Using Power in Negotiations

0:09 in this unit 0:10 we're talking about tactics to use 0:12 during the actual negotiation 0:15 and one very important tactic 0:18 one very important aspect of the 0:21 negotiation 0:22 is to understand your power and let me 0:26 start by asking you this question 0:28 what is your source of power in a 0:30 negotiation 0:32 in any negotiation where does your power 0:34 come from 0:36 please think about that for a second 0:37 maybe jot down your answer 0:42 i think people generally agree that 0:47 information represents your main source 0:50 of power 0:51 in a negotiation and how do you get that 0:54 information 0:55 during the actual negotiation process 0:58 you ask a lot of questions 1:01 some people especially traditionalists 1:04 think of negotiation 1:05 as a persuasion you're trying to 1:07 persuade somebody else 1:09 to do what you want when in fact 1:12 the best negotiators are the ones who 1:15 while they might be persuasive 1:17 are the ones who ask questions harvest 1:21 information 1:22 and then use that information to analyze 1:25 your position and to analyze your 1:29 interests a friend of mine 1:32 who used to conduct negotiation seminars 1:35 with me 1:37 used to explain to the class that 1:40 not only should you ask questions 1:44 but it's very important to listen 1:46 carefully to the answers 1:47 and analyze the answers that's why god 1:50 gave us 1:50 in his view two ears and one mouth 1:54 so we could spend more time listening 1:57 than speaking 2:00 um there's a cross-cultural element to 2:04 the ability to ask questions and 2:07 to listen carefully to the answers 2:10 for example there have been some studies 2:12 of german negotiators 2:14 and chinese negotiators and the 2:16 conclusion was 2:18 that chinese negotiators asked three 2:20 times as many questions 2:22 as german negotiators that means the 2:25 chinese negotiators 2:26 are harvesting that much more 2:29 information 2:30 to use in the negotiation 2:34 the ability to ask questions and the 2:36 ability to listen 2:37 are important for more than just 2:39 negotiation purposes 2:42 i worked for several years 2:45 with a large international consulting 2:47 firm 2:48 and uh one day i was having lunch with 2:52 one of the leaders of the firm 2:53 somebody who has worked with leaders 2:55 around the world 2:56 and i asked him why why is it that 3:00 some people move to the top of an 3:02 organization while other people 3:05 become stranded at a middle level 3:09 even though both both people are very 3:11 talented 3:13 both people are smart articulate 3:16 but i explained to him that i've seen 3:17 this often with my students students 3:19 two students graduate from michigan and 3:22 one moves to the top 3:23 and the other remains were in a middle 3:25 level position 3:27 and he didn't hesitate in giving me an 3:30 answer he said really 3:31 it boils down to two factors number one 3:35 is conceptual knowledge that comes from 3:39 your experience in the business 3:40 understanding the business building on 3:42 your experience 3:44 and number two he said is the importance 3:47 of the ability 3:48 to listen the ability to hear 3:52 he asked me if we had any courses on 3:55 listening 3:56 in business schools and i explained to 3:58 him that no 4:00 not to my knowledge probably professors 4:02 are the very worst people 4:04 to teach courses on listening but yet 4:07 it's a very 4:08 important tool in negotiation 4:12 and for anyone who wants to move to a 4:15 leadership position 4:18 now i do have some bad news for many of 4:21 you 4:22 who are participating in this course 4:26 and that is that many of you 4:29 physically are unable to listen as well 4:33 as other people there have been been 4:36 some recent 4:37 studies based on brain scans so-called 4:40 fmris 4:42 that indicate that males are able to 4:45 listen 4:46 with only half their brain 4:49 now this is something probably females 4:51 could have told us a long time ago 4:52 without the brain scans 4:54 but if you are male then you have to 4:56 work extra hard 4:58 to develop your listening ability 5:02 so your power generally comes from 5:05 information 5:06 and this information comes from asking 5:09 questions and listening carefully to the 5:11 answers 5:12 but there's a more specific aspect of 5:15 power there's a particular piece of 