Conflict and Negotiation

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The Group
CHAPTER
15
Conflict and
Negotiation
LEARNING OBJECTIVES
After studying this chapter, students should be able to:
1. Define conflict.
2. Differentiate between the traditional, human relations, and interactionist views of conflict.
3. Outline the conflict process.
4. Define negotiation.
5. Contrast distributive and integrative bargaining.
6. Apply the five steps of the negotiation process.
7. Show how individual differences influence negotiations.
8. Assess the roles and functions of third-party negotiations.
9. Describe cultural differences in negotiations.
Summary and Implications for Managers

Many people automatically assume that conflict is related to lower group and organizational performance.
This chapter has demonstrated that this assumption is frequently incorrect. Conflict can be either
constructive or destructive to the functioning of a group or unit. As shown in Exhibit 15-8 on page 506 of
the textbook, levels of conflict can be either too high or too low. Either extreme hinders performance. An
optimal level is one at which there is enough conflict to prevent stagnation, stimulate creativity, allow
tensions to be released, and initiate the seeds for change, yet not so much as to be disruptive or to deter
coordination of activities.
What advice can we give managers faced with excessive conflict and the need to reduce it? Dont
assume that one conflict-handling intention will always be best! You should select an intention appropriate
for the situation. The following are some guidelines:1
Use competition when quick, decisive action is vital (in emergencies), on important issues,
where unpopular actions need to be implemented (in cost cutting, enforcing unpopular rules,
discipline), on issues vital to the organizations welfare when you know youre rights and
against people who take advantage of noncompetitive behavior.
Use collaboration to find an integrative solution when both sets of concerns are too important
to be compromised, when your objective is to learn, to merge insights from people with
different perspectives, to gain commitment by incorporating concerns into a consensus, and
to work through feelings that have interfered with a relationship.
Use avoidance when an issue is trivial or when more important issues are pressing, when
you perceive no chance of satisfying your concerns, when potential disruption outweighs the
Copyright 2009 Pearson Education, Inc. publishing as Prentice Hall
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benefits of resolution, to let people cool down and regain perspective, when gathering
information supersedes immediate decision, when others can resolve the conflict more
effectively, and when issues seem tangential or symptomatic of other issues.
Use accommodation when you find that youre wrong and to allow a better position to be
heard, to learn, and to show your reasonableness; when issues are more important to others
than to yourself and to satisfy others and maintain cooperation; to build social credits for later
issues; to minimize loss when you are outmatched and losing; when harmony and stability
are especially important; and to allow employees to develop by learning from mistakes.
Use compromise when goals are important but not worth the effort of potential disruption of
more assertive approaches; when opponents with equal power are committed to mutually
exclusive goals; to achieve temporary settlements to complex issues; to arrive at expedient
solutions under time pressure; and as a backup when collaboration or competition is
unsuccessful.
Negotiation is an ongoing activity in groups and organizations. Distributive bargaining can resolve
disputes, but it often negatively affects the satisfaction of one or more negotiators because it is focused
on the short term and because it is confrontational. Integrative bargaining, in contrast, tends to provide
outcomes that satisfy all parties and that build lasting relationships. When engaged in negotiation, make
sure you set aggressive goals and try to find creative ways to achieve the goals of both parties, especially
when you value the long-term relationship with the other party. That doesnt mean giving in on your selfinterest; rather, it means trying to find creative solutions that give both parties what they really want.
The chapter opens by showing how Nelson Peltz, CEO of Train Fund Management L.P.,
created conflict at the Heinz corporation by buying 3% of Heinz shares of stock and
acquiring a set on the Board of Directors. When he began lobbying for changes in the
company to raise the slumping stick price, he met with resistance. Whether due to this
conflict or not, the stick price has increased roughly 11 The conflicting styles of Peltz and
other board members provide an illustrative introduction to this chapters material.
Brief Chapter Outline

I.
A DEFINITION OF CONFLICT (PPT 152)
We define conflict as a process that begins when one party perceives that
another party has negatively affected, or is about to negatively affect, something that the
first party cares about.
II. TRANSITIONS IN CONFLICT THOUGHT (PPTs 153 and 154)

A.
The Traditional View
This early approach assumed that all conflict was bad. By definition, it was
harmful and was to be avoided.
This view was consistent with the prevailing attitudes about group behavior in the
1930s and 1940s. Conflict was seen as a dysfunctional outcome resulting from
poor communication, a lack of openness and trust between people, and the
failure of managers to be responsive to their employees.
B.
The Human Relations View
Conflict is a natural occurrence in all groups and organizations.
The human relations view dominated conflict theory from the late 1940s through
the mid-1970s.
C.
The Interactionist View
The Interactionist view is the one taken in this chapter.
CHAPTER 15
Conflict and Negotiation
120
This approach encourages conflict on the grounds that a harmonious, peaceful,

tranquil, and cooperative group is prone to becoming static and non-responsive
to needs for change and innovation.
Whether a conflict is good or bad depends on the type of conflict. (PPTs 155
and 156)
o
Not all conflicts are good. Functional, constructive forms of conflict
support the goals of the group and improve its performance. Conflicts
that hinder group performance are dysfunctional or destructive forms of
conflict.
Task conflict relates to the content and goals of the work. Low-tomoderate levels of task conflict are functional.
Relationship conflict focuses on interpersonal relationships.

These conflicts are almost always dysfunctional.
Process conflict relates to how the work gets done. Low levels of
process conflict are functional and could enhance team
performance.
III. THE CONFLICT PROCESS (PPTs 157 to 1513)

A.
Stage I: Potential Opposition or Incompatibility
1.
Communication
Communication as a source of conflict represents those opposing forces

that arise from semantic difficulties, misunderstandings, and noise in
the communication channels.
2.
Structure
Size and specialization act as forces to stimulate conflict. The larger the
group and more specialized its activities, the greater the likelihood of
conflict.
3.
Personal Variables
Include individual value systems and personality characteristics. Certain

personality types lead to potential conflict.
Most important is differing value systems. Value differences are the best
explanation for differences of opinion on various matters.
B.
Stage II: Cognition and Personalization
Conflict is personalized when it is felt and when individuals become emotionally

involved.
This stage is where conflict issues tend to be defined and this definition
delineates the possible settlements.
Second, emotions play a major role in shaping perceptions.

C.
Stage III: Intentions
1.
Introduction
Intentions are decisions to act in a given way.
Primary conflict-handling intentions are represented in Exhibit 152 along

two dimensions:
o
Cooperativenessthe degree to which one party attempts to
satisfy the other partys concerns.
o
Assertivenessthe degree to which one party attempts to
satisfy his or her own concerns.
Five conflict-handling intentions can be identified: competing,

collaborating, avoiding, accommodating, and compromising.
2.
Competing
3.
Collaborating
4.
Avoiding
5.
Accommodating
6.
Compromising
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D.
E.
The Group
Stage IV: Behavior

Stage IV is where conflicts become visible.
Stage IV is a dynamic process of interaction; conflicts exist somewhere along a
continuum.
Exhibit 154 lists the major resolution and stimulation techniques.
Stage V: Outcomes
1.
Introduction
Outcomes may be functionalimproving group performance, or

dysfunctional in hindering it.
2.
Functional Outcomes
Conflict is constructive when it:

o Improves the quality of decisions.
o Stimulates creativity and innovation.
o Encourages interest and curiosity.
Conflict is an antidote for groupthink.

o
Increasing cultural diversity of the workforce should provide
benefits to organizations.
3.
Dysfunctional Outcomes
Undesirable consequences:
o
A retarding of communication
o
Reductions in group cohesiveness
o
Subordination of group goals to the primacy of infighting between
members
4.
Creating Functional Conflict
If managers accept the interactionist view toward conflict, they

encourage functional conflict.
IV. NEGOTIATION (PPTs 1514 to 1519)

A.
Introduction
Negotiation is a process in which two or more parties exchange goods or

services and attempt to agree upon the exchange rate for them. We use the
terms negotiation and bargaining interchangeably.
B.
Bargaining Strategies
1. Distributive Tactics
Its most identifying feature is that it operates under zero-sum conditions.

