BUAD_304_Lecture_4

BUAD_304_Lecture_4 - BUAD 304: Leading Organizations...

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BUAD 304: Leading Organizations Lecture Session #4 Leader as Negotiator and Conflict Handler Leader as Politician
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w the process where two or more parties decide what each will give and take in the context of their relationship . . . Negotiation is . . .
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To assess the quality of a proposed deal, you need to know (at a minimum): n What are your alternatives if this deal fails? n What is your reservation point (bottom line)? n What is your aspiration ? So What is a “Good Deal?”
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Reservation Prices, Aspirations, and Bargaining Zones Buyer’s Aspiration Seller’s Aspiration |---------|-----------|------------|----------|-----------|----------|-----------|----------|-----------| 0 2 4 6 8 10 12 14 16 18 Buyer’s Reservation Price Seller’s Reservation Price Reservation Price: Point at which one is indifferent between an impasse and an agreement Bargaining Zone: Overlap between the parties’ respective reservation prices
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w Don’t know it’s an option w Uncomfortable with negotiating (it’s not part of our relationship!) L e s   t h a n r i o l Why not negotiate?
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The Importance of Negotiating w Linda Babcock examined the starting salaries of Carnegie Mellon MBA grads. Men’s starting salaries were 7.6% (about $4,000) higher than those of women. n Only 7% of the women, but 57% of the men had asked for more money (i.e., negotiated on salary). n Of those students who negotiated (most of whom were men) were able to increase their starting salaries by 7.4% (about $4,000).
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The Cost of Not Negotiating w Suppose at age 30, two equally qualified applicants (Chris and Fraser) get job offers for $100,000 per year. Chris negotiates and gets a salary increase of $107,600 while Fraser accepts the $100,000 – and they receive the same 5% annual raises each year. By age 65, they are ready to retire. How much longer Fraser will have to work than Chris to make up the difference? Nine years longer!
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Strategies and Considerations w Know your alternatives. w Determine your bottom line or reservation price. w Set aspiration levels that are significantly better than your reservation price, but optimistic. w
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BUAD_304_Lecture_4 - BUAD 304: Leading Organizations...

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