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A fundamental dilemma in negotiations is choosing between “creating value” and “claiming value” (Lax and Sebenius, 1986). Value creators believe that successful negotiators

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must be inventive and cooperative in searching for a win-win solution. Value claimers see “win-win” as naively optimistic. For them, bargaining is a hard, tough process in which you have to do what it takes to win as much as you can.

One of the best-known win-win approaches to negotiation was developed by Fisher and Ury (1981) in their classic Getting to Yes. They argue that parties too often engage in “positional bargaining”: They stake out positions and then reluctantly make concessions to reach agreement. Fisher and Ury contend that positional bargaining is inef!cient andmisses opportunities to create something that’s better for everyone. They propose an alternative: “principled bargaining,” built around four strategies.

The !rst strategy is to separate people from the problem. The stress and tension of negotiations can easily escalate into anger and personal attack. The result is that a negotiator sometimes wants to defeat or hurt the other party at almost any cost. Because every bargaining situation involves both substance and relationship, the wise negotiator will “deal with the people as human beings and with the problem on its merits.” Paul Maritz demonstrated this principle in dealing with the prickly Dave Cutler. Even though Cutler continually baited and insulted him,Maritz refused to be distracted and persistently focused on the task at hand.

The second strategy is to focus on interests, not positions. If you get locked into a particular position, you might overlook better ways to achieve your goal. A classic example is the 1978 CampDavid treaty between Israel and Egypt. The sides were at an impasse overwhere to draw the boundary between the two countries. Israel wanted to keep part of the Sinai; Egypt wanted all of it back. Resolution became possible only when they looked at underlying interests. Israel was concerned about security: no Egyptian tanks on the border. Egypt was concerned about sovereignty: The Sinai had been part of Egypt from the time of the Pharaohs. The parties agreed on a plan that gave all of the Sinai back to Egypt while demilitarizing large parts of it (Fisher and Ury, 1981). That solution led to a durable peace agreement.

Fisher and Ury’s third strategy is to invent options for mutual gain instead of locking in on the !rst alternative that comes to mind. More options increase the chance of a better outcome. Maritz recognized this in his dealings with Cutler. Instead of bullying, he asked innocently, “Could you do a demo at COMDEX?” It was a new option that created gains for both parties.

Fisher andUry’s fourth strategy is to insist on objective criteria—standards of fairness for both substance and procedure. Agreeing on criteria at the beginning of negotiations can produce optimism and momentum, while reducing the use of devious or provocative tactics that get in the way of a mutually bene!cial solution. When a school board and a teachers’ union are at loggerheads over the size of a pay increase, they can look for independent

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standards, such as the rate of in”ation or the terms of settlement in other districts. A classic example of fair procedure !nds two sisters deadlocked over how to divide the last wedge of pie between them. They agree that one will cut the pie into two pieces and the other will choose the piece that she wants.

Fisher and Ury devote most of their attention to creating value—!nding better solutions for both parties. They downplay the question of claiming value. Yet there are many examples in which shrewd value claimers have come out ahead. In 1980, Bill Gates offered to license an operating system to IBM about 48 hours before he had one to sell. Then he neglected to mention to Tim Paterson of Seattle Computer that Microsoft was buying his operating system to resell it to IBM. Gates gave IBM a great price: only $30,000 more than the $50,000 he’d paid for it. But he retained the rights to license it to anyone else. At the time, Microsoft was a “ea atop IBM’s elephant. Almost no one except Gates saw the possibility that consumers would want an IBM computer made by anyone but IBM. IBM negotiators might well have thought they were stealing candy from babies in buying DOS royalty-free for a measly $80,000. Meanwhile, Gates was already dreaming about millions of computers running his code. As it turned out, the new PC was an instant hit, and IBM couldn’t make enough of them. Within a year, Microsoft had licensed MS-DOS to 50 companies, and the number kept growing (Mendelson and Korin, n.d.). Twenty years later, onlookers who wondered why Microsoft was so aggressive and unyielding in battling government antitrust suits might not have known that Gates had long been a dogged value claimer.

