In this unit we're talking about tactics to use during the actual negotiation and one very important tactic, one very important aspect of the negotiation is to understand your power. And let me start by asking you this question. What is your source of power in a negotiation, in any negotiation? Where does your power come from? Please think about that for a second. Maybe jot down your answer. And like people generally agree that information represents your main source of power in a negotiation and how do you get that information? During the actual negotiation process, you ask a lot of questions. Some people, especially traditionalist, think of negotiation as a persuasion. You're trying to persuade somebody else to do what you want. When in fact the best negotiators are the ones, who while they might be persuasive, are the ones who ask questions, harvest information, and then use that information to analyze your position and to analyze your interests. A friend of mine who used to conduct negotiation seminars with me used to explain to the class that not only should you ask questions but it's very important to listen carefully to the answers and analyze the answers. That's why God gave us, in his view, two ears and one mouth. So we can spend more time listening than speaking. There's a cross cultural element to the ability to ask questions and to listen carefully to the answers. For example there have been some studies of German negotiators and Chinese negotiators. And the conclusion was that Chinese negotiators ask three times as many questions as German negotiators. And that means the Chinese negotiators are harvesting that much more information to use in the negotiation. The ability to ask questions and the ability to listen are important for more than just negotiation purposes. I worked for several years with a large international consulting firm and one day I was having lunch with one of the leaders to the firm. Somebody who's worked with leaders around the world. And I asked him, why is it that some people move to the top of an organization, while other people become stranded at a middle level, even though both people are very talented. Both people are smart, articulate. But I explained to him that I'd seen this often with my students. Two students graduate from Michigan, and one moves to the top, and the other remains more in a middle level position. And he didn't hesitate in giving me an answer. He said, Willie, it boils down to two factors. Number one is conceptual knowledge. It comes from your experience in the business, understanding the business, building on your experience. And number two, he said is the importance of the ability to listen, the ability to hear. He asked me if we had. Any courses on listening in business schools. And I explained to him that, no, not to my knowledge. Probably professors are the very worst people to teach courses on listening. But yet it's a very important tool in negotiation and for anyone who wants to move to a leadership position. Now I do have some bad news for many of you who are participating in this course. And that is that many of you physically are unable to listen as well as other people. There had been some recent studies based on brain scans, so called FMRIs, that indicate that males are able to listen with only half their brain. Now this is something probably females could have told us a long time ago without the brain scans, but if you are male, then you have to work extra hard to develop your listening ability. So your power generally comes from information, and this information comes from asking questions, and listening carefully to the answers. But there's a more specific aspect of power. There's a particular piece of information. That is especially important in negotiation. We've all ready covered this piece of information in another context, but can you guess what that information is? If you could ask for one specific piece of information what might that be in a negotiation? Think about that for a second. And write down your answer. The specific piece of information that's especially valuable in a negotiation is information about the other side's BATNA. And the reason for that is that your BATNA gives you power, and the other side's BATNA gives them power. The BATNA, the best alternative to a negotiated agreement, gives you leverage, so that if your BATNA is strong, then you can negotiate from a much more powerful position. You have a lot greater strength, because you have a great alternative. And so given the fact that your BATNA gives you power, one of the first things you want to do in a negotiation is to find out how powerful the other side is by trying to discover what their BATNA is. What is their alternative? And they're going to do the same thing to you. They're going to try to find out what your BATNA is. Question. Will you tell the other side what your BATNA is? Think about that for a second and write down yes or no. Yes I will disclose but BATNA, no I will try to keep my BATNA secret. The best answer in my opinion is that it depends. If you have a week BATNA, if your alternatives are weak, if your negotiating from a position of weakness then you definitely do not want the other side to know what you're BATNA is. However, if your BATNA is strong, then you absolutely want them to know what your BATNA is because they know that it will be easy for you to walk away and to pursue the alternative. I live in Ann Arbor, Michigan, which is close to Detroit, Michigan, where the major auto companies are based. And