Free Company Training Program
Geoge Siedel has developed a teaching package that includes an exercise designed to help participants learn how to:
- understand different types of negotiations;
- prepare for negotiations;
- recognize and decide ethical issues, using law-based standards and general ethical guidelines;
- develop and use negotiating power via the concept of Best Alternative to a Negotiated Agreement (BATNA);
- apply contract concepts to negotiations; and
- create value in a manner that benefits both sides.
The exercise is "The House on Elm Street" negotiation from the free course at Coursera. This exercise involves a transaction anyone can identify with -- the sale of a house. Each participant receives a short (two-page) role description as either the buyer or seller. They negotiate for 30 minutes, followed by a 60-minute debriefing. There is a twist in the exercise known only to one of the negotiators. At the conclusion of the exercise, students receive an assessment of their negotiation skills that will help them improve those skills in the future.
The exercise has been used internally by well-known international organizations. You can use the package within your company or organization without charge (and no permission is necessary). In addition to the two roles, the package includes a Teaching Note and Powerpoint slides. Here is a link to the package:
https://umich.box.com/s/ewycm8d4vedns15hj7m68oxfx4yu2qvz
If you want a more comprehensive training program that covers the entire negotiation process and includes information about your organization's policies, you can use the following Master Negotiation Checklist. Individuals throughout your organization can complete the program at any time by reviewing each question in column 1 in sequence and watching the videos listed in column 3.
The checklist was originally developed by a manager who works for a major international company based in Europe. It includes references to policies of this company. At places marked [COMPANY] in column 2 you can replace this company’s policies with those of your organization.
Master Negotiation Checklist
| Preliminary Issues | ||
|---|---|---|
| Question | Comments | Source |
| Should I negotiate? | Negotiations require time and effort, which come with a cost. Spending two weeks of work time to negotiate a deal that pays 3000 EUR [insert your own amount] is probably not worth the effort. | Video “Should I Negotiate?” Book, Chapter 1 |
| Preparation | ||
|---|---|---|
| Question | Comments | Source |
| Is this an interest-based (win-win, non-zero sum) or position-based (win-lose, zero-sum) negotiation? | Disputes, sales agreements or salary negotiations are typically seen as position-based: my target is X, yours is Y, let’s meet somewhere in between. Even in these cases, it is possible to find win-win solutions. The key is to understand the underlying interests of the other party, instead of just focusing what they want. | Video “A Position-Based or Interest-Based Negotiation?” Book, Chapter 2 |
| Is this a dispute resolution or deal making negotiation? If it is a dispute resolution, what processes are available? | There are many alternatives to resolve disputes, from hardest to softest:
Deal making can also make use of mediation—or even arbitration. |
Video “A Dispute Resolution or Deal Making Negotiation?” Book, Chapter 2 |
| Is this a cross-cultural negotiation? | When negotiating with someone from another culture (which could be someone within your own country or city), you should assess differences in negotiating styles. | Video “Cross-Cultural Negotiations” Book, Chapter 2 |
| What is your overall goal and what are the most important issues; why? | Identify your own drivers. | Video “Analyzing the Negotiation” Book, Chapter 3 |
| What is your best alternative to a negotiated agreement (BATNA)? | This gives you leverage and the ability to evaluate possible solutions. If you cannot achieve something equal to or better than your BATNA, stop negotiating. Think of ways to improve your BATNA. | Videos “Analyzing the Negotiation,” “Your BATNA in a Dispute-Resolution Negotiation,” and “Using Decision Trees to Complete Your BATNA Analysis” Book, Chapter 3 |
| Should you disclose your BATNA to the other side? | As a general rule, you will probably want to disclose a strong BATNA and hide a weak BATNA. | Video "Using Power in Negotiations” Book, Chapter 5 |
| What is your reservation price? | What is the lowest possible price you are willing to accept as a seller or the highest price you are willing to pay as a buyer? This is linked to the value of your BATNA. | Video “Analyzing the Negotiation” Book, Chapter 3 |
| What is your most likely achieved price? | What can you reasonably expect, if the other party is acting rationally? | Video “Analyzing the Negotiation” Book, Chapter 3 |
| What is your stretch goal? | Negotiators with the highest stretch goals are often the most successful ones. However, the stretch goal should be credible. | Video “Analyzing the Negotiation" Book, Chapter 3 |
| Have you considered ethical issues? | Law-related ethics dictate your negotiation strategy. For example, you should avoid misrepresentation of material facts. Consult [COMPANY] legal counsel if in doubt.
