Negotiation and Deal-Making

MOR 569 Fall 2016 Draft 08/09/16

USC Marshall School of Business Negotiation and Deal-Making MOR 569 Fall 2016

Professor: Christopher Voss Email: [email protected] Phone: 917-374-2119

“Yes” is nothing without “How”. (Price is not enough.)

3-5 Black Swans exist in every negotiation.

No deal is better than a bad deal.

1. Introduction – Hostage Negotiation is EQ on Steroids.

This class is not so much a course for you on negotiation as it is a clinic for you to get better.

I was the FBI’s lead international kidnapping negotiator from 2003 – 2007. “So?”

What is the difference between kidnapping negotiation and business negotiation? The stakes.

The reality of kidnapping negotiation is “Implement the agreement or people die”. The reality of business negotiation is “Implement the agreement or careers die”. “Yes” is nothing without “how”.

Negotiation principles that you could use effectively with a terrorist or serial killer (or in-law!) will be the same ones you will use effectively with a corporate executive, a corporate raider (or a colleague). Why? Emotions. Hence the growing focus these days on emotional intelligence, or EQ and how it correlates to business success.

Hostage negotiation is EQ on steroids.

One of the most widely read hostage negotiation texts1 uses this negotiation definition from a business negotiation book2: “Negotiation is the use of information and power to affect behavior in a web of tension”.

I view negotiation very broadly. I would define negotiation as: 1 “Crisis Negotiations: Managing Critical Incidents and Hostage Situations in Law Enforcement and Corrections”, Wayman Mullins and Mike McMains

2 “You Can Negotiate Anything” Herb Cohen Page 1 of 12 MOR 569 Fall 2016 Draft 08/09/16

“A communication process designed to gather information and influence a lasting change (beyond the interaction).”

This defines a process that serves two (2) distinct functions for you: (1) information gathering and (2) influencing behavior. It includes almost any communication by you where you want something from the other side. (Though the skills are applicable to all communication, a negotiation is not a communication where you are simply seeking guidance or direction from someone else.)

This course is designed to help you get better at negotiation. There is a high correlation between your class participation and your quality of performance. This is the place for you to get outside of yourself and experiment to get better.

There is also an inverse correlation between quality of work and last minute submissions. Getting going on the writing assignments early will serve you well.

2. Laptop Policy: NO LAPTOPS (or use of other devices for email, texting or web-surfing) ALLOWED IN CLASS

3. Course Design

This is an interactive course. Please remember that your colleagues are dependent on you to attend and be prepared. Chance favors the prepared mind3. The simulations that you will do with each other will either be handed out in class or the week before.

4. Assigned Class Negotiation Scenarios

You will be paired off and negotiate scenarios which will be either distributed during class or emailed out shortly thereafter. Each of you will negotiate with your counterpart.

You will bring the results of your negotiation back to class, to be handed in on a “term sheet”. A “term sheet” is simply a piece of paper (that you provide) signed by both parties that lists the terms of your agreement.

You will also complete a “Negotiation Prep-sheet” prior to the negotiation, to be used as a tool for you during the negotiation. The guidelines of how you will prepare this document will be shared with you in class. Your “Negotiation Prep-sheets” need to be emailed to me prior to the start of the class in which that negotiation will be reviewed. Any paper you write for an in-class assigned negotiation will need to include into the paper in the 2nd section this preparation.

The final document you will complete for each negotiation with be a “Negotiation Out-brief”. This document will be made available to you after class begins, you will fill it out and provide it to your negotiation counter-part during the class immediately following the negotiation. You will be given time

3 Louis Pasteur – also translated as “In the fields of observation chance favors only the prepared mind.” Page 2 of 12 MOR 569 Fall 2016 Draft 08/09/16 during this class to discuss the negotiation process with your counter-part. This will be a critical part of the process of each of you helping each other get better. Any paper you write for an in-class assigned negotiation will need to include into the paper in the beginning of the final section this feedback from your counterpart.

5. Grading

The course is graded on a modified curve based on point accumulation. Your grade will not be adversely affected by inexperience, honest mistakes of application or language difficulty. It will be adversely affected by lack of participation or not meeting deadlines.

Failure to follow the guidelines as outlined in the syllabus correlates strongly with failure of papers.

a. Point Accumulation

- Attendance at a class is worth 1 point. - Application of Course Skills Paper(s) (1250 words minimum for outside of class negotiations and 1750 words for in-class negotiations4) up to 4 points o See section 3(c) page 3 for requirements)

- ***It is required to write three (3) of these papers in order to obtain a “B” or higher. It is required to write the first of these papers prior to the beginning of class 65. I’m sorry but if the 1st paper a student submits is not received by this deadline neither it nor any subsequent paper(s) will earn points. . Limit six (6) of these papers and no more than one per week6 is allowed.*** - The Final Exam is worth up to 15 points. - Class participation (instructor’s evaluation) is worth up to 15 points

b. Attendance:

A sign in sheet will be circulated at the beginning of each class. Missing 5 lectures disqualifies you from receiving an “A”. Missing 7 lectures disqualifies you from receiving a “B” or higher. Missing 9 lectures disqualifies you from passing the course. Arrival 15 minutes after a class has begun or departure 15 minutes early constitutes an absence. Leaving after you’ve signed in does not constitute attendance for the lecture.

