Lesson n°1 « business is business » : negotiation lecture

5 AM. I can open my eyes but still cannot see. It’s too early.

I am going back to school today and i am entering what promises to be my penultimate year of study. I can proudly say that I am a first year master student in international business management at the university Paris-Sorbonne (can’t I ?).

My first class of the day is english negotiation and I have (absolutely) no idea what is it going to be ("seriously she is a master’s degree and she have no idea of what she is going to study ?"). Are we going to talk ? To listen and write down the lecture ? Whatever, this year I am determined to improve my english level. After all, I did not take the TOEIC examination for nothing, right ? 

The class is starting with the global presentation of the school subject, the organization of the classes, the criteria of notation. At this moment, I am understanding that my homework will be a little bit different than the other years insofar as I was told to write a blog ! So… Here I am !
Actually it is a big premiere for me (what is astonishing in the age of social networks) insofar as I do not really like to write about me or even exposing my life all over the internet. However, I am really glad about that. This idea seems to be a really good one : i will be able to gain self-confidence because yes... I am someone filled with doubts. 

I will also be able to provide un update on what I am learning, stand back and look at what I am turning to because I am sure there will be some changes thanks to this class. And I think I will soon realize that this entire year is going to induce a lot of changes. 

I realized that at the beginning of this academic year, which has been really intense. Yes, I will have to get out of my confort zone. I was told to do so a long time ago now. And I think it is essential, I need to feel this fear, this fear that will make me want to work twice more.

The introduction starts and first thing to know is that you have to know your opponent/interlocutor but you also have to prepare your negotiation deal if you want to succeed. Ok well sure, this is obvious, isn't it ? Then comes that image of a monkey and a man exchanging a truck load of bananas against a soda. We can infer several things : here the  ̶c̶o̶c̶a̶ ̶c̶o̶l̶a̶ pepsi can is supposed to be very important ; as important as all the truck load (really?). Several questions then arise : how to negotiate properly ? How to evaluate the fact that a deal is the best we can make ? I never asked myself this question insofar as I believe to be a good negotiator… but am I good professionally ? Because YES, it is very different to negotiate with our relatives and with collaborators for instance. We don’t behave the same way. It is difficult to appeal feeling with your collaborators (and a little bit inappropriate/awkward/ineffective).

Moreover I never though about theorizing negotiation. It must appears stupid but as long as it worked, there were nothing to worry about. I was thinking « if Doe accepts to close a deal with me, it is because Doe agrees all the term of our agreement », when in fact, people can just yield and see this deal as a debt (« the other day, we went to see your movie, next time we will see what I want »). 

But I had a sure feeling that we would only do theory. In fact, we were able to check our negotiation skills through a practical exercice : the 2$ bargaining simulation. The principle is simple : you have an interlocutor and you find 2$ on the ground. We have to negotiate but we both want a different amount of money (we must not reveal how much we want to our interlocutor of course…).  

First attempt : First of all, the lack of informations is an obstacle and I try by all means to inquire about the amount needed by my interlocutor, the reason why he/she needs the money etc. My first try took approximatively less than two minutes. The second try was more fruitful : we were able to conclude an agreement including a refund in order to be both satisfied ! I had, for the second try, the instruction to be suspicious. It was the most difficult during the exercice because i am not suspicious in nature. The lack of preparation was also an obstacle just like the fact that we had to invent information (why do we need the money ? for now or later ?).

Indeed we generally focus on our own interest and to create one on the moment is the worst thing to do. The analysis of our environment was impossible : check the word of my interlocutor as part of the game. While it is possible to do it in real life. And the balance of power is different from an interlocutor to another, it depends on the nature, the attitude, the feeling…Some people have unstoppable arguments while other have questionnable ones. So in order to make a good negotiation, we have to know our interlocutor, her/his intentions, ours too but also our limits.  

The class is over and I am sure of at least one thing : I am actually a (very) bad negotiator and even more when I have to do it in english. Never mind, I am here to learn. I hope that I will improve myself quickly. We leave with two brochures in order to enhance our knowledge about negotiation and I must admit that I love brochures because its always contain a lot of examples and explanations allowing us to take ownership of the lectures which is really appreciable. 

In order to help you understand what I learn and in order you became a great negotiator, I am making below a resumé of the « key concept » to know.

1) BATNA

First of all, it is interesting to know what is your BATNA, that is to say your best alternative to a negotiated agreement. It is the best alternative you will have if the negotiation leads to nothing. So it refers to the best alternative off-negotiation. 

The best your BATNA will be the more you will have a strong power on your interlocutor. You must determine some fall-back solutions. You can complete the negotiation if the final proposal is less interesting than you fall-back solution.

To have a good alternative gives you confidence to achieve a mutually satisfactory agreement.

We have the funny example of the King Louis XI who, instead of wage war on Edward IV, decided to make a deal with him. As a result of peace agreement signed between both king in 1475, Louis XI got ride of Edward IV offering him feasting and drinking (what cool be better than food to avoid a war). Morality : instead of making war (which was his BATNA) he choose a cooler option. This example shows that knowing our BATNA and trying to understand the other is a way to obtain better solutions (plus food can resolve everything).

If we manage our BATNA, we will be able to negotiate in a much efficient way and to avoid being at a disadvantage. It is possible to improve our BATNA by looking for informations about our interlocutor, the market etc. Knowing the BATNA of our interlocutor is also an important thing gives us a certain power. 

To think objectively, we can trust numbers, put ourselves in our interlocutor shoes so we can see everything differently. In any cases, it is fundamental to have an alternative (back-up plans are a guideline) in order not to be at the mercy of our interlocuteur. Nevertheless, we do not have to think that our BATNA is easy to determine. Indeed we do not have to be swayed by external factors such as our feelings, our desires, our position…

2) Reservation price

It depends on our BATNA because this latter determines the lowest acceptable value for us in a deal so our reservation price. BUT : even if our BATNA is close to our reservation price, they are not similar because there are several criteria to take into account. 

So from the seller’s perspective, the reservation price is the least he will accept to sell its good while from the buyer’s perspective it is the most he will pay for the service. If your reservation price for buying is greater than your interlocutor reservation price for selling it, than you can probably make a deal.

3) ZOPA

This notion means zone of possible agreement. This zone exists if there is a potential agreement that would benefit both sides. It is situated between the seller’s and buyer’s reservation price !

In order to determine a ZOPA, the parties must first know their reservation price. 

We take the lowest price the seller is ready to sell his good and the lowest price the buyer is ready to give for this same good and we find that zone which facilitate and introduce a real leeway. The aim is not to reveal our reservation price and to negotiate above this latter in order to make as much as possible profit.This way each interlocutor is in a wining situation insofar as they have more than they were expected (more than their reservation price). Sometimes, this zone does not exist in the case where the reservation price of the seller is higher than the reservation price of the buyer. So here the negotiation will be possible only is the seller make a concession, offering something « more »…

4) Value creation through trades 

This happens when goods/services are traded that have only modest value to their holders, but great  value to the other party. It is like a double exchange between the parties leading to a mutual satisfaction even bigger than the one generated by the negotiation itself. 

It can take several apparences : for instance for an employee, it can be the possibility to work at home x days per week. In order to determine the value creation through trades, we have to try to put ourselves in the shoes of the others by learning to know, ask some questions…

Those concepts are essential to know how to negotiate properly. I must confess : I did not know these concepts… until now ! I am starting to understand. 

I am ready for the next lecture… and you ? Will you be ? See you in two weeks !