand.
Halpern and McLean, 1993

Inappropriate humour will damage the relationship and the joke-making side
can lose status and seem foolish. Inappropriate humour includes complicated
jokes (including satiric and ironic content), jokes on taboo or sensitive subjects,
and anything that could seem insulting. Of course, please do not tell jokes as if
a comedian had joined the negotiating team!

Revealing issues through humour

In her work on humour in negotiation, Joan Emerson (1969) found that
a joking reference to a difficult or even taboo problem could help identify and
address an issue to other parties. Because an issue might be unacceptable in
a serious conversation, it might be acceptable in a joking context. And that in
turn could allow the topic to be handled seriously.
Example of poorly executed humour:

Party A: You know, this reminds me of In this example Party A starts a joke, but
the time I was in a bar and a doctor and Party B has not identified the statement
a horse walked in. as a joke. This means that Party A has
Party B: A horse? tried the joke at the wrong time, or has
Party A: Yeah, and the horse says, not introduced it properly. As a result,
“Give me a beer and a gallon of water.” Party B may consider the other person
Party: Who said that? to be foolish or wasteful of time.
Party A: Well, it is a joke, you see …
Party B: Oh. Let’s consider the cost in
your proposal …
134 Negotiation tactics

Example of well executed humour to decrease tension:

Extract one: Client Negotiation
1 SellerJ So we in the U.K. we’ve got about just
2 (SIPS COFFEE)
3 round about seventy people working for
the company we’ve got
4 forty-two service engineers running
about in little white vans [an’
5 things like that
6 BuyerM right ha

Reprinted with permission, Vuorela, 2005, p. 112

Vuorela (2005) holds that this humour-based approach strengthens feeling of

joint purpose in some negotiations.

Section summary

Humour is a useful tool to build relationships and send signals about offers.
However, it must be used carefully with sensitivity toward language skills
and face saving issues.

Ethics

Do no harm
Your negotiating should always focus on building value for your company and
your projects. At the same time, you should actively try to not hurt the other
side when sharing existing or future value. Actively means that you review the
agreements and the processes before completing the negotiations. This is quite
different from passively allowing the other parties to make mistakes that are part
of (or not part of) the business being negotiated.
Q: Why should I spend the time and effort to check that the other side is OK?
A: Because being part of a negotiation with a bad outcome for the counter-
parties will directly harm them and indirectly harm you. In the same way that
you would help a person avoid an accident on the street, as a businessperson,
you are expected to help others avoid damaging errors.
Of course, if your negotiating partner comes to harm, others may suspect you
of harming them and the result may be damage to your reputation. Whether
you are or are not guilty of harming the other party, the damage to your repu-
tation may occur – therefore it is best for you to actively prevent damage to
your reputation by helping your negotiation partners avoid damaging errors.
Additionally, if your negotiating results are too hard for the other parties to
manage, they may
 Negotiation tactics 135

a) go out of business;
b) feel forced to break an agreement;
c) refuse to do business with you in the future; or
d) try to renegotiate the agreement.

Any of these results means additional cost and lost time to you.

Example
Company A managed a hard bargain against company B to supply memory
chips. Company B agreed to a very low price, just a little more than their costs.
Suddenly, a new regulation caused one of their inputs to become more expen-
sive and they were forced into bankruptcy. Company A suddenly found itself
with no supplier, as well as an urgent need to find a new partner and make
a new agreement. In the months spent searching and negotiating, they lost
market share, income, and the faith of their customers.

Help others build value

You should help the other parties in a negotiation build value in activities you
are not interested in.
Q: Why should I help some company make money when it does not include
my company, especially if it is not even my business area?
A: Because you will benefit from the improved relationship between the two
companies.
A: Directing the other parties towards good business ideas will not prevent you
from getting full value out of the negotiations.
A: You may be able to build a more robust agreement that will not collapse or
need to be renegotiated if there is an economic downturn or if unexpected
problems arise. That could save you money and time,

CASE 7.2: ETHICS MAKES MONEY FOR HONEST TEA AND

CAPRI SUN

A drinks maker, Honest Tea, searched for a reusable package for their kids’
drinks. They found none. Finally, they found a recycler that could use the
drink package (a pouch) in some fabrics … but what to make? In 2007, Ter-
racycle suggested bags and kids’ backpacks. The backpacks carry the name
of the recycler and Honest Tea (good for corporate image) but Honest Tea
takes no profit from the bags. The recycler, however, is able to grow
a reliable business … which serves Honest Tea. See www.terracycle.net for
more products.
136 Negotiation tactics

FIGURE 7.5 Recycle your waste with Capri Sun® and Honest Kids®
Source: Image used with permission of Terracycle.

Traditional view: New view:

ethics are just another cost ethics can contribute to income

Gross income 100,000 Gross income 100,000

Ethics –15,000 Ethics 15,000

Insurance –8,000 Insurance –8,000

Maintenance –10,000 Maintenance –10,000

Taxes –6,000 Taxes –6,000

Net Income 61,000 Net Income 91,000

FIGURE 7.6 Ethics as a net gain

This ethical approach also benefited CapriSun, a maker of drinks for kids, and
competitor to Honest Tea. CapriSun joined the Terracycle pouch recycling pro-
gramme in 2008.
The case above supports the idea that ethics can contribute to the strength of
your company. Ethical business behaviour is not just a cost (see Figure 7.6).

Be ethical, but get all the value you can

Your ethical actions do not prevent you from getting more value than the other
side, nor from taking value that the other side does not recognize or seek or
care about.
 Negotiation tactics 137

TABLE 7.4 Ethics in action

Dialog Comment

Tanba Agro: By the way, do you want us Tanba can use the eggshells as a source of cal-
to take away the eggshells? cium for the chickens. They will save money
Hyogo Cake: What? We usually throw by taking the eggshells. They have agreed to
them out. get a valuable item (eggshells) from Hyogo
Tanba Agro: That is 100kg of trash for free.
every day, we can pick them up a little
cheaper than the cost of the trash service.
Hyogo Cake: OK!

In your opinion, is there an ethical problem in the above conversation, or not?

_________________________________________________________________
_________________________________________________________________

Example
Let’s remember Tanba Agro and Hyogo Cake. The cake factory finally agreed
to buy the eggs. Consider their next conversation.

Business negotiator’s oath of ethics

I will not actively harm another person or company with the process or results
of negotiating. I will actively check that the other parties in a negotiation are
not harmed by their or my actions or agreements.

Section summary

Be sure not to harm other companies, organizations, or people intentionally

or unintentionally as a result of your negotiating.
An ineffective negotiation occurs when there is no intention to commit to the
agreement and if the negotiator only aims to beat the others with fake promises.

Who should you not negotiate with?

There are some companies and organizations you should avoid; they may cheat
even if the agreement is robust. Use your BATNA, because deals with them are
bad, or very risky. Learn about organizations you should avoid by reading and
by talking to people with more experience. Try to get positive references about
an organization before starting negotiations.
Generally, avoid companies that:
138 Negotiation tactics

A) Have a reputation for very aggressive agreements and hardball tactics;

a. Some big car companies, for example, are excessively demanding with sup-
pliers regarding price, delivery schedule, response time, exclusivity, etc.
b. Some large retailers force prices down to the level of minimal profit
making it hard for the supplier to survive.

B) Have a history of fraud or legal problems;

a. Some companies have transferred Intellectual Property or secret business

information to other companies or governments. Don’t give those
organizations the opportunity to sell your secrets! Even working with
organizations like that may damage your reputation.
b. Some companies have many on-going disagreements about contracts.
They may frequently be in legal court, arbitration, or in settlement
actions. Do research to find partners who have a history of completing
contracts with few legal disputes.
c. Some countries regularly rule against foreign companies when there is
a problem – avoid doing business with organizations in those countries.

C) Have unethical/illegal behaviours.

a. Some companies mistreat their workers in their home country or in

other countries.
b. Some companies have frequently made low quality or unsafe products.
c. Some companies may want to negotiate with competitors to set prices
within the industry (see news article www.nytimes.com/2013/09/27/
business/9-auto-parts-makers-plead-guilty-to-fixing-prices.html?
ref=business)

If you must negotiate with a company of this sort, be sure to have a strong
BATNA. It may be better to use the BATNA before you start talking!
Why do the “bad guys” continue to conduct business and find partners? After
decades of bad experiences, we would expect whole countries, not to mention
companies, to be shunned. Yet new companies are attracted to them despite
their bad reputation and record.
The answers to this question seem to fall into these categories:

1 Extremely appealing terms are offered. Inexperienced businesspeople may

be strongly attracted by the chance to make large profit margins. However
more experienced negotiators will recognize that the offer can only be very
appealing if the other side never pays out fully.
 Negotiation tactics 139

2 Many businesses think they are smart enough not to get tricked, “It won’t
happen to me!”
3 No alternative due to weak BATNA or monopoly situation.
4 Social/political pressure requires dealing with a bad partner, at a loss, in
order to gain other profitable opportunities.

Section summary

Avoid negotiations (and close partnerships) with organizations that could

hurt your business or your reputation.
8
WIN AT HOME BEFORE YOU GO

Educating the boss and coworkers

Teach your coworkers, superiors, and staff about negotiation so they can help
you and additionally so they can understand your results. You now know that
a negotiator needs time and information to prepare for a negotiation. The
people who work with you may not know that. They may not understand how
much information you need to have. They may not understand why you need
to think the way your negotiation counterparties think. Without understanding
and support at home, you may not be successful. Therefore, you will have to
explain basic ideas about negotiation including the need for time and resources
while preparing in advance of a negotiation.
After a negotiation, you will always need to explain why the deal you got was
good. You might have to explain to your boss, your coworkers, the board of direct-
ors, or other stakeholders. If they do not understand negotiation, they may not
understand your results. In that case, you will have to explain key concepts to them.

Questions
What points and what terminology should you teach your coworkers and other
management staff regarding negotiation?
List some points that you feel are necessary, but not too difficult to teach.

1. _________________________ 5. _________________________
2. _________________________ 6. _________________________
3. _________________________ 7. _________________________
4. _________________________ 8. _________________________
 Win at home before you go 141

Section summary

Educate your boss and coworkers to gain their support and understanding
before and after the negotiation. You will not improve the long-term success
of your company if you are the only good negotiator in it!

Back table negotiations

In your working life, negotiation tasks will generally start with requirements
from your boss. A simplified negotiation task might be, “Don’t spend more than
$X, get these concessions, finish it by Friday next week.” Notice that this sort
of task assignment is lacking even enough information to complete the HIT list
discussed in Chapter 4!
As a negotiator, you have to understand and satisfy your back table. In the end
you will have to explain to that person or group why you agreed to the deal you
got. You can also indirectly communicate to the back table of other parties. An
Austrian business owner interviewed for this book said he always gave economic
reasons for his offers that the other party could take to their boss. A Japanese busi-
ness owner in Tokyo described in an interview how she explains advantages for
the other side based her knowledge of their bosses and companies.

CASE 8.1: FUJI SEIKO ACTIVITY

Consider this case regarding Fuji Seiko.

You have offered the Fuji Seiko negotiation team the terms below. But you
know they have to report the offers to headquarters for approval. Your product
is a little better than your competitors’ product, but a little more expensive.
How would you help the Fuji Seiko team win the argument with their bosses?

Terms:

• Three partial payments instead of one lump sum.

• Delivery one week earlier.
• Adjustment of color to match the Fuji Seiko product.

Example:
By the way, let your CFO know that we will accept three payments with
no price increase – it may help with cash flow.

Your arguments:
________________________________________________________________
________________________________________________________________
________________________________________________________________
142 Win at home before you go

________________________________________________________________
________________________________________________________________

Write one or two reasons why you should consider the back tables of other
parties in a negotiation.
________________________________________________________________
________________________________________________________________
________________________________________________________________
________________________________________________________________

The back back table

Behind the back table you may find the back back table, a spooky space
inhabited by ghosts. These ghosts are people or organizations that you cannot
communicate with but which may have influenced your choice of outcomes or
your negotiation process. Examples of these ghosts include retired or even
deceased coworkers, company founders, idealized famous personalities, political
figures, and mythic business leaders.
As an example, the author is aware of a Tokyo company that could not divest
itself of an underperforming US bank because its acquisition had been made by an
executive manager whose importance in the company was closely tied to the
acquisition. The executive had been retired for 15 years, yet the current directors
would not even discuss selling the bank because it might insult that retired person.
Even though that person no longer participates in the company, he blocks the dis-
cussion to restructure. His ghost at the table stops any movement on the issue.
Ghosts such as the one described can:

– block topic areas from discussion (impose taboos);

– block outcomes even if they represent practical results;
– create a cognitive bias against logical problem solving.

Section summary

Pay careful attention to your back table in order to move smoothly from
talks to agreements. The back table must be satisfied with your negotiation
results before a proper agreement can be made.

Negotiation error: back table out of synch

In the fictitious case below we can see how a manager brought back a result
that was unsuitable for and unacceptable to upper management.
 Win at home before you go 143

CASE 8.2: NOT WHAT THE BOSS REALLY WANTED

Alaana informed Jowa of his assignment to complete a deal with Artix, Inc.,
a customer, for their cooperation in developing an improved version of pallet
lifting equipment. She said, “Please negotiate the details with Artix regarding
the commitment of hours and staff as well as the expectations of each side.
Above all we have to keep our costs down and keep ahead of our competitors.”
Despite this fairly vague statement of goals, Jowa researched the relation-
ship with Artix, learned about the individuals he would talk with and put
together a reasonable agreement committing both sides to exchanges of
information, discussions, testing, and so on. The agreement put much of
the burden for action on Artix and avoided exposing Jowa’s company to
open commitments of staff and time.
When he brought the draft agreement to Alaana for approval, she looked
somewhat annoyed. “You let them take over the project! They will have so
much of the inside knowledge that they will not need us.” She then negoti-
ated a new agreement without the support of Jowa.
Jowa thought this result was unfair. However, he realized he had not kept
in close enough contact with Alaana. His mistake was to let his negotiation
efforts get out of contact with the back table.

Problem solving techniques

Many experienced negotiators are good at problem solving. They think creatively
and react flexibly, and they know useful tools and techniques. Some of those tools
and an overall process are presented in this section. Sometimes pressure helps cre-
ativity; an insightful business student pointed out to the authors that she was
better at problem solving when pressured by having a weak BATNA.
An overall process for problem solving might start with a high-level analysis of
people and facts, describe problems, identify root causes of problems, and find pos-
sible solutions for discussion. The overall process should begin long before the
negotiation parties meet. Later, however, the process should include all parties –
doing so will boost communication and problem solving power. The sequence of
steps shown in Table 8.1 below is an easy way to start, but it is not the only path.
With some practice and experience, you might find a sequence of steps you prefer.

Ishikawa diagram (fishbone)

An Ishikawa program is used to identify and categorize issue contributing to
a problem. A useful diagram can be made quickly (see Figure 8.1). Generally
these start with the categories shown in the diagram shown in Figure 8.2:
People, Policies, Equipment, and Environment. The problem itself is written
into the “head” of the fish (it is often called a fishbone diagram).
144 Win at home before you go

TABLE 8.1 Tools for problem solving

Step and Level Tools Purpose

1 Macro Stakeholder analysis; Strength- Establish the groups and individuals

environment Weakness-Opportunity-Threat involved directly or indirectly, their
level (SWOT); Political-Economic- level of power (the ability to influence
Social, Technological-Legal- decisions), their needs, goals, and inter-
Environmental (PESTLE) ests. (See Appendix VI for further
explanation.)
2 Project Ishikawa diagram (fishbone) Roughly sketch the issues contributing
level to a problem.
3 Root level Why-why (5 Whys) Determine trigger causes and the root
causes of each issue.
4 Root level Goals and fixes Identify what to do and achieve in
order to solve the problem.
5 Root and Recommendations Propose how to solve each problem.
project levels
6 Project Creative solutions and action plans Expand the discussion from single
level problems to integrate related problems
and solutions.

Integrated
Recommendations creative
What and How solutions
Root cause:
Why-why
Mid-level: analysis
Ishikawa
diagram
Stakeholder
analysis &
Environment
review

FIGURE 8.1 Possible sequence of analyses for problem solving

The diagram in Figure 8.3, for a high-speed rail line, based on a student’s
work, uses the four basic categories to find causes of complaints about quality of
life by residents near the rail line.
The four categories, people, policies, equipment, and environment, in the
examples above are just suggestions. They are a good starting point because they
 Win at home before you go 145

People Policies

Problem

Equipment Environment

FIGURE 8.2 Ishikawa diagram, basic

FIGURE 8.3 Ishikawa diagram, train line

cover common problem areas. However, when working on a negotiation prob-

lem, start with these four, but also replace and supplement them with other cat-
egories that are suitable for the problem you are working on.

Why-why (five whys)

After using the Ishikawa fishbone to identify the contributing problems, select one
for better understanding. Drill down into the contributing problem to find a root
cause using the “Five Whys” approach developed by Toyota Motor Corporation.
146 Win at home before you go

Each time the why question has more than one answer, the diagram branches.
Each of these answers may continue or branch until arriving at a root cause.
Notice that different branches may come to the same answers and root causes.
Some branches finish sooner than others – so how can we know when to
stop asking why? Analysts usually follow these guidelines:

– Circular (points you back to a previous why in the same branch);

– No longer logically related to the original question;
– Outside the range of the problem/organization;
– Natural limits of physics.

In the example in Figure 8.4, the starting problem is the refusal by one party to
agree to share data collected by their autonomous cars and sensors. We ask first
why that is a problem. Then we ask why for each answer until we come to
a stopping point. In this case we appear to be finished after three levels of Why.
The diagram then shows several root causes. Some branches join with other
branches and come to the same root cause. The root causes are starting points
for fixing the original problem.
Looking at the example in Figure 8.4, we can see that some branches come
together because problems in the middle of the diagram sometimes have the same
intermediate cause. Further, a root cause might appear in more than one place. How-
ever, branches with the same intermediate causes should end with the same root
cause, or be explained in a note. The root causes are made clearer in Figure 8.5.
The why-why diagram in Figure 8.5 now clearly shows the root causes no
matter where they appear. Some of the root causes appear to be the same
despite coming from different branches (note the items in white boxes).

What to do and how to do it

Now that the why-why has been completed with clear root causes, it is possible
to add a What column at the edge of the why-why that shows in simple terms
what needs to be achieved.
The What column is an easy way to communicate the clear goals that correct
the root causes of the starting problem. Additionally, the graphic communicates
that some of the root causes require the same action. In the graphic in Figure
8.6, we have a total of five Whats in six boxes that we must fix.
The next step is to add a How column at the edge after the Whats in order
to show how to achieve the Whats. This How column does not need to be
very detailed. It is a starting point for serious planning and joint work with the
various partners in the negotiation (see Figure 8.7).
Now that a rough set of problems and solutions exists, you can join forces
with the other negotiation parties to work out the details while creating and
claiming value in a well informed process.
 Why? Why? Why? Why?
Too Too Many types
technical complicated and sources Root

Poor
explanation Root

Root
Safeguards
needed
Why is Data Too
Sharing a sensitive Root
Problem Could lead
to liability
Root
No
No fast concession
benefit of
sharing Poor
Too busy
Concentrate explanation
on technical Long term Root
work benefit not
clear

FIGURE 8.4 Five Whys example

Why? Why? Why? Root

Too Too Many types
technical complicated and sources

Poor
explanation

Safeguards
needed
Why is Data
Too
Sharing a
sensitive
Problem Could lead
to liability

No
No fast concession
benefit of
sharing Poor
Too busy
Concentrate explanation
on technical Long term
work benefit not
clear

FIGURE 8.5 Five Whys: Roots made clear

148 Win at home before you go

Why? Why? Why? Root What?

Too Too Many types
Simplify
technical complicated and sources

Poor Improved
explanation explanations

Safeguards Up to date
needed and practical
safeguards
Why is Data
Too
Sharing a
sensitive
Problem Could lead Scrub out
to liability certain data

No Developed
No fast concession concessions
benefit of
sharing Poor Improved
Too busy
Concentrate explanation explanations
on technical Long term
work benefit not
clear

FIGURE 8.6 From Why to What

Creative solutions
In the first five steps in the problem solving process shown in Table 8.1 this
textbook proposes your team might work alone or with the negotiation part-
ners. If there is an established comfortable relationship, all steps can be done
jointly. If the relationship is not good, the first steps can be done alone, however
in the last step of the problem solving sequence the parties must unavoidably
join forces. But some might say, “Better to work on the solutions alone and be
sure to get the best ones for yourself! Don’t let the other parties join!”
What do you think? Please write down the advantages and disadvantages of
working out the solutions without the negotiation counterparties.

Advantages of working on solutions alone Disadvantages of working on solutions alone

___________________________________ ___________________________________
___________________________________ ___________________________________
___________________________________ ___________________________________

If you consider the potential for improved ideas as well as the value of build-
ing satisfaction and relationship and the possibility for building those things
through frequent interaction over problem solving, you may see good reasons
for sharing the solution creating step and even most of the earlier steps.
 Why? Why? Why? Root What? How?

Too Too Many types Jointly

Simplify
technical complicated and sources create tools

Identify and
Poor Improved extract key
explanation explanations data

Up to date
Safeguards Develop
and practical
needed safeguards
safeguards
Why is Data
Too
Sharing a
sensitive Identify and
Problem Could lead Scrub out
extract key
to liability certain data data

No Prepare
Developed
suitable
No fast concession concessions
concessions
benefit of
sharing Poor Reconsider
Too busy Improved
need and
Concentrate explanation explanations
explanation
on technical Long term
work benefit not
clear

FIGURE 8.7 From What to How

150 Win at home before you go

Section summary

Use these techniques (and other approaches) to solve problems both before
the negotiation and during with the participation of all other sides.

