Copyright 2014 Carolina Academic Press, LLC. All rights reserved. THE ART OF NEGOTIATION IN THE BUSINESS WORLD

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1 THE ART OF NEGOTIATION IN THE BUSINESS WORLD

2 LexisNexis Law School Publishing Advisory Board Paul Caron Professor of Law Pepperdine University School of Law Herzog Summer Visiting Professor in Taxation University of San Diego School of Law Bridgette Carr Clinical Professor of Law University of Michigan Law School Olympia Duhart Professor of Law and Director of Lawyering Skills & Values Program Nova Southeastern University, Shepard Broad Law School Samuel Estreicher Dwight D. Opperman Professor of Law Director, Center for Labor and Employment Law NYU School of Law Steven I. Friedland Professor of Law and Senior Scholar Elon University School of Law Carole Goldberg Jonathan D. Varat Distinguished Professor of Law UCLA School of Law Oliver Goodenough Professor of Law Vermont Law School Paul Marcus Haynes Professor of Law William and Mary Law School John Sprankling Distinguished Professor of Law McGeorge School of Law

3 THE ART OF NEGOTIATION IN THE BUSINESS WORLD CHARLES B. CRAVER Freda H. Alverson Professor of Law The George Washington University School of Law

4 ISBN: (print) ISBN: (ebook) Library of Congress Cataloging-in-Publication Data Craver, Charles B. The art of negotiation in the business world / Charles B. Craver, Freda H. Alverson Professor of Law, The George Washington University, School of Law. pages cm Includes index. ISBN Negotiation in business. I. Title. HD58.6.C dc This publication is designed to provide authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional services. If legal advice or other expert assistance is required, the services of a competent professional should be sought. LexisNexis and the Knowledge Burst logo are registered trademarks of Reed Elsevier Properties Inc., used under license. Matthew Bender and the Matthew Bender Flame Design are registered trademarks of Matthew Bender Properties Inc. Copyright 2014 Matthew Bender & Company, Inc., a member of LexisNexis. All Rights Reserved. No copyright is claimed by LexisNexis or Matthew Bender & Company, Inc., in the text of statutes, regulations, and excerpts from court opinions quoted within this work. Permission to copy material may be licensed for a fee from the Copyright Clearance Center, 222 Rosewood Drive, Danvers, Mass , telephone (978) Editorial Offices 121 Chanlon Rd., New Providence, NJ (908) Mission St., San Francisco, CA (415) (2014 Pub.3384)

5 About the Author Charles B. Craver is the Freda H. Alverson Professor at the George Washington University Law School where he teaches two different courses on Negotiation. He also conducts the Peter Bronstein Negotiation Institute each fall at the University of Virginia. Over the past 35 years, he has made presentations on Effective Legal Negotiation to over 90,000 attorneys and business persons throughout the United States and around the world. He is the author of Effective Legal Negotiation and Settlement (7th ed. 2012), Skills & Values: Legal Negotiating (2d ed. 2012), and The Intelligent Negotiator (2002). He is coauthor of Skills & Values: Alternative Dispute Resolution (2013), Alternative Dispute Resolution: The Advocate s Perspective (4th ed. 2011), and Legal Negotiating (2007). He is the author or coauthor to eight other books dealing with labor and employment law, and many law journal articles pertaining to negotiating, dispute resolution, and labor and employment law. iii

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7 Chapter 1 INTRODUCTION IMPORTANCE OF BARGAINING PROFICIENCY LIMITED EDUCATIONAL TREATMENT AMERICA IS NOT A BARTERING CULTURE ETHICAL CONSIDERATIONS TRAITS POSSESSED BY PROFICIENT NEGOTIATORS SCOPE OF BOOK Chapter 2 IMPACT OF DIFFERENT NEGOTIATOR STYLES WHICH STYLE IS MORE EFFECTIVE INTERACTIONS BETWEEN COOPERATIVE AND COMPETITIVE STYLE NEGOTIATORS COMPETIVIVE/PROBLEM-SOLVING NEGOTIATORS UNPROFESSIONAL BEHAVIOR IS A SUBSTITUTE FOR BARGAINING PROFICIENCY CONCLUSION Chapter 3 ESTABLISHING GOALS AND LIMITS DURING THE CRITICAL PREPARATION STAGE INTRODUCTION GATHERING CRITICAL INFORMATION DETERMINING OWN AND OPPONENT ASPIRATIONS ELEVATED GOALS GENERATE MORE BENEFICIAL RESULTS PLANNING ELEVATED OPENING POSITIONS MULTI-PARTY NEGOTIATING TEAMS CHOREOGRAPHING THE IMPENDING INTERACTION CONSIDERATION OF RELEVANT PSYCHOLOGICAL FACTORS DETERMINING THE CONTEXTUAL FACTORS CONCLUSION Chapter 4 USING THE PRELIMINARY STAGE TO ESTABLISH RAPPORT AND THE TONE FOR THE INTERACTION ESTABLISHING RAPPORT AND TONE USING ATTIDUDINAL BARGAINING TO COUNTER NEGATIVE BEHAVIOR CONCLUSION v

