Negotiation is the process by which two or more parties attempt to reach an agreement. The definition is simple, but the process can be complex.
How parties approach a negotiation depends on their differences, their goals, and their desire to reach a resolution. Past experiences, personal biases, and individual temperaments also come into play.
Learning how to get our way starts very early. Children negotiate with parents, siblings, caregivers, teachers, and peers. Most young people learn that no single approach works with everyone. Schoolyard bullying, unfortunate but still rife, rarely works at home. The sweet approach that wins over your grandma falls flat with your big brother.
Despite intuitively adapting their negotiating style in social settings, some people treat all business negotiations as purely competitive, attempting to win at all costs. This approach falters when negotiations involve ongoing business relationships.
Effective negotiators distinguish negotiations by type and apply appropriate strategies.
Modern theories about negotiation have roots in multiple disciplines, including behavioural psychology, conflict management, economics, law, international relations, labour relations, and mathematics. Most experts divide negotiations into two broad types: distributive and integrative.
Distributive negotiation gets its name from the idea of dividing a “fixed pie.” The more one gets, the less for others, creating winners and losers. Such negotiations are described as adversarial, bargaining, competitive, transactional, or win-lose. Compromises can leave all parties dissatisfied, as in across-the-board budget cuts, yielding lose-lose outcomes deemed to be fairer than having one side win.
Integrative negotiation gets its name from the idea of working together to maximize the goals of each party. Such negotiations are described as collaborative, transformative, or win-win. Negotiators “expand the pie” by including non-monetary trade-offs and benefits.
In the early 1900s, Mary Parker Follett, a social worker and pioneering theorist of organizational behaviour, proposed constructive conflict resolution, which integrates the desires of both parties. Follet told story about two sisters who wanted the same orange and cut it in half (a distributive approach). However, one wanted only the juice to drink and threw out the peel, while the other wanted only the peel for baking a cake and threw out the pulp. Had they shared their true goals with each other, both could have gained more through a different settlement.
Follett’s constructive conflict principles, well worth considering across a range of negotiation situations in business and in life:
· Put conflict to work: As a conflict difference is here in this world, and we cannot avoid it, we should use it to work for us.
· Friction is good: the mechanical engineer capitalizes on friction, the music of the violin we get by friction, we left the savage state when we discovered fire by friction.
· Chess analogy: Anticipation of conflict does not mean necessarily the avoidance of conflict, but playing the game differently, that is you integrate the different interests without making all the moves.
· Three ways: The three main ways of dealing with conflict are domination, compromise and integration… Compromise is about giving up something; it does not create, it deals with what already exists… Integration is about finding a solution in which both party’s desires have found a place.”
· Conflict, invention, and new values: We should always hope to have conflict, the kind which leads to invention, to the emergence of new values.
· Revaluation: One of the most important reasons for bringing the desires of each side to a place where they can be clearly examined and valued is that evaluation often leads to revaluation. We progress by a revaluation of desire.
· Whole vs. parts: Deal with business problems by breaking up wholes into parts. To break up a problem into its various parts involves the examination of symbols, the careful scrutiny of the language used to see what it really means.
· Careful with whole-words: e.g., Much of what is written of the consumer is inaccurate because consumer is used as a whole-word, whereas it is quite obvious that the consumer of large wealth has different desires and motives from the consumer of small means.
· Circular response: Response is always to a relation. I respond, not only to you, but to the relation between you and me. My behaviour helps create the situation to which I am responding. That implies (what we have daily to take into account) that my behaviour is helping to develop the situation to which I am responding the developing situation makes it impossible to develop a map of the future
· Plus values: Every one of us interested in any form of constructive work is looking for the plus values of our activity.
Some negotiations do not lend themselves to win-win solutions. In single transactions, where the parties have no prior relationship and no expectation of one afterward, each side strives for maximum gain without concern for the other’s outcome.
To drive a hard bargain, experts recommend these steps:
· Know your best alternative to a negotiated agreement (BATNA): Identifying alternatives in advance improves your leverage by clarifying at what point you should accept a deal or walk away.
· Gain an information advantage: Reveal as little as possible about your position, while prying as much information as possible from your counterpart. Divulging preferences, needs, motives, or urgency weakens your bargaining position.
· Don’t make the first offer: The first offer tends to become an “anchor” around which further negotiations revolve. Allowing the other party to make the first offer reveals their position and informs your negotiating stance.
· Reveal alternatives: Sharing this information strengthens your position by reminding the other party that you may walk away from the negotiation.
· Make reasonable concessions: Avoid scuttling a good agreement by trying for too much, especially if the offer is significantly better than your BATNA.
Many businesses hire subcontractors, form alliances or create partnerships, and virtually all desire ongoing relationships with suppliers and customers. Negotiated outcomes viewed as inequitable by either side threaten these relationships. Finding new partners or customers is costly.
Negotiations tied to ongoing relationships tend to involve multiple issues beyond setting a price, so discussions become wide-ranging. Integrative negotiation turns the distributive process on its head.
To achieve a collaborative win-win agreement, I recommend these steps:
· Establish trust: Trust is a prerequisite for disclosures that expose vulnerabilities. Each side needs confidence the other is acting in good faith (principled negotiation). Distributive tactics, like bluffing, intimidation, delays, or exaggerated emotions poison discussions.
· Share information: Exchange as much information as possible. Fuller disclosure helps each side understand the other’s needs, motives, and areas of common ground.
· Focus on interests, not positions: Separate interests from positions by asking “why” to uncover underlying reasons for a particular demand.
· Solve problems jointly: Shift the focus from extracting concessions to solving problems. Trade less important issues for more important ones. Adjust a monetary figure in exchange for other benefits, such as a longer contract, larger territory, or quicker payments.
Some theorists believe all negotiations can be integrative. Others contend that distributive and integrative approaches can be blended. Business negotiators must understand both. In today’s environment of greater transparency, specialization, and outsourcing, learning to negotiate win-win outcomes is essential for sustainable, long-term business relationships.
Because of technology, more information is available to more people at more speed every passing moment. I’ll leave you with this thought: With such increasing accessibility to information, it is not only preferable to create win-win outcomes, it’s increasingly easier.
David Imrie is the Principal and Director of Paramount People, a recruitment and coaching consultancy firm in Sydney, Australia, specialising in sales, business development, marketing and communications professionals. Networker, Headhunter, Team Builder and Coach.