War gaming as preparation

This textbook includes real and fictitious cases to use in learning how to prepare
and execute negotiations. Some of the cases appear as games and role playing
opportunities. Why stop playing the negotiation game at the end of this course?
In your future negotiations, the preparation team can take the roles of the coun-
terparties in addition to their own real roles. As your team members represent
the other sides, you will:

– Learn how the other side thinks;

– Gain understanding of their interests;
– Identify matching interests;
– Identify conflicting interests.

Simulating and modelling the negotiation will help you communicate with the
counterparties and help you discover how to create and claim value with them.
This practice and discovery approach is sometimes called war gaming.

Red team vs blue team

Organizations facing high stakes negotiations sometimes make a team for each
side, for example Red and Blue teams. The Red teams will play the roles of other
organizations or individuals in the negotiation with Blue taking the “home” role.
All teams work without contacting each other for an agreed period of time (days
or weeks) to research interests, strategies, tactics, and issues. When the teams meet
again, they will behave as in a real negotiation presenting offers and counteroffers,
proposing solutions to problems, and distributing resources as they see necessary.

CASE 8.3: WAR GAMING EXAMPLE

Komsel, Inc. and Singcell, Pty. plan a difficult negotiation … they have many
common interests; however, resources are very limited. Komsel decides to
conduct a war game in advance hoping to identify the probable limits of
Singcell in order to present their own ideas without unnecessary conflict.
Komsel therefore selects staff members for a Red Team that will play the
role of Singcell in a mock encounter. The Blue Team includes the Komsel
staff who will go into real negotiations with Singcell a few weeks later.
 Win at home before you go 151

TABLE 8.2 War gaming sheet, Komsel’s Red Team representing Singcell

Red Team Members Staff member from Komsel Interests Comments

assigned to understand that role

CFO
Legal Counsel
Senior Engineer
Other team member

Some organizations will go so far as to hire actors who look and behave like
the real counterparties on the other negotiating teams.
Write down the advantages you see in a Red Team vs Blue Team war gaming
practice:
_________________________________________________________________
_________________________________________________________________

Write down the disadvantages you see:

_________________________________________________________________
_________________________________________________________________

Additional benefit – greater creativity

When the participants in a war gaming exercise include some of the actual
negotiators, the war game can be used to explore broad possibilities. Dr. Larry
Susskind (2013), writes that it becomes possible to consider “a range of possible
options that the parties might never discover under normal circumstances”. The
actual negotiation, if it is very tense, may not allow the negotiators to discuss
options that would bring criticism from back table observers. However, putting
the issues into an unofficial war game situation may provide the freedom to
bring up, and seriously discuss, solutions that would otherwise be taboo. The
advantage is that additional solutions get consideration and may be put into play
in the real negotiations that follow.

Additional benefit – intuitive thinking

War gaming creates knowledge that is not easy to pass along and explain – we
gain negotiation skills best through years of experience and interaction with
highly skilled coworkers. This kind of knowledge, tacit knowledge, does not
develop quickly or independently (Polanyi, 1966; Nonaka and Takeuchi, 1995).
However, time is a resource which may be in short supply. Even if we have
years available, it may not be possible to gather suitable experience unless there
are numerous challenging negotiations annually. Lastly, each major negotiation
152 Win at home before you go

is likely to be unique, so how can we develop so much deeply intuitive know-

ledge quickly enough?
Share the knowledge and experiences gained from the simulated negotiation
through in depth communication among the assembled team members. Through
communicating, maximize the communication and reflection that leads to tacit
knowledge in the individuals and in the team as a whole. Conducting the nego-
tiation more than one time will increase the gain of experience and uncover
various possibilities to create and claim value.
The war gaming approach will help you and your team to develop the deep,
unspoken and intuitive knowledge that will lead you and your staff to quick and
sure action at the real event.

Section summary

Simulating a negotiation with your own staff playing the counterparties will
help with understanding the possible interests and solutions. Further, you
may improve team performance in speed and mutual understanding.

Financial modelling
When negotiating, make use of financial projections supported by spreadsheets
and financial modelling software. These can include spreadsheets that you
develop or models used in your organization. Oracle’s CrystalBall software is
a widely used general purpose package of financial models which can be used to
create financial projections. DecisionShare software from Integratto is particularly
useful for assessing uncertain numbers such as the level of sales, costs, or profits
associated with a product or service. Without knowing the exact number of
units that will be sold, profits and costs are similarly hard to establish. Addition-
ally, DecisionShare helps to analyze, display, and rank the importance and sensi-
tivity of elements in a complex negotiation. For example, the software might
reveal that a feature such as cost or estimates of sales or price point is of greatest
impact. The parties can then agree how to resolve the issue before it becomes
a block to the negotiation.
In addition to the tools mentioned, a variety of calculators and financial tools
can be found on websites for free use. One of these is Spliddit (www.spliddit.
org). Spliddit helps users to divide a group of items that are of unequal value
and which the individuals may value differently. For example, if three siblings
inherit a house, a cat, a car, and an old diamond ring. They can turn these
things into cash, but then the objects will be lost … and of course the cat has
no cash value. With Spliddit, the parties attach a number from 0 to 1,000 to
 Win at home before you go 153

each item to show their feeling about its value. Spliddit then calculates the fairest
division of the objects based on personal evaluations.

Section summary

When negotiation requires prediction of uncertain financial numbers, use

software tools to simulate. Then choose the actions that will have the best
results.
9
WHAT KIND OF NEGOTIATOR
… are you? … are they?

How do you resolve disputes?

The Thomas-Kilmann Conflict Mode model is widely used to describe how
conflict is resolved. The model compares how assertive a party is to how
cooperative a party is regarding any issue. The model can be used to judge
your own approach on any one issue or the approach by a counterparty to
an issue.
The model in Figure 9.1 is very similar to the one presented in Figure 1.6 in
Chapter 1. The key difference is that this one helps you to understand individual
styles (yours and others’) as you plan your negotiation.
The concepts in the model have the following meaning:

Competing means: taking a distributive, win-lose approach without joint wins;

Avoiding means: delaying or never discussing an issue;
Accommodating means: accepting proposals of the other parties with little or no
change;
Compromising means: sharing some benefits and disadvantages among the
parties;
Collaborating means: working together on solutions and plans.

Note that Collaborating falls short of creating “synergy” as discussed in Chapter

3, in the section on Principle Based Negotiation. Synergy means that completely
new joint plans and value are created together.
Of course, your choices based on Figure 9.1 will change depending on
the issue and the context around the issue. However, you should be able to
identify and understand your general preferences and the preferences of
your counterparties.
 What kind of negotiator … 155

FIGURE 9.1 Thomas-Kilmann Conflict Mode Model

Source: http://kilmanndiagnostics.com

Emotional style
Each person has an emotional style. Some are more relaxed, warm, insistent,
empathic, introverted, or extroverted. Knowing more about yourself, your
team, and your counterparties will help you adjust to their style and improve
communication.
Use the quiz below from Leigh Thompson’s book, The Mind and Heart of the
Negotiator, to learn more about your emotional style. In the quiz below, “R”
means “Rational”, “P” means “Positive” and “N” means “Negative”. When
you answer the questions of the quiz, try to think about one of the areas of
your life in which you negotiate, for example family, work, clubs, associations
and so on. Because our relationships are not the same in these different areas,
you may get different results for each area. You might find that your style is
quite different at home and at work! Think about how you really negotiate, not
about how you would like to negotiate ideally.

Emotional Style Questionnaire

1. In a negotiation situation it is best to “keep cool”.

2. I believe that in negotiations, you can have more success by being pleasant than by
being unpleasant.
3. It is important to me that I remain in control in a negotiation.

(Continued )
156 What kind of negotiator …

(Cont.)

4. Establishing a positive sense of rapport with the other party is key to effective
negotiation.
5. I am good at displaying emotions in negotiation to get what I want.
6. Emotions are the downfall of effective negotiation.
7. I definitely believe that I must emphasize what I think are problems in order to get
improvements in many negotiation situations.
8. If you are nice in negotiations you can get more than if you are cold or neutral.
9. In negotiations you have to fight the other party if they fight you.
10. I honestly think better when I am in a good mood.
11. I would never want the other party to know how I really felt in a negotiation.
12. I believe that in negotiations, you can have more success by being direct and tough.
13. I have used emotion to manipulate others in negotiations.
14. I believe that good moods are definitely contagious.
15. It is very important to make a very positive first impression when negotiating.
16. The downfall of many negotiators is that they lose personal control in a negotiation.
17. It is best to keep your face from showing emotion in negotiations.
18. It is very important to get the other person to respect you when negotiating.
19. I definitely want to leave the negotiation with the other party feeling good.
20. If the other party gets emotional during the negotiation, you can use it to your
advantage.
21. I believe that it is important to have similar thinking and feelings as the other party.
22. It is important to demonstrate resolve in a negotiation.
23. If I sensed that I was not under control, I would call a temporary halt to the
negotiation.
24. I would not hesitate to make a threat in a negotiation situation if I felt that the
other party would believe it.

Scoring Yourself
Computing your “R” score: Look at items #1, #3, #6, #11, #16, #17, #20, #23. Give
yourself one point for every “true” answer and subtract one point for every “false” answer.
Then combine your scores for your R score (rational).
Computing your “P” score: Look at items #2, #4, #8, #10, #14, #15, #19, #21. Give
yourself one point for every “true” answer and subtract one point for every “false” answer.
Then combine your scores for your P score (positive).
Computing your “N” score: Look at items #5, #7, #9, #12, #13, #18, #22, #24. Give
yourself one point for every “true” answer and subtract one point for every “false” answer.
Then combine your scores for your N score (negative).

Adapted and used with permission, Thompson (2012), p 117

Your R score: ________ Your P score: ________ Your N score: ________

Based on your score and your preferences, you can choose to continue without
change, or to adjust your style.
 What kind of negotiator … 157

TABLE 9.1 How to handle others’ emotional styles

Other Rational Positive Negative

party →
You
↓

Rational You can work together You can work well with If you avoid direct con-
well. this party or manipulate flict, you may be able to
their desire to maintain work well with
good relationship by a negative party by show-
gaining concessions from ing the benefits they gain
them. in cooperating with you.
Positive You can work well with You can work together Your positive nature may
this party by cooperating well, but do not let your make the negative party
with their desire for pro- strong positive feelings more negative. Try to
cess and transparency. Do get out of control or restrain your positive but
not let them gain conces- come into conflict. Over continue to look for ways
sions playing on your optimism and loss of to cooperate. Be careful
preference for good focus are risks. not to allow the negative
relationship. party to provoke your
positive thinking into
anger
Negative You can use your prefer- You may use the positive Don’t increase the com-
ence to compete and win person’s desire to have petitive win/lose feeling
with rational parties, but a good relationship to which can lead to
competing too hard may your benefit, trading unprofitable conflict.
cause them to walk away relationship for concrete Instead, work together to
or to minimize the total concessions. show the benefits and
gains in favour of more problems in a clear way
productive partners and that allows all parties to
projects. gain some victories.

Rational – preference for less emotional content, preference for more logic.
Positive – preference for relationship.
Negative – preference for competition and winning.

After you have learned about yourself and your own way of doing things, you
can think about how to manage coworkers or counterparties. Each will have
their own style; if you can recognize it, you may be able to work with them
more comfortably and successfully. Table 9.1 will help you select the right
approach for different types.

Emotional intelligence
Emotional Intelligence (EQ or Emotional IQ) is the ability to correctly identify
and understand the feelings of others. Knowing those feelings makes it more
possible to find solutions that your negotiation partners will accept.
158 What kind of negotiator …

To learn more about EQ, take an online quiz like the one at www.ihhp.
com/free-eq-quiz/or http://greatergood.berkeley.edu/ei_quiz/
You can learn more about personalities in order to evaluate yourself, your
team members and the other negotiating parties using the Five Factor model,
the Myers Briggs Type Inventory (MBTI) or other approaches.

Comparing
It is possible to compare individuals based on their styles. The chart in Figure
9.2, for example, compares two people based on their styles including Rational,
Negative, Positive, Assertive, and EQ.
To create a radar map like the one in Figure 9.2, measure the five characteris-
tics broadly and simply as high, medium, and low with scores of three, two, and
one respectively.

Rational
3

2
Emotional IQ Negative

Assertive Positive

Mr. A Mr. B

FIGURE 9.2 Personal styles compared

The advantages of comparing individuals are explained in the text box below.

Knowing the style of counterparties will help you know what to expect from them.

– Rational parties may avoid showing emotions and may react poorly to displays of
emotion.
– Negative parties may manipulate by displaying emotions and may escalate emotions
that they experience from others.
– Positive parties may seek to build relationship and be sensitive to positive emotions.

(Continued )
 What kind of negotiator … 159

(Cont.)

Knowing the style of counterparties will help you to adjust to them.

• Rational parties may react well to proposals based on logic and fairness.
• Negative parties may react well to proposals in which they perceive extra benefit,
a win, for themselves.
• Positive parties may react well to proposals that show improvements in relationships.

Knowing the style of counterparties will help you to manage them.

• Rational parties may be managed by showing logical steps and conclusions.

• Negative parties may be managed by avoiding a competitive spiral.
• Positive parties may be managed by including the value of relationship in offers.

Source: Thompson (2012), Chapter 5

Assertive
Assertive teammates may reinforce each other’s assertiveness. Weakly assertive
individuals may find that together they are more effective at putting their ideas
into the conversation. On the other hand, strongly assertive teammates may
become overpowering, smothering ideas that could come from other parties.

Section summary

Learn about yourself and your counterparties in order to best manage your
approaches and the behaviours of the counterparties.

Cognitive bias
Understanding yourself as a negotiator also means you must understand how
you think. The term “cognitive bias” means influences on thinking that can
lead to errors. These errors are important to understand and avoid because they
may lead to poor decision making. There are many kinds of cognitive bias;
some that are of interest to negotiators are described in Table 9.2.

Example of framing
A small tech company, Zing Inc., is entering negotiations with a large, well
known globalized electronics maker, Pineapple Corp. Compare the framing in
Table 9.3.
TABLE 9.2 Types and impacts of cognitive bias

Type of bias Explanation Negotiation impact (examples)

Anchoring Starting with a high sale price or Anchoring is effective if the other
low purchase price can create parties are not familiar with the
a bias that shifts the entire price concept and do not re-anchor. If
discussion to move within another party anchors far from
a limited range. your target, simply re-anchor in
the opposite direction in order to
neutralize their anchor.
Confirmation/ Interpreting data based on what Thinking that the other sides are
Expectation bias you expect it to be, for example friendly and not reacting appro-
expecting winter to be cold and priately when they show
wearing a coat even on unfriendly behaviours.
a warm day.
Emotional bias Sympathy or distaste for a person, Negotiators may make agreements
team or topic may impact that do not optimize gains or
decisions. cooperation.
Framing Overall presentation of an issue or Expressing a problem as “a chance
idea (i.e. positive/negative; to work together on solutions” is
urgent/non-urgent; important/ much more positive than present-
less important). ing it as a difficulty. Research
(Neale and Bazerman, 1985) shows
that positive framing leads to higher
mutual gains than negative framing.
Law of Small A small sample is inappropriately A negotiator must insist on high
Numbers (repre- interpreted as widely true (Kahne- quality data (i.e. new, clearly
sentativeness) mann and Tversky, 1982). explained, detailed and not aggre-
gated) and must interpret that data
carefully. Skills in statistics are
appropriate and negotiators
should take the time, even if
inconvenient, to understand data.
Optimism/ Expecting to gain more than is Negotiators may feel dissatisfac-
Overconfidence likely. Research (Neale and tion despite a good agreement.
Bazerman, 1985) shows that Raising the expectations of the
negotiators who expect to gain back table unreasonably.
are less likely to make concessions
and make agreements.
Prejudice Failing to take new information Rejecting the solutions proposed
into account because of existing by certain people because your
ideas about the subject. culture expects those people to
have poor business thinking.
Undervaluing Bias Concessions are not evaluated Because concessions are often
accurately, instead they are evalu- undervalued by the receiving
ated lower than their real worth. party, it is useful to make numer-
ous small concessions rather than
a single one.
(Continued )
 What kind of negotiator … 161

TABLE 9.2 (Cont.)

Type of bias Explanation Negotiation impact (examples)

Vivid Information Responding too strongly to data Skilled negotiators must not over-
Bias that are striking (Nisbitt and Ross, value shocking or surprising
1980). points of information.
Example: we may be afraid of
flying because air accidents are
front page news involving large
numbers of people. In fact, how-
ever, air travel is much safer than
road travel by most measures.

TABLE 9.3 Framing and re-framing

Version 1 Version 2

Thank you so much for taking your time to So, I understand you are interested in our
consider our xZhei technology. We hope xZhei technology.
you will find it suitable for your projects!
Version 1 creates a mindset that the large Version 2 creates a mindset that the small
company is doing the small one a favour. company holds something that the large
company wants.

Section summary

Good business thinking is not always strictly logical and emotionless. How-
ever, try to identify and avoid bias in your thinking that could lead to
mistakes.

Bias and decision making

The ideal decision-making process is one that is conducted in multiple steps
without time pressure by experienced people. When time and resources are
limited, the process is often compressed or shortened with poor decision making
as a result. Even under the best conditions, the decision makers can fall into
cognitive bias.

Kepner-Tregoe decision-making process

This widely used process was first described in the seminal book The New
Rational Manager. The “rational process” the authors propose follows the four
162 What kind of negotiator …

State the problem succinctly

Create solutions that do not

avoid MUSTs and MUST NOTs
Set the objectives

Results you Results you

MUST have MUST NOT have Screen solutions against
Results you Results you weighted WANTs and AVOIDs
WANT to have WANT to AVOID

Pick from the remaining

Weight the objectives solutions

Relative importance of
WANTs and AVOIDs

FIGURE 9.3 Steps in Kepner-Tregoe model

phases of situational appraisal; problem analysis; decision analysis; and potential

problem analysis (Kepner and Tregoe, 1997).
Those steps include stating the decision to be made, developing objectives on
a “must” versus “must not” basis as well as a “want” versus “avoid” basis,
weighting the wanted results, creating alternative solutions, and screening the
alternatives to arrive at a set of final best possible choices (Parker and Mosely,
2008). It is important to understand that this model does not start with propos-
ing solutions and trying to pick the best one – that approach may lead to time
wasting efforts that do not take the desired outcomes into consideration. Some
versions of the Kepner-Tregoe model start with appraising the situation. Starting
at the situation level, identify needs surrounding the problem, not just the
immediate needs.
The steps might appear as in Figure 9.3.
Plus and minus of Kepner-Tregoe model

+ Attempts to clearly identify the problem to be handled;

+ Includes situational information around the problem;
+ Clarifies objectives into must/must not and want/avoid;
+ Weights the possible want and avoid items;
+ Includes a step to clearly maintain Must and Must Not items;
+ Uses a screening process to avoid a poor choice.
 What kind of negotiator … 163

However:

– Starts with the situation and problem rather than the broader environment;
– Fails to address bias as a discrete step or parallel process;
– Fails to analyze stakeholder needs;
– Starting with stating the problem allows a framing bias to enter at the start
of the process;
– There are no repeated checks for identifying and managing bias;
– Has no process for handling the intuitive judgments of high level experts.

TABLE 9.4 Improved decision-making process and bias

Process Bias

Consider the biases you and your Many kinds of bias can enter the process at
team may have➔ any stage. Therefore review and consider-
Review the stakeholders and their ation of bias should be conducted multiple
needs; review the broad times, even constantly, throughout the
environment➔ process.
Identify the biases of the decision Bias checking can include self identification
makers and problem solvers➔ of biases, evaluation by an outside expert or
Identify the problem➔ team, increasing team diversity, and formal
Make an intuitive judgment and set protocols for checking and handling biases.
it aside➔
Gather info➔
Analyze the problem and solution
parameters ➔
Evaluate for bias ➔
Create solutions ➔
Evaluate for bias ➔
Predict results of solutions ➔
Compare solutions and your intui-
tive judgment ➔
Select best ➔
Evaluate for bias ➔
Implement best solution ➔
Evaluate results ➔
Adjust the decision or implementa-
tion based on the evaluation.

Note that the process described above allows for intuition. Take this step early to improve
your intuitive abilities and to capture the input of team members, especially those with lots
of experience. Very experienced people are often able to correctly decide about complex
situations quickly because of their years of modelling, practice, and observation (Klein,
2011). Writing down the intuitive solutions and comparing them to more deliberate solu-
tions will:
a) Identify situations that are particularly difficult, and which need more work; and
b) Build up the skills of less experienced staff members.
164 What kind of negotiator …

The process described above may have good results. In a business negotiation
the process can be done by one side or jointly with other sides if the relationship
has developed strongly. Mutual problem solving will lead to mutual satisfaction
and mutual gains. However, time is not always available for a slow and careful
decision-making process.

High pressure high speed process for negotiators

Negotiators in the middle of interacting with counterparties may feel high pres-
sure to act and decide quickly regarding complex issues and solutions. The pres-
sure may come from their back table, the counterparties, external sources, or
even their own feelings about the negotiation. In situations like this, the negoti-
ators may shorten the process. Below is one way to manage a shortened process.
Note that this shorter process can only be successful if the negotiators have iden-
tified the problem and have prepared alternative solutions, at least partly, in
advance. It is important for the negotiators to resist time pressure and evaluate
offers slowly and thoroughly. To manage a short, fast decision-making process,
it is best if negotiators have well organized information about all interests and
issues. Also, they can prepare a checklist of their own most likely biases.