Any gain I make is at your expense, and vice versa.
The most widely cited example of distributive bargaining is in labormanagement negotiations over wages.
2.
Integrative Tactics
Integrative bargaining builds long-term relationships and facilitates

working together in the future; it bonds negotiators and allows each to
leave the bargaining table feeling victorious.
Distributive bargaining, on the other hand, leaves one party a loser. It

tends to build animosities and deepens divisions.
C.
The Negotiation Process
1.
Preparation and Planning:
Do your homework.
Determine your and the other sides Best Alternative To a Negotiated

Agreement (BATNA).
2.
Definition of Ground Rules:
Who will do the negotiating? Where will it take place? What time
constraints, if any, will apply?
3.
Clarification and Justification:
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D.
V.
122
When initial positions have been exchanged, explain, amplify, clarify,

bolster, and justify your original demands.
4.
Bargaining and Problem Solving:
The essence of the negotiation process is the actual give-and-take in trying
to hash out an agreement.
5.
Closure and Implementation:
The final stepformalizing the agreement that has been worked out and
developing any procedures that are necessary for implementation and
monitoring
Issues in Negotiation
1.
The Role of Mood and Personality Traits in Negotiation
Overall assessments of the personality-negotiation relationship find that

personality traits have no significant direct effect on either the bargaining
process or negotiation outcomes.
2.
Gender Differences in Negotiations
Men and women do not negotiate differently.
The belief that women are nicer is probably due to confusing gender
and the lack of power typically held by women.
Womens attitudes toward negotiation and toward themselves appear to

be different from mens.
3.
Cultural Differences in Negotiations
Negotiating styles clearly vary across national cultures.
The French like conflict.
The Chinese also draw out negotiations but that is because they believe
negotiations never end.
Americans are known around the world for their impatience and their
desire to be liked.
The cultural context of the negotiation significantly influences the amount

and type of preparation for bargaining, the emphasis on task versus
interpersonal relationships, the tactics used, etc.
4.
Third-Party Negotiations
A mediator is a neutral third party who facilitates a negotiated solution by

using reasoning and persuasion, suggesting alternatives, and the like.
An arbitrator is a third party with the authority to dictate an agreement.
A conciliator is a trusted third party who provides an informal

communication link among parties.
A consultant is a skilled and impartial third party who attempts to

facilitate problem solving through communication and analysis, aided by
his or her knowledge of conflict management.
SUMMARY AND IMPLICATIONS FOR MANAGERS

A. Conflict can be either constructive or destructive
B. Inadequate or excessive conflict
Reduced satisfaction
Increased absenteeism
Lower productivity
C. Optimal conflict
Decreases apathy
Increases motivation
D. Handling conflict
Competition
Collaboration
Avoidance
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Accommodation
Compromise
E Negotiation
Distributive bargaining
Expanded Chapter Outline

I.
A DEFINITION OF CONFLICT
There are several common themes which underlie most definitions:

o
The parties to it must perceive conflict.
o
Commonalties in the definitions are opposition or incompatibility and some form
of interaction.
We define conflict as a process that begins when one party perceives that another party
has negatively affected, or is about to negatively affect, something that the first party
cares about.
o
This describes that point when an interaction crosses over to become an interparty conflict.
o
It encompasses the wide range of conflicts that people experience in
organizations.
II. TRANSITIONS IN CONFLICT THOUGHT

A.
The Traditional View
The traditional view of conflict argues that it must be avoidedit

indicates a malfunctioning with the group.
This early approach assumed that all conflict was bad. Conflict was
synonymous with such terms that reinforced its negative connotation. By
definition, it was harmful and was to be avoided.
This view was consistent with the prevailing attitudes about group
behavior in the 1930s and 1940s. Conflict was seen as a dysfunctional outcome
resulting from poor communication, a lack of openness and trust between
people, and the failure of managers to be responsive to their employees.
B.
The Human Relations View
The human relations view argues that conflict is a natural and inevitable
outcome in any group and that it need not be evil, but has the potential to be a
positive force in determining group performance.
Conflict is a natural occurrence in all groups and organizations. Since it

was natural and inevitable it should be accepted.
It cannot be eliminated and may even contribute to group performance.

The human relations view dominated conflict theory from the late 1940s through
the mid-1970s.
C.
The Interactionist View
The interactionist approach proposes that conflict can be a positive force

in a group but explicitly argues that some conflict is absolutely necessary for a
group to perform effectively.
The Interactionist view is the one taken in this chapter.
This approach encourages conflict on the grounds that a harmonious,

peaceful, tranquil, and cooperative group is prone to becoming static and nonresponsive to needs for change and innovation.
Group leaders maintain enough conflict to keep the group viable, selfcritical, and creative.
Whether a conflict is good or bad depends on the type of conflict.
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Not all conflicts are good. Functional, constructive forms of conflict

support the goals of the group and improve its performance. Conflicts
that hinder group performance are dysfunctional or destructive forms of
conflict.
What differentiates functional from dysfunctional conflict? You need to
look at the type of conflict.
Task conflict relates to the content and goals of the work. Low-tomoderate levels of task conflict are functional and consistently
demonstrate a positive effect on group performance because it
stimulates discussion, improving group performance.
Relationship conflict focuses on interpersonal relationships.
These conflicts are almost always dysfunctional.
The friction and interpersonal hostilities inherent in

relationship conflicts increase personality clashes and
decrease mutual understanding.
Process conflict relates to how the work gets done.
Low-levels of process conflict are functional and could

enhance team performance.
For process conflict to be productive, it must be kept low.
Intense arguments create uncertainty.
III. THE CONFLICT PROCESS

A.
Stage I: Potential Opposition or Incompatibility
1.
Communication
Communication as a source of conflict represents those opposing forces

that arise from semantic difficulties, misunderstandings, and noise in
the communication channels.
Differing word connotations, jargon, insufficient exchange of information,

and noise in the communication channel are all barriers to
communication and potential antecedents to conflict.
Semantic difficulties are a result of differences in training, selective

perception, and inadequate information.
The potential for conflict increases when either too little or too much
communication takes place.
The channel chosen for communicating can have an influence on

stimulating opposition.
2.
Structure
The term structure includes variables such as size, degree of

specialization, jurisdictional clarity, member-goal compatibility, leadership
styles, reward systems, and the degree of dependence.
Size and specialization act as forces to stimulate conflict. The larger the
group and more specialized its activities, the greater the likelihood of
conflict.
The potential for conflict is greatest where group members are younger
and turnover is high.
The greater the ambiguity in responsibility for actions lies, the greater the
potential for conflict.
The diversity of goals among groups is a major source of conflict.
A close style of leadership increases conflict potential.
Too much reliance on participation may also stimulate conflict.
Reward systems, too, are found to create conflict when one members
gain is at anothers expense.
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3.
B.
C.
Finally, if a group is dependent on another group, opposing forces are

stimulated.
Personal Variables
Include individual value systems and personality characteristics. Certain

personality types lead to potential conflict.
Most important is differing value systems. Value differences are the best
explanation for differences of opinion on various matters.
Stage II: Cognition and Personalization
Antecedent conditions lead to conflict only when the parties are affected by and
aware of it.
Conflict is personalized when it is felt and when individuals become emotionally

involved.
This stage is where conflict issues tend to be defined and this definition
delineates the possible settlements.
Second, emotions play a major role in shaping perceptions.