4 Not counting headers or footers. This is an interesting way to pad your word count, but not acceptable. In-class negotiations must include the terms of the deal and your counterpart’s feedback to you on your style.

5 No joke. Therefore: the first 20 students that send me an email regurgitating this point prior to the beginning of class #4 will receive 2 points of extra credit.

6 A “week” is defined as from the beginning of one class to the beginning of the next. Therefore the 1st week begins with the initiation of the 1st class. Page 3 of 12 MOR 569 Fall 2016 Draft 08/09/16

c. Application of Course Skills Papers:

The purpose of these papers is to draw a roadmap for your improved performance. The focus must be on how you will use course skills and concepts to improve.

These papers are to be submitted via e-mail in Microsoft Word format and be no less than 1250 words for negotiations conducted with counterparts that are not members of this class and 1750 words for negotiations as a result of assigned pairings for class negotiations. (Pdf’s are not acceptable format.) A failed paper may be re-written. Credit for re-written papers will drop ½ point per attempt.

****3 papers are required in order to receive a “B” or higher and it is required to write the first of these papers prior to the beginning of class 5. 1 of those papers must be with someone not a member of this class. No more than 1 paper per week will be accepted.7****

A requirement for this paper to pass is that you applied specific skills from this course in the negotiation.

The number of papers written past the 3rd paper correlates very strongly with the opportunity for increases in your grade. There are exceptions to this in every class. I make no promises.

The Application of Course Skills paper is a deconstruction of a dynamic that occurred during one of your negotiations where you applied specific course skills. This negotiation can be an in-class negotiation, a negotiation which occurred in your professional life or a negotiation which occurred in your personal life. Your counterpart needs to be an adult. No more than one paper will be accepted which has occurred in your personal life involving a spouse or a member of your family.

Papers regarding negotiations that took place prior to this course will not be accepted.

2 OF YOUR 3 PAPERS – YET NO MORE THAN 2 – MUST BE FROM NEGOTIATIONS ASSIGNED FROM CLASS. IF YOU DO ADDITIONAL PAPERS, THEY MUST BE UNASSIGNED NEGOTIATIONS.

PAPERS FROM ASSIGNED NEGOTIATIONS MUST INCLUDE THE TERMS OF THE AGREEMENT AND HAVE A HIGHER WORD COUNT MINIMUM (1750). These papers must also incorporate at the beginning of the “Which Course Skills Were Applied” section your preparation and at the beginning of the “Edge Of Tomorrow Analysis”q section the feedback from your class-mate/counterpart and how you will adjust as a result of that feedback.

OUT-OF-CLASS NEGOTIATIONS HAVE LIMITATIONS AS WELL. YOUR COUNTERPART MUST BE AN ADULT. NEGOTIATIONS WITH CHLDREN ARE NOT ACCEPTABLE. NO MORE THAN ONE (1) OUT-OF-CLASS NEGOTIATION WILL BE ACCEPTED INVOLVING A SPOUSE.

There will be likely multiple dynamics within the negotiation you choose. It isn’t necessary to relay the entire negotiation. The paper must include and delineate (not doing so will cause the paper to fail) the following concise sections:

7 See footnote #5. I’m not kidding about this one either. Sorry, no extra credit for acknowledging this one. Page 4 of 12 MOR 569 Fall 2016 Draft 08/09/16

Required Sections for Application of Course Skills Papers

1. Set up: (Who, What & Why – Objective) (This is where you briefly summarize who is involved, why and what your objective is. What outcome – beyond this moment – are you trying to affect?) “The stakes involved are... “I am talking to... because of (circumstances) and I want… “And they want…

2. Preparation: Accusations Audit “Their (ridiculous) fears my cause them to unfairly accuse me of…

3. Course skills Applied & What Was Said: (Transcript) a. List the skills from the “Negotiation 9” (Lecture 1) in this course which you applied. (The list of the course skills that were in fact applied by you in the dialogue. This is not what you meant to apply, but what you actually did apply. This is NOT the skills your counterpart used.) b. Transcript

4. Edge of Tomorrow Analysis & Advice: a. Feedback (In-class assigned negotiations require the feedback from your counterpart at the beginning of this section and your intended improvement as a result of that feedback.)

b. Black Swans: What you learned about the situation you didn’t know going in – how you got smarter as a result of the interaction – what you discovered that was new to you. i. Positive & Negative Drivers actually motivating my counterpart ii. Facts Uncovered

c. What outcomes did your skills trigger? (What did you do that you wouldn’t have done otherwise?) d. Labels for Next Time: (List of 3-5 based on what you learned if you were to relive this negotiation) e. “What” & “How” Calibrated Questions For Next Time: (List of 3-5 based on what you learned if you were to relive this negotiation)

This is your “lessons learned” section & it is critical to the success of your paper. The purpose of your paper is to take a critical look at your performance and here is where you do it. Stating that you did a good job is not lessons learned. Few interactions can’t be improved. A candid discussion of shortcomings and how you will address those shortcomings demonstrating an understanding of course concepts is critical for success in this section.

