Running head: FINAL REACTION PAPER
Negotiation has been an integral part of our lives. Regardless of different issues, we have been directly or indirectly involved in negotiation process from the selection of school as a kid, purchase of car, to the negotiation with the company when one is hired as an employee. We are used to seeing this negotiation issues in newspaper every day, between nations, inside the nation, business decision making, labor unions, sports and environmental issues and so on. The term negotiation can be defined as the process that is aimed at reaching a point of interest between parties that have different preferences, be it business houses, nations or even a family. This process of coming to an agreeable point in spite of different interest between different parties can be termed as negotiation.
As a management professional or students, we are prone to different issues and cases of organizational decision making. These decisions should be made in a manner that it aligns with the interest of different parties involved. At one point or other, we have to make negotiations. From a manager’s eye, negotiation is important for the smooth flow of work in the organization. A proper negotiation process can be facilitated when there is an understanding of rationale behind their decision making and both parties are willing to come to an agreeable point (positive bargaining zone) such that both parties achieve maximum benefits. Despite of the fact that both parties can be mutually benefited rather than avoiding a common point, they fail to settle the negotiation process and many negotiation process lefts pending and unsuccessful in many cases. That is the main reason why there is loss of market share, declining sales, employee dissatisfaction and performance in business houses as they lack proper negotiation between involved parties in businesses. In this regard, negotiator cognition plays an important role. The cognitive mistake and biases of a negotiator affect the whole negotiation process. At many times, negotiators can’t come up with point of common interest as various issues affect their thinking process. Negotiator’s cognition tends them to make mistakes and the whole negotiation process ends undone. There are several issues that shape negotiator’s cognition and ultimately the negotiation process which can be stated as:
1. The mythical fixed pie negotiation
2. The framing of negotiator judgment
3. The non-rational escalation of conflict
4. Overestimating your own value
5. Self-serving biases in negotiation
6. Anchoring biases in negotiation
The mythical fixed pie negotiation:
There are several negotiation cases where the negotiating parties fail to come to a point of agreement as their assumption of fixed pie in such cases. Because of this vision, many rational decision makers fail to come to the efficient outcomes such that there is a mutual benefit between the parties involved. There are several cases of negotiation between business houses, political parties, families and nations failed because they were struggling to achieve the biggest share or fixed pie. There are times when increasing the size of pie facilitates the creative agreement but when parties involved find the size of pie is fixed they fight for the biggest share. This mentality hinders the whole negotiation process and the opportunity associated with creative solution and successful negotiation process.
The case of Eastern airlines, based in United States is a perfect example of this case. The company was struggling hard for existence, faced with intensive competition in airlines industry and harsh economic pressure as well. Management had to reduce the operation cost which was only possible by cutting the labor cost. To address this issue the management had to negotiate with three different unions in the organization. The management asked labor union to adjust the heavy wage concessions or else, they would sell the company. The union didn’t like this approach made by management and believed it to be unrealistic. By the time, two of the unions agreed on twenty percentage concession on wage. However, one among the three only agreed for fifteen percentage cut on wages. But, the management did not accept their position. Both of the parties stood still in the negotiation assuming that if the other party didn’t accept the terms of agreement the airline would be closed. The Board of directors finally decided to bring in the new management personnel which forced huge wage cuts by eliminating jobs in the organization to settle the issue. Despite of all this, the performance of the company was going down and finally had to file bankruptcy. The two parties involved in the negotiation fought for the biggest share assuming that the pie was fixed. They believed in having the greatest share of fixed pie which ruined the whole negotiation process and creative agreement. Both parties neglected the opportunity associated. This particular action didn’t bring any good to the parties involved rather there was huge job elimination and change in management, leading the organization to bankruptcy. As a business student we should consider such factor in a negotiation process such that it facilitates the achievement of organizational objectives rather than ignoring consequences that might lead to lose the business as in the case of Eastern airlines. (http://www.negotiations.com/case/union-negotiation/)
I would like to share my experience regarding mythical fixed pie negotiation. I would like to describe the political situation on Nepal in regard to mythical fixed pie negotiation. Nepal is in the stage of building an interim constitution which is represented by several parties of Nepal. The interim government was formed based on the election. None of the party won the majority of seats and the coalition government had to be formed based on consensus between the parties in order to give a long term political solution for the country. The party who had majority of the seats wanted all the strong departments in the government. The other remaining parties who had almost half of the total seats denied their proposal in negotiation. They couldn’t come up with agreement and finally the major party denied forming a government. The parties believed the pie was fixed and they were not willing to come into agreement ignoring the mutual benefits and opportunities. The parties involved believed in winning, which resulted to unnecessary lengthening of the talks and formation of constitution. Finally, it seemed that the important matter (constitution formation) was none of a concern for parties as all of them were fighting for the biggest share of fixed pie.