Remember also general ethics. Do your negotiation tactics match our code of conduct and other [COMPANY] rules? Do your tactics match your personal ethics? How would you feel telling your family about your tactics? |
Videos “How to Handle Ethical Issues” and “General Ethical Standards” Book, Chapter 4 [COMPANY] Policies [COMPANY] Rules [COMPANY] Code of Conduct |
| Should you use [COMPANY] legal counsel during negotiations? | In valuable, risky or complex contracting situations, you should contact [COMPANY] Legal. In particular, this applies to “High criticality contracts” as defined in the [COMPANY] contract management rules. | Video “Using Agents in Negotiations” Book, Chapter 6 See [COMPANY] Contract management rules |
| Should you use external negotiators? | External negotiators can be better and more experienced. They can have specialized knowledge or a more neutral relationship with the other side. In difficult negotiations, consider using an external mediator. | Video “Using Agents in Negotiations” Book, Chapter 6 |
| Do you and the other side have authority to make a deal? | If in doubt, make sure you are negotiating with a person who has authority. Don’t ask for confirmation from this person. Instead, ask those who can grant authority (company management, board of directors).
If you are unsure of your own authority, and who can grant authority, refer to [COMPANY] “Policy for contract, trading and investment acceptance procedure.”
|
Video “Using Agents in Negotiations” Book, Chapter 6 [COMPANY] Policy for contract, trading and investment acceptance procedure |
| Negotiation - key tactics | ||
|---|---|---|
| Question | Comments | Source |
| Do you know the other party and their culture? Have you looked at the negotiation from the other side? | If you don’t know the other side, pay close attention to understanding the other party’s motives and background. “Two ears, one mouth” – spend a lot of time listening in the beginning. | Video “Getting to Know the Other Side”” Book, Chapter 5 |
| Do you know the BATNA of the other side? | Understanding the other side’s best alternative solution is a source of negotiation power. Decide how you can weaken the other side’s BATNA. | Video “Using Power in Negotiations” Book, Chapter 5 |
| Psychological tools and traps (fixed pie assumption): Do you assume that the negotiation is about a fixed pie? | Your interests are not necessarily in conflict with the interests of the other side! Do not assume anything about the other side unless you know the facts. Concentrate on building a larger pie. | Videos “Introduction to Psychological Tools; Mythical Fixed Pie Assumption” Book, Chapter 7 |
| Psychological tools and traps (anchoring): Who should throw out the “first price”? | People tend to anchor on first value they receive if the value is uncertain. If you don’t have good information, let the other side throw out the first value to gather information – but do not anchor on that value! If you do have good information, throw out the first price to anchor the other side. | Video “Psychological Tools: Anchoring” Book, Chapter 7 |
| Psychological tools and traps (overconfidence): Are you overconfident when making negotiation decisions? | Try not to be overconfident when estimating the zone of potential agreement (ZOPA). This might result in a ZOPA that is too narrow.
Search for disconfirming evidence when making negotiation decisions. |
Video “Psychological Tools: Overconfidence” Book, Chapter 7 |
| Psychological tools and traps (framing): Can you frame alternatives to influence the other side’s decisions? | How you frame choices can influence the other side’s decisions. For example, framing the choices as positive might lead to a risk adverse decision by the other side. | Video "Psychological Tools: Framing" Book, Chapter 7 |
| Psychological tools and traps (availability): Can you use the availability concept to influence the other side’s decisions? | Individuals tend to rely on information that is easily available when making decisions. Presenting the other side with dramatic examples that support your interests might influence the other side’s decisions. | Video "Psychological Tools: Availability" Book, Chapter 7 |
| Psychological tools and traps (escalation): Do you understand the key negotiation lessons derived from escalation? | There are two key lessons from escalation. First, avoid competitive arousal. Second, always look at the negotiation from the perspective of the other side. The second lesson separates good negotiators from great negotiators. | Video “Psychological Tools: Escalation” Book, Chapter 7 |
| Psychological tools and traps (reciprocity): Can you utilize reciprocity? | When you give something to the other side, they feel the need to repay you. Try to give in to the other side on issues that mean more to them than to you in return for issues that meet your needs. | Video “Psychological Tools: Reciprocation, Contrast Principle, and Big Picture Perspective.” Book, Chapter 7 |