o
Negative emotions produce oversimplification of issues, reductions in
trust, and negative interpretations of the other partys behavior.
o
Positive feelings increase the tendency to see potential relationships
among the elements of a problem, to take a broader view of the situation,
and to develop more innovative solutions.
Stage III: Intentions
1.
Introduction
Intentions are decisions to act in a given way.
Why are intentions separated out as a distinct stage? Merely one party
attributing the wrong intentions to the other escalates a lot of conflicts.
One authors effort to identify the primary conflict-handling intentions is

represented in Exhibit 152 is along two dimensions:
o
Cooperativenessthe degree to which one party attempts to
satisfy the other partys concerns.
o
Assertivenessthe degree to which one party attempts to
satisfy his or her own concerns.
Five conflict-handling intentions can be identified: competing,

collaborating, avoiding, accommodating, and compromising.
2.
Competing
When one person seeks to satisfy his or her own interests, regardless of
the impact on the other parties to the conflict
3.
Collaborating
When the parties to conflict each desire to fully satisfy the concerns of all
parties. The intention is to solve the problem by clarifying differences
rather than by accommodating.
4.
Avoiding
A person may recognize that a conflict exists and want to withdraw from
it or suppress it.
5.
Accommodating
When one party seeks to appease an opponent, that party is willing to be

self-sacrificing.
6.
Compromising
When each party to the conflict seeks to give up something, sharing

occurs, resulting in a compromised outcome. There is no clear winner or
loser, and the solution provides incomplete satisfaction of both parties
concerns.
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D.
E.
126
Intentions provide general guidelines for parties in a conflict situation.

They define each partys purpose, but they are not fixed.
o
They might change because of reconceptualization or because
of an emotional reaction.
o
However, individuals have preferences among the five conflicthandling intentions.
o
It may be more appropriate to view the five conflict-handling
intentions as relatively fixed rather than as a set of options from
which individuals choose to fit an appropriate situation.
Stage IV: Behavior
Stage IV is where conflicts become visible. The behavior stage includes the
statements, actions, and reactions made by the conflicting parties. These conflict
behaviors are usually overt attempts to implement each partys intentions.
Stage IV is a dynamic process of interaction; conflicts exist somewhere along a

continuum.
At the lower part of the continuum, conflicts are characterized by subtle, indirect,
and highly controlled forms of tension.
Conflict intensities escalate as they move upward along the continuum until they
become highly destructive.
Functional conflicts are typically confined to the lower range of the continuum.
Exhibit 154 lists the major resolution and stimulation techniques.

Stage V: Outcomes
1.
Introduction
Outcomes may be functionalimproving group performance, or

dysfunctional in hindering it.
2.
Functional Outcomes
How might conflict act as a force to increase group performance?
Conflict is constructive when it:

o
Improves the quality of decisions.
o
Stimulates creativity and innovation.
o
Encourages interest and curiosity.
o
Provides the medium through which problems can be aired and
tensions released.
o
Fosters an environment of self-evaluation and change.
The evidence suggests that conflict can improve the quality of decision
making.
o
Conflict is an antidote for groupthink.
o
Conflict challenges the status quo, furthers the creation of new
ideas, promotes reassessment of group goals and activities, and
increases the probability that the group will respond to change.
o
Research studies in diverse settings confirm the functionality of
conflict.
The comparison of six major decisions made during the

administration of four different U.S. presidents found that
conflict reduced the chance of groupthink.
When groups analyzed decisions that had been made by

the individual members of that group, the average
improvement among the high-conflict groups was 73
percent greater than was that of those groups
characterized by low-conflict conditions.
o
Increasing cultural diversity of the workforce should provide
benefits to organizations.
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PART THREE
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Heterogeneity among group and organization members
can increase creativity, improve the quality of decisions,
and facilitate change by enhancing member flexibility.
The ethnically diverse groups produced more effective

and more feasible ideas and higher quality, unique ideas
than those produced by the all-Anglo group.
Similarly, studies of professionalssystems analysts and research and

development scientistssupport the constructive value of conflict.
An investigation of 22 teams of systems analysts found that the more

incompatible groups were likely to be more productive.
Research and development scientists have been found to be most

productive where there is a certain amount of intellectual conflict.
Dysfunctional Outcomes
Uncontrolled opposition breeds discontent, which acts to dissolve

common ties and eventually leads to the destruction of the group.
Undesirable consequences:
o
A retarding of communication
o
Reductions in group cohesiveness
o
Subordination of group goals to the primacy of infighting between
members
Conflict can bring group functioning to a halt and potentially threaten the
groups survival.
The demise of an organization as a result of too much conflict is not as

unusual as it might first appear. One of New Yorks best-known law firms,
Shea & Gould, closed down solely because the 80 partners just could not
get along.
Creating Functional Conflict
If managers accept the interactionist view toward conflict, they

encourage functional conflict.
Creating functional conflict is a tough job, particularly in large American

corporations.
A high proportion of people who get to the top are conflict avoiders.
At least seven out of ten people in American business hush up when

their opinions are at odds with those of their superiors, allowing bosses
to make mistakes even when they know better.
Such anti-conflict cultures are not tolerable in todays fiercely competitive

global economy.
This process frequently results in decisions and alternatives that

previously had not been considered.
One common ingredient in organizations that successfully create

functional conflict is that they reward dissent and punish conflict
avoiders.
The real challenge for managers is when they hear news that they do not
want to hear.
Managers should ask calm, even-tempered questions, such as: Can you
tell me more about what happened? or What do you think we ought to
do? They should also offer a sincere Thank you.
3.
4.
IV. NEGOTIATION
A.
Introduction
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128
B.
Negotiation is a process in which two or more parties exchange goods or services

and attempt to agree upon the exchange rate for them. We use the terms
negotiation and bargaining interchangeably.
Negotiation permeates the interactions of almost everyone in groups and

organizations. For example, labor bargains with management.
Not so obvious, however, managers negotiate with employees, peers, and bosses.
Salespeople negotiate with customers.
Purchasing agents negotiate with suppliers.
A worker agrees to answer a colleagues phone for a few minutes in exchange for
some past or future benefit.
Bargaining Strategies
1.
Distributive Tactics
An example of distributive bargaining is buying a car:

o
You go out to see the car. It is great and you want it.
o
The owner tells you the asking price. You do not want to pay that
much.
o
The two of you then negotiate over the price.
Its most identifying feature is that it operates under zero-sum conditions.

Any gain I make is at your expense, and vice versa.
The most widely cited example of distributive bargaining is in labormanagement negotiations over wages.
The essence of distributive bargaining is depicted in Exhibit 156.

o
Parties A and B represent two negotiators.
o
Each has a target point that defines what he or she would like to
achieve.
o
Each also has a resistance point, which marks the lowest
outcome that is acceptable.
o
The area between these two points makes up each ones
aspiration range.
o
As long as there is some overlap between A and Bs aspiration
ranges, there exists a settlement range where each ones
aspirations can be met.
When engaged in distributive bargaining, ones tactics focus on trying to

get ones opponent to agree to ones specific target point or to get as
close to it as possible.
2.
Integrative Tactics
An example: A sales rep calls in the order and is told that the firm cannot
approve credit to this customer because of a past slow-pay record.
o
The next day, the sales rep and the firms credit manager meet to
discuss the problem. They want to make the sale, but do not
want to get stuck with uncollectible debt.
o
The two openly review their options.
o
After considerable discussion, they agree on a solution that
meets both their needs. The sale will go through with a bank
guarantee that will ensure payment if not made in 60 days.
This example operates under the assumption that there

exists one or more settlements that can create a win-win
solution.
In terms of intra-organizational behavior, all things being

equal, integrative bargaining is preferable to distributive
bargaining.
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Because integrative bargaining builds long-term

relationships and facilitates working together in the
future, it bonds negotiators and allows each to leave the
bargaining table feeling victorious.
Distributive bargaining, on the other hand, leaves one

party a loser. It tends to build animosities and deepens
divisions.
Why do we not see more integrative bargaining in organizations? The

answer lies in the conditions necessary for this type of negotiation to
succeed.
o
Parties who are open with information and candid about their
concerns
o
A sensitivity by both parties to the others needs
o
The ability to trust one another
o
A willingness by both parties to maintain flexibility
The Negotiation Process
1.
Preparation and Planning
Do your homework. What is the nature of the conflict? What is the history
leading up to this negotiation? Who is involved, and what are their
perceptions of the conflict? What do you want from the negotiation?
What are your goals?
You also want to prepare an assessment of what you think the other
party to your negotiations goals are.
o
When you can anticipate your opponents position, you are better
equipped to counter his or her arguments with the facts and
figures that support your position.
Once you have gathered your information, use it to develop a strategy.
Determine your and the other sides Best Alternative To a Negotiated