when a major auto company like Ford is negotiating with a supplier, I'm guessing they'll tell the supplier their BATNA before they even say good morning. They'll probably say to the supplier look, we want you to cut your cost even further in this round of contract negotiations. And if you don't I've got five other suppliers sitting in the waiting room who would be delighted to have our business. They'll let you know their BATNA up front. So whether you disclose or not depends on the strength of your BATNA. Once you find out their BATNA, then your ext strategy in a negotiation is to try to weaken their power. Try to weaken their alternative. Weaken their BATNA. So for example, let's say your supplier negotiating and they tell you that they have five other suppliers waiting in the waiting room. Well, what can you do in that situation? How can you weaken their view of their BATNA? Think about that for a second, you might even press pause, and write down your answer. If I were a supplier, I would try to point out to Ford that look I've been supplying you for years. I've been very reliable with delivery, the quality has been high. I've partnered with you in developing new products, new components. You know you can count on me. Yes, my price might be a little bit higher, but you're getting much higher quality whereas if you take a chance with one of those other suppliers then you might not get delivery on time. You might not get the same quality product. They're not going to be willing to work with you on new product development the way we are and so on. That would be my pitch to try to weaken their power, to weaken their BATNA. And the third and final piece of your BATNA strategy is to try to improve your power. Improve your alternatives. This is something you'll actually probably do, before the negotiation begins. You'll try to develop alternatives, and, use that, as a source of strength. For example, you see quotes like this in the business press. Millennium Pharmaceuticals. Whenever we feel there's a possibility of a deal with someone, we immediately call six other people. It drives you nuts trying to juggle them all. But it will change the perception of the other side. Or this quote from AOL. You would never do a deal without talking to anyone else, never. Now what they're saying in negotiation language is we want to strengthen our BATNA by talking with other parties. We always talk with other parties. We always develop alternatives to strengthen our position. So that basically represents your BATNA strategy during a negotiation. Find out the other side's BATNA, weaken their BATNA and strengthen your own BATNA. There's one other aspect of power that I'd like to mention. And that is in some situation, you can develop a coalition as an alternative to the BATNA strategy and here's an example involving a friend of mine although I've, of course, changed the names and changed the facts. But this is the basic scenario. My friend was involved in discussion with a couple of other entrepreneurs about forming a tennis center. One of the possible partners in the tennis center was a very well-known, retired professional tennis player. The second was less well-known, but known in the local community and sponsored a youth tennis program. The third possible partner, my friend, was not known at all, but loves tennis and did some coaching. Now in their discussions they realized that the annual profits from this venture were estimated at around one million. About 50% of those profits would result from Ash's involvement, as the well-known retired pro. 30% would result from Billie's involvement is known locally, and 20% from Chris's involvement. So when my friend contacted me, they were negotiating over how the profits should be split. And let's assume they need at least two of the three partners in order to form the business. Well, this is a classic coalition bargaining scenario where the traditional BATNA analysis doesn't work because the alternatives are too dynamic. You have too many combinations. There are a lot of different combinations of the three parties or two of the three, Ash and Billy, Billy and Chris, Chris and Ash. And In those combinations, you have almost an infinite amount of profit sharing. So, for example, Ash obviously is the most powerful party involved here. Ash and Billie might decide to form a separate partnership without Chris which would give them 80% of the profits. But maybe Ash's very greedy and wants 80% of those profits, and so Chris could then enter the scene and say hey, Billie why don't you join with me? Our total profits will be less. But I'll give you a larger share of the profits than what Ash could. And so in a negotiation like this you can go round and round. There's no mathematically precise solution. It's almost impossible to calculate a BATNA, so what becomes important in a coalition bargaining is developing trust from the other parties, treating the other parties fairly. And when I do this simulation based on this scenario in class, I often find that Billy and Chris might form a coalition and squeeze out Ash because Ash became to greedy and wanted too large a share of the profits. So, in other words, forming a coalition is another very powerful form of negotiation even when on the surface it looks like you're less powerful than the other side. It looks here that Billy and Chris are less powerful than Chris but by forming a coalition they might actually squeeze Ash out of the deal. So that concludes our look at the use of power in negotiation.
