What you’ll learn to do: Discuss the history of negotiating techniques within organizational behavior
Now we understand what conflict is and ways it can be managed, we will move onto negotiation. And if you think conflict causes anxiety, wait until you meet negotiation!
People are intimidated by the negotiation process, and the reason for it is because they think negotiation is personal issue. But negotiation is about solving problems and arriving at win-win solutions for all the parties involved. The people component should only add benefit to the negotiation process, not add an element of dread.
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Negotiation skills are highly valuable in the business world, and here we’re going to talk about techniques that bring about successful issue resolution.
Discuss how negotiating is different from managing conflictDescribe the stages in the process of negotiationCompare various types of negotiating strategiesIdentify issues in negotiatingDiscuss third-party negotiations
Negotiation vs. Conflict Management
We negotiate every day. We might be looking for a better job, trying to purchase a used car, or walking down the street on the right side and seeing someone coming right toward us, seemingly unwilling to step to the left. We don’t necessarily think about whether we won or lost a negotiation when we step to the left and let the walker pass, but it’s a negotiation, nonetheless.
Negotiation is the process of discussing each individual’s position on a topic and attempting to reach a solution that benefits both parties. We often step in and negotiate when a conflict is taking place, but conflict doesn’t have to exist for there to be an opportunity for negotiation. It can be a discussion of an exchange of goods and services (or just jockeying for position on a sidewalk).
All negotiations share four common characteristics:
The parties involved are somehow interdependentThe parties are each looking to achieve the best possible result in the interaction for themselvesThe parties are motivated and capable of influencing one anotherThe parties believe they can reach an agreement
If these conditions don’t exist, neither can a negotiation. The parties have to be interdependent—whether they are experiencing a conflict at work or want to do business with one another. Each has an interest in achieving the best possible result. The parties are motivated and capable of influencing one another, like a union bargaining for better working conditions. A worker doesn’t have influence over a manufacturer, but a union of workers does, and without that influence as a factor, both parties won’t be motivated to come to the table for discussions. Finally, the parties need to believe they can reach an agreement; otherwise any negotiation talks will be futile.
There are two basic types of negotiation—distributive and integrative:
Distributive negotiation operates under zero-sum conditions. Anything one party gains in the deal is lost by the other party. There can be a winner and a loser, and parties are usually opposing each other. Any relationship between the two parties is usually short term, as at least one party will walk away a “loser” of sorts and animosities can build.
Buying a Used Car
Imagine you’re looking to purchase a used car. You might meet a salesperson on the lot. You ask the price of the green Chevy. The salesperson tells you, and you shake your head—you know you don’t want to pay that much. You make an offer that’s significantly cheaper than the current sales price. Negotiation begins.
The new price will likely come at the commission of the salesperson, as there’s a fixed amount of resources to be divided. As you “win” a discounted price, he “loses” commission. You and the salesperson are opposing each other in the price negotiation. And when the purchase is complete, you’ll part ways, not likely to interact again.
Integrated negotiation features a variable amount of resources to be divided. In integrated negotiations, both parties can walk away winners. Their primary interests don’t make them “opposing parties,” but rather they’re convergent or congruent with one another. In integrated negotiations, the relationship can be of longer term, because feelings are preserved and no one walks away a loser.
Residential Amusement Park
Let’s say a long-operating amusement park is now surrounded by residential housing. One fall, the park announces that they’re going to open a roller coaster on the side of the park that’s closest to the residential neighborhood, and they’re going to build a parking structure to accommodate the extra guests they’re sure the coaster will attract. Neighbors mount a protest—they don’t want noise and the extra traffic that the roller coaster will bring. They complain to the city, and meetings are called.
The amusement park realizes that having the trust of these area homeowners is important because their complaints are not only well-founded but can cause delays to the park’s plans. The park agrees to move the parking structure to the other side of the park, reposition speakers that might create too much noise for their neighbors and build a wall to keep the sound in the park and not out in the neighborhood. It’s a win-win for both sides—neighbors keep a neighborhood free from traffic and noise, and the amusement park can add its profit-building roller coaster. Additionally, if the park can keep the neighborhood on its side, people from the neighborhood are more likely to visit the park.
Stages of Negotiation
Negotiation, in simplified terms, is a five-step process. Those steps are shown in Figure 1.