Agreement (BATNA).
Your BATNA determines the lowest value acceptable to you for a

negotiated agreement.
Any offer you receive that is higher than your BATNA is better than an
impasse.
2.
Definition of Ground Rules
Who will do the negotiating? Where will it take place? What time
constraints, if any, will apply?
To what issues will negotiation be limited? Will there be a specific

procedure to follow if an impasse is reached?
During this phase, the parties will also exchange their initial proposals or
demands.
3.
Clarification and Justification
When initial positions have been exchanged, explain, amplify, clarify,

bolster, and justify your original demands.
This need not be confrontational.
You might want to provide the other party with any documentation that
helps support your position.
4.
Bargaining and Problem Solving
The essence of the negotiation process is the actual give-and-take in

trying to hash out an agreement.
Concessions will undoubtedly need to be made by both parties.

5.
Closure and Implementation
C.
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D.
130
The final stepformalizing the agreement that has been worked out and
developing any procedures that are necessary for implementation and
monitoring
Major negotiations will require hammering out the specifics in a formal

contract.
For most cases, however, closure of the negotiation process is nothing

more formal than a handshake.
Issues in Negotiation
1.
The Role of Mood and Personality Traits in Negotiation
Can you predict an opponents negotiating tactics if you know something

about his/her personality? The evidence says no.
Overall assessments of the personality-negotiation relationship find that

personality traits have no significant direct effect on either the bargaining
process or negotiation outcomes.
2.
Gender Differences in Negotiations
Men and women do not negotiate differently.
A popular stereotype is that women are more cooperative, pleasant, and

relationship-oriented in negotiations than are men. The evidence does
not support this.
Comparisons between experienced male and female managers find

women are:
o
Neither worse nor better negotiators.
o
Neither more cooperative nor open to the other.
o
Neither more nor less persuasive nor threatening than are men.
o
The belief that women are nicer is probably due to confusing
gender and the lack of power typically held by women.
Low-power managers, regardless of gender, attempt to

placate their opponents and to use softly persuasive
tactics rather than direct confrontation and threats.
Womens attitudes toward negotiation and toward themselves appear to

be different from mens.
Managerial women demonstrate less confidence in anticipation of

negotiating and are less satisfied with their performance despite
achieving similar outcomes as men.
Women may unduly penalize themselves by failing to engage in

negotiations when such action would be in their best interests
3.
Cultural Differences in Negotiations
Negotiating styles clearly vary across national cultures.
The French like conflict.

o
They gain recognition and develop their reputations by thinking
and acting against others.
o
They tend to take a long time in negotiating agreements, and
they are not overly concerned about whether their opponents like
or dislike them.
The Chinese also draw out negotiations but that is because they believe
negotiations never end.
o
Just when you think you have reached a final solution, the
Chinese executive might smile and start the process all over
again.
o
Like the Japanese, the Chinese negotiate to develop a
relationship and a commitment to work together.
o
Americans are known around the world for their impatience and
their desire to be liked.
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Astute negotiators often turn these characteristics to their
advantage.
The cultural context of the negotiation significantly influences the amount

and type of preparation for bargaining, the emphasis on task versus
interpersonal relationships, the tactics used, etc.
A study compared North Americans, Arabs, and Russians negotiating

style, how they responded to an opponents arguments, their approach to
making concessions, and how they handled negotiating deadlines.
o
North Americans tried to persuade others by relying on facts and
appealing to logic.
They made small concessions early in the negotiation to

establish a relationship and usually reciprocated the
opponents concessions.
North Americans treated deadlines as very important.

o
The Arabs tried to persuade by appealing to emotion.
They countered opponents arguments with subjective

feelings.
They made concessions throughout the bargaining

process and almost always reciprocated opponents
concessions.
Arabs approached deadlines very casually.

o
The Russians based their arguments on asserted ideals.
They made few, if any, concessions.
Any concession offered by an opponent was viewed as

a weakness and almost never reciprocated.
Finally, the Russians tended to ignore deadlines.
A second study looked at verbal and nonverbal negotiation tactics

exhibited by North Americans, Japanese, and Brazilians during half-hour
bargaining sessions.
o
Brazilians on average said No 83 times compared to five times
for the Japanese and nine times for the North Americans.
o
The Japanese displayed more than five periods of silence lasting
longer than ten seconds during the 30-minute sessions.
o
North Americans averaged 3.5 such periods; the Brazilians had
none.
o
The same number of times, but the Brazilians interrupted 2.5 to 3
times more often
o
Finally, while the Japanese and the North Americans had no
physical contact with their opponents during negotiations except
for handshaking, the Brazilians touched each other almost five
times every half-hour.
Third-Party Negotiations
When individuals or group representatives reach a stalemate and are

unable to resolve their differences through direct negotiations, they may
turn to a third party.
A mediator is a neutral third party who facilitates a negotiated solution by

using reasoning and persuasion, suggesting alternatives, and the like.
o
They are widely used in labor-management negotiations and in
civil court disputes.
o
Their settlement rate is approximately 60 percent, with negotiator
satisfaction at about 75 percent.
o
The key to successthe conflicting parties must be motivated to
bargain and resolve their conflict, intensity cannot be too high,
and the mediator must be perceived as neutral and noncoercive.
o
4.
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V.
132
An arbitrator is a third party with the authority to dictate an agreement.

o
It can be voluntary (requested) or compulsory (forced on the
parties by law or contract).
o
The authority of the arbitrator varies according to the rules set by
the negotiators.
o
The arbitrator might be limited to choosing one of the
negotiators last offers or to suggesting an agreement point that
is nonbinding, or free to choose and make any judgment.
o
The big plus of arbitration over mediation is that it always results
in a settlement.
o
Any negative depends on how heavy-handed the arbitrator
appears.
A conciliator is a trusted third party who provides an informal
communication link among parties.
o
This role was made famous by Robert Duval in the first
Godfather film.
o
Conciliation is used extensively in international, labor, family, and
community disputes.
o
Comparing its effectiveness to mediation has proven difficult.
o
Conciliators engage in fact finding, interpreting messages,
and persuading disputants to develop agreements.
A consultant is a skilled and impartial third party who attempts to
facilitate problem solving through communication and analysis, aided by
his or her knowledge of conflict management.
o
In contrast to the previous roles, the consultants role is to
improve relations between the conflicting parties so that they can
reach a settlement themselves.
o
This approach has a longer-term focus: to build new and positive
perceptions and attitudes between the conflicting parties.
SUMMARY AND IMPLICATIONS FOR MANAGERS

A. Conflict can be either constructive or destructive
B. Inadequate or excessive conflict
Reduced satisfaction
Increased absenteeism
Lower productivity
C. Optimal conflict
Decreases apathy
Increases motivation
D. Handling conflict
Competition
Collaboration
Avoidance
Accommodation
Compromise
E. Negotiation
Distributive bargaining
Text Exercises
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Myth or
Science?
The Group
High Starting Bids Lead to High Auction

