BATNA Negotiation - Assignment Example

 Table of Contents Introduction 3 BATNA 3 Reservation Price 4 Ethical/Unethical Behaviour 5 Key Challenges When Preparing For a Multiparty and Multicultural Negotiation 5 Multiparty Negotiations 6 Multicultural Negotiations 7 Integrative and Distributive Negotiation 8 Interest-Based, Rights-Based and Power-Based Approaches 9 Competitive Negotiation Style 9 Conclusion 10 References 11 Introduction Negotiation is important in every aspect of life and is not just restricted to management. Negotiation skills are critical in order to achieve success in today’s world. Negotiation is best defined as a process or an act of bargaining to reach a mutually acceptable objective or agreement between two parties with disputes (Oliver, 2010). Negotiation should be a core management competency. This paper is aimed at analysing the various concepts associated with negotiation along with its styles and approaches. BATNA The concept of BATNA was developed by William Ury and Roger Fischer, and it stands for Best Alternative to a Negotiated Agreement. BATNA is the preferred action that should be taken in case an agreement is not reached through negotiation. It is to be understood that BATNA is not the bottom line (worst possible outcome) but the best possible alternative to a negotiated agreement (Society for Human Resource Management, 2005). BATNA is not determined based on the objectives of a negotiation but by the course of action if there is a failure in reaching the agreement in specified time frame. BATNA can be best understood by the following example: A HR consultant is offered an assignment by a new client to prepare descriptions of all jobs in his company. The consultant is yet to negotiate the compensation that would be offered to him and in order to decide on this, a meeting is fixed. As the consultant is not sure of the compensation that would be offered and if at all an agreement would be reached, he needs to consider his BATNA prior to going to the meeting. He knows that if he works for an existing client and conduct market research for him on his new product, he will be able to earn $10,000. Therefore, $10,000 would be the consultant’s BATNA. It is to be noted in the above example, that BATNA is not the bottom line but the best possible outcome in the absence of an agreement. The consultant can come to an agreement with the new client for lesser than $10,000 but it would not be the best result for him. A well defined BATNA prior to negotiation will assist the negotiator to identify between an attractive agreement and an unfavourable one (Society for Human Resource Management, 2005). Reservation Price Reservation price, unlike BATNA, is the least favourable outcome that one would accept as a negotiated agreement. This is the bottom line or the walk away price that a negotiator is ready to give or willing to get out of a negotiated agreement. Reservation price is derived from and sometimes can be the same as BATNA but they are two different concepts (Brett, 2007). Following example would better explain the difference between BATNA and reservation price: A business owner pays $15/square foot for his current office space in a suburban location. He is happy with the office and believes it is a fair price. But he would be willing to pay $25/square foot for an office space in an urban location which puts him closer to his customer and gives him a strategic advantage. Therefore in this situation if he decides to look for office space in an urban location, then $25 would be his reservation price (the bottom line) and $15 would be his BATNA (best alternative). Therefore, it is very important for a negotiator to know his/her reservation price before going into negotiation. Knowing the reservation price gives clarity to a negotiator and allows him/her to make an informed decision. Ethical/Unethical Behaviour It is important that parties involved in negotiation and negotiators do not indulge in unethical behaviour. The reasons why parties indulge in unethical behaviour are: Profits: Profits or pursuit of greater gains are one of the main motivators of unethical behaviour. Defeat an opponent: When the outcome of the negotiation becomes very important and critical, parties indulge in unethical behaviour to beat the opponent at any cost. Restore Justice: When there is some injustice done that can affect the outcome of the negotiation, parties sometime behave unethically to restore justice and bring balance to negotiation. Irrespective of the reasons, unethical behaviour must be avoided under all circumstances. Success of a negotiation is negatively affected by unethical behaviour. Lying, manipulation, retracting, unfair competitive practices are some of strategies that fall under the category of unethical behaviour. Key Challenges When Preparing For a Multiparty and Multicultural Negotiation There are numerous challenges that arise when dealing with multiparty and multicultural negotiations. Multiparty Negotiations Following are the key challenges with respect to multiparty negotiations: Dealing with coalitions: In order to influence the outcome in a better way, subgroups join together to form coalitions. Coalitions might not share common interests but work together as the power of all parties is increased. Off-channel communication strategies are needed in order to form coalitions and these can be harmful or helpful based on negotiation type and the side you support. Formulating trade-offs: Trade-offs is the exchange of favours between parties to reach an agreement. One party offers another party something of value in return of something that is of value to the first party. Voting and Majority Rule: The main purpose of voting is to suppress minority opinion. But in a multiparty negotiation, voting is used for strategic purposes and groups tend to misrepresent themselves. Groups vote to accomplish a specific goal and do not always vote for exactly what they want. Groups misrepresent themselves in order to punish or support other groups based on the benefit they get out of it. Communication Breakdown: Communication is a major issue during a multiparty negotiation. People and groups only hear what they want to and interpret it accordingly. Also those with specific and special knowledge assume that others also have the same knowledge which creates a bias in communication and thinking. Another challenge is context-based communication wherein actual meaning of what is said can be understood only if the listener understands the context to which the speaker has referred to. Multicultural Negotiations Key challenges with respect to multicultural negotiations: Expanding The Pie : Studies have shown that expanding the pie in a