Have you ever tried to make dinner plans with a large group of people? Aligning with everyone on a time, place and date can be an ordeal. Whether or not you realized it, arranging those dinner plans was an exercise in negotiation, something we all navigate in our personal and professional lives in formal and informal ways on a regular basis.
When people are involved, different perspectives are inevitable. The outcome of those opposing perspectives will depend on the negotiation, whether you are trying to put a stubborn toddler to bed, looking to lobby your boss for a raise or negotiating a business merger between two enterprises. Regardless of the domain you are negotiating in, with expertly practiced negotiation tactics, different perspectives don’t have to equal bitter divisiveness, and outcomes can be a victory for everyone involved.
What is Negotiation?
Negotiation is a problem-solving approach where two or more people strive to reach a shared decision on common terms by willingly discussing their differences and seeking a shared solution.
Although negotiation doesn’t guarantee a successful outcome, it does allow people to have a voice in decision making and to reconcile differences in a manner that isn’t destructive to relationships. Generally, all parties involved in a negotiation have a shared interest that makes it impossible to achieve the outcome alone, according to the Harvard Law School Program on Negotiation (PON).
We all have to negotiate in a variety of settings, but approaches to negotiation can vary – along with the value of the outcome.
Types of Negotiation
Positional vs. Principled Negotiation
In a positional negotiation, discussion kicks off with each party adhering to their original position and striving to move the opposed parties to share that position or to come to a middle ground between the two opposing sides. This approach is considered a win-lose approach because at least one party will eventually lose their position. This approach is effective in communicating each party’s desires and objectives in clear terms; however, it can be damaging to relationships as it often neglects the losing party’s interests altogether. In some cases, such as price haggling, this approach is often the most practical.
Principled, or interest, negotiation is considered a win-win approach, according to PON. It focuses more on the higher-level aspects involved in the outcome as opposed to merely the “thing” at hand, taking into account people, various interest, options and criteria. Instead of drawing a hard line or cowing to the opposing side, principled negotiation strives to isolate the best possible outcome and achieving the overall goals.
For example, a parent trying to persuade a stubborn child to go to bed could take the approach that the child must be in bed immediately, at all costs. This is a positional negotiation. The parent wants his child to sleep, the child wants to stay awake, and each may hold his ground until one side wins. On the other hand, in the same scenario, the parent may take a principled approach, keeping in mind that they both have a shared interest of the child getting enough rest for the next day. They may ultimately agree on one last bedtime story, song or drink of water, and each side will have achieved value: the child is getting a little extra time and the parent in getting the child in bed within a few minutes of bedtime.
Distributive vs. Integrative Negotiation
Distributive negotiation is also referred to as the “fixed pie” strategy, in reference to the idea that resources are finite, and the objective is to get as big a piece of pie as possible. The goal is to get as many resources as possible, which requires understanding how other negotiators will position themselves competitively.
Integrative negotiation is precisely the opposite – the view is not on the individual party’s results, but on what outcome integrates the best possible outcome for the group as a whole. Other negotiators, then, are not to be defended against but collaborated with.
A business leader may need to adopt a distributive position when resources are fixed. For example, a product’s service or price is often fixed. In negotiation with a vendor, your organization may draw the line at $10,000 in project costs, but the vendor has told you they will not provide the project for less than $12,000. Here, your goal is to get as close to the $10,000 as possible, which means an outcome where you agree to pay $10,500 means you have given up less than the vendor.
Applying an integrative approach in the same scenario, you may determine that both your organization and the vendor organization stand to benefit from a long-term relationship, and you may seek to find a shared arrangement that considers both sides. In this case, you may agree to pay $11,000, with each party losing $1,000 from the desired short-term goal, but have made a concession that will be better for the long-term. Integrative bargaining is generally less tense because it is approached in a conciliatory manner, as opposed to distributive, which is much more competitive.
Stages of the Negotiation Process
Overall, negotiation moves through three different stages:
- Analysis. In this phase, all the documentation, facts, data and other details are compiled to ensure all necessary information is available. In this stage, you may identify shared interests. Here, you must also establish your objectives for the negotiations, defining the best possible outcome and the lowest possible outcome you’re willing to accept.
In addition, you would also want to develop a contingency plan in case the negotiation doesn’t move as anticipated, often referred to as a BATNA, or Best Alternative to a Negotiated Agreement.
- Planning. In this stage, ideas for common interests and shared wins are shared as a brainstorming session. Remember, this is not the stage when a decision is made, but when ideas are developed.
Consider the position other parties may take, and which options offer them the most benefits.
- Discussion. Finally, negotiators generate options and reach an agreement by reviewing options against criteria, compromising where appropriate.
To conclude, the agreement may be formalized in writing.
A solution isn’t a guaranteed outcome in a negotiation, but practiced negotiators who can avoid dirty tricks or emotional outbursts and keep the real objectives in mind are much more likely to achieve a successful outcome, maintain relationships and avoid making premature concessions.