Sales
This statement is false. That might surprise you, given that we just reviewed evidence on anchoring bias,
which would suggest that if Im selling something in an auction, I should set the initial bid as high as
possible. Research shows that this would be a mistake. In fact, the opposite strategy is better.
Analyzing auction results on eBay, a group of researchers found that lower starting bids generated
higher final prices. As just one example, Nikon digital cameras with ridiculously low starting bids (one
penny) sold for an average of $312, whereas those with higher starting prices went for an average of
$204.2
What explains such a counterintuitive result? The researchers found that low starting bids attract
more bidders, and the increased traffic generates more competing bidders so that in the end, the price is
higher. Although this may seem irrational, negotiation and bidding behavior arent always rational, and as
youve probably experienced firsthand, once you start bidding for something, you want to win, forgetting
that for many auctions, the one with the highest bid is often the loser (the so-called winners curse).
Class Exercise
1.
2.
Consider using the team exercise at this point or referencing this material when you process the
exercise.
At that time, have students discuss what part the lack of communication had in fostering the
conflict or how communicating minimized and/or resolved the conflict.
International
Negotiating Across Cultures
Obtaining a favorable outcome in a negotiation may in part depend on the cultural characteristics
of your opponent. A study of negotiators in the United States, China, and Japan found that culture
plays an important role in successful negotiation. The study found that, overall, negotiators who
had both a self-serving egoistic orientation and a high goal level fared the best overall compared
to negotiators with an other-serving prosocial orientation and low goal level. In other words, the
strategy combining a self-serving negotiation position, where one is focused only on maximizing
ones own outcomes, coupled with a strong desire to obtain the best outcomes, led to the most
favorable negotiation results.
However, the degree to which this particular strategy resulted in better outcomes
depended on the negotiating partner. The results showed that being self-serving and having a
high negotiation goal level resulted in higher outcomes (in this case, profits) only when the
negotiating opponent was other-serving. Negotiators from the United States are more likely to be
self-serving and have high goal levels. In China and Japan, however, there is a greater likelihood
that negotiators are other-serving and thus are more concerned with others outcomes.
Consequently, negotiators from the United States are likely to obtain better outcomes for
themselves when negotiating with individuals from China and Japan because American
negotiators tend to be more concerned with their own outcomes, sometimes at the expense of the
other party.
Though this study suggests that being self-serving can be beneficial in some situations,
negotiators should be wary of being too self-serving. Though American negotiators may benefit
from a self-serving negotiation position and a high goal level when negotiating with individuals
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from China or Japan, being too self-serving may result in damaged relationships, leading to less
favorable outcomes in the long run.
Source: Based on Y. Chen, E. A. Mannix, and T. Okumura, The Importance of Who You Meet: Effects of
Self-Versus Other-Concerns Among Negotiators in the United States, The Peoples Republic of China, and
Japan, Journal of Experimental Social Psychology, January 2003, pp. 115.
Class Exercise
Instructors may wish to engage their students in a class discussion concerning cultural differences in
negotiating.
IN THE
Marriage Counseling for the Top Bosses

That the two top executives of a company conflicted with one another is no surprise. Whats surprising is
what they did about it.
When Watermark, a struggling maker of kayaks and car racks, brought in a new executive team, the
top two executives came from very different backgrounds. CEO Jim Clark, 43, was an avid hunter and
outdoorsman. COO Thomas Fumarelli, 50, was an urbane professional used to high finance in New York
and Paris. Because the organization was struggling, with anxious employees who were playing them off
one another, the two executives knew their differences were likely to overwhelm them. So they headed off
personality conflicts at the pass with 2 years of joint executive-coaching sessions.
Although such joint coaching sessions are highly unusual, both Clark and Fumarelli (it was his idea)
credit the weekly sessions for helping them work through their differences. It was like marriage
counseling, said Clark. You get all the issues on the table.
Early on, the coaches asked Clark and Fumarelli what they needed from another. Clark said that he
needed Fumarelli to be his eyes and ears for the company and to cover his back. Fumarelli replied that
he needed Clark to support him. I can check my ego at the door, he recalls saying, But I need validation
and support from you for the role Im playing to support you.
The two discovered a conflict, though, when the coaches asked them separately how much time they
should spend on various corporate activities. Both Clark and Fumarelli thought that development of the
annual budget was his responsibility. After getting this out in the open, Clark realized the budget should
primarily be Fumarellis responsibility. Very early on, we knew we were going to be stepping on each
others toes, Clark said.
When a private equity company bought Watermark, both left the company. But even then, the two
used coaches to handle what they called their divorce.
Source: Based on P. Dvorak, CEO and COO Try Marriage Counseling, Wall Street Journal,
July 31, 2006, p. B1, B3.
Class Exercise
Discuss with students (as a class or in groups) the following:
1. Was the approach taken based on distributive or integrative bargaining techniques?
2. What was the most important factor in framing the negotiations?
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3. Think of recent negotiation that you were involved with. Was the framework distributive or integrative?
4. Did relationships play a significant part in your negotiation?
5. What could you have done to improve the outcome of the negotiation?
Point
Counterpoint
Conflict Benefits Organizations
Point
Conflict Benefits Organizations
Lets briefly review how stimulating conflict can provide benefits to the organization:
Conflict is a means to solve problems and bring about radical change. Its an effective device by
which management can drastically change the existing power structure, current interaction patterns,
and entrenched attitudes. If there is no conflict, it means the real problems arent being addressed.
Conflict facilitates group cohesiveness. Whereas conflict increases hostility between groups,
external threats tend to cause a group to pull together as a unit. Conflict with another group brings
together those within each group. Such intragroup cohesion is a critical resource that groups draw on
in good and especially in bad times.
Conflict improves group and organizational effectiveness. Groups or organizations devoid of
conflict are likely to suffer from apathy, stagnation, groupthink, and other debilitating diseases. In fact,
more organizations probably fail because they have too little conflict, not because they have too
much. Stagnation is the biggest threat to organizations, but since it occurs slowly, its ill effects often
go unnoticed until its too late. Conflict can break complacencythough most of us dont like conflict,
it often is the last best hope of saving an organization.
Counterpoint
In general, conflicts are dysfunctional, and it is one of managements major responsibilities to keep
conflict intensity as low as humanly possible. A few points support this case:
The negative consequences from conflict can be devastating. The list of negatives associated
with conflict is awesome. The most obvious negatives are increased turnover, decreased employee
satisfaction, inefficiencies between work units, sabotage, and labor grievances and strikes. One study
estimated that managing conflict at work costs the average employer nearly 450 days of management
time a year.<EN>3
Effective managers build teamwork. A good manager builds a coordinated team. Conflict works
against such an objective. When a team works well, the whole becomes greater than the sum of the
parts. Management creates teamwork by minimizing internal conflicts and facilitating internal
coordination.
Conflict is avoidable. It may be true that conflict is inevitable when an organization is in a downward
spiral, but the goal of good leadership and effective management is to avoid the spiral to begin with.
You dont see Warren Buffett getting into a lot of conflicts with his board of directors. Its possible
theyre complacent, but we think its more likely because Berkshire Hathaway is a well-run company,
doing what it should, and avoiding conflict as a result.
Teaching Notes
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1.
136
Lead a discussion on how conflict between the student body and the administration could help or
hurt your institution.
Create functional/dysfunctional lists on the board, and ask students first how conflict could help
the college or university. Record these under functional. In the discussion, see if specific topics
or issues are on the students minds.
Next, ask how such conflict can harm the institution. Again, record these and solicit specific
issues, and record to whom the costs or hurts would apply.
Now discuss what would make such conflict functional or dysfunctional.
Is it the topic?
The parties involved?
The history of the issue?
Student expectation of administration reaction to conflict?

