BATNA, Compromise, and Negotiations

Unfortunately, as I am writing this, the 2020 NARSA Spring Management Conference scheduled for May 14-16, 2020 in Iowa has been cancelled. The coronavirus that is causing so many postponements has found its way to our corner of the world as well.  

The hope is to have the speakers slated for May join us for the HD Conference in September in Borger, Texas. We will of course keep you updated. 

One of the guest speakers was Azeemuddin Ahmed, MD, MBA who has a faculty appointment in both the University of Iowa Department of Emergency Medicine and the University of Iowa Department of Management and Entrepreneurship. Dr. Ahmed was the professor for my Dynamics of Negotiations class as I worked for my MBA.  

Negotiations are something that we all have dealt with in our lives and businesses. We negotiate with our suppliers over the price, payment terms, delivery times, and more on the items we need. We negotiate with our employees on their base pay, their bonuses, their benefits, paid time off and more on how we compensate them. We negotiate with our customers on the price of a product or service, the lead time to completion, the manner of work, testing to be performed after installation and more when we are bidding on a job.  

When you head into a negotiation, being prepared is the best thing you can do to set yourself up for success. When you head onto a car lot or are looking at buying a house, you do research. What have other houses in the area sold for? What have similar models of cars sold for? What are current interest rates? Can I get pre-approved? How long has the house been on the market? Is it nearing the end of a month, quarter, or model year? What is my trade in worth? What is my house worth on the market? Do I need to sell my home first before I can close on a new home?  

Negotiations are something that we all have dealt with in our lives and businesses.

Aaron Morrow
NARSA President

All these bits of information can add up to an advantage when it comes to negotiating the terms of a purchase or other deal. A negotiation is a conversation between two parties when the parties want something from the other. In a negotiation, each party has an Aspiration Level. This is the target point that they are trying to reach. Each party should have a Reservation Price. This the bottom line, the most you are willing to pay or give up. And each party should know their Best Alternative to a Negotiated Agreement (BATNA). 

There are five styles of negotiation that you can employ: Conciliatory, Collaborative, Avoiding, Competitive, and Compromising. Each style has its own advantages and disadvantages.

Conciliatory can also be called accommodating. This style focuses more on the relationship between the two parties and less on the outcome of the negotiation. Under this style, you are more willing to ‘lose’ the negotiation in deference to the relationship.  We’ll classify this as a “Lose/Win” type strategy. 

Competitive style is the opposite of conciliatory. This is seen as a “Win/Lose” type strategy and is focused on the outcome of the negotiation and not on the relationship between the parties. In this style, you want to win at all costs.  

Avoiding style is a “Take what’s left” approach and has a low focus on the relationship and a low focus on the outcome. This is seen as a “Lose/Lose” strategy. This can be used when a negotiating point is trivial to both sides and not worth the time investment or could be used by someone that doesn’t like negotiating or don’t mind losing as long as you lose too.  

The opposite of Avoiding is Collaboration style. In this setup, the parties work to “grow the pie” and then divide. This is seen as a “Win/Win” strategy. In this style, you are highly focused on both the outcome of the negotiation and the relationship with the other party.  

The last style is Compromising and incorporates a little bit of each of the other four strategies.  Ultimately, this strategy is a “Win/Lose and Lose/Win.”

Johnson Manufacturing was looking forward to hosting everyone and having an opportunity to show off our facility, but the health of our members and their staff is much more important.  I look forward to seeing you at future NARSA events. 

Aaron Morrow
NARSA President

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