Figure 1. The five steps of negotiation
Let’s take deeper look into each step.
Preparation and Planning
In the preparation and planning stage, you (as a party in the negotiation) need to determine and clarify your own goals in the negotiation. This is a time when you take a moment to define and truly understand the terms and conditions of the exchange and the nature of the conflict. What do you want to walk away with?
You should also take this moment to anticipate the same for the other party. What are their goals in this negotiation? What will they ask for? Do they have any hidden agendas that may come as a surprise to you? What might they settle for, and how does that differ from the outcome you’re hoping for?
This is a time to develop a strategy for the negotiation. We’ll talk more about strategies in the next section.
Definition of Ground Rules
After the planning and strategy development stage is complete, it’s time to work with the other party to define the ground rules and procedures for the negotiation. This is the time when you and the other party will come to agreement on questions like
Who will do the negotiating—will we do it personally or invite a third party? Where will the negotiation take place? Will there be time constraints placed on this negotiation process? Will there be any limits to the negotiation? If an agreement can’t be reached, will there be any specific process to handle that?
Usually it’s during this phase that the parties exchange their initial positions.
Clarification and Justification
Once initial positions have been exchanged, the clarification and justification stage can begin. Both you and the other party will explain, clarify, bolster and justify your original position or demands. For you, this is an opportunity to educate the other side on your position, and gain further understanding about the other party and how they feel about their side. You might each take the opportunity to explain how you arrived at your current position, and include any supporting documentation. Each party might take this opportunity to review the strategy they planned for the negotiation to determine if it’s still an appropriate approach.
This doesn’t need to be—and should not be—confrontational, though in some negotiations that’s hard to avoid. But if tempers are high moving into this portion of the negotiation process, then those emotions will start to come to a head here. It’s important for you to manage those emotions so serious bargaining can begin.
Bargaining and Problem Solving
This is the essence of the negotiation process, where the give and take begins.
You and the other party will use various negotiation strategies to achieve the goals established during the preparation and planning process. You will use all the information you gathered during the preparation and planning process to present your argument and strengthen your position, or even change your position if the other party’s argument is sound and makes sense.
The communication skills of active listening and feedback serve the parties of a negotiation well. It’s also important to stick to the issues and allow for an objective discussion to occur. Emotions should be kept under control. Eventually, both parties should come to an agreement.
Closure and Implementation
Once an agreement has been met, this is the stage in which procedures need to be developed to implement and monitor the terms of the agreement. They put all of the information into a format that’s acceptable to both parties, and they formalize it.
Formalizing the agreement can mean everything from a handshake to a written contract.
Let’s take a look at this process in action. A team from a retail organization, Salesco, is looking to purchase widgets for resale directly to the consumer. You lead a team from WholesaleCo and are interested in negotiating an offer to sell these widgets to them at a wholesale cost.
Preparation and Planning. You know that WholesaleCo will be going up against OtherCompany, who is likely to outbid you on price. You research, as best you can, the price and quantity OtherCompany is willing to come to the table with. You also know, from your earlier research, that Salesco is a company that values quality and if they’re going to say no to OtherCompany, it’ll be because they have a reputation for skimping on quality. Your company produces the better, but more expensive, widget. Armed with this information, you put together your proposal.Definition of Ground Rules. Salesco, as your customer, has let you know that they expect widgets to be manufactured and delivered in the first quarter of the following year. They’d like to sign with a 25% deposit. Your company usually requires 50% down, but you counter with 30%, provided you have a signed contract before the end of the year, which is approaching quickly. You offer Salesco your proposal. Salesco does not share OtherCompany’s offer.Clarification and Justification. Salesco wants to understand more about your deposit requirements, and you’d like to know if your offer is otherwise in the ballpark for them. You reiterate that you provided them the best price you could for the quality product you produce. Salesco assures you your offer is good but they’ll review it further with their legal team.Bargaining and Problem Solving. Salesco understands that WholesaleCo is not providing them the best price but that the quality they look to provide their customers will only come from WholesaleCo, and never OtherCompany. They’d still like to go with a 25% deposit because that’s all they have budgeted for the remainder of the fiscal year. As a representative of Wholesale, you offer to go with a 25% deposit if a second payment can be made at the beginning of the next quarter, which would allow them to pay it out of next year’s budget. Agreements are made.Closure and Implementation. WholesaleCo makes changes to the contract for the widgets and a representative from Salesco signs. The new contract outlines the changes in the deposit structure, and a full delivery schedule of widgets to Salesco’ distribution centers by an agreed-upon date.