A classic treatment of value claiming is Schelling’s 1960 essay The Strategy of Con!ict, which focuses on how to make credible threats. Suppose, for example, that I want to buy your house and am willing to pay $250,000. How can I convince you that I’m willing to pay only $200,000? Contrary to a common assumption, I’m not always better off if I’m stronger and have more resources. If you believe that I’m very wealthy, you might take my threat less seriously than you would if I can get you to believe that $200,000 is the highest I can go. Common sense also suggests that I should be better off if I have considerable freedom of action. Yet I may get a better price if I can convince you my hands are tied. Perhaps I’m representing a very stubborn buyer who won’t go above $200,000, even if the house is worth more. Such examples suggest that the ideal situation for a bargainer is to have substantial resources and freedom while convincing the other side of the opposite. Value claiming provides its own slant on the bargaining process:

• Bargaining is a mixed-motive game. Both parties want an agreement but have differing interests and preferences, so that what seems valuable to one may be negligible to the other.

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• Bargaining is a process of interdependent decisions. What each party does affects the other. Each player wants to be able to predict what the other will do while limiting the other’s ability to reciprocate.

• The more player A can control player B’s level of uncertainty, the more powerful A is. The more A can keep private—as Bill Gates did with Seattle Computer and IBM—the better.

• Bargaining involves judicious use of threats rather than sanctions. Players may threaten to use force, go on strike, or break off negotiations. In most cases, they prefer not to bear the costs of carrying out the threat.

• Making a threat credible is crucial. A threat works only if your opponent believes it. Noncredible threats weaken your bargaining position and confuse the process.

• Calculation of the appropriate level of threat is also critical. If I underthreaten, you may think I’mweak. If I overthreaten, youmay not believe me, may break off the negotiations, or may escalate your own threats.

Creating value and claiming value are both intrinsic to the bargaining process. How do you decide how to balance the two? At least two questions are important: How much opportunity is there for a win-win solution? And will you have to work with these people again? If an agreement can make everyone better off, it makes sense to emphasize creating value. If you expect to work with the same people in the future, it is risky to use scorched- earth tactics that leave anger and mistrust in their wake. Managers who get a reputation for being manipulative, self-interested, or untrustworthy have a hard time building the net- works and coalitions they need for long-term success.

Axelrod (1980) found that a strategy of conditional openness works best when negotiators need to work together over time. This strategy starts with open and collaborative behavior and maintains the approach if the other responds in kind. If the other party becomes adversarial, however, the negotiator responds accordingly and remains adversarial until the opponent makes a collaborative move. It is, in effect, a friendly and forgiving version of tit for tat: do unto others as they do unto you. Axelrod’s research found that this conditional openness approach worked better than even the most !endishly diabolical adversarial strategy.

A !nal consideration in balancing collaborative and adversarial tactics is ethics. Bargainers often misrepresent their positions—even though society almost universally condemns lying as unethical (Bok, 1978). This leads to a tricky question for the manager as politician: What actions are ethical and just?

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MORALITY AND POLITICS Burns (1978), Lax and Sebenius (1986), Messick and Ohme (1998), and Svara (2007) explore ethical issues in bargaining and organizational politics. Burns’s conception of positive politics (1978) draws on examples as diverse and complex as Franklin Roosevelt and Adolf Hitler, Gandhi and Mao, WoodrowWilson and Joan of Arc. He sees con”ict and power as central to leadership. Searching for !rm moral footing in a world of cultural and ethical diversity, Burns turned to Maslow’s (1954) theory of motivation and Kohlberg’s (1973) treatment of ethics.

From Maslow, he borrowed the hierarchy of motives (see Chapter 6). Moral leaders, he argued, appeal to higher-order human needs. Kohlberg supplied the idea of stages of moral reasoning. At the lowest, “preconventional” level, moral judgment rests primarily on perceived consequences: An action is right if you are rewarded and wrong if you are punished. In the intermediate or “conventional” level, the emphasis is on conforming to authority and following the rules. At the highest, “postconventional” level, ethical judgment rests on general principles: the greatest good for the greatest number, or universal moral principles.

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