Finally, discuss:
Why have students not spoken up on these issues?
How could functional conflict be started and managed over a specific issue?
What are the dangers if it got out of hand?
2.
3.
4.
5.
Questions for Review

1
What is conflict?
Answer: Conflict is a process that begins when one party perceives that another party has
negatively affected, or is about to negatively affect, something that the first party cares about
2.
What are the differences among the traditional, human relations, and interactionist views of
conflict?
Answer: The traditionalist view of conflict is the belief that all conflict is harmful and must be
avoided. The human relations view of conflict is the belief that conflict is a natural and inevitable
outcome in any group. The current view is the interactionist view of conflict or the belief that
conflict is not only a positive force in a group but also that it is absolutely necessary for a group to
perform effectively.
3.
What are the steps of the conflict process?

Answer: The process is diagrammed in Exhibit 151.
Stage I: Potential opposition or incompatibilityThe first step in the conflict process

is the presence of conditions that create opportunities for conflict to arise. These
conditions have been condensed into three general categories: communication, structure,
and personal variables.
Stage II: Cognition and personalizationThe antecedent conditions can lead to

conflict only when one or more of the parties are affected by, and aware of, the conflict.
Just because a conflict is perceived does not mean that it is personalized. It is important
because it is where conflict issues tend to be defined.
Stage III: IntentionsIntentions are decisions to act in a given way. Exhibit 152
represents one authors effort to identify the primary conflict-handling intentions. Two
dimensionscooperativeness and assertiveness. Five conflict-handling intentions can be
identified: competing (assertive and uncooperative), collaborating (assertive and
cooperative), avoiding (unassertive and uncooperative), accommodating (unassertive
and cooperative), and compromising (midrange on both assertiveness and
cooperativeness).
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4.
The Group
Stage IV: BehaviorThe behavior stage includes the statements, actions, and reactions
made by the conflicting parties. These conflict behaviors are usually overt attempts to
implement each partys intentions. Exhibit 153 provides a way of visualizing conflict
behavior. Exhibit 154 lists the major resolution and stimulation techniques that allow
managers to control conflict levels.
Stage V: OutcomesOutcomes may be functional in that the conflict results in an
improvement in the groups performance, or dysfunctional in that it hinders group
performance. Conflict is constructive when it improves the quality of decisions, stimulates
creativity and innovation, etc. Dysfunctional outcomesuncontrolled opposition breeds
discontent, which acts to dissolve common ties, and eventually leads to the destruction of
the group. Among the more undesirable consequences are a retarding of communication,
reductions in group cohesiveness, and subordination of group goals to the primacy of
infighting between members.
What is negotiation?
Answer: Negotiation is a process in which two or more parties exchange goods or services and
attempt to agree on the exchange rate for them
5.
What are the differences between distributive and integrative bargaining?

Answer: Distributive Bargaining is negotiation that seeks to divide up a fixed amount of
resources; a win-lose situation. Integrative Bargaining is negotiation that seeks one or more
settlements that can create a win-win solution. Exhibit 15-5 shows that these approaches to
bargaining differ in their goal and motivation, focus, interests, information sharing and duration of
relationship.
6.
What are the five steps in the negotiation process?

Answer: Exhibit 15-7 shows a model of the negotiation process. It includes the preparation and
planning, definition of ground rules, clarification and justification, bargaining and problem solving,
and closure and implementation.
7.
How do the individual differences of personality and gender influence negotiations?

Answer: Personality and gender can both influence negotiations. Personality traits like
extroverts and agreeable people are weaker at distributive negotiation. In contrast, disagreeable
introverts are best at this type of negotiation. Intelligence is also a weak indicator of bargaining.
Effectiveness. With gender, men and women negotiate the same way, but may experience
different outcomes. Women and men take on gender stereotypes in negotiations such as tender
and tough. In addition, women are less likely to negotiate.
8.
What are the roles and functions of third-party negotiations?

Answer: There are four basic third-party roles:
Mediator -A neutral third party who facilitates a negotiated solution by using reasoning,
persuasion, and suggestions for alternatives
Arbitrator - A third party to a negotiation who has the authority to dictate an agreement.
Conciliator - A trusted third party who provides an informal communication link between
the negotiator and the opponent
Consultant - An impartial third party, skilled in conflict management, who attempts to
facilitate creative problem solving through communication and analysis
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9.
138
How does culture influence negotiations?

Answer: Negotiating styles vary across national cultures. Some like the Japanese negotiate
indirectly. American negotiators are more likely than Japanese bargainers to make a first offer.
North Americans use facts to persuade, Arabs use emotion, and Russians used asserted ideals
Brazilians say no more often than Americans or Japanese. One study looked at verbal
and nonverbal negotiation tactics exhibited by North Americans, Japanese and Brazilians.
Japanese on average said No five times for the nine times the North Americans did, while the
Brazilians said no 83 times. The Japanese displayed more than five periods of silence lasting
longer than ten seconds during the 30-minute sessions. North Americans averaged 3.5 such
periods. The Japanese and North Americans interrupted their opponent about the same number
of times and the Brazilians interrupted 2.5 to 3X more than their North American counterparts.
Finally, the Japanese and the North Americans had no physical contact with their opponents
during negotiations except for handshaking.
Experiential Exercise
A NEGOTIATION ROLE PLAY
This role play is designed to help you develop your negotiating skills. The class is to break into pairs. One
person will play the role of Alex, the department supervisor. The other person will play C. J., Alexs boss.
Both participants should read The Situation, The Negotiation, and then their role only.
Purpose
This role play is designed to help students develop their negotiating skills.
Time
Up to 1 hour.
Instructions
1.
2.
3.
4.
5.
Break the class into pairs. Identify one person as Alex and one person as C.J.
One person will play the role of Alex, the department supervisor.
The other person will play C.J., Alexs boss.
It is easier to manage if all the student pairs sit facing the same way, so you can
designate one side as C.J. and one side as Alex. It will help you keep students roles
straight during the discussion.
Have students read only their portion of the role play.
Students should take 15 minutes to think through the facts in this exercise and to prepare a
strategy.
They then have up to 15 minutes to conduct negotiation.
When negotiation is complete, the class will compare the various strategies used and pair
outcomes.
The Situation
Alex and C.J. work for Nike in Portland, Oregon. Alex supervises a research laboratory. C.J. is the
manager of research and development. Alex and C.J. are former college runners who have worked for
Nike for more than six years. C.J. has been Alexs boss for 2 years. One of Alexs employees has greatly
impressed Alex. This employee is Lisa Roland. Lisa was hired 11 months ago. She is 24 years old and
holds a masters degree in mechanical engineering. Her entry-level salary was $47,500 a year. She was
told by Alex that, in accordance with corporation policy, she would receive an initial performance
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evaluation at 6 months and a comprehensive review after 1 year. Based on her performance record, Lisa
was told she could expect a salary adjustment at the time of the 1-year evaluation.
Alexs evaluation of Lisa after 6 months was very positive. Alex commented on the long hours
Lisa was putting in, her cooperative spirit, the fact that others in the lab enjoyed working with her, and that
she was making an immediate positive impact on the project she had been assigned. Now that Lisas first
anniversary is coming up, Alex has again reviewed Lisas performance. Alex thinks Lisa may be the best
new person the R&D group has ever hired. After only a year, Alex has ranked Lisa as the number-three
performer in a department of 11.
Salaries in the department vary greatly. Alex, for instance, has a basic salary of $76,000, plus
eligibility for a bonus that might add another $7,000 to $12,000 a year. The salary range of the 11
department members is $38,400 to $66,350. The lowest salary is a recent hire with a bachelors degree in
physics. The two people that Alex has rated above Lisa earn base salaries of $59,200 and $66,350.
Theyre both 27 years old and have been at Nike for three and four years, respectively. The median salary
in Alexs department is $54,960.
Alexs Role
You want to give Lisa a big raise. While shes young, she has proven to be an excellent addition to the
department. You dont want to lose her. More importantly, she knows in general what other people in the
department are earning and she thinks she is underpaid. The company typically gives 1-year raises of 5
percent, although 10 percent is not unusual, and 20 to 30 percent increases have been approved on
occasion. Youd like to get Lisa as large an increase as C. J. will approve.
C.J.s Role
All your supervisors typically try to squeeze you for as much money as they can for their people. You
understand this because you did the same thing when you were a supervisor, but your boss wants to
keep a lid on costs. He wants you to keep raises for recent hires generally in the 5-to-8 percent range. In
fact, he has sent a memo to all managers and supervisors saying this. He also said that managers will be
evaluated on their ability to maintain budgetary control. However, your boss is also concerned with equity
and paying people what theyre worth. You feel assured that he will support any salary recommendation
you make, as long as it can be justified. Your goal, consistent with cost reduction, is to keep salary
increases as low as possible.
The Negotiation
Alex has a meeting scheduled with C.J. to discuss Lisas performance review and salary adjustment. Take
a couple of minutes to think through the facts in this exercise and to prepare a strategy. Then you have up
to 15 minutes to conduct your negotiation. When your negotiation is complete, the class will compare the
various strategies used and pair outcomes.
Teaching Notes:
1.
2.
3.
4.
The process for running the exercise is self-explanatory.

