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Leading the Way In Negotiation and Decision Making
The following article is the eighth in a series on the activities and research taking place in each academic unit at HBS.
Whether it involves getting striking baseball players back on the field, cutting a deal with a foreign supplier, or simply coordinating your employees' vacation schedules, negotiation has become a key part of daily management. "Instead of being an important skill for special occasions - making deals and managing disputes - negotiation is increasingly a way of life for managers," notes James K. Sebenius, the School's Gordon Donaldson Professor of Business Administration and chair of the Negotiation and Decision Making unit.
Indeed, the field has grown so important that in 1994 HBS became the first major business school to require a full negotiation course for MBAs. In that popular new course, which draws on economics and psychology, students negotiate a series of real-life scenarios. These simulations build from the simple - two parties negotiating a one-shot price deal for headlamps - to the complex-- many parties in a long-term relationship seeking agreement on the myriad issues involved in a major infrastructure project. The course also highlights "internal" organizational negotia- tions. To add realism, the unit's faculty has scrambled the sections for this course so that students encounter both familiar and unfamiliar faces across their classroom bargaining table.
"The role of informal negotiation has increased," Sebenius explains, "with growing numbers of stakeholders potentially influencing decisions, with teams and flatter organizations, and with command, control, hierarchy, and authority systems often unable to elicit crucial cooperation and commitment." In addition, he notes that "the sheer pace of change in markets, technologies, and competition frequently requires previously agreed-upon issues to be renegotiated."
Add in the risks of costly misunderstanding and conflict from globalization and a diverse U.S. workforce, Sebenius continues, and it's clear why students are going beyond the required course to oversubscribe the unit's two new electives - Negotiating Complex Deals and Disputes: Real Estate, Sports, Public-Private Partnerships, and Litigation, taught by newly promoted Professor of Management Michael A. Wheeler, and Dealmaking: Financial and International Business Negotiations, led by Sebenius. Many of the School's executive programs have substantial negotiation components as well.
The unit's research methods include everything from analyzing negotiations in progress to psychological lab studies with subjects in negotiation experiments to running computer-simulated game-theory applications. For example, Professor Jerry R. Green, using game-theory insights, studies the negotiation process within agencies as he looks for ways that business or government can make the right decision for an organization as a whole while still benefiting individual divisions or departments whose best interests may be served by other alternatives.
Sebenius specializes in multiparty negotiations, especially in international, financial, and public-private contexts. With Professor Jay O. Light of the Finance unit and Professor Richard F. Meyer, he is exploring ways that broader principles for structuring valuable and sustainable deals can be applied to international and financial transactions. Also crossing unit lines is Professor Richard E. Walton who contributes expertise in strategic negotiation to the examination of economic and social contracts as well as intraorganizational negotiations. Several members of the group are actively collaborating with members of the Entrepreneurial Management unit.
Michael Wheeler, a lawyer and specialist in real-estate development, investigates the conflicts and negotiations that often result when private development interests collide with environmental and public safety issues. To develop more effective approaches, he is looking at chemical-manufacturing safety disputes, pollution permit-trading, redevelopment of distressed urban areas, hazardous waste site location problems, and intracorporate negotiation over investments in energy conservation.
Three recently promoted associate professors, Kathleen L. Valley, Robert J. Robinson, and George Wu, add to the unit's research portfolio through their differing yet complementary backgrounds. Valley examines conflicts in the workplace through the lens of organizational behavior and individual psychology. Through behavioral decision theory, Wu looks at the issues affecting people's perceptions of a negotiation - learning not just how people should make decisions but how, in fact, they do make decisions. Robinson, a social psychologist, investigates the factors that are expected to increase organizational conflict in the future and the managerial skills required of the "conflict-competent organization." Assistant Professor Patrick W. Sileo mathematically analyzes bargaining behavior and how people should select negotiating situations and tactics.
For many years, HBS faculty research into the dynamics of dealmaking and conflict resolution took place at the Negotiation Roundtable, itself part of an active University-wide effort called the Program on Negotiation, based at Harvard Law School. Since its establishment in the early 1980s, the Negotiation Roundtable's participants - including the group's director emeritus and HBS professor emeritus Howard Raiffa, as well as Sebenius - strive to shift the process of conflict negotiation toward mutually beneficial and sustainable agreements.
"We're really trying to help people better understand effective dealmaking and dispute resolution," Sebenius concludes. "And since HBS is leading the way among business schools in its commitment to negotiation, getting it right has been an exciting challenge."
A Video for Negotiators
Using a dramatization of a real negotiation, a new video from HBS Management Productions, Negotiating Corporate Change, authored by Professor James K. Sebenius, examines the change process through a negotiating lens. The dramatized negotiation involves interactions between a manager responsible for a critical project and other managers whose help the project manager needs but over whom he has insufficient formal authority to force the result he wants. The program presents a broad scheme - centered on the concepts of underlying interests versus positions, no-deal options, and coalition-building - for thinking about and approaching internal negotiations.
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