8 Chapter 5 CREATING VALUE THROUGH THE INFORMATION STAGE IMPORTANCE OF INFORMATION-SEEKING QUESTIONS BENEFITS OF INDUCING OPPONENTS TO MAKE INITIAL OFFERS NEVER ACCEPT OPPONENT OPENING OFFERS MULTIPLE ITEM NEGOTIATIONS DISCLOSING AND WITHHOLDING IMPORTANT INFORMATION EXPLORING THE UNDERLYING NEEDS AND INTERESTS CONCLUSION Chapter 6 CLAIMING VALUE THROUGH THE DISTRIBUTIVE AND CLOSING STAGES NEED FOR CAREFULLY PLANNED CONCESSION PATTERNS RESORT TO POWER BARGAINING TACTICS A. Argument B. Threats, Warnings, and Promises C. Ridicule and Humor D. Silence E. Patience F. Guilt and Embarrassment G. Loud Voice and Intense Language NEGOTIATORS MUST ALWAYS REMEMBER THEIR NON-SETTLEMENT ALTERNATIVES USING THE CLOSING STAGE TO SOLIDIFY THE DEAL CONCLUSION Chapter 7 VALUE MAXIMIZING THROUGH THE COOPERATIVE/INTEGRATIVE STAGE EXPLORE WAYS TO EXPAND THE OVERALL PIE BOTH SIDES MUST RECOGNIZE TRANSITION FROM THE CLOSING STAGE TO THE COOPERATIVE STAGE BE SURE TO CONFIRM TERMS AGREED UPON AND REVIEW ACCORDS DRAFTED BY OTHER SIDE USING TIT-FOR-TAT APPROACH TO ENCOURAGE COOPERATIVE BEHAVIOR A. Don t Be Envious of Opposing Side B. Be Nice at the Outset C. Be Provokable in Response to Uncooperative Behavior D. Be Forgiving E. Be Transparent and Establish a Clear Reputation vi

9 7.05. CONCLUSION Chapter 8 NEGOTIATING TECHNIQUES BENEFITS DERIVED FROM UNDERSTANDING THE DIFFERENT TECHNIQUES COMMON NEGOTIATING TECHNIQUES A. Numerically Superior Bargaining Team B. Use of Asymmetrical Time Pressure C. Extreme Initial Demands D. Use of Probing Questions E. Boulwareism/Best Offer First Bargaining F. Settlement Brochures G. Multiple/Equal Value Offers H. Contingent Concessions I. Range Offers J. Limited Client Authority/Lack of Client Authority K. Flinch/Krunch L. Real or Feigned Anger M. Aggressive Behavior N. Walking Out/Hanging Up Telephone O. Irrational Behavior P. False Demands Q. Alleged Expertise/Snow Job R. Bracketing S. Disingenuous Consecutive Concessions T. Uproar Chicken Little U. Brer Rabbit (Reverse Psychology) V. Mutt and Jeff (Good Cop/Bad Cop) W. Belly-Up ( Yes..., but... ) X. Passive-Aggressive Y. Splitting the Difference Z. Nibble Technique CONCLUSION Chapter 9 VERBAL LEAKS, POSTURE/SPEECH PATTERN MIRRORING, AND NONVERBAL COMMUNICATION VERBAL LEAKS BODY POSTURE/SPEECH PATTERN MIRRORING READING AND INTERPRETING NONVERBAL SIGNALS COMMON NONVERBAL SIGNALS vii

10 A. Classic Signs Facial Expressions Pursed Lips Lips Rotate in Outward Manner Flinch Pained Facial Expression Raising of One Eyebrow Raising Both Eyebrows/Widening of Eyes Scratching Head/Brushing Cheek with Hand Wringing of Hands Tightly Gripping Arm Rests/Drumming on the Table Shoulder Shrug Biting Lower Lip/Biting Fingernails/Running Fingers Through Hair/Rubbing Forehead Beady Little Eyes/Snake Eyes Eyes Wandering/Looking at Watch/Crossing and Uncrossing Legs/ Doodling/Head Resting in Hand/Sighing Sitting or Standing Face-to-Face or at an Angle Shifting Back and Forth in Chair/Tilting Head from Side to Side/Opening and Closing Mouth Without Speaking Hands Neatly Folded in Lap Sitting on the Edge of One s Chair Hands Touching Face/Stroking Chin/Playing with Glasses/Playing with Papers or Notes Steepling Gesture (Hands Pressed Together with Fingers Uplifted or Hands Together with Interlocked Fingers also Uplifted, with Elbows Out in Expansive Manner) Leaning Back in Chair with Hands on Back of Head Placing One Hand Behind Head/Massaging and Stroking Neck Extending Hands Toward Opponent with Fingers Pointed Upward and Palms Facing Out Rubbing Hands Together in Anticipatory Manner Placing Palm of Right Hand Over Heart Open or Uplifted Hands with Palms Facing Out Crossed Arms/Crossed Legs Standing with Hands on Hips Gnashing of Teeth Covering and Rubbing One Eye Massaging the Pain Muscles Between the Eyes Rubbing Chin in Inquisitive Manner Picking Imaginary Lint from One s Clothing Casual Touching (e.g., Prolonged Hand Shake; Hand or Arm on Opponent s viii