Consider assigning some pairs a distributive strategy and some an integrative strategy. This will
permit a comparison of results for discussion.
Consider your gender mix in the pairs, if you want to include a discussion of male/female
negotiating strategies.
For the sake of time, this exercise can also be conducted as a fish bowl using only one pair of
students and having the rest of the class observe.
Ethical Dilemma
IS IT UNETHICAL TO LIE, DECEIVE, OR COLLUDE DURING NEGOTIATIONS?
In Chapter 11, we addressed lying in the context of communication. Here we return to the topic of lying
but specifically as it relates to negotiation. We think this issue is important because, for many people,
there is no such thing as lying when it comes to negotiating.
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Its been said that the whole notion of negotiation is built on ethical quicksand: To succeed, you must
deceive. Is this true? Apparently, a lot of people think so. For instance, one study found that 28 percent of
negotiators lied about at least one issue during negotiations, while another study found that 100 percent
of negotiators either failed to reveal a problem or actively lied about it during negotiations if they were not
directly asked about the issue. Why do you think these numbers are so high? The research on negotiation
provides numerous examples of lying giving the negotiator a strategic advantage. 4
We can probably agree that bald-faced lies during negotiation are wrong. At least most ethicists would
probably agree. The universal dilemma surrounds the little lies: The omissions, evasions, and
concealments that are often necessary to best an opponent.
During negotiations, when is a lie a lie? Is exaggerating benefits, downplaying negatives, ignoring
flaws, or saying I dont know when in reality you do considered lying? Is declaring this is my final offer
and nonnegotiable (even when youre posturing) a lie? Is pretending to bend over backward to make
meaningful concessions lying? Rather than being considered unethical, the use of these lies is
considered by many as an indicator that a negotiator is strong, smart, and savvy.
Or consider the issue of colluding, as when two bidders agree not to bid against one another in a
(concealed) effort to keep the bids down. In some cases, such collusion is illegal, but even when it isnt
illegal, is it ethical?
1. When are deception, evasiveness, or collusion out of bounds?
Answer: when they cross the legal boundaries. The goal is to win-win at the end and
retain an ongoing relationship in most instances.
2. Can such tactics be legal and still be unethical
Answer: Yes, there are many situations where things are unethical but not illegal. The
law cannot cover every instance, nor should it attempt to.
3. Is it naive to be completely honest and bare your soul during negotiations?
Answer: Yes, barely your soul or being nave will probably not have a good result. You
can be a good negotiator without being unethical or deceptive. Timing is important.
4. Are the rules of negotiations unique? Is any tactic that will improve your chance of winning
acceptable?
Answer: Yes, negotiation is a skill that needs to be learned and honed. The rules are
somewhat unique but you need to negotiate with integrity. No, many tactics are not
acceptable. The ground rules should be set upfront.
Source: Based on R. Cohen, Bad Bidness, New York Times Magazine, September 2, 2006, p. 22;
M. E. Schweitzer, Deception in Negotiations, in S. J. Hoch and H. C. Kunreuther (eds.), Wharton on
Making Decisions (New York: Wiley, 2001), pp. 187200; and M. Diener, Fair Enough, Entrepreneur,
January 2002, pp. 100102.
Class Exercise
Lead a discussion, or break the students into groups to discuss the questions raised in the last paragraph
of the dilemma. Ask them to apply these questions to various situations. Do they come up with different
outcomes depending on the scenario? Why or why not?
Suggested Discussion:
The issues raised in the Ethical Dilemma, focus on negotiations and deceptive practices. To enhance the
discussion, the instructor may wish to provide students with two models of negotiationsdistributive and
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integrative. The former model assumes limited resources in fixed amounts and falls into the category of
zero-sum activities (in order for one party to gain, the other must lose); the integrative approach is
thoroughly discussed in the book Getting To Yes. Here the assumption is that negotiations are principled
affairs that are based on establishing goals, not engaging in deceptive practices. Other areas for
discussion should focus on relationships between the parties (and whether or not those relationships are
on-going). One topic to explore could be using deceptive practices in negotiating with individuals with
whom you have an on-going relationship. Ask students what may happen to issues of trust and
cooperation?
Suggested Scenarios:
1.
2.
3.
4.
Negotiate your salary and benefits package for a job you have just been offered with a new
employer. The employer would like to know what you were compensated in your last job.
Negotiate with a vendor who will do extensive renovations of the company headquarters over the
next year. You are on a very tight budget and if you come in under budget, you will be a hero
and receive a promotion and bonus.
Negotiate a divorce. Your retirement and the savings for your childrens education are at stake.
You suspect your to-be ex-spouse will fritter it away.
Negotiate the sale of your house. You are in deep debt and need to maximize the selling price to
come out unscathed. You are moving into a very small apartment to save money once the sale
is complete.
Case Incident 1
DAVID OUT-NEGOTIATING GOLIATH: APOTEX AND BRISTOL-MYERS SQUIBB
Peter Dolan survived many crises in his five-year tenure as CEO of drug giant Bristol-Myers Squibb.
There were a corporate accounting scandal, allegations of insider trading, FBI raids of his office, and a
stock price that dropped 60 percent during his tenure. But in the end, what may have done Dolan in was
his negotiation performance against the head of Apotex, a Canadian drug company founded by Dr. Barry
Sherman.
At its peak, Plavixa drug to prevent heart attackswas Bristol-Myerss best-selling drug and
accounted for a staggering one-third of its profits. So when Apotex developed a generic Plavix knockoff,
Dolan sought to negotiate an agreement that would pay Apotex in exchange for a delayed launch of
Apotexs generic competitor. Dolan sent one of his closest lieutenants, Andrew Bodnar, to negotiate with
Sherman. Bodnar and Sherman developed a good rapport, and at several points in their negotiations
asked their attorneys to leave them alone. At one key point in the negotiations, Bodnar flew to Toronto
alone, without Bristol-Myerss attorneys, as a gesture of goodwill. The thinking was that the negotiations
would be more effective this way.
As Dolan, Bodnar, and Bristol-Myers became increasingly concerned with reaching an agreement
with Sherman and Apotex, they developed a blind spot. Privately, Sherman was betting that the Federal
Trade Commission (FTC) wouldnt approve the noncompete agreement the two parties were negotiating,
and his goal in the negotiation was to extract an agreement from Bristol-Myers that would position Apotex
favorably should the FTC reject the deal. Indeed, he nonchalantly inserted a clause in the deal that would
require Bristol-Myers to pay Apotex $60 million if the FTC rejected the deal. I thought the FTC would turn
it down, but I didnt let on that I did, Sherman said. They seemed blind to it.
In the meantime, Apotex covertly began shipping its generic equivalent, and it quickly became the
best-selling generic drug ever. Thus, Sherman also managed to launch the generic equivalent without
Bristol-Myerss even considering the possibility that he would do so while still engaged in negotiations.
It looks like a much smaller generic private company completely outmaneuvered two of the giants of
the pharmaceutical industry, said Gbola Amusa, European pharmaceutical analyst for Sanford C.
Bernstein & Company. Its not clear how or why that happened. The reaction from investors and analysts
