Concept: Reserved point and target point
Essay Author:
‘I decided to introduce a third issue for negotiation–one which I believed was as critical as non-payment and non-performance. It was the ongoing long‐term relationship which we had built with BLJ, and vice versa. I called another meeting, and kicked it off by stressing the importance of this relationship to both BLJ and QCDC. I explained that both parties had played a role in this problem, and that the solution was in the middle. On their part, QCDC had kept quiet about work which was shown to be sub-standard and in breach of the performance obligations to which BLJ had signed up to in the engagement letter. On the other hand, BLJ was owed several months of payment for work delivered to and accepted by QCDC. I went further, explaining to both parties that the relationship BLJ had built with QF (including its centers) extended far beyond the 3 parties currently in this meeting. Whilst QCDC’s engagement with BLJ might be 12 months long, QF had worked with BLJ for 2 years, and looked forward to working with them for the next 2 years. It was important to both QF and the remaining subsidiary centres under our umbrella, that we solve this issue in a way that preserved our relationship with BLJ.
To BLJ, I suggested they switch out the employees currently embedded in QCDC, and involve QCDC in the selection of the new team. To QCDC, I suggested they include my team and I in the approval process. In this way, we would provide a second pair of eyes to review all of BLJ’s submissions for quality, and ensure that the submissions were in line with project scope. I felt that the evidence of documentation showing tracked changes was too strong to ignore. Therefore, I asked BLJ to revise the invoices submitted, adjusting for any work delivered that QCDC had edited, based on evidence from tracked changes documentation. This led to a 30% reduction in the amount payable. QCDC were happy with the revised amount, and in particular, appreciated the Suggestions on future cooperation. For the first time in almost 3 months, the meeting between QCDC, myself, and BLJ had ended without a shouting match. I looked forward to a relaxing weekend, and a quiet telephone at work.’
In this situation, the two parties could not come to an agreement as they all had certain expectations that they felt were not being met. These related to the concept of reserved point and target point. The reserved point is the perceived point at which anything below this expectation would mean no deal. There is always a point where individuals can still negotiate. However, the reserved point is where the end of negotiation is experienced. The target point, on the other hand, is the end goal of the negotiation process. It refers to what the parties seek to achieve. Also, the Zone of Possible Agreement is the point at which both parties feel comfortable with the terms offered by the other companies.
According to Malhotra & Bazerman (2007, p. 36) “If you are risk averse, you might be inclined to lean toward the lower end of the range. But if you are optimistic about your ability to negotiate with Quincy, you might lean toward the upper end.” Since the reservation point is the walk away point, these two parties must first consider their BATNA before making any decisions (Abed, 2016). Therefore, the company experiencing more risk will be the one that has a much lower Reservation value. This is because it will have so much to lose in case the deal fails. However, as the genius negotiator, this cannot be said directly but through an effective negotiation of terms.
This excerpt is a good example of the concept because BLJ is the company with a lower reservation value as it had employees who offered poor quality work. On the other hand, even though this was the case, QCDC did not terminate the contract but instead failed to pay for a number of month’s services. Therefore the resulting negotiations saw to it that the relationship was not impacted because the company which went at a loss due to poor quality was only expected to pay for 70% of the required amount. In this case, this was the zone of possible agreement.
References
Abed, R. (2016). What I learned from Negotiation Genius-Deepak Malhotra and Max Bazerman. Youtube.
Malhotra, D., & Bazerman, M. (2007). Negotiation Genius:How to Overcome Obstacles and Achieve Brilliant Results at the Bargaining Table and Beyond. http://proz-x.com/stephanlangdon/Library/USCore/Negotiation/Negotiation%20Genius.pdf