Compare offer to alternatives prepared in advance ➔

Review for bias ➔
Consider needs of stakeholders and select best alternative➔
Discuss amendments internally and with counterparties ➔
Review for bias ➔
Consider whether you would agree if various biases were in place➔
Accept or refine ➔
Agree to implementation but insisting on options to refine or change ➔

In the ideal process presented earlier, careful decision makers review for bias
throughout all the steps. In the shortened practical process, the negotiators
should have specific steps to consider bias. In this step, they can identify bias
and propose changes to the solution, or reject it completely, in order to avoid
a poor decision. The shortened version also requires negotiators to have some
alternative scenarios prepared in advance; do your homework!

Section summary

Look for cognitive bias in your ideas and try to avoid bad decisions based on
these errors. Practise your decision-making process with your team.
 What kind of negotiator … 165

Teamwork
On a soccer team, there are players who specialize in defending or attacking;
they take positions like goalkeeper, striker, and so on. However, even special-
ized players must always defend and attack as necessary – the positions and
duties overlap. A negotiation team can work similarly. Some team members can
specialize regarding certain issues, but members in any position should be able
to support each other in practical ways.
Unlike soccer, small teams are generally best in negotiation unless there are
many very complex topics. Generally, a negotiation team should have one or
two specialists or technical people, a knowledgeable generalist, and a decision
maker (usually a manager authorized to make certain decisions). The actions of
the team members must overlap as they support each other. The team may have
many members, but they do not all have to go to the negotiation table.
Similarly, the members of a negotiation team work together by:

a) having special positions, and

b) supporting each other in all the team’s positions.

Some positions may not be in frequent contact with the rest of the team when
it is interacting with other parties. For example, Final Decision Makers, Liaisons,
and Champions may not interact with the other sides and may not observe the
interaction. The following suggested positions are for teams (Baber, 2018b).
Leader:

• Agrees agenda,
• Keeps agenda on track
• Acts to resolve or avoid deadlock
• Agrees to final proposal
• Supports specialists when they are leading the conversation
• Maintains alignment of the talks and outcomes with the goals of the Final
Decision Makers

Team Member:

• May be specialists or generalists

• Specialists usually lead the conversation when those special topics are in
discussion
• Agrees to a specific point when criteria are met (or signals the leader to
agree)
• Supports leader and other team members when they are leading the
conversation
• Helps with analysis and decision making during interactions and in private
sessions with the team
166 What kind of negotiator …

Observer:

• Watches the interaction and gains an overview of the progress, gains, and
errors of the team; may not necessarily speak and interact with
counterparties
• Observes the personalities and style of the counterparties
• Evaluates the skills and abilities of the members
• Advises and coaches the team after sessions

Final Decision Maker

• Makes the final decision to accept or reject the negotiated agreement

• This person or group may be part of the negation team at the table, espe-
cially if the organization is small or if the negotiation is strategically
important

Liaison/Champion:

• Communicates the progress and needs of the team to higher management

• This position is more useful when the team leader lacks time or organiza-
tional standing to communicate well with higher management
• A champion additionally promotes the team’s work at the level of higher
management to ensure that the necessary resources are available for the
team’s success

Other supporters:

• Undertake tasks that help the team such as conducting research or answer-
ing technical questions

Third party:

• The third party intervenes (invited or assigned) to help negotiations that are
difficult, deadlocked, very complex, or which otherwise require support.
The third party can be a mediator, facilitator, arbitrator, judge or some
informal combination of these. The third party can also be a group or panel

The team positions identified above do not necessarily have to be separate

people. One person might take more than one of those positions.
It is possible to have a successful team that has no positions and all members
are generalists. A team of that sort usually has been working together for a long
time developing experience in cooperation and learning how to function
smoothly. As a result it may be able to delegate its tasks without a leader or
specialists.
 What kind of negotiator … 167

Q: What does it mean to support other team members?

A: It means you must carefully follow the talking and your team’s overall plan.
If you notice a problem, an opportunity, a mistake, new information, etc. you
need to communicate it to your team members. You can do this by:

• Silently writing a brief note and passing it to other team members;

• Quietly and briefly speaking to a team member;
• Directly speaking to the counterparty about it.

This kind of communication is called supportive interaction (Vuorela, 2005).

Vuorela gives these examples:

• “The sellers ensure that all their arguments are covered with the help of
teamwork, with different members of the team contributing to the on-
going discussion at different times.”
• “They also take turns at times repeating an argument a co-team member
put forth earlier, and sometimes this seems enough to convince the buyers
of their argument.”

Q: Is teamwork good for getting all the arguments and opinions out openly?
A: Yes. “Teamwork is a useful tool in covering the ‘full front’ when pursuing
an argument with every member of the sales team bringing forth a different
angle of the argument” (Vuorela, 2005).
For example, if the conversation moves to another topic before all the key
points have been discussed, a team member can carefully interrupt and return to
the unfinished topic. Teams that have members who are sceptical or disruptive
of the agreement gain the benefit of dealing with hard challenges. These chal-
lenges may help the team avoid errors in the agreement.

Q: Is it OK to talk with your team members during a negotiation?

A: Generally, you should use some internal talk but avoid talking too much
because it will distract others. You can put in a word or brief comment or
question, if your team is used to this behaviour. Also, you can talk with
your teammates loudly and clearly in a way that the counterparties can join.
However, internal conferences with long whispering are generally poor eti-
quette. If you need a conference with your team, politely ask the other side
to give you a few minutes of privacy, or propose a general break for refresh-
ments. Use the break time to coordinate with your teammates.
Using note paper or tablet devices to communicate internally is effective, and
not very distracting to teammates and counterparties. Be sure that your team-
mates can comfortably use such methods by practising before trying it at the
negotiating table.
168 What kind of negotiator …

TABLE 9.5 Preferred team size and composition

Team A includes Team B includes

2 engineers with appropriate specializations 1 engineer
1 marketing person 1 marketing manager
2 business managers 1 business manager
1 top level manager (CEO, COO, GM or other)
1 notes taker
1 finance person
1 human resources person

Q: What is “team building”?

A: It means becoming good at working together. This happens by practising
and discussing the strategies and details together in depth. A team leader
needs strong listening skills in order to understand the individual members
and identify the skills and strengths of the team and attempt to make weak
areas stronger. At the same time the team leader needs to understand the
goals of the individuals in order to align them with the goals of the team
and the company. In addition to frequent meetings (one to one and as
a group), having a casual meal or drinks together helps to build team func-
tion. If the team is created specifically for the negotiation, it may be possible
to select compatible team members based on their personalities and skills.
Teams need frequent interaction and communication in order to share their
knowledge effectively. The sharing of knowledge builds up tacit knowledge
(Polyani, 1966; Nonaka and Takeuchi, 1995) and intuitive capacity. With time,
teams can become very fast to act and decide. See the section on War gaming in
Chapter 8 for comments on building the ability of a team to work well together.
Read the descriptions of the teams in Table 9.5 and decide with your partner
which is best.
Please fill out the following:

I think Team ___ is best because …

_____________________________________________________________
_____________________________________________________________
_____________________________________________________________

Cross-cultural teams
Teams that include people from various cultures face some challenges and enjoy
some advantages.
Write some possible disadvantages here: ________________________________
_________________________________________________________________
_________________________________________________________________
 What kind of negotiator … 169

Write some possible advantages here: __________________________________

_________________________________________________________________
_________________________________________________________________

One of the most commonly identified difficulties with cross-cultural teams is

the increased time for communication that is necessary to get the same results.
Inexperienced managers may be surprised by lack of progress as deadlines
approach. Frequent one-to-one communication may help to establish the rela-
tionships and mutual confidence necessary for a team to work well together.
Teams that are spread across many locations and which meet mainly online or
by phone may experience difficulties such as time coordination, miscommunica-
tion, lack of clarity about tasks, delays, and so on. Consider the individual’s per-
sonality and culture carefully, as some will appreciate additional communication
and others will find it upsetting. Adjust the mixture of voice, email, and other
media to suit the individuals.
When considering the members of a cross-cultural team, the team leader
might aim to gather people with similar rank, previous positive cross-cultural
experience, and reasonably strong skills in a common language.

Common language within the team

The common tongue of business is usually English, though other languages are
dominant such as Chinese in much of East Asia or French, Spanish, Turkish and
Arabic in various regions. A team that includes native and non-native speakers
will need the native speakers to improve their communication skills: less slang,
slower speed, careful pronunciation, simple grammar choices, for example. At
the same time, the non-native speakers may need to concentrate on their own
pronunciation, choice of phrases, and ability to ask for clarification. Gestures and
use of pauses, facial expression, and humour will also need adjustment – mutu-
ally, not by one group or person only. See Browaeys and Price’s Understanding
Cross-Cultural Management (2011) chapters 15–17 for additional useful comments
on these topics.

Section summary

Make sure your team understands the goals, the plan, and all the steps well.
Practice together, prepare together, communicate frequently.
10
AGREEMENTS

Robust agreements that can survive

At the negotiating table, you should end with clear written agreements that
your legal team will later finalize. You hope that these agreements will survive
as intended.
How can you make an agreement that the other parties will not reconsider
and perhaps break? How can you make a robust agreement even in a country
that has a poor legal system? How can you get cooperation from people who
are distracted with other projects? How can you make agreements that survive
even if the other party is unreliable?

Your ideas: _______________________________________________________

_________________________________________________________________
_________________________________________________________________

These approaches may help:

1. Include short term incentives to continue;

2. Plan actions in numerous steps or milestones that must be completed and
accepted before continuing;
3. Plan for payment upon completion of milestones, or only partial payment
before the milestone is completed;
4. Include negative outcomes to deter breaking off;
5. Share value fairly and communicate about that fairness;
6. Communicate the benefits and value creation of continuing;
7. Plan for “predictable surprises”;
 Agreements 171

8. Communicate to be sure the other sides understand the benefit of joint

cooperation;
9. Create contingent agreements that change with the circumstances in a way
that all sides consider fair;
10. Check the agreement for clauses that could be misinterpreted or misused
and remove or improve them;
11. Communicate the high probability of additional successful work in the
future, or, even better, agree to future projects that follow up on the cur-
rent project (build the relationship, cement the relationship.

The last item on the list appeared in this textbook in the discussions in Chapter
2 about relationships, satisfaction and so on. It is part of all good negotiation
thinking from start to finish. This is the easiest, most obvious, most effective
way to increase the likelihood of cooperation and minimize the chance of
breaking off or cheating.
The Consensus Building Institute (http://cbuilding.org) says, “Design nearly
self enforcing agreements.” That means agreements that reward completion
through incentives and make non-completion unappealing through punishments
or clawbacks.
Dr. Larry Susskind of MIT suggests making agreements that help against “pre-
dictable” surprises. We know that even good ships sink, so we put lifeboats on
them. Even good agreements may be harmed by a bad economy, changes in
regulation, or other “surprises” that we can reasonably expect. Create agree-
ments that can survive such surprises.

CASE 10.1: THE AGREEMENT THAT NEEDED RENEGOTIATION

Starbucks, the café chain, found itself in an agreement it could not live with.
After a strong start selling coffee products with Kraft in 1998, the environ-
ment changed. But there was no date for ending or reviewing the agree-
ment. Starbucks felt in 2010 it was necessary bring the agreement to an end
and offered Kraft cash to end the agreement. Kraft, however, refused. There-
after Starbucks simply broke the agreement. Kraft insisted on arbitration
which it won in 2013.
As noted in the Harvard Law School article at bit.ly/1tyCV56, the compan-
ies could have and should have agreed to a time or set of conditions for
renegotiation. Writing these issues out would have provided an easy, and
cheap, process for continuing, changing, or terminating the agreement.
In the end, both parties wasted money and decision-making time. Star-
bucks additionally had to pay all the profits it made on similar coffee prod-
ucts after breaking the agreement, over $1 billion, to the Kraft spin-off
company, Mondelez.
172 Agreements

Section summary

Design agreements that can survive changes in the environment. Well-

designed agreements have clauses that explain what the parties will do in
case of changes in the business environment.

Control mechanisms often found in negotiated agreements

After the deal has been agreed and the discussion has finished, how can you be
sure that the other sides will do as agreed? There are many ways to control the
actions of negotiation parties after the talking has finished. These can be sum-
marized as follows:

– Provide reasons (incentives) for the other sides to complete the work in
a satisfactory way;
– Provide reasons (disincentives) for the other parties not to do incomplete,
late or unsatisfactory work.

Some of the mechanisms for giving those incentives and disincentives are
described below.

Milestones: Agreed intermediate points of completion. When each milestone is

reached, payments are made, and new commitments are made. In a Joint Ven-
ture for manufacturing, milestones might include purchasing a factory site,
installing utility services, constructing the building, installing equipment, and so
on. Each major step is a milestone and an incentive to continue. The opposite
would be an agreement that simply describes a single completed target.
Example:

Upon completion of the Working Prototype detailed in Section

3 of this agreement, Party A will pay Party B $900,000 by bank
transfer within 5 working days.

Gates: Points in a project when resources are re-allocated. An agreement with

gates allows the parties to commit resources when necessary and suitable instead
of committing major resources years in advance. The advantages include flexibil-
ity, and the ability to withdraw if a project fails.
Example:

After completion and acceptance of Phase 3 of the contract, the

parties agree to discuss allocation of resources for Phase 5
including the following points ….
 Agreements 173

Incentives: Reasons, usually financial, for a party to perform above the minimum
required in an agreement. For example, a party that completes a task a week in
advance might receive 5% more in payment.
Example:

Completion of installation of the equipment more than 5 work-

ing days in advance of the schedule set out in Paragraph 7 of
this contract will entitle party A to an additional payment of 5%
by Party B within the payment terms of Paragraph 12 of this
contract.

Clawbacks: Agreements to return part or all of a payment if a task is not done as

required. These agreements protect one party if the other party does not per-
form well.
Example:

In agreement with Section 17a of this document, Party A will

pay Party B $10,000 in order to cover startup costs associated
with the project. Should the target of $80,000 gross sales not be
reached by November 31st, Party A reserves the right to insist
that Party B repay 75% of the $10,000 startup costs paid by
Party A, totaling $7,500.

Punishments and penalties: The opposite of incentives. Typical punishments

include receiving less payment if a task is completed late or with low quality.
Example:

Party A will receive only 90% of the sum in Section 7 (b) if the
polishing work is not completed with 30 business days after the
date of the agreement of this contract.

Contingent clauses: These are built on “if” structures.

Example:
Party A will conduct the E17 test procedure if Party B is unable
to complete development of the substrate by December 17th,
2016.

Renegotiation clauses: If conditions change the parties can return to

a negotiation instead of facing a drastically unbalanced business situation. In this
way both parties can avoid situations that could be very destructive of their busi-
ness, and avoid the need to unilaterally break the agreement.
Example:

The parties shall reconvene to discuss Section 3 of this Agreement

should the price of gold decrease below $1100 for longer than
one week.
174 Agreements

Renewal clauses: These allow the parties to continue the business if a major change
to a product is made such as a new edition of software or a reference book.
Example:
In the case that Party A updates the Software Product, they will
inform Party B in advance of the update. Party B will have the
first opportunity to agree to continue or renegotiate the current
agreement within five working days of receiving notification
from Party A.
And of course … don’t agree to pay fully in advance!

Section summary

Create good agreements that encourage success through fair sharing, incen-
tives, communication, and high likelihood of future activities. Use control
mechanisms that all sides agree are fair in order to encourage the parties to
proactively solve problems and avoid difficulties.

When agreements don’t survive: outside support, mediation,

arbitration
Negotiation does not always result in great agreements and satisfied partners.
If the agreements are poorly designed with gaps in understanding, no enforce-
ment mechanisms, and no tools to repair a disagreement, the partners may want
to renegotiate some or all of the agreement. That of course costs more time,
money and energy … so it is better to develop good agreements in the first place!

When to renegotiate
You can expect your business partners to renegotiate an agreement if some or
any of the following conditions exist:

• A drastic change in the economic environment occurs;

• Availability of resources changes;
• New regulation or legislation impacts the business activity;
• Political atmosphere changes;
• Disasters or wars occur;
• Supply or demand adjusts drastically;
• Supply chain collapses;
• Renegotiation is part of the culture or personality of a party;
• Relationship considerations change with respect to economic needs.
 Agreements 175

In some cultures and companies, renegotiation is considered to be a bad outcome

or even a failure. In others however, renegotiation is seen as a way to expand the
relationship and the business activity. Therefore, businesspeople should be willing
to renegotiate in order to improve a business agreement and relationship. How-
ever, it is even better to write good agreements that need little renegotiation.
In any case, renegotiating part or all of an agreement is better than allowing the
agreement to collapse. Recall the case of Starbucks and Kraft discussed previously.
It would have been most sensible for Starbucks to have renegotiated before break-
ing the agreement. In fact, their failure to renegotiate and their failure to honour
the agreement cost them more than the profits earned by breaking the agreement.
What if the parties cannot come to terms despite trying to renegotiate and
the agreement collapses? It may be time to call in a thirrd party that will act as
a neutral helper.

Process facilitators, mediators, and consultants

Facilitators, mediators, and consultants are paid outsiders, usually negotiation pro-
fessionals, hired to move negotiations along. Usually they are selected by mutual
agreement among the negotiating parties because they are experienced, respected,
and trained. They may regulate the flow of discussion like a traffic policeman
regulates a busy intersection, they may ensure the negotiation process is fair, they
may certify that information is correct by accessing confidential information on all
sides. They usually do not deal with deeply substantive issues; however, they help
the parties voice their views, actively listen to each other, and they can help the
parties create solutions through use of problem solving techniques.
Mediation, facilitation, and consulting are generally done with careful regard for
neutrality. Even though these professionals are normally hired by mutual agreement
as neutral outsiders, they will emphasize their neutrality in various ways, for example,
by sitting in the middle of the parties, not with one group or another. Additionally,
they may offer confidential conversations with one or all sides in order to better
understand the thinking, positions, and goals of the parties. A careful observer will
understand that a mediator or facilitator can never be truly neutral or impartial – par-
ticipation in the problems and parties is what makes a mediator effective.
A useful overview of mediation, including a general set of rules, can be found
on the website of the World Intellectual Property Organization (WIPO) at
www.wipo.int/amc/en/mediation.

Buddhist mediation
Buddhist mediators attempt to facilitate resolution of disputes by applying Bud-
dhist practices such as:

– Awareness of self (mindfulness): Mindfulness refers to keeping overall aware-

ness of multiple facts, positions, opinions etc. as objects in the mind,
176 Agreements

including one’s personal thoughts and feelings, as objects separate from the
self or the situation. Mindfulness supports attention (Burke, 2010), analysis,
comprehension, and the creative development of solutions (Ostafin and
Kassman, 2012).
– Separation of self from the emotions and pressures and statements of the
problem: Separation allows the individual not to become attached to posi-
tions, events, feelings, demands, personalities and so. No longer attached to
a specific issue or detail, the parties can evaluate their goals and the goals of
other parties more objectively.
– Awareness of interdependencies: Parties learn that the best solutions are
ones that include the participation and satisfaction of all sides to the greatest
extent possible. Without interdependent action and resolution, it is very like
that one or more parties will reject the results immediately or later.
– Awareness of options for problem solving: As the above processes develop,
the parties, including the mediator, become more easily able to create solu-
tions that may have been perceived as impossible, taboo, or unattainable
before. Even very unlikely proposals may provide elements that appear in
the ultimate solution.

These practices are explained and taught to the mediation parties as necessary
when the mediation begins and throughout the process.
While these approaches may be appropriate in areas with strongly Buddhist
cultures, they may also be welcomed in North America and Europe. Some
approaches that have been used among Buddhist mediators in the English speak-
ing world include (Kramarae, 2013):

• Understanding-based mediation approach

• Insight Mediation Framework
• Nonviolent Communication (NVC) Framework
• Consensus Making Framework

Islamic mediation
Mediation in the Islamic world is based on Sharia, the system of laws stemming from
Koranic teaching. The term wasaata is widely used and the process puts focus on gain-
ing an outcome that will bring disputing parties to a peaceful resolution. The wasaata
process is intended to include comprehensiveness and flexibility (Bouheraoua, 2008)
especially through the mediator’s fairness, appropriate knowledge, and possible inter-
vention. Furthermore, the wasaata process involves the wider community whereas
mediation and arbitration in the European and North American tradition are usually
limited to the immediate participants (Pely, 2011). Ideally, the mediation includes rec-
onciliation, sulha, in order to bring about a state in which the parties are expected to
have no further disagreement or bad feeling. Wasaata is not a process specifically for
business, though business disputes may be managed by a wasaata–sulha process.
 Agreements 177

External experts and fact-finders

Experts and fact-finders may be asked to help when the negotiators lack the
knowledge, time, or skill to investigate a question fully. In some cases,
a third party may be brought in from another organization, a consulting com-
pany, a university, government, or a competitor, to provide information in
a neutral and objective way. The negotiators expect that additional data and
neutral interpretations will help them to find solutions – external experts and
fact-finders are usually not included in the negotiation process and do not
directly participate in problem solving. Ideally, fact-finding processes should
happen early in the negotiation process, however in reality, they are often
started when the parties have run into a block because they need more
information.

Ombudsman
The ombudsman (or ombudsperson) is found inside an organization and may be
useful if your negotiation is internal to that organization (for example in the
context of labour negotiations). Their job is to make sure that the process of
negotiating an internal disagreement is fair. They seek to resolve problems early
before they involve higher levels of management and more resources. The
ombudsperson is relatively independent despite being inside the organization.
The neutrality of the ombudsperson is usually not in question because they do
not make binding decisions – they only help the parties to understand. The
ombudsperson might however propose resolutions to the parties in a dispute as
well as to upper level management in order to help the organization avoid simi-
lar problems in the future.

Disputes: arbitration or court

Arbitration is not a negotiation process, it is more similar to a court pro-
cess. Arbitration is a formal process for resolving a dispute and binding the
parties to solutions. After arbitration, the relationship between the parties
may be too damaged to re-engage in new business projects. Therefore, it is
better to try negotiation, mediation, and other options before starting
arbitration.
Because arbitration is a formal process, it is more expensive than negoti-
ation or mediation, though usually less expensive than a legal court.