The negotiation process is complete.
Books have been written, and classes have been taught on the art of negotiation. The ability to master negotiation strategy is a coveted skill in the business world. Now that we understand the basics of the negotiation process, let’s take a look at some of the negotiation “experts” that are out there and how they finesse the process to get the best results.
Types of Negotiating Strategies
If someone is looking to become skilled in the art of negotiation, that person would not have to look very far to find some help. The business section of your local bookstore has a shelf that’s probably jammed with books promising to make you a better negotiator. There is no shortage of people who claim to have the best strategy, and each offers differing suggestions, tactics, and techniques to be used within the negotiation process that will help you get more out of your negotiations.
While there are slew of opinions and sources on the subject, we’ll focus on three popular texts:
Getting to Yes by William Ury and Roger FisherGetting More by Stuart DiamondNever Split the Difference by Chris Voss with Tahl Raz
Getting to Yes by William Ury and Roger Fisher
When it was first released, Getting to Yes in particular got everyone’s attention and changed the game for people trying to make a deal. The book was initially published in 1981, but with new editions published in 1991 and 2011 (both of which added Bruce Patton as a co-author) Getting to Yes remains among the most popular books on negotiation. Getting to Yes was written by William Ury and Roger Fisher, two Harvard University researchers and members of Harvard’s Negotiation Project.
This book, and the concept of principled negotiation that it introduced, was determined to change the way people make deals, and millions of readers flocked to it to digest its sage advice. In principled negotiation, one moves successfully through the process by determining which needs are fixed and which needs are flexible for the negotiators. It was meant to be a negotiation strategy by which agreements could be made without damaging business relations. There are five major points that one should consider in the negotiation process:
Separate the people from the problem.
This describes the way the parties should interact with each other throughout the negotiation process. Negotiators are only people, and they have personal interests in their positions. If the Party A attacks the position of Party B, it can feel as though he or she is attacking Party B personally. If parties can go into a negotiation committed to clear communication, and do their best to acknowledge the emotions that are attached to the negotiation process, there will be a better chance for amicable resolution.Focus on interests, not positions. This is an aspect to be considered throughout the negotiation process, starting with planning and preparation and revisited in clarification and justification. A party’s position is something he has decided upon. His interests are the reason why he’s made that particular decision. Each party should attempt to explain their interests clearly and have a full understanding of the other party’s interests.Invent options for mutual gain. It’s during this stage, that falls within the bargaining discussion part of the process, that parties should get together and try to generate as many possible options for resolution. Parties can focus on shared interests to generate as many win-win solutions as they can during the brainstorming sessions. Once all possible solutions are exhausted, evaluation of those proposed solutions can begin.Insist on using objective criteria. Using objective criteria can keep the discussion polite and the relationship preserved during the negotiation process. This objective criteria can be introduced during the ground rules stage, or at any point thereafter, and parties should agree to its use. Objective criteria can be statistics, past legal judgments, professional standards or other data that is legitimate and practical.Understand your “BATNA.” The BATNA – the best alternative to a negotiated agreement – is the most advantageous course of action a party can take if negotiations fail and an agreement can’t be made. A party should never accept a negotiated deal that leaves him or her worse off than his BATNA. The BATNA is a leverage point in negotiations, and without a clear idea of BATNA a party is negotiating blindly.
With these suggestions, Fisher and Ury made a huge impact on the art of negotiation. People didn’t look anymore to just get a “piece of the pie.” They wanted to “expand the pie” and keep relationships intact by applying these integrated bargaining techniques to their next negotiation opportunities.
Getting More by Stuart Diamond
Do Fisher and Ury provide the only way to negotiate? Of course not! Many books out there take Fisher and Ury as the starting place and work from there. Pulitzer Prize-winning journalist and Wharton Law Professor Stuart Diamond was the associate director of the Harvard Negotiation Project (with which Fisher and Ury were affiliated), and he takes a different approach to negotiation strategy in his book Getting More.