The framing of negotiator judgment:
The negotiation process also depends upon the way the negotiator’s judgment is shaped and framed. Our judgment as a negotiator is framed by our rationale behind why we make decision on something ignoring the other factors that also has significant role in such decision making process. The reasons that frames or shapes our judgment plays important role in negotiation process. Hence, as a negotiator, we need to have the understanding of what frames the judgment of parties involved in negotiation process such that it facilitates the process. By focusing on positive aspects that frames the judgment, the negotiating parties can come to the agreement point which benefits the both parties.
I would like to share my experience and thoughts regarding the framing of negotiator judgment and how does it plays an important role in decision making. Some years back, I had to sell my motorbike for some financial reasons. So, I had my ad posted on internet. In this process, I had a negotiation going on with one of many people who wanted to buy my motorbike. He wanted to give 2000 $ for my bike which was 500 beyond my selling price of 2500. Neither one of us was willing to come to an agreement point with an own particular frame of judgment. He believed the price was worth for a second hand bike and the price was reasonable to me as a well maintained bike. We couldn’t come to an agreement point as his judgment was framed by negative aspect of bike i.e., second hand bike and mine judgment framed by a well maintained bike. Had we focused on the positive aspects that framed our judgment we could have come to an agreeable point. If the buyer viewed any raise below the 2500 as gain and I viewed any raise above 2000 as gain the negotiation would be possible. None of us focused on positive frame that reached the mutually beneficial outcomes rather we focused on the negative aspect that framed the judgment which ruined the negotiation process.
The non-rational escalation of conflict:
An understanding of escalation of conflict is very important for the negotiation process and understanding of opponent’s behavior. In a negotiation process negotiator can emotionally be bounded and come into position or state where they can make decision and choices which are again their interest and benefits. There are numerous situations in business where negotiator acts beyond the expectation of organizational objectives and interest leading to huge losses and failure. One of such situation where negotiator forgets the objectivity of negotiation is non- rational escalation of commitment to previous set of actions. Such escalation of conflict has very devastating effect on organization which may be a result of competition or without competition. I would like to relate it with a business case. There were two rival organizations which faced tough competition from each other. As Nepal became a member of the WTO (world trade organization) several multinational companies came in competition. Understanding this threat the companies negotiated to from a merger and compete with multinational company for survival. However, due to the non-rational escalation of conflict i.e., feeling of rivalry between the organizations they couldn’t come into agreement and negotiation process was abandoned. Finally, both had to file for bankruptcy hurting many people associated with their business. Such non rational commitment can bring devastating consequences for organization.
Overestimating your own value:
In negotiation overestimating our own value and the chances the opponent will give us what we want, can have a serious impact on negotiation process and ruin the whole process. There are cases where negotiator is likely to overestimate the chances other side will give in a negotiation process which can ruin the whole negotiating process and the opportunity associated. I used to have a friend in my high school who was the best student in the class. After we graduated he got an offer of 75 percentage scholarship from the best school in the city. He overestimated his value and neglected the offer in a negotiation process. He wanted a 100 percentage scholarship which the school wasn’t willing to give him. As a result of that he couldn’t go to the best school in the city. Finally, he had to attend school not as good as compared the prior one which affected his education. The best school would have provided him with the best education and affiliation which he missed, as he overestimated his value.
Self-serving biases:
Self serving bias can be defined as the tendency of people to define what is fair in a way that bring good them. Self serving biases can effect negotiation in a manner that it may seem fair to one of the parties involved but not to the other one. In a negotiation process, self serving bias tends the negotiation by focusing the negotiation process on a manner that seemd fair and good to them. But, on the other hand it mayn’t seem fair to other party which might result to the failure of negotiation process. In a negotiation process between employer and employee higher pay may seem fair to employee but not to employer. In a manner this self serving bias may ruin the whole negotiation process.
Anchoring biases:
People tend to be overly affected by the initial anchor, without realizing the affect. This affect the negotiation process as the people may come into conclusion without considering the result, just as a result of initial anchor. In a negotiation process the individual focus on specific information such that they make decision on the matter without realizing the overall process, result and factors. Such tendency of people may affect the negotiation process as they might make conclusion based on limited information and initial feelings or anchors. As a result of this the whole negotiation process and factors to be considered may be neglected. One buyer may buy the house just by looking the locality or exterior but in real the house may not be as good as expected. Such anchoring factors are to be considered while making negotiations (http://www.sciencedirect.com/science?).
Finally, as a management student we should considered these factors such that it facilitates the whole negotiation process in a manner that there is achievement of organization objective and achievement of organizational excellence.
References:
Max H. Bazerman., Don A. Moore (2009). Judgment In Managerial Decision Making: John Wiley & Sons, Inc.
http://www.negotiations.com/case/union-negotiation/
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