1. The parties to arbitration agree in advance to accept the ruling and the
solution of the arbitrator.
2. The parties agree to an arbitrator or a team of arbitrators that they view as
neutral but qualified.
3. The parties and arbitrators agree to a process, usually with strict rules about
presenting documents, arguments, and counter arguments.
178 Agreements

4. The parties prepare and submit documents and summaries of their positions.
5. Usually there is a facilitated face-to-face verbal discussion.
6. After the discussion, often weeks or months later, the arbitrators will deliver
a decision which is legally binding.
7. It may be necessary to complete a follow-up legal action in the other coun-
try to enforce the decision of arbitration court.

Arbitration and courts may have strict requirements about processes such as pres-
entation of arguments, presentation of evidence, statements of experts, making
of offers, and other actions. Participants must follow these processes precisely.
Arbitration tends to be less expensive, less complicated, and less risky than
court. However the costs of arbitration and court may motivate the parties to
return to negotiation. The parties in an arbitration or court process face a higher
risk than they do in negotiation because there are fewer compromise positions
and all or nothing win/lose situations are more likely. A careful risk analysis by
the parties may motivate them to return to negotiation.

Section summary

When negotiations fail or become deadlocked, use alternative methods to

restart the process. Agreeing through negotiation, however, will usually be
the least formal and least expensive way to reach agreements.

Draft or binding agreements

Draft agreements indicate intent and binding agreements are “in force” when
signed. The parties should agree whether their agreement will be a draft docu-
ment or a final, binding document. If it is a draft, the parties will usually have
final versions completed by legal staff. On the other hand, a binding agreement
can be made at the negotiating table if the parties wish. Negotiators who prefer
detailed complex legal agreements may not feel comfortable with a binding
agreement completed at the table. They will probably prefer to have a final ver-
sion completed later by legal staff.
Draft agreements can be general or specific. Some individuals and some cul-
tures will prefer more or less detailed documents. Generally speaking, the
Anglo-American cultures prefer detailed agreements and negotiations. The writ-
ten documents, draft or final, can be many pages in length. The advantages of
a detailed document include greater clarity and therefore fewer issues that will
need to be discussed, explained, or renegotiated later.
A detailed agreement might cover the following items or more (Table 10.1):
Other cultures, especially Latin, Pacific, and East Asian cultures, often prefer
general agreements that show intent and broad commitment. These documents
 Agreements 179

TABLE 10.1 Agreement components

• Compliance • Purpose
• Confidentiality • Representations, Warranties and
• Contributions from all parties Covenants
• Damages • Risk, e.g. inflation risk, currency risk,
• Dispute resolution political risk, etc.
• Enforcement • Scheduling
• Exclusivity including sector, channel, • Share of profits/Compensation
territory • Tasks for implementation, obligations
• Force majeure • Term (length of time the agreement
• Improved versions, new editions etc. will continue)
• Infringement • Termination
• Liability • Transfer of obligation
• Organizational structure/ownership • Units of measurement
• Parties • Waivers
• Payment terms, i.e. in advance, upon
completion, by milestone etc.

may be quite short, just a few pages. As an example, one of the authors’ part
time contract with a university in Japan filled barely two pages. A similar agree-
ment with a university in Canada filled 16 pages!
This textbook however recommends detailed agreements in order to minim-
ize opportunities for misunderstanding and dispute. Well-designed agreements
can save time and cost over the long term.
Some agreement documents you might work with include:

Memorandum of understanding (MOU) or letter of intent (LOI)

An MOU or LOI is usually not written with high detail. It is usually not legally
binding. The purpose of the document is to describe the spirit of a cooperative
agreement and, broadly, how the cooperation will function. It should not detail
the work or commitments of the parties.

Contract
A contract is highly structured and is binding once the legal representatives of
the organizations have signed it.
A contract might contain the following sections as noted in Bradlow and Fin-
kelstein (2013):

– Recitals: Identifies the companies and substance of the agreement.

– Definitions: Defines words, especially technical jargon used.
– Business Terms: Core issues of who, what, where, when, cost, etc.
180 Agreements

– Representations and Warranties: Statements of fact such as “the factory at

33 Maple St. can support equipment weighing up to 2 tons per square
meter.”
– Covenants and agreements: Generally these are promises to perform.
– Conditions: These include conditions that must be met, such as inspections,
before the agreement comes into force.
– Indemnification: Liabilities from failure to perform the covenants and
agreements.
– Miscellaneous: May include clauses about termination, renegotiation and so on.
– Attachments and schedules: These may include lists of equipment, facilities,
staff, property or other materials important to the agreement.

Reviewing an agreement
You should review agreements carefully before signing. Look for:

• Wording that is very limiting or too vague;

• Wording that a bad actor could intentionally misinterpret;
• Third party roles that could confuse responsibility;
• Clear definitions of ideas and things;
• Reasonable rights;
• Hidden liabilities;
• Unbalanced benefits; and
• Schedules that might be too difficult to attain.

An additional check should be made from the point of view of a bad actor or
“black hat” party that wants to abuse the agreement: look for ways to exploit
wording or possibilities to gain more value than expected or intended.
If possible, have a legal expert review the document.

Agreement text examples

For examples of text (free or for fee) that can be used in agreements, please visit
some of the following websites:
General:
www.wipo.int/
www.lawmart.com/
www.lawinsider.com

Dispute resolution:
www.jamsadr.com/
www.iccwbo.org/
 Agreements 181

www.huschblackwell.com

Confidentiality:
www.bitlaw.com/forms/nda.html
www.cdr-news.com/

Section summary

Create agreements that cover details to the satisfaction of all parties. Agree
to create draft agreements that are non-binding to allow time for review by
legal professionals.
11
REVIEW FROM A HIGH ALTITUDE

What is the overall thinking and approach, the heart and mind of negotiation we
need to follow? Lax and Sebenius say “Think strategically, act opportunistically”.
To do so, they suggest the following strategic approach:

• Assess setup barriers:

○ Thoroughly map all the parties, their interests, and their BATNAs.
○ Decide sequence and process.

• Assess barriers to agreement.

• Assess tactical and interpersonal barriers.
• Overcome these barriers by mapping backward from the target
deal by making a 3D Strategy:

○ Set up the right negotiation content and goals.

○ Design value-creating possibilities.
○ Emphasize problem solving as a joint approach.

Adapted from 3D Negotiating, Lax and Sebenius, 2006, p. 237

Acting opportunistically means being flexible and ready to change your ideas in
order to get the best results.

Only effective preparation and focused action make the difference – and in our
experience, the best preparation is mastering the principles of 3-D Negotiation.
Lax and Sebenius, 2006, p. 19
 Review from a high altitude 183

Your goal: “create and claim value for the long term”
Lax and Sebenius, 2006, p. 237

Another way of thinking about the overall goal and purpose of business nego-
tiation is to think, “Let’s maximize value and solve problems and avoid fail-
ure.” Maximizing value means putting new value-creation before distribution
of resources and rewards. Solving problems means creatively removing barriers
to agreement and developing value-creating ideas. Avoiding failure means
designing agreements that are workable, enforceable, and profitable.

Lifecycle of negotiation
An overall negotiation process can be blocked into six phases (see Figure
11.1). Each phase has events and documents that show it has finished and that
the next is underway. The process can come to an end at any point in
a phase or at a phase boundary. The process can return to a previous phase,
however it is not possible for the process to skip a phase. At the end of the
fifth and sixth phases, it is possible for the process to restart with new topics
and deals (Baber, 2018a).
The activities within the first five phases can be roughly broken down
into processes as in Figure 11.2. These processes may repeat and cycle, but the
overall movement is from left to right, from earliest beginnings of planning and
research to evaluation and, sometimes, expansion and continued negotiation.

Example of a negotiation through the phases

Table 11.1 refers to negotiations around the Ichthys offshore liquid natural gas
project. The table refers to only one part of this complex of negotiations,
namely the process of assembling the finances for the project. The project is
located in the Indian Ocean, some 200 km from Perth, Australia. The agree-
ment includes many shareholders, investments of $20 billion, and is planned to
continue for more than 40 years.

Stop Stop Stop Stop Stop

Value Go Deal Go Inter- Go Ratific- Go Post-Deal Go Follow

Network Design Evalua-
action ation Up
Fit tion

Return Return Return Return

FIGURE 11.1 Macro phases of negotiation

Source: Baber, 2018a
FIGURE 11.2 Negotiation lifecycle
TABLE 11.1 Ichthys – highly complex negotiation

Phase Action(s) Ichthys Offshore Natural Gas Project

Value Network Considered shareholders, equity The parties considered which com-
Fit Phase shares, suppliers, actions of com- panies would provide major services
petitors, supply and demand fore- and which would lead the project.
casting, etc. Parties reported to be considering
equity shares, Summer 2010 (Osaka
Gas Journal, www.ogj.com/articles/
2010/08/inpex-mulls-sale-of.html)
Deal Design Crafted various deals for them Various deals and percentage invest-
Phase ment and profit were considered.
Groups formed and reformed.
Tokyo Gas leads, Total, Inpex and
others considered whether to take
leading or supporting roles. Their
ideas and proposals developed over
time (see articles at https://www.
ogj.com).
Interaction Talked and jointly crafted Finally, one of the parties, INPEX,
agreements formally completed its internal Final
Investment Decision, Jan. 2012.
Partnerships considered, and agreed,
sales of equity Summer, 2012 (Osaka
Gas Journal, www.ogj.com/articles/
2012/07/total-increases-stake-in-
ichthys-lng-project.html)
The parties developed the finance
agreement included interactions
with eight export credit agencies and
24 commercial banks leading up to
the Project Finance Agreement (see
INPEX Annual report 2013).
Ratification Executive decision makers agree The legal counsels of the parties
Phase (or disagree and cycle the docu- reviewed the Project Finance Agree-
ment back to talks) ment and, after agreeing to some
changes, the CEOs and boards of
those organizations ratified the
agreement.
Project Finance Agreement signed,
Dec. 2012. (INPEX Annual report
2013)
Evaluation and Enact, monitor, evaluate the Production begins in 2018; from this
Monitoring negotiation and outcomes point forward, the parties will check
Phase that everyone is fulfilling their obli-
gations and that the agreement is
working as expected.
(Continued )
186 Review from a high altitude

TABLE 11.1 (Cont.)

Phase Action(s) Ichthys Offshore Natural Gas Project

Follow-up Subsequent negotiations re sup- Purchasing agreements, delivery con-

Phase pliers, contractors, schedules etc. tracts, contracts related to maintaining
and improving delivery and produc-
tion infrastructure need to be created.
In addition to those B2B agreements,
negotiations with local government
and citizen groups take place.
Agreements and renegotiations may be
renegotiated and adjusted as regulation
or economic environment evolve.

Practical list of don’ts

At the end of our review of the negotiation process, we can come to a practical
“do not” list:

Do not rush.
Do not be snowed under by data.
Do not be too greedy.
Do not harm others.
Do not give something for nothing.
Do not fail to learn.
Do not fail to prepare.

Do not rush
Push deadlines back with superiors, clients, partners, and other negotiating par-
ties. Allow more time rather than less time in order to solve problems and
create relationships that will survive fruitfully.

Do not be snowed under by data

Do not allow large amounts of data to confuse you. Data is not useful until categorized
and analyzed. Use careful decision-making processes and appropriate business analysis.
Learn to categorize information so that you are not distracted by too much data.

Do not be too greedy

Learn to capture a reasonable amount of value so that you do not damage other
parties in the negotiation. A reasonable approach will cause your reputation as
fair negotiator to develop.
 Review from a high altitude 187

Do not harm others

Never directly harm another party because your reputation will suffer. Worse,
you may become a target for others trying to damage you and your business.
Instead, learn to create satisfaction in all parties.

Do not give something for nothing

Giving something for nothing drains your resources. Gaining from your conces-
sions means the gains must be of comparable value. The gains can be tangible
(assets and resources) or intangible (relationship, reputation, brand, strategic pos-
ition, etc.).

Do not fail to learn

Every negotiation, successful or unsuccessful, is a source of learning. Evaluate
the negotiation in detail in the middle, shortly after completion of the negoti-
ation, and again when the agreement is being executed.

Do not fail to prepare

There will be few successes in your career if you do not deeply know the details
of the issues and the stakeholders related to it. Know the people, know the
facts!

Section summary

An overall process starts with research and finishes with robust agreements.
In between are many repeated steps if communicating, solving problems,
and deciding. Each step is an opportunity to learn, create value, and find
satisfaction among the participants.
12
REFLECTION ON NEGOTIATION
THEORY

This book aims to explain negotiation in practical ways to build up skills that
students can put to immediate use. However, students and educators are wel-
come to consider the theory and academic understanding of negotiation behind
our book. This chapter briefly presents the central theories behind negotiation.
Negotiation is based on two or more parties interacting in order to come to
agreement. The Theory of Cooperation and Competition (Deutsch, 1973) says that
the parties largely choose to cooperate or compete depending on the relative
importance of the issues and the atmosphere around the discussion. The Dual
Concern Theory (Pruitt and Rubin, 1986) compares the weight the negotiators
assign to their interests and the interests of others. These theories contribute to
the five strategy model discussed in this textbook.
Theory generally places negotiation within the field of conflict resolution as
an activity around the resolution of problems that may play out in mediation,
courtroom, or various kinds of talks. However, there are key points to recog-
nize. Among these is that the participants in a negotiation have joined voluntar-
ily. Participants in litigation, arbitration, etc. may or may not have joined
voluntarily and disputes underlie these interactions.

Voluntariness
The parties in negotiations may have compelling practical reasons to work together,
but they can choose not to. Therefore, in negotiation, the parties are voluntarily
working together. The opposite situation is generally true in court cases (litigation)
where one or more parties have no choice about continuing or leaving. In negoti-
ation, a party can leave if they feel there is a better choice than negotiating.
Because the parties are interacting willingly, negotiation means that the agree-
ment has to be unanimous. If the parties do not all agree, there can be no
 Reflection on negotiation theory 189

Voluntary Participation

Unanimous No
Agreement Agreement

High Low
Satisfaction Satisfaction

High Low Complete Renegotiation

Completion Completion Failure

FIGURE 12.1 Negotiation outcomes

agreement. Of course, a unanimous agreement might not be completely satisfy-

ing to those parties. In that case a party might not do what the agreement
requires – failure to execute the agreement means the negotiation was a partial
or complete failure. Figure 12.1 shows how negotiation can lead to completion
of agreements, or failure.
According to Figure 12.1, agreements that satisfy the parties, and even other
stakeholders, are more fully implemented and have a higher rate of completion than
agreements that do not satisfy the participants as well. The logical conclusion that
this theory leads to, is that negotiators must work supportively and cooperatively
with the other parties in order to get the best agreements. Nonetheless, some parties
will emphasize their own gains and thereby decrease the satisfaction of the other
side to the minimum point necessary for them to complete the agreement. If the
satisfaction decreases further, however, they will not agree, or if they do, they will

Satisfaction Minimum Required Completion

Received Satisfaction Unlikely

Satisfaction Minimum Required Completion

Received Satisfaction Likely

FIGURE 12.2 Satisfaction and completion

190 Reflection on negotiation theory

not fully complete the agreement without further negotiation, legal action or other
steps. Figure 12.2 shows the relationship between satisfaction and completion.
Another key point is that in negotiations, there may or may not be a dispute.
Thus, Raiffa (2002) places negotiations in the field of decision making. Negoti-
ations, especially regarding commercial business, usually involve a deal,
a mutually beneficial package of obligations, contributions, concessions, and
goals. Negotiations that include third party mediators or facilitators may take
place for the purpose of dispute resolution or deal creation.

Utility
In order to understand solutions that increase or decrease satisfaction, negotiators
must consider the relative utility of the issues they negotiate. Utility Theory
(Fishburn, 1970) refers to the relative values that one or more parties place on
things. At the basis of this theory is the belief that individuals can determine and
rank the value of multiple things. For example, it may seem that $10,000 has
the same value for everyone because it can be used to purchase $10,000 worth
of goods or services. In Utility Theory, however, the parties have different ideas
about the value of $10,000. For a small organization or a person with little
money it might mean the difference between success and bankruptcy. For
a large organization, however, $10,000 might have little impact on their plan-
ning or their profits. Because the parties have different values, they may come
to convenient exchanges by coordinating what they value more or less. There-
fore it is vital to understand the value you place on resources and issues as well
as the values other parties place on issues and resources.
In order to understand the utility you attach to an issue, you must compare it
to other issues: the value of something is understood in the context of the
things around it. To help understand the relative utility values of multiple issues,
negotiators may take the following two steps:

1. The total value of the issues to be discussed is set equal to 100.

2. The 100 value points are divided among the issues with important issues
getting more.

For example, in a negotiation about time, money, and raw resources a party
might assign more value to time, less to money, and much less to the resources,
depending on what they need more urgently. The other parties’ ideas might be
similar, or quite different.

Strategy
In negotiation, strategy refers to one of five overall approaches to a negotiation;
Compromise, Collaborate, Accommodate, Compete, and Avoid. Negotiators
choose a strategy based on two different feelings about issues. The first is their
 Reflection on negotiation theory 191

evaluation about how important the issue is. The second is their judgment
about how important the relationship to the other parties is. In negotiation, this
is explained by Lewicki, Hiam and Olander (1996) as relationship versus sub-
stance. Additionally, strategy can be explained as conflict style by comparing the
negotiator’s strength of feelings about their own issues with the other parties’
issues (Thomas and Kilmann, 1974). The five conflict styles are similar to the
strategies discussed in negotiation.
Negotiators’ evaluations and judgments, naturally, do not remain fixed
throughout a negotiation. As parties communicate and learn, and as the environ-
ment changes, the understandings about the other parties (relationships) and the
resources and issues (substance) change dynamically for better or worse. As
a result, the choice of strategy is not fixed. Strategy, therefore, is a not a fixed
and limiting behaviour, it is a dynamic and evolving series of behaviour choices.

Relationship
Relationships are built partly on the norm of reciprocity, a feedback loop that
reinforces the positive or negative cycle of interactions. When parties aim to
create win-win results, they are likely to develop a closer and more positive
relationship. Generally, positive relationships lead to more information sharing
and thus better problem solving as well as greater creation of mutual value, espe-
cially when the relationship matures into a “working relationship” (Pruitt and
Carnevale, 1993). A positive cycle of relationship building typically leads to
good relationships and these lead to better mutual outcomes for negotiators.
Empathy, the ability to share the feelings of other parties, allows relationships to
grow faster and stronger.
In integrative negotiations where both sides can optimize their utility, good rela-
tionships are usually beneficial to all parties. In distributive negotiations, however,
where one party gains at the other’s expense, a good relationship may result in
greater loss as one side manipulates the other to exchange relationship for substance.
Thus, in order to protect oneself, relationships, empathy and impressions
should be seen as something to be managed. Impressions, for example, can be
managed to make a party seem more inviting to relationships or less vulnerable
to exploitation.

Relationship and negotiations across cultures

Good relationships can lead to good negotiation results (Halpert et al., 2010).
Building relationship with members of other cultures requires additional skills
and abilities. Cultural Intelligence (CQ) includes a combination of cognitive,
behavioural, motivational, and metacognitive aspects (Ang et al., 2007). High
CQ indicates ability to adjust cross-culturally including developing relationships
with people in the target culture. In order to develop CQ, people can study and
gain experiences. Learning depends partly on awareness, and greater awareness
192 Reflection on negotiation theory

means more ability to identify the differences that matter and the adjustments to
behaviour, speech, and interaction that matter (Triandis, 2006). Thus awareness
and motivation are foundational, but ongoing effort is needed to communicate
with mentors, interculturally fluent people (Baber, 2012), experts, instructors,
and individuals who can provide quick feedback, in order to become highly
successful.

Negotiation structure
Negotiations can be described as a process because they have a beginning and an
end. A process can be separated into phases at the highest level, with each phase
containing many aggregated activities. Phases that cover the entire lifecycle of
a negotiation start with review of the strategic level value chain followed by
planning of the deal and then by the main interactions among the parties. These
three phases are followed by the ratification phase when any agreements are
finalized and formalized. Finally, agreements are implemented, monitored, and
the negotiation process and outputs are evaluated. In cases where the topics are
relatively complex, for example international trade deals and large corporate
mergers, there may be a follow-on phase in which subordinate agreements are
negotiated or adjustments to the main agreement are renegotiated (Baber, 2018).
Theory generally suggests that the interaction among parties will include dis-
tributive and integrative moments or sections and some models place this near,
in terms of time and process, the end of negotiation and close to the moment of
agreement (Gulliver, 1979; Lax and Sebenius, 2006; Glenn and Susskind, 2010;
Craver, 2012).
In this section it is also appropriate to note negotiation proposals that are not
intended for completion. These are bad faith negotiations that may be smoke-
screens to distract from other tasks or to gain time (Faure, 2012).