multicultural negotiation is very difficult. The main reason for this is that in a multicultural negotiation parties fail to understand the priorities of each other and recognise the opportunities for exploiting issues that are compatible. Parties fail to create value for each other as their bargaining styles do not match. Sacred values and taboo trade-offs: Sacred values are assumptions, customs and beliefs that are fundamental to the culture’s belief system. It is basic and fundamental values of the culture that are not even debatable or discussable. Cultures resist to trade-offs sacred values in exchange of economical values. These scared values are different for different cultures and understanding of this is a major challenge for a negotiator. The trade-offs of sacred values for secular values are considered to be taboo by cultures. Biased punctuation of conflict: Biased punctuation of conflicts occurs when parties tend to understand and interpret the interactions with respect to their adversaries. Each party focuses on their self-serving terms. This is seen greatly among multicultural negotiations. Affiliation bias: This occurs when a person’s actions instead of being evaluated on the merits of the behaviour is evaluated with respect to the affiliations of the person. Parties have different perceptions about the culture of the other party and hence their actions are evaluated based on their affiliation with culture than the actual merits. Integrative and Distributive Negotiation Distributive negotiation is focused on dividing value wherein for one party to gain, the other has to lose. It is often referred to as ‘fixed pie’ negotiation as the ideology behind is that of dividing a fixed pie. In distributive negotiation, each party believes that their goal is in direct conflict with the other party and hence tries to maximise its share of the pie. This is a win-lose approach as one party wins as it maximises its outcome and the other party loses (Carrell & Heavrin 2008). An example of this is the sale of a product by one party and its purchase by another. The value of the product is fixed and based on the negotiation; one of them gets the larger piece of the pie. On the other hand, integrative negotiation adopts a win-win approach wherein each party gains something. Both parties in an integrative negotiation try to identify and accommodate mutual benefits with a spirit of collaboration. Multiple issues are identified wherein each party enjoys different preferences and values, negotiation helps in reaching an agreement where value is created for both parties (Mannix, Overbeck & Neale 2011). In simple words, integrative negotiation is seen as growing the pie. An example of this is a negotiation between a potential tourist and a tourism company during off season. The tourism company knows that it is off season and there isn’t much business and hence every tourist is important, on the other hand tourist also knows the fact and tries to benefit out of it. Each party try to create value for them and in the process creating value for other. Interest-Based, Rights-Based and Power-Based Approaches Each approach to negotiation is different from one another with respect to the goal that is to be achieved, focus, implications, etc. In an interest based approach, the primary goal is to safeguard the self interest and resolve the dispute. The temporal focus in on the present. That is, the focus in on the current needs and interests. Interest based approach will have positive implications on future negotiations as it will lead to greater understanding of the parties and satisfaction. Also the agreement reached will be stable. Rights-based approach focuses on the past with the goals to achieve fairness and justice. A rights based approach always produces a definite result with a winner or a loser. The distribution is unequal and it is difficult to expand the pie using this approach. The implication of a right-based approach could be a court action. In a power based approach, the goal is to win and accomplish respect. The focus in this approach is on the future and the actions that can be taken to overpower other parties. This is similar to rights-based approach as it also produces a clear winner or a loser. Hence, distribution is unequal and expansion of the pie is difficult. Revenge, retaliation and resentment could be the possible outcomes of power based approach. Competitive Negotiation Style Competitive negotiation style is one wherein negotiation is treated as a competition. There are only 2 results, win or lose. Competitive negotiation is also called as assertive, distributive, positional or aggressive negotiation. In competitive negotiation style only one person achieves what they intended to achieve while the other does not get anything. It is based on the assumption that it is a zero-sum game where winner takes all. The real concern of this style of negotiation is the substance that is being traded and all other matters are of no importance. The relationship between the parties in competitive negotiation style is unimportant. The complete focus is on self and neither party cares about the other. Competitive negotiation is based on the assumption that there is a fixed pie and only one party gets it. The strength of competitive negotiation style is that the terms and the outcome to be achieved are clear from the very beginning. Negotiators are sure of the approach that is to be followed. On the other hand, its weakness is that there is no consideration to maintain relationships with the other party. This can prove to be costly during future negotiations and also there isn’t any alternative if the other party abandons the negotiation. Conclusion This paper has successfully discussed the concepts related to negotiation such as BATNA and reservation price. It has explained the various challenges with respect to multiparty and multicultural negotiations. It has distinguished between integrative and distributive negotiation, and interest-based, rights-based and power-based approaches to negotiation. It has also explained in detail the competitive negotiation style. References Brett, J.M. (2007). Negotiating Globally: How to Negotiate Deals, Resolve Disputes, and Make Decisions Across Cultural Boundaries. NJ: John Wiley & Sons. Carrell, M.R. & Heavrin, C. (2008). Negotiating Essentials: Theory, Skills, and Practices. NJ: Prentice Hall. Mannix, E.A., Overbeck, J.R. & Neale, M.A. (2011). Negotiation and Groups. Bingley: Emerald Group Publishing. Oliver, D. (2010). How to Negotiate Effectively. PA: Kogan Page Publishers. Society for Human Resource Management (2005). The essentials of negotiation. Boston, MA: Harvard Business School Publishing. Read More