In Getting More, which encompasses many of the lessons taught in his class at University of Pennsylvania, Diamond’s approach focuses on finding and valuing the perceptions and emotions of others rather than using the traditional tactics of power, logic, and leverage. “Think of yourself as the least important person in the negotiation,” a written quote on his website suggests. “Even with hard bargainers, it has to begin with their feelings and perceptions, their sensibilities.”
Getting More emphasizes valuing the trust aspect of negotiations, encouraging participants to be transparent and constructive, not manipulative. He even encourages parties to “make emotional payments,” that is, tapping into the other party’s emotional psyche with empathy or simply by valuing them. Getting More takes the idea of preserving a relationship during the bargaining process and escalates it to the next step by actually leveraging the personal connection.
This negotiations model has been adopted by U.S. Special Operations Command for the training of U.S. Special Forces, Green Berets, U.S. Navy Seals, the U.S. Marines and other units, and Google has used the book to train 12,000 of their employees worldwide. The book rivals Ury and Fisher’s Getting to Yes with its 1.5 million copies sold.
Never Split the Difference by Chris Voss with Tahl Raz
Former FBI hostage negotiator Chris Voss took a different stance on the negotiation process in his recent book Never Split the Difference, where he promotes the idea of “tactical empathy.”
In Chris Voss’s negotiation strategy, by empathizing with the other party, the negotiator is able to win trust and bring that other party over to his side, where he then involves her in the solving of “her problem.” This is following Stuart Diamond’s book, valuing people by acknowledging their intelligence, after which the negotiator advances his own point of view by asking the other party’s opinion. The process relies simply on the idea that both parties understand each other’s point of view when it comes to this subject.
Chris Voss also provides some psychological techniques that help connect you, as the negotiator, to the other party. He suggests “mirroring” what the other party says by repeating their last three words before adding your own thoughts. Mirroring helps the other party feel more secure and heard. The negotiator can also help foster a level of security with the other party by giving them the chance to offer up a few “no” responses to requests. “Pushing too quickly for a yes can lead to mistrust,” he says. By asking questions that “bait the ‘no,’” Voss helps the other party feel in control. “Is this a bad time to talk?” he might ask. “No,” the other party might reply, “this is a good time.”
This differs from Diamond’s approach to negotiation in that Diamond is advocating for genuine personal connection to put the other party at ease, while Voss uses techniques and tactics that do the same without having to make a personal investment. But both strategies take Ury’s and Fisher’s recommendation of “separating the person from the problem” to a more thoughtful, purposeful level.
Cialdini’s Influence: The Power of Persuasion and Kerry Patterson’s Crucial Conversations are also popular reads on the subject and offer slightly different ways to hone your negotiation talents. Overall, it’s important to understand that each of these approaches to negotiation strategy has something to offer and, used correctly by the right kind of negotiator, the strategies can yield excellent results.
Issues in Negotiation
As you might guess, negotiations don’t always go smoothly. Before you step into a negotiation, you’ll want to understand what kind of issues could throw a wrench into the bargaining machinery and how others manage those variables. Let’s take a look at some common issues that contemporary negotiators face, and how they can be overcome.
If “talent is just personality in the right place,” then what are the right and wrong kinds of personality traits for negotiation? Tomas Chamorro-Premuzic, professor of business psychology at University of London and Columbia University, suggests that high emotional intelligence is key if a negotiator is going to be successful. Emotional intelligence is the capacity to be aware of, control, and express one’s emotions, and to handle interpersonal relationships judiciously and empathetically.
In his article, “The Personality Traits of Good Negotiators,” for the Harvard Business Review, Chamorro-Premuzic cites people who show neurotic tendencies and “Machiavellianism” (a term that describes a person’s tendency to exploit and manipulate others) as those who can expect to experience less attractive results at the negotiation table.
If the process is followed and strategic considerations are made for the problem and people involved, personality should neither help nor hinder the negotiation process.
Men and women don’t necessarily negotiate differently; studies show that men negotiate slightly better outcomes than women do in the same situations, but the difference is often nominal. Continued emphasis is placed on collaborative, integrative negotiation, and both men and women can succeed with this approach. But there is evidence that gender affects the outcome of bargaining. Why is that?