Communication
E-Negotiation is associated with the communication performance and effective-
ness of communication tools. The key theory to support the e-Negotiation is
Media Capability Theory (Dennis, Fuller and Valacich, 2008) which is devel-
oped from the perspective of Task-Technology Fit (Goodhue and Thompson,
1995; Zigurs and Buckland, 1998). The media capability theory incorporates
both technology and task characteristics to investigate the communication pro-
cess that fits the use of tools to reach communication effectiveness.
The media capability theory links the media capabilities and communication
processes that are fit to perform communication. First of all, the media capabil-
ities feature the transmission and processing capabilities to associate with media
synchronicity that enables the communicator to coordinate the use of tools and
information. The media capabilities cover the features of “transmission velocity”,
“parallelism”, “symbol sets”, “rehearsability”, and “reprocessability”. Secondly,
 Reflection on negotiation theory 193

the communication processes differentiate information conveyance and informa-

tion convergence to interact with media transmission and process capabilities to
propose the fit of tools. For instance, the media transmission capability for com-
munication conveyance enables communicators to provide new, diverse, and
larger types of information. In contrast, the media processing capability for com-
munication conveyance enables communicators to indicate retrospective events
and deliberation. Moreover, the media transmission capability for communica-
tion convergence enables communicators to identify familiar, distilled, and smal-
ler type of information. Yet, the media processing capability for communication
convergence enables communicators to verify information, adjust to the given
ideas, and negotiate the differences.
Moreover, there are interaction factors between the communicators in the
process of negotiation, such as the familiarity between the negotiators, the train-
ing of utilizing technological communication tools, the past experience of using
tools and between the negotiators and the social norms. The fit among media
capabilities, communication processes and interaction factors would enable the
negotiators to reach shared understanding and thereby deliver their tasks; such as
the quality of outcome and the time efficiency.

Game theory and negotiating

Game theory in negotiations rests on the notion of maximizing utility. The
repeated form of the Prisoner’s Dilemma “game” helps to explain how parties
communicate even without verbally discussing and coordinating their moves. In
Prisoner’s Dilemma, players react to the moves of the other person. If the move
is favourable, they should react with a positive move to continue and reinforce
the flow of benefits. Returning a favourable move with a favourable move is
referred to as cooperating. On the other hand, if one party delivers a move that
hurts the other party, they should react with a similarly negative move; this is
called defecting. Negotiators, according to this theory, constantly choose either
to cooperate or to harm the other and maximize their own benefit.
Game theory also helps negotiators to determine payouts and with this know-
ledge they can choose to move rationally toward optimizing the gains for one
or all parties.
APPENDIX I
Glossary

3D Negotiation: involves three phases of action: (1) what to do at the table;

(2) designing the target agreement; (3) setup of the overall negotiation. Lax
and Sebenius (2006) wrote a book called 3D Negotiation which has been
widely translated; check to find a copy in your language.
Anchoring: setting the expectations about cost and the general price range by
making the first price offer. It is generally a good idea to make the first price
offer based on sensible price research.
Assertive: strongly demanding.
At the table: formal negotiation time when the parties are talking. Imagine all
parties sitting at a table, talking.
Away from the table: time and situations (breaks, recesses, meals, weekends,
nights) when the parties are not formally negotiating.
Bargaining chip: a relatively unimportant concession that you plan to give in
exchange for some concession. Sometimes these are called sweeteners.
Bargaining/Bartering: conceding low-priority items for concessions on items
that are more important to you. Also called “logrolling” or making tradeoffs.
This approach is practical with relatively simple issues and is often used to
sweeten a proposal with concessions.
Bottom line: sometimes this phrase is used with the meaning of reserve price or
point (see below).
BATNA: Best Alternative to a Negotiated Agreement (sometimes also called the
“walk away”). BATNA is the result you would have if you did not negotiate.
See Chapter 3.
Claiming value: trying to get the parts of a business arrangement that are most
useful (and valuable) to you. See Chapter 1.
Concession: something that you give or receive, for example, a better price,
a change of schedule, or a change of product that suits the other parties.
 Glossary 195

Consensus: agreement. Negotiators manage consensus within their team, with

their back table, and ultimately with their counterparties.
Counterpart(y): a negotiator from the other side of the negotiating table.
Creating value: discovering new opportunities for value and profit. See Chapter 1.
Deadlock: a situation in which there is no progress and no agreement. The
parties must break the deadlock or give up and follow their BATNA.
Deal: the package of issues in the negotiation. Also, the agreement.
Deal/no-deal balance: the thinking and decision making that go into agreeing
or not agreeing; the considerations that lead negotiators to accept and offer or
choose their BATNA.
Deal breaker/show stopper: an issue that must be resolved or it will cause the
entire negotiation to fail. Obviously it is important to identify and manage
these issues in advance of negotiations.
Deceit: providing information that is not true. This is almost always a bad idea.
You may gain in the short term, but you may damage yourself in the long
term.
Delinkage: separating an issue from other issues in the negotiation; delink if
a particular issue threatens to ruin the negotiation, or if you can sensibly
separate groups of issues from each other.
Distributive negotiating: negotiating the sharing or claiming of limited
resources (such as time, money, products, etc.) in a win-lose approach.
Empathy: understanding for feelings of other parties.
False concession: pretending that a concession you must give or do not care
about is a concession that you did not want to give. You can trade this “false”
concession for something of value. Not recommended – when the other side
learns that they had to fight for something they could have gotten without
any question, the relationship may be damaged.
FOTE: Full Open Truthful Exchange. This means telling everything to the other
sides. Parties tell the whole truth concealing nothing. This is sensible in
negotiations where all sides have confidence in creating value jointly and
sharing it reasonably. See POTE.
Hardball tactics: a variety of aggressive tactics such as threats and delays, and so
on. Basically these are unprofessional and unsuitable for most business
negotiation. However some businesses use hardball tactics to put pressure
on the other party. Having a good BATNA will protect you from most
hardball tactics. At the table, hardball tactics are best met with silence, or by
resuming your normal questions.
Integrative negotiating: bringing together many issues in order to solve prob-
lems, maximize mutual gains, repackage and optimize, and make robust
agreements.
Interests: things that a negotiator (person, team, organization) wants. These
things can be tangible (money, buildings, equipment, etc.) or intangible
(services, pride, success, dignity, etc.).
Linkage/integration: combining and relating issues in the negotiation.
196 Glossary

Mutual gains: solutions that benefit you and all parties in the negotiation.
The benefits can be different for the different partners.
Negotiation: a discussion with the intent to agree. The discussions include
sharing of information; the making, rejecting and adjustment of offers; the
solving of problems; and the making of decisions and agreements. In this
textbook, the topic is always generally that of business, not politics, policy,
hostages, or other topics.
Opponent: a person or group you are fighting … never use this word when
talking about negotiating. You should never fight negotiation counterparts!
Party: a person or group in a negotiation. The same meaning as counterpart,
counterparty, or negotiation partner.
POTE: Partial Open Truthful Exchange. Parties tell the truth, but not the
whole truth. Parties may wish to conceal certain info such as reserve
price and items they want to offer as false concessions.
Principled Negotiation: (sometimes called mutual gains bargaining) means trying
to increase the total value of the negotiation by developing new ideas with
your counterparts.
Reciprocity: (sometimes called the norm of reciprocity). The back and forth
sharing of information among negotiating parties. When one side gives
a little, others are likely to give too. Do not give away all your information at
once in order to develop a comfortable exchange of facts and ideas.
Reciprocity not only shares information, it helps to build up the relationship.
Relationships: the long-term connection between the people and organizations
in a negotiation.
Reserve point or reserve price: the maximum price a buyer is willing to pay. The
minimum price a seller is willing to accept. Also called the reservation price or the
walk away point. If the negotiation issue is not about money, it means the extreme
maximum or minimum that a party is willing to give or accept in terms of con-
cessions or resources. Beyond the reserve point, there is no logic in continuing
the negotiation and you should choose your BATNA (walk away).
Stalling: intentionally wasting time to put pressure on the other side or push
them into a quick unfavourable agreement. This tactic is not recommended
because time pressure is a two-edged sword!
Stereotype: a superficial description of a person based on a group, not individ-
uals. Stereotyping leads to misunderstandings if applied to individuals.
Stereotyping is only useful as a starting point for careful research into what
groups and individuals expect and prefer as well as research into their unique
preferences.
Strategy: an overall approach to a negotiation. High level strategies include com-
promise, collaborate, collapse, and avoid. At a lower level of detail, specific
strategies include the goals of the negotiation and the sequence of moves
necessary to arrive at the goals.
Synergy: working together to create new benefits that parties could not manage
alone.
 Glossary 197

Tactic: a specific effort to influence the negotiation, for example through

behaviour, framing of offers, deceit, staged release of information, increasing or
decreasing the comfort level of the other parties. Tactics may be distributive or
integrative. Integrative tactics can be used to develop a negotiation, or misused
to take advantage of the other negotiators. Distributive tactics may bring short
term results but may also derail a negotiation. Distributive tactics are best used
in limited ways, and rarely, in order to slightly improve tangible outcomes.
Threats: a hardball tactic … do not threaten your counterparts because it will
damage the relationship. A threat may however be effective in bringing
a party into a negotiation when they have refused to join. In such cases, the
relationship is already quite damaged, and there may be nothing more to lose.
Ultimatum: a strong offer or demand that must be agreed to immediately. This is
a high pressure tactic. Typically these are offered at the last moment. This
tactic is easily defeated by extending your time and continuing a calm
discussion.
Walking out: a hardball tactic … only walk out if your BATNA is good enough
to break off negotiations. Do not walk out in order to put pressure on the
other parties.
Walk away point: the same as reserve point.
Win/Lose: a very simplified form of thinking about negotiating. Suitable only for
distributive negotiations.
Win/Win: a more complex and better way of thinking about negotiating – create
a deal that all sides can be satisfied with. However, an even better way is to
create new value for all parties and go beyond win/win to synergize and
create new value.

You can find additional useful definitions at http://www.negotiations.com/defin

ition/and other Internet locations.
APPENDIX II
Case simulations

The authors have developed the cases below in student class rooms. For add-
itional cases by the authors, visit www.casecentre.org.

CASE A2.1: INHERITANCE FAR AWAY

Theresa Powicki died at the grand old age of 97 in the city of Wellington,
New Zealand. She had a reputation as an active and intelligent woman
who decisively improved the quality of elementary school education in
Wellington. She named her grandson Thomas as the sole beneficiary in her
will*, because he was the only living relative. Thomas and his lawyer are
the only ones who have read the will. Thomas lives in Tokyo and works for
an international bank. He would visit his grandmother once a year during
vacation or Christmas. Travel was long and expensive: 10 hours of flying
plus renting a car.
In the past few years, a husband and wife (Bob and Cheryl Willis) not
related to Theresa, who lived in the same town, often took care of the aging
woman. They took her to the doctor or sometimes to church or on excur-
sions and helped with cleaning, even inviting her to their home on holidays.
The Willis family is active in the town contributing to the homeless centre
and volunteering at the fire department. Bob is a junior high school teacher,
and Cheryl lost her job two years ago.
After her death and after the usual taxes and related costs, Theresa’s
will included the house, its contents, and about 60,000 New Zealand dol-
lars (NZD) in cash and securities and, surprise, $500,000 in gold! Appar-
ently Theresa had wisely bought gold from Willis Metals (owned by
a cousin of Bob’s) in the years before it became expensive. There are
 Case simulations 199

many household items of value, totalling $40,000, that are part of

Thomas’ childhood memories. Of course, the value of these items could
be great if sold carefully in the proper place and time, but they would be
worth less than half that if sold suddenly at one time. The house itself is
worth $220,000 to $280,000 and perhaps even more if the economy
improves in the next few years.
Thomas was pleasantly surprised, he had not expected so much at all. But
then the will was contested by the Willises. They felt that their caring was
worth $280,000. Thomas responded angrily, “You were just interested in
getting her money, you didn’t really care about her!” However they said,
“In fact we did a lot while you did nothing. You hardly ever visited and
could never help when she really needed someone. Anyway, who could
have guessed she had a lot of gold?” This conversation was reported in the
local newspaper.
The Willises brought the case to legal court in the city of Wellington. The
judge refused to accept the case until after parties to had attempted private
negotiation or formal mediation.
Thomas and the Willises decided to attempt negotiation. A court battle
might mean months or years of waiting and high court expenses, plus travel
costs for Thomas.

*Note: a “will” is a document that indicates what to do with a person’s

money and property after he/she dies.

1. Is this negotiation mostly distributive or mostly integrative?

2. What are the interests of Thomas?
3. What are the interests of Bob and Cheryl?
4. Are there issues other than money that Thomas could integrate into the
negotiation?
5. Should Thomas, Bob and Cheryl negotiate directly or include another
person(s)? If so, who?
6. Approximately, what are the reserve points that Thomas and Bob and
Cheryl should set before they start talking?
7. Is it possible for the parties to create value together?
8. What is Thomas’s BATNA?
9. What is the BATNA of Bob and Cheryl?

CASE A2.2: THREE WAY JOINT VENTURE

Background
Three companies are engaging in negotiations to form a Joint Venture
which will produce an electronics product. The three companies have not
200 Case simulations

done business together before, but they all have international experience.
The companies include:

TouchPad, KK: A maker of electronic touch pads in Itami, Hyogo, Japan.

Seeking a contract manufacturing company to produce a new
touch pad for service industry use.
Wushi Dalian: An electronics assembly company in Dalian (大連), China.
Taakto OY: A software company in Oulu, Finland.

The three companies have generally discussed their plans by email and
phone, but this is the first meeting of all three. The goal of this meeting is
to agree to a three-way joint venture, sharing investment, profits, and risk.
Roughly, the three companies, Touchpad, Wushi, and Taakto, expect to
have a 4:4:2 shareholding ratio respectively.
In order to be successful, the three companies must combine their
resources to collect about $12 million in contributions (cash or other).
Therefore they must consider the value of non-cash contributions such as
intellectual property, facilities, skills, and so on. These non-cash contributions
might help to balance the cash contributions, or they might make it impos-
sible to manage the deal.
If the potential deal is not acceptable to the business needs and realities
of one of the companies, then that party should decide not to join the deal.
Building on the Memorandum of Understanding (MOU) below, the par-
ties must now decide how to evaluate the non-cash contributions of each.
Each side can be flexible in the short term, but the long term outcome has
to be one that all parties believe is durable.
Generally, the three companies expect to provide the following elements
to the JV, as described in Table A2.1.
Generally the parties expect to sell the following units per year, for the
first five years.

TABLE A2.1 TouchPad, Wushi, Taakto

TouchPad Wushi Taakto

Design, operating Most of the manufacturing User interface, certain

system, marketing, con- and all of the assembly, client and server software,
cept, most of the cash most of the non-cash post-sale monitoring, some
investment. investment investment in cash, some
in-kind expertise
 Case simulations 201

Unit Sales
350000
300000
250000
200000
150000
100000
50000
0
1 2 3 4 5

Expectations are that total cost per unit will be as shown in the following
table, plus or minus 7% for the first five years.

Cost/Unit
$16.00
$15.00
$14.00
$13.00
$12.00
$11.00
$10.00
1 2 3 4 5

Profit per unit expectations are approximately as shown in the table

below for the first five years.

Profit/Unit
$35

$30

$25

$20

$15
1 1.5 2 2.5 3 3.5 4 4.5 5

MOU: Taakto, Wushi, TouchPad

202 Case simulations

A non-binding memorandum of understanding (MOU) has already been

agreed by each company. The MOU includes the following text.
The parties, TouchPad, Wushi, and Taakto announce their intent to form
a Joint Venture (JV) with approximate shareholding of 40:40:20 respectively.
The activity and field of the JV shall be touch screen control pads. Generally,
with details of the following issues to be decided on during negotiations:

– TouchPad intends to take the role of OEM designing the equipment,

developing the operating system, and managing the overall concept and
undertaking marketing, distribution, after-sales support, and all interaction
with customers and end users.
– Wushi intends to take the role of assembler with staff and facilities to
assemble components, sub-assemblies, housings and so on. Likewise,
Wushi will directly manage certain sub-assembly and component compan-
ies that are located in China.
– Taakto intends to design and develop the user interface, certain client and
server software, post-sale monitoring and some support services.

CASE A2.3: OVD HOSTS THE FOREIGN INVESTOR AND

THE LOCAL BUSINESS

General background for OVD, global design, and LCM

GlobalDesign is a Canadian company that designs and sells consumer products
for daily use, including many innovative products that might be popular for
a year or two or which react to new technology. GD is proud that it was the
first company to bring products such as protective pads and ergonomic grips
to consumer electronics like tablets, smart phones, and the newest wearable
technology.
Previously a vertically integrated manufacturer, the company restructured in
2001 to become a designer and B2B/B2G marketing company, leaving manu-
facturing and retailing behind. Most of GD’s manufacturing has been done in
China up to now, however a series of unfortunate incidents regarding corrupt
officials has made them consider doing business in Ruritania, a large and grow-
ing South East Asian country. Ruritania also does not have a snow white repu-
tation, but business acquaintances have said it is “not too bad”.
GD has reviewed several companies in Ruritania and asked Overseas
Development (OVD) to arrange several meetings. The first is with LCM,
a local contract manufacturing company.
OVD is a government agency. It exists to bring together foreign and local
companies. OVD’s charter allows it to make small investments, take an equity
share up to 20% in new companies (JVs or independent firms), and provide
 Case simulations 203

expertise and facilitation in exchange for payment, a fee, or an equity position.

OVD is hosting the meeting in their downtown office.
LCM is a three-year-old company with a small plastics facility outside the
capital city. It has successfully completed several contracts for US and Japan-
ese firms. They are excited to meet with a large foreign company like GD.

CASE A2.4: AP AND SHEPARD FAIREY AND HOPE

Case copyright infringement

In the year 2008, the US presidential election saw hopes and excitement
arise around one candidate in particular, Barack Obama, who would later be
elected. The excitement inspired numerous artists to create works based on
candidate Obama. One of the most well-known and enduring works was
done by Shepard Fairey, an artist using stencil art that had gained wide rec-
ognition. For more information about the artist, see www.shepardfairey
prints.com and other sources.
The artist based his work (see https://www.npr.org/sections/thetwo-way/
2011/01/12/132860606/shepard-fairey-and-ap-settle-copyright-dispute-over-
hope-poster) on a photograph taken by Mannie Garcia who was temporarily
working for the news agency Associated Press (AP).
AP discovered the original photo was from AP in early 2010. AP was upset to
discover that an image which they had ordered and paid for was being used to
such wide acclaim – all of which went to Mr. Fairey. Additionally, the image came
to be sold on many day to day objects as it became increasingly popular. The
profits from these objects went to the artist, not the photographer, and not AP.
AP considered legal action. However things were not so clear. Their law-
yers told them,

The picture has been changed – it will be up to a court to decide if

the changes are substantial enough that it can no longer be con-
sidered the same picture. There are few guidelines and precedents for
this matter, so much will be up to the judge.

Further, they explained,

The ownership of the photo is also not so clear. Mr. Garcia was not
a full time employee, so his images do not automatically belong to
AP. At the time, he was not even a part-time worker for AP, he was
a temporary hire and had not signed a contract. Even though he was
paid for his time and he submitted the photos to AP, it is not com-
pletely clear who the rights for the picture belong to.
204 Case simulations

Meanwhile, the artist refused to discuss sharing the ownership of the

changed image or profits from it. Fairey claimed that under the established
rules and laws of “fair use” he was legally safe in his use and “reinterpret-
ation” of the image.
With time, AP collected enough legal arguments to consider action; at the
same time, Shepard Fairey considered his legal strengths and weaknesses;
likewise, Garcia decided to let AP represent him. Both sides gave long
thought to the potential costs of a protracted legal battle…and, they
decided to negotiate. But what should they agree to?
Here are some facts and estimates regarding the case:

• A court case of this sort could take half a year to five years. One or
both sides can maximize the delays in order to drive up the costs and
irritation for the other side. A single quick court action might cost
$50,000. A single lengthy court battle might cost $2.5 million.
• Shepard Fairey has used the art of other artists in much of his work
ranging from his “Andre the Giant” series to commissioned work for
corporate clients. A legal loss to AP would put him at risk of other
lawsuits and potential losses.
• Shepard Fairey claims that he and his design company (Studio Number
One) are nearly broke. This claim seems unlikely, but AP has to admit
that there would be additional time and cost after winning a court case
in order to get any money at all from the artist.
• AP estimates gross sales from products with the image before now
2011 to be $5 million and $2 million per annum.
• Fairey estimates gross sales from products with the image to be
$500,000 and $200,000 per annum currently.
• Independent observers estimate gross sales from products with the
image to be “closer to AP’s guess”.
• Fairey claims that income from the Obama poster during the election
years was spent entirely on more posters – he considers this to be
legally a campaign contribution.
• The cost of an independent audit would be about $50,000.
• Independent observers estimate that the total market for products with
these images could range from $1 million per annum to $5 million per
annum depending on the popularity of President Obama.
• AP has agreed with the photographer, Mannie Garcia, that they will
represent him in the negotiations providing some share of the agreed
outcomes to him.

Your assignment:
Represent your client (AP/Garcia or Shepard Fairey) to come to an agree-
ment about at least the following points.
 Case simulations 205

– Sharing of profits up to the time of agreement;

– Sharing of profits after this agreement;
– Statements by either side to the public in general;
– Protecting AP photos;
– Other issues, if any.

Determine your goals, your reserve positions for your goals, and your
BATNA, and who will participate in the actual negotiation at the table.

