As a result of study/assignment withdrawals post my MBA (’19 – #ILL), I needed another dose of learning, albeit the intent was to hone in on some key skills that pay long term dividends. After quite a bit of research, I narrowed it down to two areas: Business Law (for non-lawyers @ USC) and Negotiation Mastery (@ HBS). Since, I’m writing about Negotiation Mastery, no mystery on what I ended up choosing…

Here are 3 takeaways that I learned from HBS Faculty, Titans in the Negotiation Industry and peers (via case studies) spanning the globe.
  1. Best Alternative to the Negotiated Alternative - BATNA 
  2. Walkaway
  3. Zone of Possible Agreement (ZOPA)
Best alternative to the negotiated agreement (BATNA): 

Best way to explain BATNA is to use an example. Say you’ve identified a car to buy and are negotiating with the dealership. Now you know that beyond price you want a couple of other features. The dealership on the other side also have selling price in mind and few incentives they can offer. Through active negotiations, both parties would find what alternatives beyond price can they collectively offer to each other, thereby sweetening the pot. This is where BATNA comes in – what value can you create and claim for each other that’s better than just the base price, without walking away from the deal. 

Walkaway: 

Continuing with the same example of the car, these additional features are a must for you, while the dealership can only provide one and wants to charge more the second. As such, your walkaway is base price + two features. Know your walkaway by being well prepared.

Zone of possible Agreement (ZOPA): 

In the example of the car purchase, each party has an upper and lower limit or range. This the ZOPA. The sweet spot for ZOPA, is where both parties create maximum value and also claimed it. Car purchased, possibly at a slightly lower price, both features included, but 2nd feature has additional revenues for dealership.

Collectively, BATNA, Walkaway and ZOPA are the fundamentals of every negotiation. Each requires thorough preparedness and understanding of the situation at hand.

Creating and Claiming Value:

Whilst it may be perceived as simple, this is the most tricky part of the negotiation cycle, to say the least. If you’re wondering why it’s tricky, think of it this way: If you’re creating value, are you in a position also to claim value, or inversely if you’re claiming value, who created the value?

Going back to the car example: Say you end up with the price and one feature agreement with dealership – it’s possible that both while assuming value creation and claiming, have actually lost value. To elaborate, assume the 2nd feature had an ongoing subscription service - which you'll happily pay, and it provides a % of revenue to the dealership. Since, its not part of the package, you don’t buy the service and the dealership has lost the % of ongoing revenue.

Another reason why this is tricky is because not everyone has the full information at hand. Therefore, in order to create and claim value, ask open ended questions with What-if’s and Why’s and How about…

Value creation and claiming does not have to be win-loss scenario, rather can lead to exponential gains for both sides, leading to a win-win scenario. 

Emotions and Bargaining Style:

The most common emotion unearthed during a negotiation is "anger/anxiety" - but what leads to this state? 

It may stem from the bargaining style (vernacular used) or body language (or lack thereof) that you exude during the conversation. 

I was recently in a team event and proposed an option to the problem at hand. Another colleague suggested that it may not be the most viable approach and suggested that he rest of attendees, agree or disagree on the positions. There are two possible outcomes here: A) No one would speak up to avoid taking sides, or B) They would speak up but in avertedly end up taking sides. Neither is a good outcome as it’s a win-lose situation.

To diffuse such situations, be present in the conversations, but ask yourself, “If I was an outsider looking in, how would I perceive this dialogue and what would I suggest”. For example, a possible outcome of the above scenario would be, “It’s a good proposal, let’s look into it a bit more and if viable, we can add the perspective in later”. This approach removes resentment (current and future), avoids putting others in a bind (take sides) and strives for a constructive, collaborative environment. 

Other tidbits:

  • If someone gives you an ultimatum, reframe that to ensure future conversations can be held. As an example, “Whilst the circumstances may not be ripe today, let’s….”. This provides an opportunity for departing on good terms and keeping future doors open.
  • Small talk actually serves as ice breakers, albeit don’t be cynical or condescending, which has an opposite effect.
  • Cultural impacts: Be mindful of who you are negotiation with and where – geographical nuances requires an understanding of the cultural impacts on negotiation tactics. 
  • Listening for understanding vs responding.

In summation, Negotiation is an art of value creation and claiming. Avoid the prisoners dilemma, “only one dominant strategy – win/lose” and find creative solutions. 

There is no cookie cutter approach and something that may have worked in one case, may completely backfire in another. Remove yourself from the situation and consider other sides/outsiders perspective – this will alleviate the emotional tendencies and drive win-win outcomes.