Negotiations Training MAT

1. Negotiations Training MAT

2. Dilbert on Negotiations You don’t get what you deserve in life…You get what you negotiate

3. Dilbert on Negotiating Clearly we can do better than Dilbert!

4. Agenda • Importance of Negotiations • Negotiations Styles and Tips • The Negotiation Process and Preparation • Creating Alternatives • Final Exercise & Key Takeaways

5. Let’s start with the facts… 1 • 70%of people say they don’t like negotiating • 80% of business people say they want to be better negotiators • 90% of people after finishing a negotiation say they have no idea if they could have done better And, most importantly… • Everyone negotiates every day 2 3

6. Negotiations happen – even when you don’t want them to

7. What types of negotiations have you been involved in? Remember, everyone negotiates every day Note: Write answers on flipchart paper

8. This is the last day of MAT – You should be structuring/segmenting your answers Types of Negotiations Daily Periodical Professional Personal Let’s put the list we just developed in our 2-by-2

9. Everyone has personal and professional negotiations on a daily and periodic basis Types of Negotiations Daily Periodical • Deadlines for delivering work to boss • Amount of improvement needed in work by subordinates • Asking for more responsibility / money • Purchasing equipment / supplies / products • Winning support for your ideas Professional • Driving – passing and turning others • What time you’ll be home for dinner • Who does chores / errands • Buying a car / house • Agreeing with partner / spouse on key decisions Personal Other examples and segmentations are possible as well!

10. Learning comes from doing: Let’s do an exercise… • In Negotiations, as in most things in life, the more we practice the better we get • The following exercise will give you a chance to try your negotiation skills • This is a competitive negotiation between groups… The goal is to maximize profits!

11. Exercise Instructions • You are each a member of the Board of an Oil Company in one of two countries: Alba or Batia • Alba and Batia sell oil to a third country, called Capita • Alba and Batia make profits depending on: • What price they sell oil at, and • What price the other country sells oil at • However, Alba and Batia have bad relations • They do not talk to each other • They each want their country to grow more than the other Note: Trainer should read Trainer’s Note that accompanies case for full information

12. Exercise Do exercise!

13. Post-Exercise Questions • What were everyone’s final profits? • Write them on a flip-chart • What did we learn?

14. Win Win Win Win Win Win The negotiation mentality has to be win-win Wrong Mentality: I Win, You Lose Lose Win Right Mentality: Let’s Find a Way to Both Win Win

15. You need to focus on the big picture and long-term Wrong Mentality:The Tree Right Mentality:The Forest Wrong Mentality:The Battle Right Mentality:The War

16. However, you also need to master the following three things: NegotiationStyles • Understand your own • Be aware of theirs Process and Preparation • Prepare, prepare, prepare • Recognize that most negotiations succeed because of work done in advance! Creating Alternatives • Identify win-win opportunities • Think outside the box These three items will be the focus of the rest of the module

17. Agenda • Importance of Negotiations • Negotiations Styles and Tips • The Negotiation Process and Preparation • Creating Alternatives • Final Exercise & Key Takeaways

18. What is your negotiation style? • Think of a negotiation you are currently involved in (or have recently been involved in) • Write it down • Take 1 minute to think about how you would describe your style in this negotiation • Write it down • Take 2 minutes to tell the person next to you about the negotiation and your style in it • 4 minutes total

19. Circle the element which is more your negotiation style for each of the following pairs OPTION A OPTION B Participants are friends The goal is agreement Make concessions for relationship Be soft on the people and the problem Trust others Change your position easily Make offers Disclose your bottom line Accept losses to reach agreement Search for the answer they will accept Insist on agreement Try to avoid a contest of wills Yield to pressure Participants are adversaries The goal is victory Demand concessions from relationship Be hard on the people and the problem Distrust others Dig into your position Make threats Mislead as to your bottom line Demand gains to reach agreement Search for the answer you will accept Insist on your position Try to win a contest of wills Apply pressure

20. But, is there another option? What is your negotiation style? • Sum up your Total of Option A and divide by 13 • This is how much you make Concessions • Sum up your Total of Option B and divide by 13 • This is how much you Compete