CASE A2.5: GHANA GALAMSEY GOLD

Ghana Gold: Illegal mining and the Golden Tide

mining company
Background
Ghana’s economy is defined by basic commodities, especially gold, oil, and
cocoa. Golden Tide Corporation, a Chinese company, holds government permis-
sion in the form of a license to mine gold in various locations in the famous Ash-
anti gold belt in Ghana. Of the areas where Golden Tide holds concessions, the
region of Nokyem is rather problematic because: (i) it is populated by a large
number – thousands – of illegal miners called galamsey; and (ii) while Nokyem
contains an estimated 50,000 ounces of gold (worth about $88,500,000), it is
found in low concentrations and at depths that make recovery almost pointlessly
expensive: Golden Tide estimates it would cost at least $75,000,000 to get that
diffusely spread gold with modern methods and equipment over 10 years.
Nevertheless, Golden Tide would like to realize some gains from the relatively
low-value Nokyem property, improve its overall reputation in Ghana and gain
a long term ally in the galamsey and the Nokyem Chief. Golden Tide wants to
stay in Ghana as long as possible because the company has other productive
gold operations in Ghana. Moreover, as Golden Tide hopes to initiate mining
activities in a perceived high-value region neighboring Nokyem, they have
a specific interest in somehow preventing the galamsey from flocking uncontrol-
lably into that region and infringing upon future Golden Tide mining operations.
The Chief represents the Nokyem area and all its people, including the galam-
sey miners. The Chief has publicly said, “We cannot remove the galamsey, but
they can do what Golden Tide cannot – get the Nokyem gold at lower cost.
Why not transfer the license to us and improve the lives of the galamsey and all
people here?”
The galamsey who are actively mining Nokyem are doing so at very low cost
with unsafe equipment and materials. The galamsey, however, working cheaply
and simply over several decades, could recover much of the low-concentration
206 Case simulations

gold spending only a hundred dollars or so per ounce. Weekly, about 3,000
miners remove less than 50 ounces.
Golden Tide officials are aware that their Nokyem concession is swarming
with illegal mining activity and have been debating options on how best to
respond. They cannot rely on the Ghanaian government to remove the
miners without violence, and violence would damage Golden Tide’s reputa-
tion and future in Ghana. Golden Tide sees the 3,000 miners as 3,000 daily
opportunities for accidents and pollution – therefore they want to strictly
limit the number of miners.
In 2010, over 100 illegal miners were killed underground when a tunnel
in the Nokyem area collapsed. Even though Golden Tide was not legally
responsible for this accident, the company faced a barrage of negative
media attention and was compelled to address the issue in their annual Cor-
porate Sustainability Report. There are numerous injuries and fatalities annu-
ally among illegal miners.
In addition to safety problems, the galamsey face some practical disadvantages
in their daily work. Because they are operating illegally, they may not directly sell
their gold to Ghana’s legal gold buying authority, the Precious Minerals Market-
ing Corporation (PMMC). As a result they have to sell to sub-buyers for a lower
price, or barter their gold for immediately necessary goods and services.
Additionally, the PMMC controls the distribution of a vital mining resource:
mercury. As they do not possess a license allowing them to lawfully mine gold,
the galamsey cannot directly buy processed mercury and the equipment to
handle it safely from PMMC. Thus, they must turn to other more expensive and
less safe sources. Mercury, a poisonous material, is used to separate the finest
particles of gold from dirt, sand, and other minerals. Worse, the galamsey usually
clean the mercury by hand, squeezing it through heavy cloth, which means even
more exposure to the poison as well as more damage to the environment. With
direct access to PMMC, the miners could buy cleaned mercury and return the
dirty mercury safely and at reasonable cost. Apart from the issue of mercury, if
the galamsey could directly sell at a reliably higher price to PMMC, they might
also be willing to embrace other more expensive but safer methods and means
of gold extraction, even if a somewhat lower yield of gold may result.
But in order to sell to PMMC at a higher price, they must become legal
by gaining the license now held by Golden Tide.
Notwithstanding their illegal nature, the heads of each galamsey group
operating in the area pay a fixed registration fee per worker and weekly rent
(3% of their gold) to the Nokyem Chief as the traditional holder of the land.
If the Chief secures the license (from Golden Tide), he and the galamsey can
take legitimate control of the situation and work to improve the quality and
efficiency of their operations. The galamsey camps of Nokyem are well
organized and already operating under a system of by-laws that institute
transparency, fair labour practices and careful accounting.
 Case simulations 207

Dan Go, Chairman and Chief Executive of Golden Tide Mining Corpor-
ation has said, “Our goal is to leave a legacy of increased prosperity by
building sustainable capacities for the communities who are our neighbors
so that even after the mine eventually closes their lives would continue in an
improved state.”
The Golden Tide executives believe that lawful and more formalized
mining of the low-concentration gold deposits could be successful because
the Nokyem galamsey are already well organized with some worker protec-
tion and accounting systems in place. But, they say, “This process will not
be simple, if the galamsey and the Chief are not clearly interested in cooper-
ating, we should stop the negotiations and spend our money and time on
other projects. Also, they must be serious about spending their money to
improve safety, environmental protection, economic development.”
Golden Tide views with interest the failure of Newmont Corporation to
come to an agreement with the Nokyem Chief during negotiations some
years ago. There is factual historical information about the Newmont discus-
sions that negotiators can easily research and use. As far as Golden Tide is
concerned, all mining operations in Ghana are handled through their home
office in Shanglin, China, rather than the local office. Reopening the negoti-
ations may be the new opportunity to come to some agreement.

TASK: Create an agreement suitable for all parties to transfer some percent,
or all, of the license to mine Nokyem from Golden Tide to the Nokyem
Chief.
Please visit these and other sources of information to learn about gold
mining in Ghana and the galamsey

www.ghanaweb.com
www.im-mining.com
www.newmont.com/
www.aljazeera.com/programmes/101east/2016/12/china-african-gold-rush-
161213120529920.html

CASE A2.6: SHOE BUSINESS COMPETITION

General information
Mr. Tang and Mr. Lee were colleagues in a division of Runaway Sports
company1 in 1993, devoting their personal time to developing a unique, dual-
purpose, roller-skate trainer. For over three years, Tang and Lee devoted their
evenings and weekends, working through the research and development
(R&D) process. The various expenses of developing drawings and a 3D proto-
type were financed by Tang Industries2 – Mr. Tang’s father’s family business.
208 Case simulations

The unique roller-skate trainer was thus developed in Taiwan and a patent was
first granted in Taipei, 1999 and classified as an invention3 type of patent. Tang
and Lee shared time developing their ideas, investing in the product as a joint
business venture to generate lucrative profits. Further patent applications
regarding this roller-skate trainer were submitted to over 50 countries in East
Asia, Central and West Europe and North America. At this point, Tang and Lee
left their day jobs to work full-time developing their own business.
The original prototype was considered the personal property of both Tang
and Lee – under patent law, each co-inventor named on the patent applica-
tion owns that property. Patent law gives co-owners of a patent the right to
make, use, licence, sell and import the patented invention. Having gained
the official patent license, Tang and Lee shared the rights to their exclusive
product. The priority of the patent right prohibits other parties from produ-
cing imitation goods in the countries where the patent has been granted,
acting as protection against intellectual infringement. Upon release, both
Tang and Lee had legal claim to future revenue and for a while both Tang
and Lee seemed content.

History between Tang and Lee

Of the two, Tang was the more business savvy. Tang had an eye for
detail and benefited from having a strong family network as Tang’s father
was a well-respected entrepreneur with manufacturing plants dotted
throughout South East Asia. Lee’s physics’ background helped distinguish
what they were offering. His technical knowledge was fundamental to the
product’s inventiveness. Lee was confident that the design and appear-
ance of the prototype was sure to be a smash hit and his production
design was both sleek and functional. The prototype was to be the first
dual-purpose shoe of its kind and although the R&D costs were substan-
tial both men were confident that they could recoup the costs relatively
quickly. Up until this point, Tang’s family had financed the project from
conception through R&D and also through initial production as Tang and
Lee had encountered problems getting credit to manufacture at the scale
they desired.
Between 1999 and early 2001, the patents to over 50 countries’ applica-
tions were granted and the prototype was launched and distributed
throughout the world. The trainer sold especially well in the domestic
market of Taiwan, as what they had developed was truly original. The
annual revenue of this trainer for global sales and patent authorizing to
other firms was 100,000 USD. Tang valued Lee’s sense of design and agreed
to share future profit with him on a 50-50 basis, despite Tang’s family
having financed the R&D costs, estimated at 40,000 USD. Their trainers
were marketed towards kids and teenagers.
 Case simulations 209

Conflict
Lee thought Tang was taking credit for his contribution and the two had conflict-
ing ideas on how the original prototype might be improved. Unexpectedly and
rather quickly, Tang and Lee parted company in late 2001, soon after the original
prototype patent had been granted. Lee left Tang and moved to Europe to estab-
lish his own company within two years. Tang also established his business in
2001 as a sub-unit of his father’s business enterprise and utilized his family’s net-
work connections to distribute the roller-skate trainer as his father’s business had
trade links throughout Asia and the Far East.
From 2001 to 2003, both entrepreneurs implemented individual business
strategies and important new products, loosely based upon the original roller-
skate trainer. In 2013, Tang and Lee both released their own second-generation
roller-skate trainers, based on their initial prototype. Tang released his second-
generation trainer in November, 2013 and mainly applied for design patents
and and utility patents. Lee realized his second generational trainer in March,
2013 with a pending patent in invention and utility. Their second-generation
trainer’s patents had unique attributes and the shoes themselves were re-
designed for customers with different needs. The key features of Tang’s second-
generation trainer included a cool and easy adhesive strapping. The shoes were
hard wearing and featured a cushion sole. Lee’s second-generation trainer
included a shock absorbing foam-based material located in the shoe’s sole,
inspired by his background in physics. Bitter rivals, Tang and Lee quarrelled over
who had had the original idea and spent a small fortune securing patents in
a variety of domains but also on litigation – suing one another over breach of
intellectual property and ownership.

Marketing positioning
In keeping with Tang’s price point, Tang’s roller-skate trainer became espe-
cially popular in the Far East as his shoe was substantially cheaper (40%) to
manufacture than the competition in Europe. Lee’s roller-skate trainer was
more stylish, comfortable and sold well to fashion conscious Europeans. His
business had to absorb higher production costs and focused on developing
products that were truly innovative, as compared in Table A2.2.

TABLE A2.2 Tang and Lee 2nd generation products

Manufacturing Manufacturing Market Product key

2nd generation price/pair location price/pair characteristic

Tang’s shoe 5-7 USD South Asia 13-17 USD Fair value
Lee’s shoe 8.5-11.5 USD Europe 18-26 USD Fashion
210 Case simulations

TABLE A2.3 Tang and Lee comparison

Background Employees Firm’s turnover Granted patents Key business network

since 2001

Tang’s 12 850,000 USD 1 invention South American countries

firm people 3 utilities and East and Central
5 designs Asian countries, Middle
Asian emerging countries
Lee’s firm 5 people 450,000 USD 4 inventions European and North
4 utilities American countries
15 designs

The two sports trainer entrepreneurs became bitter rivals, doing whatever
they could to get an edge over the other. Neither Tang nor Lee were
beyond poaching staff and occasionally would go out of their way to put
the other’s product in a less than positive light.
It took many years before Tang and Lee could discuss matters rationally
and not wanting to meet face-to-face, they appointed their trusted business
advisors to seek out an amicable solution to resolve their long-standing dis-
pute. As Mr. Lee’ trusted business advisor, Helmut is expected to find
a satisfactory solution to please his client. Wei Wei is a trusted business
advisor of Mr. Tang and she is expected to find a beneficial solution for her
client. Both Helmut and Wei Wei are patent clerks in private commercial
firms and have arranged to discuss their clients’ concerns and negotiate on
behalf of Tang and Lee to find a mutually beneficial and satisfactory
solution.

Note: A patent clerk in commercial enterprise is often an investigator

charged with examining patent applications to provide consulting opin-
ions to patent applicants as to whether a claimed invention could poten-
tially be awarded a patent. Generally speaking, the most important task of
a patent clerk is to review the technical information disclosed in a patent
application. This involves reading and understanding a particular applica-
tion and then, searching to determine what technological contribution the
application teaches the public.
A patent is awarded for informing the public about special technical
details of a new invention, so the work of a patent clerk involves: search-
ing existing patents, scientific journals and data resources and other
material for prior artwork (diagrams etc.) and verifying an application to
determine whether it complies with the legal requirements. These
requirements are often substantially different depending on the country
in which the patent has been registered.
 Case simulations 211

Further questions for consideration:

• What are the distinguishing attributes of their positions?

• What are the dispute points?
• What do Tang and Lee stand to gain by pooling their resources?

CASE A2.7: ZAWASOFT AND PAK-TON

Background info
ZawaSoft and Pak-Ton are considering a partnership. ZawaSoft’s new “On the
Spot” software makes it possible for Pak-Ton’s electronic batteries to last three
times longer. Pak-Ton would like to license the technology from ZawaSoft for
its products (electronic batteries for small electronic equipment up to 1kg).
ZawaSoft has three shareholders with 20% each. According to newspaper
reports, the shareholders are aggressive about seeking profits within a one-
to-two-year timescale.
Pak-Ton was established by a committed Zen Buddhist; this philosophy
and system of ethics remains a basis of the company today. Pak-Ton pub-
lishes a quarterly newsletter relating their business and ethics to Buddhism
and has annual events with temples near company offices and plants.

CASE A2.8: RECRUIT THE BEST!

Recruit the best!

FC Nürnburg is a club in the top league of Germany, the Bundesliga. The club
competes against top teams like Munich, Hamburg, and so on. Although Nürn-
burg has always been in this league, it has never won the title and it seldom
performs strongly. The past two years, however, have seen a significant
improvement in the quality of play and players and the number of victories.
The club’s fortunes appear to be headed upward!
This year FC Nürnburg is recruiting another leading player into the team.
Financial resources are limited of course, so they are aiming to get only one
player. They hope they have found their new star in the person of Bolas Chojo-
nez. Chojonez is a shy and religious person who taught swimming safety in his
home country (which he misses) and famously rescued two children from a flood
there. He swims daily.
Chojonez arrived from his native home of the Philippines to the league
below Nürnburg’s two years ago. Each year he has improved, especially
last year. His opportunity to leap into one of Europe’s leading leagues has
212 Case simulations

come! It is this league that has produced World Cup winners and legendary
individuals, teams, and coaches for 40 years.
Chojonez is now 19 years old, considered young for a football player. If
he can avoid injuries, he may have 10 to 12 years of good football ahead of
him. Chojonez is considered among the top players of the lower league, but
has not been ranked within the Bundesliga.
The Nürnburg team pays “starting squad” players an average of Euro
0.5 million per season (there are 18 games in a season), usually minus 5%
for every missed game. (If the game is missed due to injuries, the player
loses only 2%.) First year members are usually paid less. In addition to the
11 starting team members, there are 20 other members who play on prac-
tice teams and occasionally join the main team. These players earn an aver-
age of 150,000 Euros annually.
FC Nürnburg has a strong connection to the city’s community. Players
appear in public at kids’ programs and other events frequently throughout
the year. Popular players attract many daily emails and letters as well as fans
with signs at games, therefore shirts with their name and number sell well.

Your task
Please come to an agreement that covers at least the following contract issues:

• Salary
• Number of years
• Illness/injury compensation

It is of course acceptable to come to no agreement.

CASE A2.9: SONDE SA STRIKES A BALANCE

General information for all participants:

The Japanese affiliate (in Osaka) of Sonde, SA has a small number of

French expatriates on the sales and design team – only 10. Of these, five
change annually meaning that each person is in Japan for two years.
These expatriates arrive and leave with the Japanese fiscal year (April ̶
March). They expect to take three to four weeks of vacation in August
like most people in France. But they are instead limited to a few days
during Obon, a three-day national vacation. As a result, several of them
stay home “sick” for a week or more in August and or September. At the
end of two years, they generally stop working early in March, staying
home for almost one month. They say they are sick, but probably they
go bicycling in the countryside!
 Case simulations 213

This cross-cultural simulation includes five roles. There are two French roles
(the site CEO and a representative of the French workers) and three Japanese
roles (Human resources manager, the head of the sales and design team, and
a low level supervisor).
The French staff complain about the short vacation time loud and long
each year.
Your job is to find a suitable solution. You will discuss and interact with
the following people:

HRM Chief Manager

Head of sales and design team
French CEO of Japanese affiliate
Japanese supervisor of the design team
French worker (sales and design team member)

See the online eResource at www.routledge.com/9780367421731 for

each of the five roles above.

CASE A2.10: CULTURAL IP ANIME

Background
PXWX of Hangzhou, China is an animation firm that provides animation ser-
vices to various Japanese animation studios. The studios in Japan develop
the main content, ideas, characters, style, and stories. PXWX usually provides
services such as colouring, background, and the many drawings that fill in
the movement between “key pictures”. This relationship has been stable for
about 10 years as PXWX has steadily increased its gross revenues, number of
contracts, and number of customers in Japan.
RekiMan of Hirakata, Japan became a customer of PXWX about four years ago
and has enjoyed a good relationship with PXWX during that time. RekiMan spe-
cializes in animations of historical material and folktales targeting young adults.
Last year, PXWX began its first original animation series. It is for the Chin-
ese market. PXWX developed the style, the characters, the stories, all anima-
tion sequences…everything, releasing the first series of 10 episodes to wide
domestic acclaim. In the development process, the storyboards (a series of
pictures outlining the action) of an episode were accidentally sent to Reki-
Man. RekiMan quickly returned the materials to PXWX with encouraging
comments about the quality of the materials and PXWX’s project in general.
PXWX, however only last week, was horrified to find that a work order
from RekiMan included a set of storyboards strikingly similar to the ones
PXWX had accidentally sent to RekiMan. PXWX was incensed!
214 Case simulations

They immediately notified RekiMan that they would start legal action for
theft of Intellectual Property in the Hangzhou city court system. PXWX was
quoted in a news article in the Hangzhou Business Press complaining about
RekiMan’s piracy. Further they told RekiMan that work would immediately
stop on the current project, though the contract was 20% ($300,000) pre-
paid and only 10% of the work had been done. Finally, they told RekiMan
to stop work on their Yamashiro White Snake project in Japan or face add-
itional legal action in Japan.
RekiMan responded that they had in no way stolen anything from PXWX
and proposed negotiations to avoid court proceedings that would destroy
the relationship and be pointlessly expensive. PXWX, feeling somewhat less
heated, agreed to listen.

CASE A2.11: TOYOTA TSUSHO AND ENCANA – SECOND

ROUND

Background for Toyota Tsusho and Encana

In April 2012, Toyota Tsusho and Encana announced an agreement in
which Toyota Tsusho would pay $602M to gain 32.5% of Encana’s Horse-
shoe Canyon field. This field produces so-called dry gas from coal beds at
relatively shallow depths.
The development of coal bed methane (CBM) gas is not too expensive
because wells are neither deep nor high pressure. However, when a field is
mature, it does not produce gas so quickly. How much gas remains in
a developed dry gas field like the Horseshoe play is quite well understood,
so it is usually possible to know when the field will be depleted, and when
the remaining gas will require more expensive efforts to recover it.
The 2012 deal included 4000 existing wells and 1500 future wells. The
field has been in production many years and the geology (and output) is
very well understood and very predictable. The deal is a “royalty interest”
deal in which Toyota Tsusho will get 32.5% of gas produced.
Toyota Tsusho was quite satisfied with the 2012 deal: it captured a long term
supply of easy to handle gas with easily predictable maintenance and running
costs. So, Toyota Tsusho sent its accountants to sharpen their pencils…and
found some additional money it could use for more gas field investment.
Toyota Tsusho and Encana are preparing new negotiations for other gas
fields or additional investment in some of the remaining part of Encana’s
Horseshoe Canyon play that is not part of the original agreement, now
part of Prairie Sky Royalty. Encana holds 60% (78 million shares) of this
company.
 Case simulations 215

With Japan’s nuclear power plants almost all closed and unlikely to re-start
soon, and access to oil from Iran, Russia and other countries seemingly always
at risk, the appeal of energy from a politically reliable source is great. Canada,
a politically stable energy exporter, is a great potential partner. Moreover, gas
is much cleaner than the coal that Japan imports from Australia, China, Indo-
nesia, and North America. Japan consumes about 4,500 billion cubic feet of
natural gas annually, of which about 4,300 billion cubic ft are imported
(source: www.eia.gov).
Total annual primary energy consumption in Japan is over 18 quadrillion
British thermal units (btu). http://www.eia.gov/countries/country-data.cfm?
fips=JA
In recent years, North American gas producing companies in North
America are avoiding investment in CBM currently as the price of gas has
declined in the past decade and recovers only during winter months to
prices between $3.00 and $4.00 per million BTU. Price forecasts are
changeable (see https://www.cmegroup.com/trading/energy/natural-gas/
natural-gas.html). Even though most thermal power plants in North Amer-
ica have switched to gas from coal, supply seems likely to stay ahead of
demand.
In 2012, ConocoPhillips announced “ConocoPhillips will virtually cease
capital spending on North American dry natural gas assets to focus on pro-
jects that offer higher returns.” http://www.platts.com/RSSFeedDetailed
News/RSSFeed/NaturalGas/6279120 For that company, and others, it
meant a focus on oil and “wet gas”. The term “wet gas” refers to natural
gas that includes many complex hydrocarbons including highly valuable
liquids (condensates). These liquids are easy to transport (no condensing
equipment or pressurized pipeline needed), require less processing than
crude oil, and command a high price. Dry gas, on the other hand, has less
value and is usually transported continuously and efficiently by pipeline,
but requires very little processing.
Encana has developed the Horseshoe play in accordance with the Toyota
Tsusho agreement drilling additional wells. Production after royalties averaged
approximately 335 MMcf/d of natural gas and approximately 9.9 Mbbls/d of oil
and NGLs. At December 31, 2013, this play included approximately 1.7 million
gross undeveloped acres (1.5 million net acres) that Encana controlled. Source:
http://www.otcmarkets.com/edgar/GetFilingPdf?FilingID=9798266 For the pur-
pose of this negotiation, the 1.7 million acres mentioned above are not available
for discussion.
Gas prices appear to be recovering in North America, however most ana-
lysts predict long term over- supply. Figure A2.1 shows the change in nat-
ural gas prices in North America from Spring 2016 to Fall 2018. Wise
negotiators will update the information below at any of several websites
with commodities data.
216 Case simulations

INTRADAY 1W 1M 3M 6M YTD 1Y 3Y 5Y 10Y MAX INDICATORS CHART OPTIONS

125.00%

4.50
100.00%

4.00
75.00%

3.50

50.00%

3.00

25.00%

2.50

-0.00%
2.00

-25.00%

2016 Jun 2017 Jun 2018 Jun Sep Nov 2019 Mar May Jul Sep

FIGURE A2.1 Gas price movements

Source: https://markets.businessinsider.com

Useful Jargon for all parties

Bbl: a unit measure of oil, a barrel of oil. One bbl = 158.98 liters.
Btu: British Thermal Unit. A measure of energy, one 1 cubic foot of natural
gas contains about 1030 Btu. Japan uses about 20,000,000,000,000,000
Btu of energy (all sources) annually.
CBM: Coal bed Methane, gas that comes from coal located in the ground.
Condensate: natural gas condensate. A range of chemicals found in natural
gas and oil that can be used for making fuel or plastics. These must be separated
from the widely used “dry natural gas” that is transported in pipelines and tanks
to point of use. The separation of condensates from gas usually occurs at the
wellhead or a processing facility in the pipeline. Condensates are inexpensive to
refine further (oil, for example, is more expensive and complex to refine).