| Psychological tools and traps (big picture): Can you see the big picture? | It is easy to get lost in the details and lose sight of what’s important. Take time to think about the big picture. | Video “Psychological Tools: Reciprocation, Contrast Principle, and Big Picture Perspective” Book, Chapter 7 |
| Closing – creating a contract | ||
|---|---|---|
| Question | Comments | Source |
| Is there an understanding throughout the company about the importance of contracts in value creation? | Contracting is the most important activity within any company. Without contracts, no business can prosper—or even survive. | Video “Perspectives on Contracts” Book, Chapter 8 |
| Do you understand that the law governing contract negotiation might vary depending on whether you negotiating the sale of real estate, services or goods? | Do not assume that the law governing one type of contract—for example, a services contract—is identical to the law governing another type of contract, such as a contract for the sale of products. | Video “Sources of Contract Law” Book, Chapter 8 |
| Do you plan to sketch a letter of intent or something similar to be used as a tool in the negotiation process? | This is fine, but the document should not be legally binding. Make sure it is stated somewhere “for negotiation purposes, not binding” to avoid misunderstanding. | Video “Creating Contracts: The Agreement” Book, Chapter 8 |
| Have you proposed changes, even minor, to an offer by the other side? | If you receive an offer and respond with “accept, but proposing one change,” you risk cancelling the original offer. | Video “Creating Contracts: The Agreement” Book, Chapter 8 |
| Do you have a need to make changes or amendments to a contract? | Beware of “consideration” requirements that exist in the UK and other common law countries where one-sided promises might not be binding. | Video “Creating Contracts: Consideration and Legality” Book, Chapter 8 |
| Are you planning a written contract? | If not, start planning to do so! It is stated in [COMPANY] contract management rules that oral contracts are discouraged. Thus, a written contract is essential. “Palest ink is better than best memory.” | Video “Creating Contracts: “Writing Requirements” Book, Chapter 8 |
| Is the contract design principally law- based or business-based? Which one should it be? | Do not think of contracts only as legal documents. They are effective tools for business success. It is possible to make “lean contracts” that are based on some simple principles and trust. Sometimes the focus is on cost and risk (long complex legal texts), sometimes on finding win-wins and building trust. | Video “Business vs. Legal Objectives in Contracting" Book, Chapter 9 |
| Post-contract disputes | ||
|---|---|---|
| Question | Comments | Source |
| Do you have a process for obtaining feedback from customers in order to prevent disputes? | Consider how social media can be used to obtain this feedback. | Video “Dispute Prevention” Book, Chapter 10 |
| Have you considered how to resolve future disputes? | Disputes are best resolved when both parties have agreed on a dispute resolution process before the dispute arises. | Video “ADR Concepts” Book, Chapter 10 |
| In particular, have you considered alternative dispute resolution (ADR), where disputes are solved by arbitration or mediation? | You should consult [COMPANY] Legal if dispute resolution requires a lot of attention. In any case, the basic aim of ADR is to avoid litigation. For example, you can agree beforehand that ADR must be used before legal actions commence. | Video “ADR Concepts” Book, Chapter 10 |
| Have you considered using ADR for purposes other than dispute resolution? | The methodology for renewal of contract terms can be based on, e.g., mediation. For instance, it could be agreed beforehand that annual price checks are conducted in co-operation with a third party consultant. Also, deal making can be done by means of arbitration or mediation. | Video “ADR Concepts” Book, Chapter 10 |
| Do you use screens when selecting an ADR process? | Screens are useful tools when deciding between binding and non-binding ADR processes. | Video “ADR Tools” Book, Chapter 10 |
| Do you understand the arbitration process? | Before agreeing to arbitration, make sure that you understand that arbitration is similar to legal proceedings and arbitrator decisions can usually not be appealed. | Videos “Arbitration” (two videos) Book, Chapter 10 |
| Do you understand the mediation process? | Before agreeing to mediation, make sure that you understand that mediation is a form of negotiation assisted by a third party. Remember that the mediator cannot make a binding decision. | Videos “Mediation” (two videos) Book, Chapter 10 |
| Do you have a deal-making mindset or an implementation mindset during negotiations? | Review your negotiations after they are completed, whether or not you were successful. Decide whether you had a deal-making mindset (which tends to be positional) or an implementation mindset that focuses more on interests. | Video “Contract Performance Review and Evaluation” Book, Chapter 10 |