11 Shoulder or Forearm) Direct Eye Contact Head Nodding Tilted or Straight Head Turning Around in Chair and Looking Away from Opponent After Making New Offer B. Nonverbal Signs of Deception Decrease or Increase in Specificity of Statements Partial Shrug Increased or Reduced Gross Body Movement Casual Placing of Hand Over Mouth Unconscious Touching of Nose with Finger Tip or Back of Finger; Rubbing One Eye Inconsistent Nodding or Shaking of Head Eyes Looking Up to Wrong Side Dilated Pupils and More Frequent Blinking Involuntary Raising of Inner Portions of Eyebrows Narrowing and Tightening of Red Margin of Lips Licking Lips or Running Tongue Over Teeth Heightened Vocal Pitch More Deliberate or More Rapid Speech Increased Number of Speech Errors More Frequent Clearing of Throat Change in Frequency of Looking at Listener Duping Delight CONCLUSION Chapter 10 PARTICULAR NEGOTIATION ISSUES TYPICAL DILEMMAS A. Initiating the Negotiation Process B. Weakening Opponent s Superior Position C. Strengthening One s Own Weak Bargaining Position D. Confronting Opposing Side Inflexibility E. Dealing with Particularly Difficult Opponents F. Telephone Negotiations G. Negotiating Via Letters or H. Responding to Is This Your Final Offer? I. Negotiauctions J. Negotiating with Government Agencies K. Renegotiating Existing Contracts/Relationships ix

12 CONCLUSION Chapter 11 IMPACT OF GENDER ON BARGAINING INTERACTIONS IMPACT OF STEREOTYPES PERCEIVED DIFFERENCES EVIDENCE CONTRADICTING BEHAVIORIAL PREDICTIONS CONCLUSION Chapter 12 TRANSNATIONAL BUSINESS NEGOTIATIONS INCREASED SIGNIFICANCE OF NEGOTIATIONS IN A GLOBAL WORLD OFFICIAL INTER-GOVERNMENT [TRACK I] DIPLOMACY PRIVATE CITIZEN INVOLVEMENT IN PUBLIC MATTERS [TRACK II DIPLOMACY] TRANSNATIONAL BUSINESS NEGOTIATIONS IMPACT OF CULTURAL DIFFERENCES NATION-SPECIFIC NEGOTIATING STYLES A. United States B. Canada C. Mexico D. Brazil E. Japan F. China G. South Korea H. India I. Russia J. United Kingdom K. France L. Germany M. Saudi Arabia N. Egypt CONCLUSION Chapter 13 DISPUTE RESOLUTION PROCEDURES MEDIATION AS ASSISTED NEGOTIATION DIFFERENT MEDIATOR STYLES A. Facilitative/Elicitive Mediators B. Evaluative/Directive Mediators C. Relationship-Oriented/Transformative Mediators x

13 TIMING OF INITIAL MEDIATION INTERVENTION MEDIATOR SELECTION PARTY AND MEDIATOR PREPARATION CONDUCTING THE INITIAL SESSION USING SUBSEQUENT SESSIONS TO EXPLORE INNOVATIVE ALTERNATIVES CONDUCTING SEPARATE CAUCUS SESSIONS MOVING TOWARD FINAL TERMS REGULATION NEGOTIATION/MEDIATION USE OF ARBITRATION TO AVOID JUDICIAL LITIGATION USE OF CYBER MEDIATION AND ARBITRATION CONCLUSION Chapter 14 BENEFITS FROM POST-NEGOTIATION ASSESSMENTS IMPORTANCE ASKING QUESTIONS ABOUT ALL STAGES A. Preparation Stage B. Preliminary Stage C. Information Stage D. Competitive/Distributive Stage E. Closing Stage F. Cooperative/Integrative Stage TOPICS TO CONSIDER A. Review of Concession Pattern B. Influence of Time Pressures on Parties C. Specific Bargaining Techniques Used D. Deceitful Tactics E. Knowing Who Achieved More Beneficial Results and Why F. Impact of Attribution [Self-Serving] Bias G. Dealing with Mistakes/New Tactics Encountered H. Use of Checklist CONCLUSION Post-Negotiation Evaluation Checklist Chapter 15 ETHICAL CONSIDERATIONS NEGOTIATION AS A DECEPTIVE PROCESS OVERT MISREPRESENTATIONS, PARTIAL DISCLOSURES, NONDISCLOSURES, AND DECEPTIVE CONDUCT A. Overt Misrepresentations xi

14 B. Misleading Partial Disclosures C. Nondisclosure of Information D. Deception by Disingenuous Conduct CONCLUSION APPENDIX INDEX I-1 xii