C1 is methane (dry gas). The “liquid rich” gases are:

C2 Ethane
C3 Propane
C4 Butane
C5 Condensate (liquid, not a gas, composed of various hydrocarbon
chemicals)

Dry gas: gas that comes out of the ground with few or no condensates. Gen-
erally, gas from coal beds (CBM) is dry.
Flaring: the practice of burning unused gas at the wellhead. This practice
is targeted by environmentalists as destructive and wasteful.
 Case simulations 217

Play: the meaning of “a play” in the oil and gas industry is an opportunity
to get resources from a certain geology. Example: Barnett shale oil in Texas
is a “play” that refers to oil in a certain kind of rock found at a certain depth
in a certain region. The Alberta Bakken play means oil and gas in a layer of
rock covering more than 500,000 km2 below the surface in Saskatchewan,
Manitoba, North Dakota and Western Montana. Many other wet and dry
gas plays exist in North America.
Royalty interest: “In the oil and gas industry this refers to ownership of
a portion of the resource or revenue that is produced. A company or person
that owns a royalty interest does not bear any of the costs of the operations
needed to produce the resource, yet the person or company still owns
a portion of resource of revenue produced.” Source: http://www.investope
dia.com/terms/r/royalty-interest.asp#ixzz1vhIb7jHj
Shallow gas wells, including CBM wells, are usually low pressure and
therefore relatively cheap to build and maintain.
Wellhead: the point where the gas or oil well breaks the surface. The well-
head is a structure immediately below and above ground that safely main-
tains pressure and strength. If a wellhead fails, there is usually an explosion,
fire, and tremendous damage.
Wet gas: two meanings: (1) natural gas that comes out of the well with high
levels of condensates. The condensates can be sold with little or no processing.
(2) gas that occurs with water coming out of the well. The water must be dis-
posed of (expensive and requires special plans and permits).

Cubic feet:
Mcf = thousands of cubic feet
MMcf = millions of cubic feet
Bcf = billions of cubic feet
Tcf = trillions of cubic feet
1 cubic foot = 0.0283 cubic meter
1 cubic foot = 28.3 liters

CASE A2.12: CHANNEL-PORT AUX BASQUES

General information Port-aux-Basques and AFD

Channel-Port aux Basques is a town of old fishing villages. It is one of the oldest
continually inhabited towns in Newfoundland, founded in the 1680s by Basque
fishermen from France and Spain. Prior to that, Basque, French, Portuguese,
and Spanish fishermen visited irregularly to trade with the aboriginal popula-
tion, from the mid 1500s. The town is some 900 km east of the city of St John’s,
Newfoundland’s main city. The locations of Channel-Port aux Basques and
Newfoundland can be seen in Figure A2.2. The economy is supported mainly
218 Case simulations

FIGURE A2.2 Newfoundland, Canada

Source: © Google Maps

by the Marine Atlantic ferry terminal which connects the Newfoundland to

Nova Scotia. In addition to the maritime history, the remains of the rail sta-
tion and some old boats make the town an interesting historical location.
The city managers will meet with a development agency to seek funding
to improve the local economy.

CASE A2.13: THREE PARTY E-MAIL NEGOTIATION – RESI-

DENTIAL REAL ESTATE

General information for all parties

The following case is to be conducted by e-mail only negotiation. The three
parties involve:

• Vender – Seller of the property, Mrs. Lee

• Estate agent – Wang Home
• Buyer – Mr. and Mrs. Pim (Thai couple).

The housing market in Asia has been growing. Lately, Asia-Pacific housing mar-
kets are getting stronger.4 There are more and more foreign and overseas
buyers who are finding property prices are affordable in Malaysia. People are
wanting to sell their homes as they stand a better chance of getting a good
price for their property. Properties are selling very quickly. The difficulty of find-
ing reasonable prices is helping the housing market inflate. From a buyer’s per-
spective, a new influx of homes has come to market, giving buyers more
opportunities to invest in different types of properties. Estate agents are pleased
to see new opportunities opening up.
A married couple, Mr. and Mrs. Pim, are planning on settling down and
are considering raising a family together. After discussing mortgage advice
with various bankers, they are aware of how much they are able to borrow.
 Case simulations 219

They have a good credit history and have incurred no debts of any kind.
Mr. and Mrs. Pim hold bank accounts in both Singapore and Malaysia and
bank with the same globally recognized financial institution.
Currently, Mr. and Mrs. Pim rent temporary accommodation in a suburb
of Kuala Lumpur, Malaysia, near to Mrs. Pim’s workplace and a second
apartment in a quiet and safe area, close by Mr. Pim’s retired parents in
Singapore. Despite living in Malaysia for over three years, neither Mr. Pim
nor Mrs. Pim speaks fluent Malay or English. Mr. Pim speaks no Malay what-
soever and spends at least six months of the year in Singapore, working in
the music industry. Due to the disadvantage of language, the couple would
like to use e-mail to communicate and negotiate with the estate agency in
Malaysia.
Mr. and Mrs. Pim have been actively searching for a house in March and
would like to have their own home by summer time. Mrs. Lee as a teacher
would like to sell her house before the new term starts. The estate agency –
Wang Home – is responsible for Mrs. Lee to sell her house in Kuala Lumpur,
Malaysia (see the house brochure Ref. KLA03A).
Note: The house price with INC, indicates that the agent fee is included in the
house sale.

How to conduct this negotiation

This is a 5-day e-mail negotiation. Participants are encouraged to plan their
e-negotiation strategy in advance. There is a suggested maximum of ten
e-mails that may be exchanged between each party. The rules are simple:

• A maximum of 10 individual e-mails may be exchanged between the

buyer and the agent.
• A maximum of 10 individual e-mails may be exchanged between the
vender and the agent.

There is no word limitation and attachments are also permitted.

TABLE A2.4 Three party email negotiation: Issues and initial planning

Cost Buyer Seller Agent

Renovation 9,000 MYR 20,000 MYR No sale, no fee.

(18 months) The higher the agent’s
White goods Not in the budget 3,000 MYR fee, the lower the soli-
(6 months) citor’s fee.
New furniture Not in the budget 7,000 MYR
(18 months)

(Continued )
220 Case simulations

TABLE A2.4 (Cont.)

Cost Buyer Seller Agent

House removal 1000 MYR 1,000 MYR

(furniture)
House gain tax 30% of gain
above 220,000
5000 MYR or
10% exemption
Agent’s fee Included in house sale
Solicitor’s fee 0.75% of the cost of the
house sale that excludes
the agent’s fee
Stamp duty 100,000 for 1%
above to 275,000 for
2%
Others 900 MYR (rental)
Example If the house is sold for 275,000 inclusive of 2.75% agent’s fee
(7562).
The solicitor’s fee: (275,000 - 7562) x 0.007 = 1872.
The stamp duty fee: 100,000 x 0.01 + 175,000 x 0.02 = 4,500
The total cost of the house, including legal fees is 281,372.
BATNA Other house 299,000 Share the cost Reducing agent’s fee
MYR of the agent’s for the seller.
or fee between Suggesting both parties
Property in Singapore buyer and split the agent fee.
(more expensive, and seller.
more likely to be an Play time and
apartment). await a higher
offer and risk
sacrificing the
down payment
on new
property.
RP 275,000 MYR of Furniture
house sale price. inclusive.
Asking price 256,000 MYR. 275,000 MYR
Walk away 300,000 MYR includ- 250,000 MYR
ing all costs. (about to lose
profit)
 Case simulations 221

TABLE A2.5 Three party email negotiation: Value claiming by party

Motive Needs Value-claiming points

The Raising Close to transportation First time buyer.

buyer a family. links. No house chain.
No vehicle. Quick transaction.
Have little money. Bank’s initial agreement.
Time pressure on housing No sale, agent makes no
market. bonus.
Avoid addition rent in
Kuala Lumpur.
The Getting Linking the interests of Strategic advantages of the
agency bonus. both parties. location.
Source of Fairly new renovation condi-
majority tion.
income. Good transportation links.
Ready to move-in condition.
Quick sale to reduce time
pressure.
Company resources.
Before the new term starts.
A minimum value is set on
MYR 250,000 for foreign
buyer.
The Moving Down payment. Found the property.
seller with Time urgency on down Ready to move-out.
Mr. Lee. payment. Selling pieces of furniture or
white goods.
Good taste on the house.
Highlighting the second house
project with the same estate
agent.
No sale, agent has no bonus.

For the seller, deciding how to sell to

If you can’t sell your home to the buyer, you may wish to take into account
whether the buyer:

• is a first-time buyer
• has found a buyer for their own property. If so, is it part of the chain of
buying and selling and how long is the chain?
• is your buyer paying cash or are they more likely to get a mortgage.
• wants to move at the same time as you.
222 Case simulations

Five tips on selling

1. Price. A person can generally sell a house by lowering the price.
2. Differentiation from the neighbours. Make the house memorable, high-
grade windows, new roof, custom-designs and improvements, such as
patio or conservatory.
3. Appearances count. Remove all clutter from inside and outside of the
building. Potential buyers want to see a clean and tidy house that is
spacious.
4. Sweeten the pot. Another way to attract buyers is to offer incentives.
For example, offer to reduce fees for a quick sale or offer to pay the
cost of moving home. Offer transferable warranty or offer to introduce
them to what is available in the neighbourhood.
5. Improve curb appeal. Remove unsightly shrubbery. Paint the front door
or patch-up the drive. The first thing a buyer sees is a house’s external
appearance and the way it looks compared with the surrounding neigh-
bourhood will set your property apart.

For the buyer, how much do you want for your home
The estate agent in Singapore or Malaysia is responsible for obtaining
potential buyers. The agent would try to get the best possible price for
the seller. Just remember, the seller does not have to accept the first offer
put to them. The seller shouldn’t be rushed into making a decision he/
she may regret.

Define your criteria Decide what you are looking for in a property – whether
you require parking and/or a garden, a specific number of bedrooms, the
style and period may also be relevant, etc… Most importantly, what you
want out of the location, schools, commuting convenience, shopping,
noise levels, and so on, so do your research. This is likely to be your biggest
personal financial outlay in your life. So visit several properties and be
selective.

Accepting an offer
Even if the seller has accepted an offer, there is nothing unlawful about a change
of mind and accepting a higher offer from someone else before you have
exchanged the fee to take the seller’s home off the market. The seller should also
bear in mind that when an offer is made and accepted, the potential buyer has
the option to change his/her mind. The buyer has 14 working days in which to
withdraw.
 Case simulations 223

Legal work
After the seller has accepted an offer, he/she is required to inform who-
ever is doing the legal work. In both Singapore and Malaysia, this is done
by either a solicitor or licensed conveyancer. In Malaysia, a solicitor works
on behalf of both parties – seller and buyer. Recently, however, it is
becoming increasingly common for both parties to be represented by
individual solicitors: one for the buyer and a second representing the
seller.
When foreigners purchase any kind of property, the minimum value is
set at MYR 250,0005. To take the advertisement off the market, a letter
of Offer/Acceptance must be signed and a 3% deposit is expected from
the buyer. Then, the Sale and Purchase Agreement must be signed
within 14 days and stamped at the Stamp Office. It suggests the buyer
has a 14 day cooling off period during which time they could abandon
the project, however they would lose the deposit. From the date of
signing, the buyer has 3 months (maximum) to complete the full
transaction.
Ref. KLA03A
Wang Home

House in Sri Hartamas

275,000 MYR INC.

Attractive semi-detached town house built in 1900, with an art-nouveau exter-

ior. This period property is situated in the residential area of Sri Hartamas, nearby
Ampang. The neighbourhood has access to restaurants and a supermarket. The
property includes 4 generous bedrooms, office, large living room leading to
a modern fitted kitchen. The property also includes two bathrooms. The ground
floor has access to two large storage spaces. Total living space is 130m2. Excellent
transportation links: a 350m walk to two bus stations and 800m to a metro sta-
tion. Energy performance certification is rated at the level of Standard.

Characteristics
Year 1900 established Garage No, shared driveway at rear
Type Semi-detached house Kitchen Separate kitchen
Interior Excellent, art-nouveau Transport Metro and bus
design
Energy 6-year boiler Windows Single-glazing throughout,
with authentic art
characteristics
Flooring Original oak-flooring Garden No, terrace decking
House tax 800 MYR/year Cellar No, but 2 large storages
Community No Bathroom 2 bathrooms and 2 toilets
charge
224 Case simulations

Ground floor:
Entrance: 8.5m2
Storage underneath stair: 1m2
Tiled flooring
Toilet with basin: 2.5m2
Shared driveway (45 m2) with two further storage spaces towards the rear
of the house (10/12m2).
First floor:
Landing and hallway: 7m2
Living room+ dining space: 42m2
Terrace: wood decking 20m2
Office: 4m2
Second floor:
Landing and hallway: 4m2
2 bedrooms: 13.5m2
En-suite bedroom: 16m2
Bathroom: 7.5m2 including wash basin, toilet, bathtub
Third floor (attic):
Hallway: 2m2
2 bedrooms: 9/11m2

Notes
1 A fabricated company name.
2 A fabricated company name.
3 There are three categories of patent in Taiwan: Invention, Utility and Design.

• Invention: a creation from a technical concept based on the laws of nature (20
years duration).
• Utility: a creation which has been made in respect of the form, construction or
fitting of an object (10 years duration).
• Design: a creation made in respect of the shape, pattern, color or their combin-
ation of an article (12 years duration).

4 http://www.globalpropertyguide.com/investment-analysis/Q4-2013-Worlds-housing-
markets-in-headlong-boom-led-by-US-and-Asia-Pacific
5 https://www.globalpropertyguide.com/Asia/Malaysia/Buying-Guide
APPENDIX III
Planning documents

Distributive/integrative + new value creation

In Table A3.1 Identify each issue on a continuum between Distributive and
Integrative. Note any New Value Creation possibilities related to the issue.

TABLE A3.1 Planning continuum

Issue Distributive Integrative NVC

< – – – – – – – – – – – – – – ->
< – – – – – – – – – – – – – – ->
< – – – – – – – – – – – – – – ->
< – – – – – – – – – – – – – – ->
< – – – – – – – – – – – – – – ->
< – – – – – – – – – – – – – – ->

TABLE A3.2 Planning continuum example (Powicki case)

Issue Distributive Integrative NVC

House Rent it for several

< – – – – – – – – – – – – –X – >
years, then sell
Gold <–X – – – – – – – – – – – – – >
Cash accounts <–X – – – – – – – – – – – – – >
Personal belongings Keep some but
< – – – – – – – – –X – – – – – >
auction others
Reputation < – – – – – – – – – – – – –X – >
< – – – – – – – – – – – – – – ->

Copyright material from William W. Baber and Chavi C-Y Fletcher-Chen (2020) Practical
Business Negotiation, Second Edition, Routledge.
Issue/Reserve Planning Document, Brett
(Based on Jeanne M. Brett, Negotiating Globally, 2017)

TABLE A3.3 Brett planning sheet, blank

Issue Self Other

Reserve Reserve

BATNA
Overall Goals

Planning document – clusters

Manufacturing Contract Negotiation

Cluster I Schedule
a) Flexible – prefer start of June NEX
but any time before Oct. OK T
b) Ask for June but agree Cluster II The Product
later for concessions on price a) specification
b) QC

Packaging
NEX

Last minute Volume and

T

changes color

Prototype
schedule Cluster III Cost
a) Per unit (reserve $4.50)
b) Per batch ($4000)
c) Total package ($4M)

Agreement

FIGURE A3.1 Cluster planning

Copyright material from William W. Baber and Chavi C-Y Fletcher-Chen (2020) Practical
Business Negotiation, Second Edition, Routledge.
Cluster Planning is most useful for complex negotiations with multiple parties.

Cluster I
a) NEX
T
b) Cluster II
c) a)
b)
c)

NEX
Sub-issue
Sub-issue

T
Sub-issue

Sub-issue Cluster III

a)
b)
c)
Agreement
Sub-issue

FIGURE A3.2 Cluster planning, blank

Reserve line

Issue 1 Issue 2 Issue 3 Issue 4

step 1 step 1
step 1

step 1

step 2
step 2 step 2

step 2

step 3 (OK if
linked to...)
step 4

Reserve:
Reserve Reserve Reserve
OK if linked to...

FIGURE A3.3 Reserve line planning

Copyright material from William W. Baber and Chavi C-Y Fletcher-Chen (2020) Practical
Business Negotiation, Second Edition, Routledge.
FIGURE A3.4 Reserve line planning, blank

Backward planning

4. List of
Start of planning
your
acceptable 1. Likely
points Agreement
2. List of 3. List of 5. Create 6. Identify
your your strategies to and modify Contains points
starting reserve work around unacceptable from all parties
proposals points unacceptable points that are likely or
4. List of unlikely to be
their accepted.
acceptable
points

FIGURE A3.5 Backward planning

Source: Developed based on 3D Negotiation, Lax and Sebenius

4.
Start of planning
1.

2. 3. 5. 6.

4.

FIGURE A3.6 Backward planning, blank

Source: Developed based on 3D Negotiation, Lax and Sebenius

Copyright material from William W. Baber and Chavi C-Y Fletcher-Chen (2020) Practical
Business Negotiation, Second Edition, Routledge.
Flowchart planning
This kind of chart takes some skill and practice to design, but it is very good for
your planning.

FIGURE A3.7 Flowchart planning

Copyright material from William W. Baber and Chavi C-Y Fletcher-Chen (2020) Practical
Business Negotiation, Second Edition, Routledge.
 Diamonds show steps, the last one in a series is the reserve. Notes explain
links among issues.

Issues, steps, reserve, scorecard

This planning document (a modified Raiffa scorecard) helps you track the posi-
tions between your preferred (1) and least desirable (reserve) steps. You can
include notes about linked issues or how to handle it in the negotiation.

TABLE A3.4 Modified Raiffa scorecard

Issue Points Steps Step Linked issues Notes

(Max.) Points

Control 25 1. Control creation and 25

of design of all new
product products
2. Share creation of new 18 OK if we agree to rela-
products, but all must tionship longer than 5
be organic years
3. Agree that existing 10 OK if we get low price
products will not on investment funding
change; no control of and no limit on
new products distribution
Length of 20 Agreed 5+ years exclu- 20
agreement sive cooperation
2 years exclusive 10
cooperation
1 – 2 years, not 5 Must increase price
exclusive

Adapted from Negotiation Analysis, Raiffa, Richardson, and Metcalfe. (2002, p. 217).

Copyright material from William W. Baber and Chavi C-Y Fletcher-Chen (2020) Practical
Business Negotiation, Second Edition, Routledge.
TABLE A3.5 Modified blank Raiffa scorecard

Issue Issue Steps Step Points Linked issues Notes

Points

Adapted from Negotiation Analysis, Raiffa, Richardson, and Metcalfe. (2002, p. 217).

Copyright material from William W. Baber and Chavi C-Y Fletcher-Chen (2020) Practical
Business Negotiation, Second Edition, Routledge.
APPENDIX IV
Cultural differences

This Appendix contains a few more cultural notes based on the research of Hall,
Hofstede, Trompenaars and Hampden-Turner as well as others. None of these
cultural differences can always and reliably be found in any culture; please refer
to the discussion in Chapter 5 on culture and stereotyping.

Review of Chapter 5: culture and behavior expected at a national level

does not always apply to individuals, therefore thinking that all people
from one country will behave similarly is false.

Additionally, please consider that experienced negotiators from any specific cul-
ture may intentionally not react and behave like most people in their home
culture.

Showing emotions
Generally, North Americans and most Europeans and people in the European
language groups show their emotions more obviously than East Asians do; cul-
ture researchers call this being affective. Affective means that they are more
likely to show by speaking or by body language that they are frustrated, satisfied,
happy, uncomfortable etc. Although they show emotions easily, they may not
be able to read emotions well!

Reading emotions
Generally, the cultures of North America and Northern Europe, are “low con-
text” which means they generally prefer to get information in the form of direct
 Cultural differences 233

words and phrases. Additionally, they may disregard or have difficulty reading
facial expressions, tone of voice, and other body language.
The result is that “affective, low context” cultures communicate a lot of
information unintentionally, but cannot read the same information as well from
opposite cultures. Therefore East Asian negotiators may be able to clearly under-
stand the feelings of counterparties from those cultures. But the North American
and North Europeans may not be able to read the East Asian side.

Advantage for …
Unless one side is trying to deceive the other, there is no deep advantage. But
there is a strong chance of miscommunication because North Americans and many
Europeans will fail to understand the East Asian side. Therefore, the East Asian side
should make their feelings about progress, satisfaction, likes, and dislikes clearly and
explicitly known to negotiators from North America and Europe in general. How?
They should try to put their feelings into words and they should try to use stronger
body language with some cultures than they use inside their own culture. This
process is called accommodating the other side. Do not try to completely accom-
modate negotiators from other cultures, but do try to be sensitive and a little bit
accommodating as you communicate with them. Adjusting in small steps will help
the mutual accommodation of all parties.