Tom Cruise was in a movie called “Edge of Tomorrow”. In that movie he was caught in the same day over and over again (sort of a time warp) with exactly the same people in the same situations. However, he retained the cumulative memory of the repeated instances and he could change what he did and said each time. The other people had no memory of the prior instances. They acted as if the day hadn’t already happened.

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I want your Edge of Tomorrow advice to yourself on how you would do the same situation over again using course skills and examples of how you would actually apply the course skills based on an analysis of what happened.

Please remember, failure to follow these guidelines as delineated will cause the paper to fail.

A self-congratulatory analysis only is likely to cause a loss of points.

d. Class Participation:

These points will be awarded based on my evaluation at the end of the course. This is quality of participation – not quantity. Critical thinking is called for here. This extends beyond simply “I think…” or “I agree…” or “I disagree…” or “My experience has been…”.

While these thoughts are the beginning of critical thinking, they are not enough. The essence of critical thinking is comparative thinking and the development and evolution of ideas. It is objective analysis and evaluation in order to form a judgment, or hypothesis, or rule.

e. Final Exam:

The final exam will be short answer essay questions. It will be take-home, open book, open note, do your own work. It will be distributed via email shortly after the last class and be due via email to the professor one week later.

6. Required Texts

Never Split The Difference – Negotiating As If Your Life Depended On It, Chris Voss with Tahl Raz, HarperCollins 2016

Priceless: The Myth of Fair Value (and How to Take Advantage of It), William Poundstone, Hill and Wang, 2011

Additional Required Course Materials: Will be made available or disseminated in class.

Optional & Valuable Reading: The Black Swan Group’s Daily Negotiation Course. This is a concise series (24) lesson course of short digestible lessons. It is available on The Black Swan Group’s website. It provides additional depth and understanding to the negotiation skills and doctrine that can’t be covered in class due to time limitations and is not available in any other readings.

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http://www.blackswanltd.com/negotiation-services/email-lessons/

At the bottom of this page is a link for the MSB discount (50%). I will include the password in a separate email.

7. Office Hours

Since I am an Adjunct and don’t have an office on campus I am available to meet with students in my course at almost any time. Please feel free to email, call or talk with me before or after class to set something up. I love the topic of negotiation and would be happy to discuss the course at a time that is mutually convenient.

8. Schedule

Please have reading completed prior to the class it is assigned.

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Week 1 The New Rules: The Black Swans

Reading Never Split The Difference Chapters 10, 2 Syllabus Pages 1 - 11

In-class Role-plays, 1 on 1s

Hand Out None

Week 2 “Yes” is the last thing you want to hear

Reading Never Split The Difference Chapters 5

Optional Daily Negotiation Course Lessons 1-6

In-class Schilling (provided in-class)

Hand Out Casino Page 7 of 12 MOR 569 Fall 2016 Draft 08/09/16

______

Week 3 Empathy

Reading Beyond Winning The Tension Between Empathy and Assertiveness

Focus Chapter 10

Optional None

Hand Out Casino II

______

Week 4 EQ -> Tactical Empathy

Reading Never Split The Difference Chapters 3

Optional None

Hand Out 404 E. Monroe

______

Week 5 Prospect Theory, the “F” Word in Negotiations & Perception Anchors

Reading Never Split The Difference Chapter 6

Priceless Chapter 13, 16, 17, 18 Page 8 of 12 MOR 569 Fall 2016 Draft 08/09/16

Hand Out OMB

______

The Deadline for writing your 1 st Application of Course Skills Paper is prior to the beginning of Class 6.

Week 6 Preparation – Chance Favors the Prepared Negotiator

Reading Never Split The Difference Chapter 7

Negotiauctions Blackboard Chapters 1 & 2

Optional None

Hand Out Les Florets

Week 7 “Yes” & “No”

Reading Never Split the Difference Chapter 4

Optional None

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Hand Out Radio Station

______

Week 8 Salary & Job Negotiations

Reading None

Hand Out Rapid Leathergoods

Week 9 Bargaining I

Reading Never Split the Difference Chapter 9 Priceless Chapters 3, 15, 38, 39

Hand Out Rivertown

______

Week 10 Bargaining II

Optional None

Hand Out None

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______

Week 11 The 3 Types

Reading Taken For a Ride Blackboard

Optional None

In-class Exercise

Hand Out None

______

Week 12 The Short Game

Reading None

In-class Oil Pricing

Hand Out None

Week 13 Team Negotiations

Optional Daily Negotiation Course Lesson 22

In-class Aerospace Investment

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Hand Out None

Week 14 Team Negotiations II

Reading The King of The Sports Deal Blackboard

In-class Baseball Negotiation

Hand out None

Week 15 Email Negotiations & Course Summary

Reading The Behavior of Successful Blackboard Negotiators

______