Class 4 (Negotiation Challenges: Dynamic Negotiations)
Read: David A. Lax and James K. Sebenius, 3-D Negotiation, Chapter 7
This chapter discusses how to think about sequences basic process choices. Although the emphasis is on multi-party negotiations, many of these ideas can be extended to dynamic negotiations in general.
PART B
Prepare: Pat Voit OR Marty Williams
You will assume the role of either Marty Williams, a writer, or Pat Voit, a book editor, about a possible book contract. This negotiation will take place in stages, with an initial negotiation, followed by the receipt of some information, followed a subsequent negotiation, etc. The information you receive may be about a new issue, a change in how you see the issue, something that changes how you value your BATNA, or perhaps something else.
You may make a deal at any time, although you will be evaluated based on the last information available to the negotiators.
Please complete the following pre-negotiation survey by Friday, 2:00 PM:
PART C
We will spend the second part of class discussing "scripts" for dealing with difficult questions that your counterpart might pose, or tricky tactics your counterpart might employ. Most of us are not quick enough to come up with a completely effective response the first time we encounter such a situation. But we can learn to develop appropriate responses in the calm of our office or home. You will be presented with several of these thorny situations. Your assignment will be to put together "scripted responses" and submit these responsesvia a web survey. We will present and discuss some of these scripts in class.
Please complete the following pre-negotiation survey by Friday, 9:00 AM:
http://faculty.chicagobooth.edu/George.Wu/survey/scriptsx.html
The scenarios are found below for your convenience:
Below, you will find 5 negotiation scenarios. The scenarios are stylized, so feel free to make assumptions in order to provide enough specificity to respond accordingly. For each scenario, you are asked to "script" a response and then indicate how you expect your counterpart to react and how you will respond accordingly (if necessary). The idea of the second part is to anticipate the response (or possible responses) and prepare an appropriate reaction.
Scenario 1 (What's your salary?)
You currently have a job at Acme that pays you $105,000. Your relatively low salary is just one indication that they don't really appreciate you. You apply for several jobs, and, after a few weeks of interviews, Bradley Industries makes you an offer. All that is left is for you to negotiate your salary.
You've talked to some friends with some inside information on what Bradley pays, and you conclude that Bradley pays people of your experience and skills a pretty wide range, from $115,00 (just above what you are getting now) to $160,000. Clearly a wide range--so effective negotiation would come in handy. Bradley is a better company that your current employer, and anything in this range is larger than what you currently get paid. So, although you'll take anything they offer (assuming your inside information is correct!), you obviously prefer to get as high a salary as possible.
You set up a time to chat with the HR director of Bradley on the phone. You make the standard small talk for a few minutes. Then you bring up the issue of salary without exchanging anything specific. The HR director responds with: "So, how much are you making at Acme right now?" Please script a response to the HR director.
- How do you expect the HR director to respond?
- What will you do as a response to this response?
Scenario 2 (Let's split the difference)
You are negotiating with a possible supplier. It has been a long and protracted negotiation. You started by offering $12. They started with a demand of $36. You came up to $14. They came down to $34. Quite a bit later, the two of you are at $22 and $25. You offer to "split the difference" and "make a deal at $23.50." Your supplier responds: "I can't do that! But I can split the difference, $24.25. Deal?"
- Please script a response.
- How do you expect the supplier to respond? What will you do as a response to this response?
Scenario 3 (The Add On)
You make electronic components for testing equipment. You have been negotiating with a new customer. The negotiation goes pretty smoothy, and it seems that everything is in place and that you have a configuration of issues that works for both you and the customer. All of a sudden, the customer tells you: "Sorry, I made a math error. I can't do that deal. I'm really sorry about that. But it works for me if we keep everything the same and you throw in free shipping. How about it?" A deal with free shipping works for you, but your margins are cut to a barely acceptable level.
- Please script a response.
- How do you expect the customer to respond? What will you do as a response to this response?
Scenario 4 (I can't trust you)
You are negotiating with a potential employer. The negotiation involves lots of issues, including compensation, location, responsibilities, etc. There are three possible locations, Atlanta, Boston, and Chicago. You rank them in that order, strongly preferring Atlanta, and modestly preferring Boston to Chicago. You tell the employer that you worked in Atlanta during your summer internship and really liked it. They push you and tell you that their firm really needs people in Boston and Chicago. Although you come up short of saying this outright, you strongly imply that Atlanta is a deal breaker--"My spouse REALLY wants to be there for job and family reasons. You know how that goes."
The employer says: "Wow! We really want you, but I really need a bit more flexibility from you. I don't know if anything will work. Let's talk about the rest of the issues and come back to location at the end." After a bit more discussion, you realize that there are opportunities in the Boston and Chicago offices that are unique and would be great for your career. So you put forth: "You've convinced me. Even though I'd still rather be in Atlanta, Boston or Chicago can work if we can sweeten things up in other ways." The employer seemed surprised by this, put down his notepad, squinted his eyes and took a long pause. “I thought you told me 20 minutes ago you HAD to be in Atlanta? I thought this was a REALLY big issue for your spouse? I don’t understand.” After another long pause he added, “I’m beginning to wonder if I can trust you. Maybe you don't even have a spouse.”
- Please script a response.
- How do you expect the employer to respond? What will you do as a response to this response?
Scenario 5 (It's all about price)
You are selling a software system to a potential customer. Unfortunately, your industry has been driven to "commodity pricing" and it's hard to get paid for any value that your product provides beyond basic functionality. Your software is innovative. Its design means increased functionality that ultimately will lead to fewer interface errors. More critically, your software provides users the ability to provide flexible reports to facilitate a wide range of decision making. You start your conversation with your customer by asking about interests. "Let's start by understanding your concerns." Your customer replies: "My only concern is with cost. I will buy your software if you sell it to me for less than I pay for my current software." You try again, but every time, you hear something of the sort: "That sounds good, and I'm glad that your product offers that. But I think that distracts us from the real issue: price. That's all that matters."
- Please script a response.
- How do you expect the customer to respond? What will you do as a response to this response?