Brief
It is a real experience that I had in my father’s company. This spring, our company planned to add one floor on the top-storey of their 3-floor office building. Before construction, our Company needed to obtain an inn owner’s permission, as the addition floor will block light shining into some rooms of his inn– AB Inn, which locates in the other building next to our office building. Therefore, our company had to negotiate with AB Inn regarding the permission and compensation issue. I was not been assigned any works in the process because of my poor experience, but I took part in the negotiation as a minute-taker, witnessing all the details. It is obvious that the AB Inn owner did not permit us adding a floor at the beginning. The owner stated that he would not approve it unless our company could provide compensation to him. Our company agreed to solve this problem by giving him a sum of compensation. But we need to negotiate on the issue that how much our company should give the inn owner, because there is no explicit policy or rules on sunshine blockage issue should be carried out but just a convention based on several cases which only adapt to residential use.
In the first meeting, both sides showed their offers and explain the reasons. There are five rooms of AB inn in the side of that building which would be affected by the reconstruction, and each room had a market value of six hundred thousand Yuan at that time. The owner requested one tenth of the market price, equal to fifty thousand Yuan, for each room, which obviously exceeded what our company can afford. Actually, only two rooms would be influenced by the adding floor, so our company planned to give the owner fifteen thousand Yuan per room for the two effected rooms. A big difference existed between our company’s anticipation and the AB Inn’s. Therefore, we didn’t reach a consensus at the first meeting.
In the second meeting, the owner performed very aggressively, insist on his position without any concession. He also stated that if we did not accept his condition, he would use his special Guanxi with government to impede our reconstruction. Additionally, he said that he would exert pressure on us by
mass media, like local newspaper. Contrary to his tough attitude, our group behaved calmly. We explain the reason that we cannot accept his request by accounting data. Besides, we also expressed that don’t use extreme approaches, because it would not solve our problems, only bringing conflictions into us. Last, we also implied we have right to refuse his requests as none of the compensation to sunshine right in the past cases was offered to businesses. But taking account of a long-term relationship, we would like to provide some voluntary compensation to him. In the end of this meeting, we didn’t get an agreement stilly.
In the third meeting, we involved a third party, a tenant of our office building, into the negotiation, instead of confronting the other side directly. The mediator provided a relative objective analysis to the inn owner and give him some friendly suggestions. Our group did not attend this conversation.
In the fourth and the last meeting, after the help of mediator, the inn owner changed his attitude and made the first concession, saying that he would like to reduce his request from three hundred thousand Yuan to one hundred and fifty thousand Yuan. But we said that we still cannot afford it as the cost far exceeded the profits. We showed that we could give the inn owner one-off compensation equal to fifteen thousand Yuan per room at most for total five rooms on the effected side and explained how we get such a number. Both of us made concessions in this time. Finally, the owner accepted this amount.
Analysis
1.Negotiation Strategy
From my perspective, I think it is a distributive negotiation because of the following reasons: Firstly, there is only one issue need to discuss in the negotiation. The main point of the negotiation is seemingly to obtain a reconstruction permit from the inn owner, but considering further, I found that the fact that whether the owner would accept it depended on only one factor that how much we could pay for him. So the essential issue of the negotiation is the amount of compensation. If we could reach or exceed the reservation point of the other side, the inn owner would like to make an agreement with us. Secondly, the general strategy is to maximize share of a “fixed pie” that is the profits of the adding floor. The area of the adding floor is unchangeable according to the construction drawing, and we earn profits from the floor in the form of leasing. Therefore, the interests of the negotiation is fixed. If we gave the inn owner more, we would get less, and vice versa. What’s more, the relationship of the parties is one time only, since the type of compensation is one-off. According to the earlier cases, the sunshine right compensation only need to be paid one time. Therefore, we didn’t have to keep a long-term relationship with the inn owner. In addition, we kept interests hidden. Just as I mention before, the adding floor is used to lease. So we can get profits from the floor continuously. But in the negotiation, we deliberately shift off this point and confused the concept of profits with the concept of annual profits. As a result, taking account all of the factors above into consideration, I conclude thatwe did not try to expand the” pie ” or share information to each other, but making efforts to maximize ourselves interests. I think it is a distributive negotiation.
2.ZOPA (Zone of Possible Agreements)
In this negotiation, our reservation point is two hundred and fifty thousand Yuan, because the yearly rental of the adding floor is 250,000 Yuan. Although we can get profits year by year, such a great amount of compensation will make a big influence on our company’s normal operation this financial year. Our target point is thirty thousand Yuan which number comes from the past cases about sunshine rights compensation to residential buildings. On the other hand, the other side’s target point is three hundred thousand Yuan which equals to the one tenth of the market price of the five rooms. This number is unreasonable and groundless, but just an aggressive anchor taken by the inn owner, whose role is to get as much as possible from this reconstruction. I am not sure that what is his reservation point definitely, but I guess the point must be very low according to the outcome.