Statistically speaking, women tend to fall short of their male counterparts is when they’re negotiating for themselves; however, research has shown that when women negotiate for others, they often outperform men. What’s the trick to getting past this? Fatimah Gilliam, founder and CEO of The Azara Group, a leadership development and strategy consulting business, offered advice on overcoming this hurdle in an article for University of Pennsylvania’s Wharton School of Business. “Change your perspective…think beyond yourself,” she said. “You’re negotiating for your family. You’re negotiating, if it’s compensation, so that you can have more money to take care of your parents when they’re old, right?”
Research also shows that women have less confidence in their negotiation abilities, which may lead to hesitation to engage in negotiation practices. Women penalize themselves by avoiding these situations when engagement is in their best interest.
Negotiation styles vary across cultures, and it’s helpful to keep in mind cultural differences when engaging in negotiations. While we don’t want to risk sounding stereotypical, here are some examples of how different cultures approach negotiation:
Italians, Germans, and French don’t “soften up” a party in the negotiation with praise, and hearing another party do this seems manipulative to them.The French enjoy conflict, so they tend to be longer in the negotiation process and aren’t terribly concerned with whether the other party likes them.The Chinese also draw out negotiations because their belief is that they never end, so when parties from other cultures feel like they’re coming to a conclusion, the Chinese party may just decide to start over.Japanese negotiators work to develop relationships, so tying up loose ends and details in an agreement may have no importance to them.The British often complain that their U.S. counterparts talk too much.Indian executives often interrupt each other, and when other parties are listening intently and not interrupting, they feel as though they aren’t being heard.Americans mix business and personal lives, and other cultures compartmentalize them, so when Americans ask, “How was your weekend?” it can seem intrusive to other cultures.Russians ignore deadlines and make no concessions because they view concessions as a sign of weakness.
The cultural aspect of negotiation significantly affects the amount of time for preparation and planning, so the negotiator can determine how to handle these cultural differences.
Negotiations are often difficult even when there are no obstacles involved, but being aware of issues triggered by personality, gender and culture can help the parties overcome them and deal with the matter at hand.
When a person is in a negotiation process to get something he or she needs, ethical concerns may surface. How far do you go to get what you want? Should you always tell the truth and reveal your plan, or does doing so compromise your position? Difficult questions like these arise often in negotiations.
Some unethical (or at least questionable) behaviors that often occur during negotiations include:
Selective disclosure: highlighting positive information and downplaying (or omitting) negative informationMisrepresentation: negotiators misstate facts or misstate their position (e.g., they are willing to accept a lower price than they originally stated)Deception and lying: negotiators provide factually incorrect information that leads to incorrect conclusionsFalse threats and false promises: negotiators mislead the other party as to actions they might take at the end of the negotiation processInflicting direct or indirect harm: negotiators intentionally sabotage the other party’s chances of success
Just because something is unethical does not mean that it’s illegal. A lot of unethical behavior is still on the right side of the law. The most you can do to monitor ethical behavior in a negotiation is to bring it to the table yourself and be willing to say no and walk away if the other party does not.
Mistakes in Negotiation
Preparation and planning are key in avoiding common negotiation mistakes, but even the most experienced negotiator can still make them. Perceptual bias and poor decisions account for most of them. Let’s look at a couple:
Winner’s curse. This is when a negotiator makes a high offer quickly and it’s accepted just as quickly, making the negotiator feel as though he is being cheated. Lack of information and expertise are chief among the issues that cause this mistake.Mythical fixed pie. The negotiator assumes that what’s good for the other side is bad for his side. For instance, imagine that two parties that want an orange. If a negotiator makes the mythical-fixed-pie mistake, he divides that orange in half and gives each party a piece. He’s let competitiveness get in the way of coming up with a creative solution, and if he’d listened, he’d have understood that one party wanted the meat of the orange and the other wanted the rind.Overconfidence. The negotiator puts too much stock in his ability to be correct, and thus uses high anchors for his initial offers and adjustments. His lack of information and distorted self-perception will cost him a fairly negotiated deal.Irrational escalation of commitment.
This is when the negotiator continues a course of action long after it’s been proven to be the wrong choice. Causes of this include an insatiable need to win and ego, and it shows a lack of commitment to actually arriving at a fair deal.
Again, preparation and planning can help a negotiator avoid these issues, but practice is another way to get better at avoiding mistakes!