Too much cultural accommodation

If both sides accommodate too much, no one will be able to correctly under-
stand their words and body language. What to do? Accommodate a little, but
not too much. Accommodate more as you become more familiar with local
expectations and practices. When you are not sure, ask for information using
simple sentences and get advice from individuals with high experience in your
culture and the culture you are targeting.

Building trust across cultures in negotiation

Jang and Chua (2011) identify a difficulty that negotiators face when dealing
with parties from other cultures. The very behaviors that help you build trust in
your culture may cause misunderstanding and mistrust with parties from other
cultures. With people from your own cultural background, you know and can
use the correct combinations of phrases, the right kind of eye contact, appropri-
ate posture, and so on that lead towards trusting relationships. Your idea about
this, or script of actions, might however lead to the wrong results with people
from other backgrounds. In order to manage this process and to learn suitable
approaches and scripts of action, Jang and Chua suggest active learning of Cul-
tural Intelligence (CQ). You can learn more about CQ at www.culturalq.com.
234 Cultural differences

Time
People from different cultures may understand time very differently. Most
North Americans and many Europeans feel that time must be used “effectively
to gain progress”. In negotiations, they may have limited time available and feel
pressure to finish an agreement. Because of this pressure, inexperienced negoti-
ators may give concessions when they get close to their deadline.
In many cases, negotiators with a more flexible idea of time have been able
to win significant benefits from negotiators who panicked because of time
limits. Experienced negotiators from any culture will not react to time pressure
this way – they will manage to avoid time limits.
Consider this hypothetical conversation in Table A4.1 between a US negoti-
ator (Smith) and one from Japan (Tanaka).
Let’s improve this conversation so that it becomes a positive event. If Tanaka
has enough experience, he will know how to react to Smith. Please write in
Table A4.2 what Tanaka should say and do.

TABLE A4.1 Misunderstanding perceived value of time

Conversation Comments

Smith: I can’t believe it, we have been This negotiator is showing his impatience.
talking about this all day with no Within the US, this would be an easily
conclusions! understood signal that means: “Let’s stop
wasting time and agree to some concrete
details.”
Outside this US, Smith’s words might be
misunderstood in many ways.

Tanaka: I see. Can we discuss the part This negotiator does not recognize the
about marketing again? signal from Smith and continues with
a slow process.

Smith: Why? We talked about it for 45 Smith gets even more upset.
minutes! It’s clear that you don’t care
about progress. That’s enough. Let’s
move on to some solid numbers.

Tanaka: Ok. Let’s move on to the related Tanaka seems to understand the need to
data. We should analyze this together. It move on. But he did not communicate
will only take a few hours. his understanding to Smith. Worse, he
suggested another long slow process.

Smith: No. Maybe we should not. I have Smith has given up and run. Even if we
to visit a company in Taiwan. I hear they consider Smith too impatient, this is
like to do business fast. Good bye. a failure for both Smith and Tanaka.
 Cultural differences 235

TABLE A4.2 Improved conversation about time

Conversation Comments

Smith: I can’t believe it, we have been This negotiator is showing his impatience.
talking about this all day with no
conclusions!
Tanaka: I see. ___________________________________________________________
______________________________________________________________________
______________________________________________________________________

Smith: OK – I feel that “time is money”, Now Smith knows that Tanaka under-
but I am willing to discuss … . stands, and the relationship is not in danger
of collapse.
APPENDIX V
Understanding failure

When a promising negotiation suddenly collapses we can clearly see that it has
failed. When a negotiation results in a signed agreement and the work starts we
can see that it has succeeded.
But perhaps those statements are not so simple and clear. Maybe that promising
negotiation was not built on good ideas. Maybe that signed agreement was not
designed well enough to survive when put into action. Consider these two ideas.

When negotiations built on bad ideas collapse, we can say it is a good out-
come because no time was wasted trying to put an agreement into action.
When negotiations collapse after the work has started, we can say it is
a terrible outcome because all the negotiation time and some of the
resources committed have been wasted.

If we keep these ideas in mind, the quality of the ideas and the amount of time
spent, we can get a picture of what failure means (Faure, 2012).

The meaning of failure

Good ideas that fail in the negotiation process:
All the potential benefits are destroyed. If the failure occurs early in the pro-
cess, the parties have lost a little time and few resources, but much potential
benefit. This is a genuine failure and a loss for the parties.
Bad ideas that fail in the negotiation process:
Some resources and time have been lost in the process of arriving at the fail-
ure point. However, no potential resources have been lost in implementing
 Understanding failure 237

Good ideas

Negotiation Negotiation
fails before completes
agreement. with benifits.
Too bad! Good!

Poor Good
process process

Negotiation Negotiation
completes but fails before
collapses later. agreement.
Terrible! Good!

Poor ideas

FIGURE A5.1 Failure matrix

a bad deal that would collapse later. Intangible losses such as damage to reputa-
tion are also limited. This is a “good” failure.
Bad ideas that complete in the negotiation process and fail later:
All the potential benefits are destroyed and all the resources committed and
all the negotiation time has been wasted.
In Figure A5.1, “ideas” mean the merits, goals, solutions, creativity, and so on of
the negotiation. “Process” refers to all the steps and activities of negotiating, agree-
ing, discovery, cooperation, and so on that the parties conduct. This graphic is not
for deals that break up because the work after agreeing and ratifying is done badly,
unless that badly done work was directly because of bad ideas or process.
Of course, good ideas can fail even after good process has led to agreement. In
these cases, all the potential benefits are destroyed and all the resources spent have
been wasted. This kind of failure can happen because of unexpected changes in
regulation, the economy, staffing, suppliers, or other changes in the environment.
It can also happen because the activities after the agreement are not done properly
(poor execution of the agreement). A very well designed agreement might protect
against most of those problems; that is why negotiators must take the challenge to
learn to write good agreements and manage contracts well.

Avoiding failure
If we want to avoid failure, we need to know how to prevent it and how to iden-
tify it and act against it. To prevent failure, we need to check at various points
about the likelihood of problems. A first check should be at the earliest beginning
238 Understanding failure

of the negotiation. At that time negotiators and decision makers should consider
the overall environment around the business and the organizations while consider-
ing the stakeholders and their needs. At each new phase of the negotiation (see
Figure 11.1) you, as a negotiator, should assess whether or not the negotiation is
progressing well and whether or not the environment has changed (see Table 1 in
Chapter 1). Also, within each phase you should sometimes assess whether or not
the negotiation is progressing well regarding the relationships, goals, BATNAs, and
interests of the parties. Continuing without reflecting increases the chance that you
do not notice changes in the factors that are important to the discussion. Reflection
is effective for finding and avoiding problems and requires little cost.

Identifying failure mechanisms and their impacts

One way to consider failures is to start with the specific action of failure. Failure
Mode Effects Analysis (FMEA) is used by engineers to understand how products
or systems fail. We can use it to understand how negotiations fail. Usually,
FMEA includes the thing that fails (failure mode), the severity of impact, the
likelihood and frequency that it will happen, ways to detect the failure, and
ways to manage it. For that reason, FMEA is a learning tool if used after
a negotiation has finished. You can use it during the negotiation to help avoid
and prevent failures. You can also use it before negotiating in order to identify
potential problems. Table A5.1 is for use during the negotiation process. Notice
that a failure mode may have more than one root cause. A few examples are
provided in Table A5.1, but many more failure modes exist.
Faure (2012) lists seven types of relative failures:

• Tactical deadlock: a tactic intended to increase leverage and improve

a position;
• Partial failure: some issues agreed, some issues cannot be agreed;
• Tactical non-implementation: one party intends to renegotiate some aspects,
or reconsidering;
• Strategic defection: a party exits because its BATNA is better;
• Decision: agree to disagree, no expectation of agreement in foreseeable
future;
• Breakoff: a party stops communicating and tries coercive methods;
• Smokescreen: the talks are merely a cover for other activity and there is no
intent to agree.

We add one more type of failure:

• Misunderstanding: interactions stop because the parties are not able to

understand each other easily. They may not realize that misunderstanding
and miscommunication are the reasons for stopping.
 Understanding failure 239

TABLE A5.1 Modified FMEA: During negotiation

Failure mode Failure effect(s) Root cause How to detect How to handle
in advance or
real time

Relationship Poor out- Miscommunication Review Use integrative

damaged comes, delay, quality of tactics, change
collapse relationship staff, or use
frequently other approaches
Intransigence Negotiation Problems not No accept- Use problem-
stops solved able solving tech-
solutions niques together,
bring experts
and consultants
Intransigence Negotiation No ZOPA No progress NA
stops on the posi-
tions of the
parties
Collapse of Trust Increased Lies or misrepre- Review of Rebuild trust
costs of nego- sentation occurred information, through incre-
tiation and active search mental steps and
monitoring, for new frequent success-
possible information ful interactions
collapse
New regulation Negotiation Slow overall deci- Regular Make deep
with negative stops sion or interaction review of changes to the
impact on business speed makes it pos- environment business model
model (major sible for major or stop the
change in changes to happen negotiation
environment) entirely
New technology Redesign of Parties did not keep Strategic Design agree-
product or up to date with review of ments for chan-
service, delay technical changes emerging ging technology,
for review, technology integrate new
collapse, technology
… other failure
modes

The above failure types can be considered using the FMEA table, or assessed in
the overall context of the negotiation and relationships.
If we understand failure, we can understand success:

Negotiations that reach an agreement and that agreement is implemented

at least so that the main elements are completed and the parties at are gen-
erally satisfied.
240 Understanding failure

In this definition, “main elements completed” leaves room for successful and very
successful results; the same is true for “generally satisfied”. Further, success means
that the parties are able to maintain a relationship that allows them to amicably
join new negotiations in the future. It also means that there can be renegotiation
and adjustment without complete failure.
APPENDIX VI
Stakeholder analysis

What is a stakeholder?
The Project Management Body of Knowledge (PMBOK) says that
a stakeholder is “a person or organization that is actively involved in a project
or whose interests are impacted by the execution or completion of a project.”
(Project Management Institute 2013, p. 376)
A person or organization that has an interest in the project or who could be
impacted by it.
(Grisham 2010, p. 77)
The people and groups of people who have an interest in the operation and
who may be influenced by, or influence, the operation’s activities.
(Slack, Brandon-Jones and Johnston, 2013)

Central and peripheral stakeholders

It is useful to describe stakeholders based on how active or important they are
to a project.
Figure A6.1 shows stakeholders that are central and peripheral to a negotiation
course. Please consider who they are and why they are central or peripheral.
Are the lists complete? If not please identify stakeholders not included above.

Central Peripheral
__________________________________ ________________________________
__________________________________ ________________________________
__________________________________ ________________________________
242 Stakeholder analysis

Central Stakeholders
Students;
Professor;
Department; etc.

Peripheral Stakeholders
University;
Textbook publisher and author;
Administrative office;
Future employers, etc.
Accreditation board

FIGURE A6.1 Central and peripheral stakeholders

A list of stakeholders should be as broad as possible. Are you a stakeholder in

a bridge being built in your town? Probably yes, after all, you and your family pay
taxes for that bridge and you or your visitors and suppliers may use that bridge.
With such a broad and open ended idea about stakeholders, we need to sort
the stakeholders in other ways to better understand and react to them.

Power/interest grid
How can we accurately identify some stakeholders as more or less important
or powerful and thereby understand how the project manager should handle
them?
The graph in Figure A6.2 provides a simple tool for assessing and managing
stakeholders. See also page 249 of the PMBOK Guide, Figure 10.4, as well as
other comments on analyzing and managing stakeholders, in Chapter 10 of
PMBOK Guide.

High
Satisfy Involved
management

POWER

Watch Inform
Low
Low INTEREST High
FIGURE A6.2 Power interest grid
 Stakeholder analysis 243

Warning – they may not stay in one place!

We have put stakeholders into categories: central, peripheral, high interest, low
power, etc. But stakeholders are people, or groups of people, therefore they can
change. A high interest stakeholder at the start of a project might retain power
but lower their interest as the project develops. For example, a bank lending
money to a contractor may strongly shape the timing, scale, and activities of the
contractor. But most of that shaping will happen as the loan is being agreed to.
Afterwards, the lending bank still retains power, however it is likely to lose
interest and unlikely to use that power unless payments are late.
In another example, an environmental activist group may have low power until
a project to build a new factory is underway. After the local residents see the earth-
moving equipment, they may suddenly join the environmental activists helping to
move the group from high interest/low power to high interest/high power.
The lesson is this: after you understand the stakeholders on all sides of
a negotiation, you must regularly review your information and change your
actions toward the stakeholders appropriately.

TABLE A6.1 Stakeholder analysis blank

Stakeholder Rights Responsibilities Wants (What they Needs (What How

(person, organ- (What they (What they want but do not they must get to to
ization, group) should receive should or must absolutely need) be satisfied) handle
without doubt) do)

Below is an example based on the Shepard Fairey–Associated Press case found

in Appendix II:

TABLE A6.2 Stakeholder analysis example

Stakeholder Rights Responsi- Wants Needs How to

and issue bilities handle

Shepard Ownership Show reason- Recognition At least majority Distributive/

Fairey of changed able evidence and income ownership of the compete
image of creative artwork; not to be
work embarrassed in
reputation
Some profit
(Continued )
244 Stakeholder analysis

TABLE A6.2 (Cont.)

Stakeholder Rights Responsi- Wants Needs How to

and issue bilities handle

Some Show clear, Avoid profit Distributive/

profit honest sharing compete
accounting
Freedom to Transparency Avoid add- Avoid future Collaborate/
create more about com- itional law- claims New value
ponent suits about Creation
images other
artwork
…other
stakeholder
…other
stakeholder

Source: used with the kind permission of Amar Ridha

Practice: Use the following case to complete Table A6.1. Answer the “How to
handle” column from the point of view of a UK government official. Careful
Internet searches will provide additional information.

CASE A6.1: SENSITIVE FOREIGN INVESTMENT

XMOS makes semiconductors, especially for the rapidly growing “Internet of

Things”. XMOS had several corporate investors including Xilinx (USA) and
Bosch (Germany) at that time. Huawei had been blocked one year before, in
2013, from some commercial activities and sales in the United States due to
the sensitive nature of top performing equipment.
Making a point that Huawei was welcome to participate in this industry
in the United Kingdom, the Prime Minister addressed the company in 2012.
In 2014, Huawei, the Chinese electronics maker made an equity investment
in XMOS, a UK technology company. The move puts Huawei ahead of com-
petitors in Taiwan and moves them closer to equality with electronics
makers from the US and Japan who already have a strong presence in UK.

1. Who are the stakeholders in this case?

2. What should be expected from them?
3. What can those stakeholders expect?

Use the stakeholder analysis table above to consider the parties and their
interests.
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INDEX

Page numbers in italic refer to figures; page numbers in bold refer to tables.

3D Negotiation xviii, 14, 19, 30, 32, 33, Bias 53, 117, 142, 159–164
46, 54, 55, 182, 194 Buddhist 175–176, 211

Accommodate 5, 8, 123, 128, 190, 233 Canadian 98–100, 202

Active listening 27, 73–74 Chinese 38–39, 76–77, 81–82, 97–104,
Agreements 4, 44, 46, 76, 90, 117, 122, 121, 169, 205, 213, 244
126, 134, 137–138,142, 160, 170–176, Communication 10, 23, 49, 67, 70–71,
178–181, 183, 185–186, 187 73–75, 79, 100–114, 125, 143, 152, 155,
Alternative Dispute Resolution (ADR) 167–169, 174, 176, 192–193, 233,
93, 128 238–239
American 12, 33, 66–67, 70, 71–72, 176, Compromise 5–8, 127–129, 178, 190, 196
178, 210, 215, 233 Conflict 1, 61, 101–103, 130, 150,
Arbitration 87–88, 93–94, 138, 171, 174, 154–155, 157, 188, 191, 209
176–178, 188 Constituent 49
Avoid strategy 5, 8, 127,139, 190 CQ 191, 233
Awareness 71–74, 76–77, 103, 175–176, Cross cultural 48, 67–68, 102, 168–169,
191–192 191, 213
Cultural Intelligence 191, 233
Back table 10, 48–49, 71, 73–74, 141–143,
151, 160, 164, 195 Deadlock 23, 61, 70, 81, 93–95, 126, 165,
Backward planning 55, 56, 228 195, 238
Bargaining 40, 194, 196 Deal breaker 55–56, 86, 195
Bargaining chip 194 Deceit 195, 197
BATNA xvii, 10–11, 23, 31–33, 35–37, Decision maker 161, 163–166, 185, 238
43, 46–48, 50, 92–94, 117–118, Decision making 34, 72–73, 76, 90–91,
121–122, 128, 129, 137–139, 143, 159, 161, 163–165, 171, 186, 190, 195
194–197, 199, 205, 220, 226, 238 Distributive 1–3, 5, 9, 14, 24, 116,
Best Alternative to a Negotiated 125–126, 154, 191–192, 195, 197, 199,
Agreement 194 225, 243–244
 Index 251

Emotion 22, 24–25, 40, 72, 75, 93, 98, New value creation 4, 41, 183,
103, 108, 110, 123, 126, 127–129, 225, 244
131, 155–157, 158, 160–161,
176, 232 Ombudsman 177
Emotional Style 155–157
Empathy 6, 10, 17, 19–21, 26, 44, 53, Perspective taking 53
191, 195 Persuasion 113, 130–132
Ethics 20, 134–137, 211 Phase 4, 49, 64, 96, 162, 172, 183–186,
192, 194, 238
Failure 7, 31, 35, 73, 101, 175, 180, 183, Position, negotiating 1, 11, 14, 20, 39–42,
189, 207, 234, 236–240 55–56, 68, 86–87, 90–92, 94, 120, 122,
False concession 119–120, 195–196 125, 127–130, 175–176, 178, 187, 205,
Flowchart 34, 229 211, 230, 238–239
Framing 159–161, 163, 197 Position, team 165–166
Power 6, 7, 10–11, 38, 49, 69, 242–243
Game theory 27, 41, 56, 193 Principle based negotiation 39, 154
Gender 79–80 Priority 31, 55, 57, 100, 117, 126, 194, 208
Problem solving xviii, 1, 10, 60–61, 76–77,
High context 69, 71, 104 79, 81, 93, 105, 107, 111, 125–126,
Humor 112, 132–134, 169 142–144, 148, 164, 175–177, 182, 191

Impression management 23, 24, 123 Raiffa 42, 52, 56–59, 120, 190, 230
Inconsistency trap 16, 121 Ratification 183, 185, 192
Intangible 4–5, 24, 57, 59, 115, 187, Ratify 237
195, 237 Reciprocity 17–19, 26, 126, 191, 196
Integrative 1–3, 5, 9, 14, 24, 45, 85, Relationship 5–11, 17–18, 20–22, 25, 26,
126, 131, 191–192, 195, 197, 199, 28, 40, 46, 53, 61, 67, 71, 75–77, 81, 87,
225, 239 92–93, 98, 99, 101, 105, 107–108, 112,
Intercultural 192 116, 118, 120, 122–123, 125–127, 129,
Interests xvii, 1, 3–4, 17, 19–22, 28, 37–42, 131–133, 135, 143, 148, 157–159, 164,
46–47, 52–57, 60–61, 82, 93, 100, 122, 171, 174–175, 177, 187, 190, 191,
125–126, 129, 144, 150–152, 164, 182, 195–197, 213–214, 230, 235, 239–240
188, 195, 199, 221, 238, 241, 244 Relationship building 20–21, 26, 28, 71,
Intuition 75, 163 76, 81, 101, 107, 191
Islamic 176 Renegotiation 44, 74, 117, 171, 173–175,
180, 186, 189, 240
Japanese 20, 33, 35, 66–67, 73–75, Research 20, 26, 30, 49, 53, 55, 63, 72, 75,
102–103, 123, 141, 203, 212–213 110, 116–117, 123, 138, 150, 160, 166,
183, 187, 194, 196, 207, 222, 232
Kepner-Tregoe 161–162
Satisfaction 20, 24–26, 85, 105, 131,
148, 160, 164, 171, 176, 181, 187,
Lead Negotiator 195 189–190, 233
Lifecycle xvii, 183–184, 192 Scorecard 52, 57–59, 230
Link 10, 44–45, 64, 90, 93, Shutdown moves 95–96
115, 121 Stakeholder 6, 10, 34, 47, 55, 74, 125, 129,
Linkage 194–195 140, 144, 163–164, 187, 189, 238,
Linking 31, 111, 221 241–244
Low context 68, 71, 232–233 Strategy xvii, 5–10, 22–23, 27, 35, 55,
79–80, 98–99, 116, 119–122, 126–131,
Mediation 93, 174–177, 188, 199 150, 166, 168, 182, 187–188, 190–192,
Modelling 150, 152, 163 196, 209, 219, 221, 228, 238–239
252 Index

Success 7–9, 17, 35, 45, 58, 70, 119, 131, Three dimensions 46
141, 155–156, 166, 174, 190, 195, Training 5, 193
239–240
Supportive interaction 167 Utility 12, 190–191, 193
Synergy 41–42, 124, 154,
196–197
Values 4, 20–21, 68, 100,
104, 190
Tacit knowledge 151–152, 168 Visual communication 104–105, 107
Tangible 4–5, 24–25, 58, 59, 115, 122,
187, 195, 197, 237
Team building 168 War gaming 150–152, 168
Teamwork 165, 167 Wasaata 176
Theory 27, 41, 56, 188–193 Win-lose 39, 41, 96, 127,
Threats 40, 43, 75, 81, 92–93, 131, 154, 195
195, 197 Win-win 39, 41, 191
 NOTES

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