has ranged from shock to outright anger. Within a few months, Dolan was out at Bristol-Myers.
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Questions
1. What principles of distributive negotiation did Sherman use to gain his advantage?
Answer: His goal was to get as much of the pie as possible. He was not looking for a long-term
relationship and as such, he was in a win/lose mode. Their interests were opposed and he did not
share information.
2. Do you think Sherman behaved ethically? Why or why not?
Answer: No, he did not bargain in good faith and he was deceptive in his tactics. He hedged his bets
and planned to win regardless of the FTC ruling.
3. What does this incident tell you about the role of deception in negotiation?
Answer: Deception can be used, however, unethical it is not illegal. In this case, he and his company
prospered due to his deceptive techniques.
Source: Based on J. Carreyrou and J. S. Lublin, How Bristol-Myers Fumbled Defense of $4 Billion Drug,
Wall Street Journal, September 2, 2006, pp. A1, A7; and S. Saul, Marketers of Plavix Outfoxed on a
Deal, New York Times, August 9, 2006
Case Incident 2
NEGOTIATION PUTS HOCKEY IN THE PENALTY BOX
Not every negotiation ends on a good note. Just ask National Hockey League (N.H.L.) Commissioner
Gary Bettman, who, on February 16, 2005, cancelled all of the games remaining in the season following a
5-month lockout by the owners. Though professional sports such as hockey and baseball have had close
calls with losing an entire season, Bettmans decision was a first: The whole schedule was lost. Said
Bettman, This is a sad, regrettable day.
On the other side of the dispute, Bob Goodenow, executive director of the N.H.L. Players
Association, similarly regretted the impasse. He said, Yes, we apologize to the fans. Though the
repercussions to the league and its players are obvious, canceling the season also had ramifications on a
broader level, including lost revenues for local businesses and N.H.L. game merchandise sales.
So, why did Bettman cancel the season? The primary issue was a salary cap, but Goodenow
said, The players never asked for more money. They didnt want to be locked out. Gary owes the
apology. He started the lockout. Weve done an awful lot to try to get to a fair resolution. According to
reports, negotiations began when the league attempted to lower the average salary from $1.8 million per
year to $1.3 million per yeara 28 percent decrease. The leagues reason? Although the N.H.L.s total
revenue had reached $2.1 billion a year, players were paid 75 percent of this revenue. According to the
league, this high percentage kept the league from being profitable and directly contributed to the leagues
loss of $479 million over the past two seasons. The players union then countered with an offer to reduce
salaries by 24 percent rather than the 28 percent the league wanted. Bettman then tried an alternative
solution: to persuade the union to accept a salary percentage of no more than 55 percent of league
revenues. Instead of reducing pay to an average level, this proposal would link players pay to the
leagues revenues, which could fluctuate up or down. The leagues players opposed both ideas until
Bettman and the N.H.L. team owners offered a salary cap that did not link payroll and revenue. At this
point, negotiations looked promising.
However, neither party could agree on an amount. The owners offered a cap of $40 million per
team and then increased it to $42.5 million. But the players wanted a cap of $52 million per team and then
lowered their proposal to $49 million. Although the dollar difference in this round of negotiations amounted
to only 6.5 million, neither side could agree, negotiations stopped, and the season was cancelled.
Said Goodenow, Gary gave us a final offer, a take-it-or-leave-it offer. We made a
counterproposal and events ground to a halt. A reporter asked both sides whether they would have
143
PART THREE
The Group
accepted a compromise of around $45 million per team. Such a compromise may have saved the season.
Bettman stated, If they wanted $45 million, Im not saying we would have gone there, but they sure
should have told us. Goodenow, however, wouldnt speculate: The what-ifs arent for real.
So how did the two sides eventually get the players back on the ice? They agreed to a 6-year
deal that set a salary cap of $39 million per team for the 20052006 season (remember the players
wanted a cap of $49 million). Many players were unhappy with the terms of the deal but felt that fighting
the salary cap was a waste of time that did nothing but alienate the fans. Many players spoke out against
Goodenow, arguing that he put the players in a no-win situation. Less than a week after the lockout
ended, Goodenow resigned as executive director of the N.H.L. Players Association. He denied that his
resignation was in response to the players complaints. The lack of an agreement in the N.H.L.
negotiations was a loss to everyonethe league and businesses connected to the league, the owners,
the players, and, of course, the fans.
Questions
1.
How would you characterize the N.H.L. negotiationas distributive or integrative? From what
perspective (distributive or integrative) did the parties approach the negotiation? How might this
approach have affected the outcome?
Answer: It is clearly distributive, adversarial where both parties viewed the situation as a zerosum activity. Neither party was willing to move from their final positions. Nor did either party
trust the other.
2.
What factors do you believe led to the lack of a settlement in the N.H. L. negotiations? How might
you have handled the negotiation if you were a representative of the league? Of the players
union?
Answer: This question calls for students to speculate as to what they may have done if they were
in the situation. This would be an interesting class exercise by having some students take the role
of management and other the players association.
3.
Negotiating parties are often reluctant to reveal their BATNA (best alternative to a negotiated
agreement) to the opposing party. Do you believe that parties in the N.H.L. negotiation were
aware of each others BATNA? How might this knowledge have affected the negotiation?
Answer: It was clear that neither party understood (or particularly cared) what the others
alternatives (or walk away positions) were. Given the lack of maturity of the parties and their
mutual distrust, there was very little room for effective and integrative bargaining.
4.
It appears that a point of compromise (a $45 million per team salary cap, for example) may have
existed. What steps could both parties have taken to reach this point of compromise?
Answer: Both parties would have had to demonstrate good faith in their dealings with the other.
Given the hostility and the volatile climate, this was virtually impossible in the environment where
the negotiations (or lack thereof) took place.
Source: Based on J. Lapointe, and R. Westhead, League Cancels Hockey Season in Labor Battle, The New York
Times, February 17, 2005, p. A.1.
ENDNOTES
K. W. Thomas, Toward Multidimensional Values in Teaching: The Example of Conflict Behaviors, Academy of
Management Review, July 1977, p. 487.
2
G. Ku, A. D. Galinsky, and J. K. Murnighan, Starting Low but Ending High: A Reversal of the Anchoring Effect
in Auctions, Journal of Personality and Social Psychology 90 (June 2006), pp. 975986.
3
Q. Reade, Workplace Conflict Is Time-consuming Problem for Business, PersonnelToday.com, September 30,
2004, <URL>www.personneltoday.co.uk</URL>.
4
K. OConnor and P. Carnevale, A Nasty but Effective Negotiation Strategy: Misrepresentation of a CommonValue Issue, Personality and Social Psychology Bulletin, May 1997, pp. 504515.

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118

Summary and Implications for Managers

Brief Chapter Outline

A DEFINITION OF CONFLICT (PPT 152)

II. TRANSITIONS IN CONFLICT THOUGHT (PPTs 153 and 154)

Conflict is a natural occurrence in all groups and organizations.

The Interactionist view is the one taken in this chapter.

Copyright 2009 Pearson Education, Inc. publishing as Prentice Hall