We now continue our look at preparing for negotiation and planning your negotiation strategy by looking at an especially important question that will apply to. Virtually every negotiation. And that is how can I conduct a negotiation analysis? How should I analyze a negotiation? This question is so important that I'm breaking the discussion into three segments. First of all, what questions should I ask to complete an analysis? Second, what is my BATNA in a dispute resolution negotiation? And finally, how can I use an especially valuable tool called a decision tree to complete a BATNA analysis, regardless of whether it's a dispute resolution negotiation or a deal-making negotiation. So let's start with this first question. What questions should I ask to complete a negotiation analysis? In order to give a framework for our discussion, let's take this simple negotiation. Let's assume that you're preparing to negotiate the sale of your car to a possible buyer, Pooja. Pooja is the only person who responded to an ad that you posted a week ago. You need at least 4,000 from the sale to finance the purchase of a truck that you have ordered. You want to keep your car for three more weeks, which is when the truck will arrive. The reasonable value of the car is $5,000. You've done a lot of research on this. You've looked at a lot of online calculators in coming up with this value. If you can't find a buyer willing to pay at least 4,500, you'll sell the car to a friend, Tommaso for 4,000. You know that Tommaso will let you keep your car for the next three weeks, so Those are the facts. Now, what I'd like you to do is to hit pause, and think about this situation. If this was you, what would be your strategy going into this negotiation with Pooja? Just jot down a few points that you would use as your negotiation strategy. When I ask my students this question, when I give them a negotiation similar to this and ask what is your strategy going into the negotiation? Often, a response I get is something like this, well, my basic strategy going into the negotiation is to try to ask Pooja a lot of questions, try to find out what her position is, try to find out what she's willing to pay, find out about her interests, and then proceed. Now there's nothing wrong with that. In fact asking questions is very positive. The problem is that, if that's your strategy, you have no way to measure the information that you are getting from Puja. You need some kind of a framework for considering the answers that she gives you. To quote a famous philosopher, is actually a baseball player, by, the name of Yogi Berra. If you don't know where you're going, you might end up somewhere else. He comes up with these adages that cause people to scratch their heads, but there's also a lot of wisdom in In these If you don't know where you're going, if you don't have a framework for thinking about the negotiation, you might not end up where you want. A few years ago, I looked at the richest people in the world and tried to find out what their negotiation strategies are. And what I discovered, a common theme among these rich people, Is they entered every negotiation knowing exactly where they wanted to be. And if they didn't get it, they walked away. So very important to have a framework for considering the information that you uncovered during a negotiation. And what I would suggest is to focus on these key questions. First of all, what's your overall goal in reaching the negotiated agreement with Pooja? Second, what issues are most important to you in reaching that goal? And then the why question. Try to get to the interest behind your position. Why are these interests important? Third, and this one is especially important. What is your best alternative to a negotiated agreement? The acronym is BATNA. This is what gives you leverage. This is how you can measure the agreement that you're developing with Pooja. If that agreement the Pooja is willing to enter into with you is not as good as your best alternative, then walk away. Next, what is your reservation price? This is negotiation language for saying in this negotiation what's the lowest price? That you will accept. What is your most likely price? What's a reasonable price that you would be happy with? And then finally what is your stretch goal? Now this last question is especially important because the negotiation research shows that the people who select the largest stretch goal. Are the most successful in negotiations overall. Now because of a large stretch goal, they might lose out in individual negotiations but when you look at their overall results, they are most successful. If that's true, then in this particular negotiation with Pooja. Why not start your negotiation with a very large stretch goal? You think that you might end up with $5,000 for the car. Why not ask Pooja for $25,000? Think about that for a second. What answer would you come up with to that question? If stretch goals are so important, why not use a very large stretch goal such as 25,000. And I think you'll immediately respond, well, if I do that, I don't have any factual basis for 25,000 and I'm going to lose credibility, Pooja is simply going to walk away. And I think that's the risk. You want to pick a large stretch goal. But not so large that you lose credibility. I don't know if you've ever heard of an American athlete by the name of Michael Tyson. But Michael is a boxer, he's known especially for one fight where he chewed on the ear of another boxer named Evander Holyfield. I happened to be in Rome a few years ago, with my son and we walked by Evander and he's a very, very nice person. And I asked if I could take a picture with my son and he graciously said yes. I was tempted to say, Evander Holyfield can you turn your head a little bit so we can see the ear., but I didn't. In any event Mike Tyson is known for that fight and Mike awhile ago bought a little place in Farmington Connecticut. 56,000 square feet, 18 bedrooms, 28 bathrooms. Wasn't large enough so he added a 3,000 square foot night club with a two-tier dance floor, and 200 TV screens, etc. He bought the house in 1997 for 2.7 million. And the very next year, he put it on the market for 22 million. Not surprisingly, there were no takers on the house. And so, he tried to back track a little bit the following year. 1999 lowered the price to $12.9 million, still no takers. Obviously, he had lost credibility with that huge stretch goal. Next year he lowered the price again to $5 million, still no takers, and finally he decided to take the house off the market. This is from an article in The Wall Street Journal Entitled no Bites on Tyson House. Here's another example, a very sad story that was written up in a book called A Civil Action, which was later turned into a movie starring John Travolta. The basic facts were that in the town of Woburn, Massachusetts there was water contamination that led to a high number of leukemia cases, and parents in the town hired and attorney, played by Travolta in the movie version. And he sued two large companies. At one point in the film, and in real life, they held a settlement meeting to try to negotiate a settlement to the lawsuits. And at this meeting it was clear, as depicted in the movie, it was clear that the