The adding floor did not have substantial negative impact to AB Inn, so the compensation might be acceptable no matter how much it was. Therefor we had a wide positive bargaining zone. Making an accurate estimation of the ZOPA is very important to negotiation. If ZOPA is negative, it indicates that there is impossible to make an agreement and both sides should not waste time on this negotiation, but achieving other alternatives. If the ZOPA is positive, it indicates that both of the parties sill have chance to make a mutual settlement. Actually our reservation point is very high, we have a great possibility to make an agreement with the other side. But we’d better not to let the other side know our real target point. Because if AB Inn knew we had a high reservation point, he would expect more and our cost would be more. At the same time, we should have a relative accurate estimation of his reservation point, in order to approach the best possible economic outcome. In this negotiation, our group had a negotiator’s surplus because of a successful estimation of ZOPA.
3.Concession
In this distributive negotiation, making a concession is a necessary and skilled tactic. Because the interests is fixed, but each side wants to get as much as possible. Making a concession is a good way to show your sincerity and attitude that I would like to pursue a mutual outcome with you. It is also the only way, I think, in distributive negotiation to make an agreement. Whether the concession you made is successful or not determine how much you can get from the ZOPA. In this negotiation, the inn owner make the first concession indicating that he really wanted to make an agreement with us. Also, the concession is big revealing that his anticipation is not very high and we had possibility to get more in the negotiation.
After taking the class, I know we adopted a BH/WH concession strategy that time. In the first three meetings we made a good preparation. We did not make any concession but tried the other side to accept our conditions and showed the reasons why we proposed such plan, making him believe that the price we gave is quite close to our reservation point. So at the last meeting, the inn owner made the first big concession, reducing 50% of the compensation. As a return, our group also made a concession — to compensate all AB Inn’s rooms on the effected side of the building. Although the concession is small than the other side’s, we can find that the owner were still satisfied with it, so he made his second concession, agreeing with our new proposal. Thus we get a desired outcome under a small concession. Because the BH-turns-WH sets up a favorable contrast for the receiver. The person who has been dealing with the BH feel relieved to now be dealing with the WH. (Arthur Hochner, Deanna Geddes & Stuart M. Schmidt 2008, Power and Negotiation in Organizations, 3rd ed.).
4.Mediator (Zhongjian Ren)
In china, mediator plays an important role to establish trust and ease the tension between the two sides in negotiation. We cannot believe a stranger, but we could believe friend’s friend. Before this negotiation, the inn owner and our company did not familiar with each other very well. We had a tough experience in the second meeting. Our group thought we cannot make a big progress, if we went on like this. So we decided to involve a mediator, a tenant of our office building, in the negotiation at the third meeting. The problem that which mediator should be chosen is quite important. First of all, it should be make sure that the mediator has the position same to our team. Before involving the person into negotiation, my father had communicated with him learning about that he thought our proposal is reasonable and would like to help us try to persuade the inn owner. Second, the mediator should have good relationships with both sides. The tenant had personal relationship with the inn owner.
At the same time he had business relationship with my father for several years, which determine he could be an ideal mediator. Last, the mediator should be an outsider in order to make his or her opinions objective (at least so it seems). Our mediator is a beholder of the negotiation and would not get any direct benefits from the negotiation, so his viewpoints or suggestions seems to be relative impartial. As a result, his involvement could calm down the tense situation. The same words coming from the mediator’s mouth would be more valuable to the inn owner, comparing to the words from ours, since the mediator belongs to neither our side nor his side. For example, the owner mentioned that he would protest in public and we tried to impede it. But he cannot listen to our persuasion, because he thought what we said aimed to pursue interests for our company, while ignoring his interests. But after the mediator’s persuasion, he did not mention protests any more. Because of the involvement of mediator, the negotiation turned from a hostile situation to a discussion between friends. The atmosphere got improved a lot.
Conclusion
Overall, it is a successful negotiation experience. Our company is the lower-power side. It is a special negotiation with no BATNA. Without the permission of the inn owner, we cannot do anything but give up the reconstruction. The other side have a powerful right to impede our project. It becomes especially crucial to figure out the other side’s basic needs in this negotiation. Only if can we meet their needs, we have possibility to obtain the permission. Although we can figure out their needs precisely, how to make the other side accept our conditions under the situation that only the basic satisfaction can be meted is another thing important. As known, Mianzi (face) is very important to people in Chinese society.
If we make the other side losing face, they will leave the table definitely. Thus we decided to use some tactic, like involving a mediator, making a concession and being polite during the whole negotiation to achieve our destination, under a mild atmosphere. Even though the inn owner behaved unfriendly in the second meeting, we still kept our virtue consistently, avoiding impasse. In conclusion, power could determine the beginning of a negotiation, but it cannot determine the end of it. Enough preparation and right tactic will help you turn the table.