5:18 information 5:20 that is especially important in 5:22 negotiation 5:23 we've already covered this piece of 5:25 information in another context 5:27 but can you guess what that information 5:30 is 5:30 if you if you could ask for one specific 5:35 piece of information 5:36 what might that be in a negotiation 5:39 think about that for a second and write 5:41 down your answer 5:45 the specific piece of information that's 5:47 especially valuable 5:48 in a negotiation is information 5:52 about the other side's batna 5:56 and the reason for that is that 6:00 your batna gives you power and the other 6:03 sides 6:04 badna gives them power 6:08 the batna the best alternative to a 6:11 negotiated agreement 6:13 gives you leverage so that if your batna 6:16 is strong 6:18 then you can negotiate much more 6:22 from a much more powerful position you 6:24 have a lot greater strength 6:26 because you have a great alternative 6:30 and so given the fact that your batna 6:34 gives you power one of the first things 6:37 you want to do 6:38 in a negotiation is to find out how 6:40 powerful the other side is 6:42 by trying to discover what their batna 6:45 is what is their 6:47 alternative and they're going to do the 6:50 same thing to you 6:51 they're going to try to find out what 6:52 your bad is 6:55 question will you tell the other side 6:58 what your batna is think about that for 7:02 a second 7:02 and write down yes or no yes i will 7:05 disclose 7:06 my batna no i will try to keep my batna 7:09 secret the best answer in 7:14 my opinion is that it depends 7:18 if you have a weak badna if your 7:20 alternatives are weak 7:23 if you're negotiating from a position of 7:25 weakness 7:26 then you definitely do not want the 7:28 other side 7:29 to know what your baton is however if 7:32 your bad net 7:33 is strong then you absolutely want them 7:36 to know what your batna is 7:38 because they know that it will be easy 7:41 for you to walk away 7:43 and to pursue the 7:46 alternative i 7:49 live in ann arbor michigan which is 7:51 close to detroit michigan 7:53 where the major auto companies are based 7:57 and when a major auto company like ford 8:00 is negotiating with a supplier i'm 8:03 guessing 8:04 they'll tell the supplier their batna 8:06 before they even say good morning 8:08 they'll probably say to the supplier 8:10 look we want you to cut your costs 8:12 even further in this round of contract 8:15 negotiations 8:16 and if you don't i've got five other 8:18 suppliers 8:19 sitting in the waiting room who would be 8:21 delighted to have our business 8:23 they'll let you know they're batna up 8:25 front 8:26 so whether you disclose or not depends 8:28 on the strength 8:29 of your batna 8:33 once you find out their batna then 8:36 your next strategy in a negotiation is 8:39 to try to 8:40 weaken their power try to weaken 8:44 their alternative weaken their batna 8:48 so for example let's say you're a 8:50 supplier negotiating with ford 8:52 and they tell you that they have five 8:55 other suppliers waiting in the waiting 8:57 room 8:58 well what can you do in that situation 9:00 how can you weaken 9:02 uh their view of their badna 9:06 think about that for a second you might 9:09 even press 9:10 pause and write down your answer 9:16 if i were a supplier i would try to 9:18 point out to ford that look 9:20 i've been supplying you for years i've 9:23 been very reliable 9:25 with delivery the quality has been high 9:28 i've partnered with you in developing 9:31 new products new components you know you 9:34 can count on me 9:35 yes my price might be a little bit 9:37 higher but you're getting 9:39 much higher quality whereas if you take 9:41 a chance 9:42 with one of those other suppliers then 9:45 you might not get delivery on time 9:47 you might not get the same quality 9:49 product they're not going to be willing 9:51 to work with you on new product 9:52 development the way we are 9:54 and so on that would be my pitch to try 9:57 to 9:58 weaken their power to weaken their 10:01 badma and then the third and final piece 10:05 of your badness strategy is to try to 10:08 improve 10:09 your power uh improve your alternatives 10:13 this is something you'll actually 10:15 probably do before the negotiation 10:17 begins 10:18 you'll try to develop alternatives and 10:22 use that as a source of strength for 10:25 example