companies we'd probably settle the case for 25 million, however the attorney ratcheted up the demand to 320 million, huge stretch goal. So basically the other attorneys ended up walking out of the settlement conference, they thought that was a ridiculous stretch goal. And the end result was the case against one of the companies was dismissed. The other company settled for $8 million, far less than probably what they would've paid initially and the attorney ended up filing for bankruptcy. And of course, the parents were deprived of a larger settlement for their loss. So those are examples of the impact of becoming too greedy with a large stretch goal. So let's go back to the case involved Pooja and what I'd like you to do is to look at the facts in this case and try to answer the key questions that I posed earlier. So please take a pencil and paper and let's go down the list of questions. And the first one is what is your overall goal in the negotiation. Please write that down. Second, what issues are most important to you? And why are these issues important? Write down your answers. Third, what's your BATNA? Very important question, often probably the very first question you always wanna ask in preparing for any negotiation. What's your BATNA? What's your reservation price? What is your most likely price? And finally what is your stretch goal? Now you have data for all questions except for the last one, stretch goal and you're gonna have to be creative in coming up with the answer to that question. So, again, these are the questions, and let's look at the answers to those questions, what's your overall goal? Well, you wanna sell the car. What issues are important to you? Why are they important? Price is an important issue and the reason is that you need the money to buy a truck. The transfer date is important, because you need the car in the next 3 weeks. What's your best alternative, what's your BATNA? Selling the car to your friend, Tommaso. What's your reservation price? The lowest price you'll accept from Pooja, 4500. Your most likely price is 5,000. And stretch goal, probably a lot of variation here, but let's assume that the stretch goal is 6,000. Now in answering those questions, it's often useful to try to diagram your answers. So this is what your analysis might look like. You have your BATNA on the left side, your reservation price of 4500, your most likely and your stretch goal. Now this is a critical part of the analysis, and you can complete this part fairly easily. What becomes more difficult is trying to look at how this negotiation looks from the perspective of the other side. This is the way a very famous negotiator put it. I find it helpful to try to figure out in advance where the other person would like to end up. At what point he will do the deal and still feel like he's coming away with something. As we'll talk about later when we get to the psychology of negotiation, this is one of the landmarks of successful negotiators. They always look at the deal from the perspective of the other side. Now, of course, it's often difficult to obtain details of what the deal looks like from the other side. You might have to guess before you go into the room and then. Once you go into the negotiating room and start negotiating, you probably will want to revise your figures. But let's say that the other side's figures look something like this. Let's say that Pooja's reservation price is 5,500. Puja is willing to pay that much for the car. Pooja thinks it probably should be able to get the car for 4500 and let's say her stretch goal is 3500. She would like to get you to agree to a low price of 3500. So, we have the analysis from your side, we've got the analysis from Pooja's side, and then there's one last key missing piece which is called the zone of potential agreement. Z-O-P-A. And that is when you look at these numbers, try to determine where the deal can take place between what number and what number. Think about that for a second and write down the zone of potential agreement. The deal can take place between what number and what number. And the answer that you should've come up with is that the deal can take place between the two reservation prices. In other words the price might be as low as $4500, which is the lowest price that you're willing to take as the seller, or it might be as high as $5500 which is the most that Pooja is willing to pay as the buyer. This is Zone of Potential Agreement, the ZOPA. Now a couple of years ago, I was teaching in Bulgaria to a group of students from pretty much around the world. And there were three Russian students in the front row. And we were talking about this concept of ZOPA and I explained to the class that it's really great if you can go into a negotiation where there is a very large zone of potential agreement. Very large ZOPA. And whenever I said this, the rest of the students began to laugh, so finally I had to stop and say, what's so funny about ZOPA? Well apparently in Russian, your ZOPA is your bottom. And so to them I was saying it's great to go into a negotiation with a very large bottom. That's one of the challenges in cross cultural teaching. Okay, so that's the analysis conclusions basically, focus on these key questions in a negotiation. We've covered these in great detail. These questions of course focus on the numbers. And there are other issues that are likely to arise, and let's just conclude by a question about one of these other issues. We determined earlier that an issue that was very important to you was the date of transfer. You wanted to keep the car for three weeks. So let's say you're negotiating with Pooja and you tell Pooja that this is one of your demands, no transfer until three weeks. Now, think of how Pooja can respond to that demand. Two basic responses. First of all, maybe that delivery date is not important to Pooja at all. So what is Pooja gonna do? She's going to use that as a bargaining chip. She's gonna try to get a lower price from you. In exchange for delaying the delivery. She might pretend as though the issue is important, but it's just a bargaining tactic. The other issue is, the other response from Pooja is that maybe this issue is very important to Pooja. Maybe she needs the car immediately. And so you are at a standstill. She demands the car immediately. You demand delaying transfer until three weeks. How can you respond? How can you resolve that standoff? Think about that for a second? The way to analyze the standoff is you each have a position. Your position is three weeks from now. Her position is immediately. Remember what to do when you're faced with positional bargaining. Ask why? Pooja, why do you need the car Immediately? Her answer might be for example, well, I just started a new job and I need the car to get to work. Well, once you focus on her interests, maybe you can think of ways to meet those interests. Maybe you could even give her a ride to work. Where does she work? Is it close to where you work? Where does she live? Is it close to where you live. You might be able to meet her interests in a way that also match your interests. So that concludes our look at this first phase of a negotiation analysis and we're now going to look at two other aspects of negotiation analysis.