21. Collaboration > Concession or Competition Collaboration is the balance of consideration for self and others

22. Circle the element which is more your style for each of the following pairs (1 of 2) Concession Collaboration Competition Participants are friends The goal is agreement Make concessions for relationship Be soft on the people & problem Trust others Change your position easily Make offers Participants are adversaries The goal is victory Demand concessions from relationship Be hard on the people and the problem Distrust others Dig into your position Make threats Participants are problem solvers The goal is awin-win outcome Separate peoplefrom the problem Be soft on people,hard on the problem Proceed independent of trust Focus on interestsnot positions Explore interests

23. Circle the element which is more your style for each of the following pairs (2 of 2) Concession Collaboration Competition Disclose your bottom line Accept losses to reach agreement Search for the answer they’ll accept Insist on agreement Try to avoid a contest of wills Yield to pressure Mislead as to your bottom line Demand gains to reach agreement Search for the answer you will accept Insist on your position Try to win a contest of wills Apply pressure Avoid having a bottom line Invent options for mutual gain Develop mutual options Insist on objective criteria Reach a result independent of wills Be open to reasonnot pressure

24. Collaboration Collaboration Participants are problem solvers Avoid having a bottom line The goal is awin-win outcome Invent options for mutual gain Separate peoplefrom the problem Develop mutual options Be soft on people,hard on the problem Insist on objective criteria Proceed independent of trust Reach a result independent of wills Focus on interestsnot positions Be open to reasonnot pressure Explore interests Collaboration – The Negotiation Vision

25. What is your negotiation style? • Think back to the negotiation you talked with your partner about a few minutes ago • Take 3 minutes (total) to answer the following questions with your partner: • Were you more conceding or competing? • How can you use the concept of collaboration to help you specifically in that negotiation? • What is the one thing you want to improve in your personal negotiation style?

26. A proactive personal style is positive, and never angry “If you can make a man laugh, you can make him like you”– Alfred E Smith, NY State Governor “You can’t shake hands with a clenched fist” – Ghandi

27. Some people are Competitive negotiators…

28. Use non-verbal communication to SOFTEN the hard-line position of others S MILE • Make a positive, friendly, connection O PEN POSTURE • Show you are open to negotiate F ORWARD LEAN • Create a bond T OUCH • Put yourselves on the same team E YE CONTACT • Maintain the bond and the focus N OD • Gain their trust

29. Here are 8 tips to negotiating well… (1 of 3) • Don’t be afraid to negotiate! 1 • Experienced negotiators know you can negotiate anything • Other people will take advantage of you if you’re shy/timid • Not wanting to negotiate can be very expensive! • It’s like anything – the more you practice, the better you get. So practice! 2 • Don’t get suckered by “rules” or “standard contracts” • Experienced negotiators know you can negotiate anything • Rules are often a trick – experienced negotiators refer to rules because they know people respect rules • There are no standard contracts – You can always negotiate • You should feel 100% comfortable making contract changes before you sign – the other party might say this is not normal, but it is!

30. Here are 8 tips to negotiating well… (2 of 3) 3 • Never be the first to name a figure • Once you give a figure, that becomes the anchor point – and you’ll never know what you could have got • Ask them “What’s their budget?” or “What are they expecting?” – You have nothing to lose 4 • Ask for more than you expect to get • Always start high – the worst that happens is they feel good because you’re giving them a “special deal” • Once the other person gives their number, even if it's much better than you expected, say something like "I think you'll have to do better than that". Don't be arrogant or aggressive. Just say it calmly. 5 • Don’t get emotionally involved • Keep calm, patient, and friendly • Leave your ego at the door and look for win-win opportunities

31. Here are 8 tips to negotiating well… (3 of 3) 6 • The final decision doesn’t rest with you • This shouldn’t be a way to re-negotiate after agreeing, but does give you time to evaluate the terms without the pressure • This prevents other people from rushing you 7 • Don’t act too interested • Giving the impression that you’re willing to walk away will have a big impact on the negotiations. It’s even better if you really are willing to walk away. • Play the reluctant buyer or seller 8 • Don’t make the other person feel they’ve been cheated • Negotiations should leave both parties feeling satisfied – or it will come back to bite you in this or a future deal • Be willing to give up things that don’t matter to you to gain goodwill