you see quotes like this in the 10:28 business press 10:29 millennium pharmaceuticals whenever we 10:32 feel there's a possibility of a deal 10:33 with someone 10:35 we immediately call six other people it 10:37 drives you nuts trying to juggle them 10:39 all 10:40 but it will change the perception of the 10:42 other side 10:43 or this quote from aol you would never 10:46 do a deal without talking to anyone else 10:48 never now what they're saying in 10:51 negotiation language 10:52 is we 10:56 want to strengthen our batna by talking 10:59 with other parties we always talk with 11:02 other parties we always develop 11:03 alternatives to strengthen our position 11:08 so that basically represents your batna 11:12 strategy 11:13 during a negotiation find out the other 11:15 side's batna 11:17 weaken their batna and strengthen your 11:19 own batna 11:22 there's one other aspect of power that 11:23 i'd like to mention 11:25 and that is in some situations 11:30 you can develop a coalition 11:34 as an alternative to the batna strategy 11:38 and here's an example of 11:42 involving a friend of mine although i've 11:45 of course changed the names and changed 11:47 the facts but 11:49 this is the basic scenario my friend 11:52 was involved in discussion with a couple 11:56 of other entrepreneurs 11:58 about forming a tennis center 12:02 one of the possible partners in the 12:04 tennis center 12:05 was a very well-known retired 12:07 professional tennis player 12:10 the second was less well-known 12:15 but known in the local community and 12:17 sponsored a youth tennis program 12:20 the third possible partner my friend was 12:23 not known at all but loves tennis and 12:25 did some coaching 12:27 now in their discussions they realized 12:29 that the annual profits from this 12:31 venture 12:32 were estimated at around 1 million 12:36 and about 50 of those profits would 12:38 result from ash's involvement 12:40 he's the well-known retired pro 30 12:43 percent would 12:44 result from billy's involvement he's 12:47 known locally 12:48 and 20 from chris's involvement 12:52 so when my friend contacted me they were 12:55 negotiating 12:56 over how the profits should be split 13:00 and let's assume that they need at least 13:02 two of the three partners 13:03 in order to form the business well 13:07 this is a classic coalition bargaining 13:10 scenario where the traditional 13:14 batna analysis doesn't work 13:17 because the alternatives are too 13:20 dynamic you have too many combinations 13:24 there are a lot of different 13:25 combinations of the three parties 13:28 or two of the three ash and billy billy 13:30 and chris 13:31 chris and ash and 13:34 in those combinations you have almost an 13:37 infinite 13:38 amount of profit sharing 13:41 so for example ash obviously is the most 13:45 powerful party involved here 13:48 ash and billy might decide to form a 13:52 separate partnership without 13:54 chris which would give them 80 percent 13:56 of the profits 13:57 but maybe ash is very greedy and wants 14:01 80 of those profits 14:04 um and so chris could then enter the 14:08 scene and say hey billy 14:09 why don't you join with me our total 14:12 profits will be less 14:13 but i'll give you a larger share of the 14:16 profits 14:16 than what ash could and so in a 14:19 negotiation like this you can go round 14:21 and round 14:22 there's no mathematical mathematically 14:25 precise 14:26 solution it's almost impossible to 14:29 calculate 14:30 a badna so what becomes important in a 14:32 coalition bargaining 14:34 is developing trust from the other 14:37 parties 14:38 treating the other parties fairly and 14:42 when i do this a simulation based on 14:45 this scenario in class 14:47 i often find that billy and chris 14:50 might form a coalition and squeeze out 14:53 ash because 14:54 ash became too greedy and wanted too 14:58 large 14:58 a share of the profits so forming 15:01 in other words forming a coalition is 15:03 another 15:05 very powerful form of negotiation 15:09 even when on the surface it looks like 15:12 you are less powerful 15:13 than the other side it looks here that 15:16 billy and chris 15:17 are less powerful than chris but by 15:19 forming a coalition 15:20 they can they might actually squeeze ash 15:24 out of the deal so that concludes our 15:28 look 15:28 at the use of power in negotiation