32. Your character – who you are and how you act – will follow you through negotiations “Men of genius are admired… Men of wealth are envied… Men of power are feared… But only men of character are trusted” -Alfred Adler, Austrian Psychologist In Negotiations, be a man or woman of character

33. Agenda • Importance of Negotiations • Negotiations Styles and Tips • The Negotiation Process and Preparation • Creating Alternatives • Final Exercise & Key Takeaways

34. Preparation is the key to negotiations • “By failing to prepare you are preparing to fail”– Benjamin Franklin • “If I had 6 hours to cut down a tree, I’d use the first hour sharpening the ax”– Abraham Lincoln • “Information is a negotiator’s best weapon”- Zdenek Necas, CzechAdventurer & Entrepreneur Should Abraham Lincoln have spent more time preparing?

35. Request bids Receive bids Negotiate Typical negotiations have three parts • Contact suppliers • Inform them of what you want • Ask for lowest possible price • Ask when they can submit bid by • Receive bids • Analyze bids • Discuss pros and cons of each supplier • Choose supplier(s) you are most interested in • Contact them to negotiate best possible price Typical negotiations follow this standard format… and have little planning / preparation

36. DevelopPlan Request Company Info Prepare Terms(RFP) NegotiateFinalTerms Request & ReceiveBids ProvideBidFeedback HoldFinal Negotiation The right way to negotiate is to start with a plan, negotiate terms first, and provide bid feedback Request bids Receive bids Negotiate • Identify scope • Create work plan and timeline • List stake-holders • Set goals • Identify all possible suppliers • Identify company info required • Send suppliers detailed request for info • Create terms you want included • Think outside the box for all terms • Request feedback on terms • Update terms where it makes sense • Inform suppliers terms are final • Ask suppliers for bids • Set a firm date • Receive and analyze bids • Provide relative / absolute feedback • Make it clear to all providers they need to reduce price • Inform selected providers they are in final stage • Hold final round (in person if large purchase)

37. The key to negotiations is to do them on your terms Common Misconceptions Reality • We’re a small company and they’re a huge company – we have no leverage • We can’t change the terms • Suppliers won’t provide their company information • Before you sign a contract is when you have ALL of the leverage– ask for what you want • It takes time and hard work to do the preparation – but it’s worth it! • This works for big and small negotiations – the only thing that differs is the extent of your effort If you are the customer and there are competitive suppliers,YOU have all the power to set the terms the way you want them

38. Two recent TACA & Volaris negotiations followed this process to success Maintenance Components Flight Simulator Scope • 10-year Component repairs contract for TACA & Volaris Airbus fleet • Purchase of Flight Simulator for Pilot Training Key Success Factors • Following the process • Setting terms in advance of price • Creating a competitive environment • Following the process • Setting terms in advance of price • Creating a competitive environment Time-frame • 3 months • 3 months • Large savings over previous contract terms • Purchase price significantly below market price Results

39. Developing a clear plan will lead you to success DevelopPlan 1 Identify scope • What’s in scope? What’s out of scope? • Why? Create workplan and timeline • What activities do we need to plan? • How long will each activity take? List stakeholders • Who needs to be involved? • How and when should we get them involved? Set goals • What do we expect to achieve? • What are our financial targets? If you don’t make time to plan, you might as well not negotiate

40. A detailed Business Questionnaire was sent to each Supplier at the very beginning of the process Request Company Info 2 TACA-Volaris Component MaintenanceBusiness Partner QuestionnaireTable of Contents • Ask for as much information as you want – Don’t be shy! • This is your chance to learn more about the suppliers • If they don’t do a good job filling this out, it’s an indicator of how much they value your business 1.1 Company Information 1.2 Financial Information 1.3 Organization & Capabilities 1.4 Key Accounts 1.5 Engineering and Technical Capabilities 1.6 Component Maintenance Capabilities 1.7 Staffing 1.8 Inventory Management 1.9 Customer Support and Account Management 1.10 Pricing Proposal Questions and Payments 1.11 Quality and Schedule Requirements 1.12 Warranty 1.13 Components Shipment APPENDIX A: SUB-CONTRACTOR INFORMATION

41. The terms should be prepared using supplier contracts and internal brainstorming Prepare Terms (RFP) 3 Analyze supplier contracts • Use old contracts • Request supplier contracts Setterms Update terms Synthesis Feedback • Synthesize thoughts • Use external consultant / SME if needed • Create document with all terms other than price • Product description • Service levels • Timelines • Penalties • Additional benefits • Volume discounts • Etc… • Use process shown on next slide (or other similar process) • Hold multiple rounds of feedback if necessary • Finalize terms that you want – The negotiations should be on your terms • Remember however that everything has a cost Conduct internal sessions • Identify company needs • Think creatively about what else to include

42. Feedback on terms should be addressed fairly, and must be agreed before negotiating price NegotiateFinal Terms Supplier input required 4 RFP Category Supplier 1 Response – Round 1 TACA Response Supplier 1 – Compliance (Yes/No) 3.4.3 Over and above repair conditions Question from Supplier: If we understand the paragraph in the RFP correctly, you mean that “over and above pricing” will only apply to repairs or removals due to: (see table on left) Yes, Over and above pricing only apply to the circumstances listed in the RFP 4.4 Turn Time Requirements The return destination of subject component has to be specified by Volaris-TACA on the first day of shipping from any Volaris-TACA designated station We cannot provide a return destination as inventory planning is dynamic 4.5.2 Responsiblities - Penalties Under the assumption that all packages will be awarded to Supplier Please see Revised RFP Requirements sent on May 22nd for new terms – overall cap on Penalties 4.11 PMA support and credit For PMAs used upon Volaris - TACA's request, TAT-performance, MTBR performance guarantee and AOG rules as set forth in the RFP will not apply All Components, OEM or PMA, that are part of the Agreement will be subject to TAT, MTBR, and AOG penalties

43. A Pricing Sheet should be based on your terms and allow you to compare apples-to-apples Request & Receive Bids 5

44. Qualitative Feedback should be provided to allow suppliers to address areas of weakness Provide Bid Feedback 6A Poor Average Excellent Below Average Key Strengths Good • Experience with A320 simulators • Competitive prices Weaknesses • Customer service • Level of detail • Software upgrades • Product is new

45. Pricing Feedback should also be provided in a way that forces competition Legend 0%-15% away from best offer 15%-30% away from best offer 30%+ away from best offer Provide Bid Feedback 6B Level D Simulator plus Airbus Parts & Data Supplier 1 Competitor Competitor Competitor Note: Price variation in legend can and should be different for each supplier

46. A final negotiation day (also possible by email) will ensure you get to the lowest price Hold Final Negotiation Simulator Final Negotiation Day 7 Objectives • We have asked suppliers: • To present advantages of their company / product • To address any perceived weaknesses • We will give feedback and ask for additional benefits • Review updated offers • Choose and inform top two suppliers • Give additional feedback • Look for win-win ways to reduce price • Ensure clarity • Receive final offers • Review offers • Make decision • Make final ask

47. How can you use this process? • Imagine you are responsible for negotiating Volaris’s new photocopier leasing contract • What would you do for each of the first three elements of the process? 1 2 3 DevelopPlan Request Company Info Prepare Terms(RFP) • Identify scope • Create work plan and timeline • List stake-holders • Set goals • Identify all possible suppliers • Identify company info required • Send suppliers detailed request for info • Create terms you want included • Think outside the box for all terms • How can you use this process in any work-related negotiations you have now or will have in the near future?

48. Agenda • Importance of Negotiations • Negotiations Styles and Tips • The Negotiation Process and Preparation • Creating Alternatives • Final Exercise & Key Takeaways

49. You can always negotiate…

50. Creating alternatives starts with interests instead of positions Interests Positions • What’s really important to me? • Can I put myself in your shoes? • How can we both achieve our interests? • How can I explain my position? • Why don’t they understand me? • How do I win?