Negotiate (West's Encyclopedia of American Law)
To conduct business transactions; to deal with another individual in regard to a purchase and sale; to bargain or trade. To conclude by way of agreement, bargain, or compact. To transfer a negotiable instrument, such as a promissory note, or other COMMERCIAL PAPER.
(The entire section is 43 words.)
Want to Read More?
Subscribe now to read the rest of this article. Plus get complete access to 30,000+ study guides!
Negotiation (Encyclopedia of Business and Finance)
Negotiation is the process of two individuals or groups reaching joint agreement about differing needs or ideas. Oliver (1996) described negotiation as "negotiators jointly searching a multidimensional space and then agreeing to a single point in the space."
Negotiation applies knowledge from the fields of communications, sales, marketing, psychology, sociology, politics, and conflict resolution. Whenever an economic transaction takes place or a dispute is settled, negotiation occurs; for example, when consumers purchase automobiles or businesses negotiate salaries with employees.
Two styles of negotiating, competitive and cooperative, are commonly recognized. No negotiation is purely one type or the other; rather, negotiators typically move back and forth between the two styles based on the situation.
On one end of the negotiation continuum is the competitive style. Competitive negotiationalso called adversarial, noncooperative, distributive bargaining, positional, or hard bargainingis used to divide limited resources; the assumption is that the pie to be divided is finite.
Competitive strategies assume a "win-lose" situation in which the negotiating parties have opposing interests. Hostile, coercive negotiation tactics are used to force an advantage, and prenegotiation binding agreements are not allowed. Concessions, distorted communication, confrontational tactics, and emotional ploys are used.
Skilled competitive negotiators give away less information while acquiring more information, ask more questions, create strategies to get information, act firm, offer less generous opening offers, are slower to give concessions, use confident body language, and conceal feelings. They are more interested in the bargaining position and bottom line of the other negotiating party, and they prepare for negotiations by developing strategy, planning answers to weak points, and preparing alternate strategies.
A buyer-seller home purchase transaction illustrates competitive negotiating. The buyer gathers information to determine home value, quality, expenses, and title status. The seller gathers information to ensure that the prospective buyer qualifies for the loan. The parties negotiate concessions regarding home repairs, items to remain in the house, closing dates, and price. The negotiations stall as the buyer and seller disagree on a closing date; the seller retaliates by keeping the buyer out of the home for several days after the closing date. As a consequence of the competitive strategies used, the relationship between the buyer and seller suffers; however, the end result (sale and purchase of a home) satisfies both parties.
On the other end of the negotiating style continuum is cooperative negotiating, also called integrative problem solving or soft bargaining. Cooperative-negotiation is based on a win-win mentality and is designed to increase joint gain; the pie to be divided is perceived as expanding. Attributes include reasonable and open communication; an assumption that common interests, benefits, and needs exist; trust building; thorough and accurate exchange of information; exploration of issues presented as problems and solutions; mediated discussion; emphasis on coalition formation; prenegotiation binding agreements; and a search for creative alternative solutions that bring benefits to all players. The risk in cooperative negotiating is vulnerability to a competitive opponent.
Cooperative negotiators require skills in patience; listening; and identification and isolation of cooperative issues, goals, problems, and priorities. Additionally, cooperative negotiators need skills in clarifying similarities and differences in goals and priorities and the ability to trade intelligently, propose many alternatives, and select the best alternative based on quality and mutual acceptability.
Cooperative negotiating might be used, for example, in a hiring situation. An employer contacts a candidate to encourage the candidate to submit his or her credentials for a job opening. Trust is built and common interests are explored as the employer and candidate exchange information about the company and the candidate's qualifications. Creative solutions are explored to accommodate the candidate's and employer's special circumstances, including work at home, flexible scheduling, salary, and benefits. The two parties successfully culminate the negotiations with a signed job contract.
THE NEGOTIATION PROCESS
Stages in the negotiation process are (1) orientation and fact finding, (2) resistance, (3) reformulation of strategies, (4) hard bargaining and decision making, (5) agreement, and (6) follow-up (Acuff, 1997). For example, a consumer purchasing an automobile investigates price and performance, then negotiates with an agent regarding price and delivery date. Resistance surfaces as pricing and delivery expectations are negotiated. Strategies are reformulated as the parties deter mine motivation and constraints. Key issues surface as hard bargaining begins. Problems surface, and solutionsuch as creative financing or dealer tradesre created to counter pricing and delivery problems. After details are negotiated, the agreement is ratified. After the sale, the agent may follow up with the buyer to build a relationship and set the stage for future purchase and negotiation. The six stages of the process would be approached differently depending on where the negotiators reside on the style continuum.
Basic strategies, both cooperative and competitive, that can be applied in the negotiation process are the following:
- Use simple language.
- Ask many questions.
- Observe and practice nonverbal behavior.
- Build solid relationships.
- Maintain personal integrity.
- Be patient.
- Conserve concessions.
- Be aware of the power of time, information, saying no, and walking away.
- Pay attention to who the real decision maker is, how negotiators are rewarded, and information sources.
- Listen actively.
- Educate the other party.
- Concentrate on the issues.
- Control the written contract.
- Be creative.
- Appeal to personal motivations and negotiating styles.
- Pay attention to power tactics.
- Be wary of such unethical tactics as raising phony issues; extorting; planting information; and making phony demands, unilateral assumptions, or deliberate mistakes.
The following summarize strategies that might be used in various stages of negotiations:
- Plan thoroughly.
- Identify and prioritize issues.
- Establish a settlement range.
- Focus on long-term goals and consequences.
- Focus on mutual principles and concerns.
- Be aware that "no" can be the opening position and the first offer is often above expectations.
- Be aware of the reluctant buyer or seller ploy.
- Revise strategies.
- Consider many options.
- Increase power by getting the other side to commit first.
- Add credibility by getting agreements in writing.
- Be wary of splitting the difference.
- To handle an impasse, offer to set it aside momentarily.
- To handle a stalemate, alter one of the negotiating points.
- To handle a deadlock, bring in a third party.
- When asked for a concession, ask for a tradeoff.
- Be wary if the other party uses a "higher authority" as a rationale for not meeting negotiating points.
- Be aware of the "vise" tactic ("you'll have to do better than that").
- Counter the other party's asking for more concessions at the end by addressing all details and communicating the fairness of the deal in closure.
- Counter a persistent negotiator by withdrawing an offer.
- Do not expect the other party to follow through on verbal promises.
- Congratulate the other side.
In international negotiations, obstacles arise when negotiating teams possess conflicting perspectives, tactics, and negotiating styles. Negotiators often assume that shared beliefs exist when, in reality, they do not. Examples are different uses of time; individualism versus collectivism; different degrees of role orderliness and conformity; and communication patterns, that differ widely worldwide. These cultural factors affect the pace of negotiations; negotiating strategies; degree of emphasis on personal relationships; emotional aspects; decision making; and contractual and administrative elements (Acuff, 1997). The goal of the negotiator should be to "look legitimately to the other side by their standards" (Fisher, 1984).
Collective bargaining frequently requires a third party to help the parties reach an acceptable solution. In these situations, such strategies as mediation, arbitration, and conflict resolution are used.
Negotiation is the process of two individuals or groups reaching joint agreement about differing needs or ideas. Two styles of negotiating, competitive and cooperative, are commonly recognized, with most negotiators moving back and forth between the two styles based on the situation. A number of strategies were discussed that negotiators might use in negotiation stages. The effectiveness of various strategies can vary based on cultural differences.
A cuff, Frank L. (1997). How to Negotiate Anything with Anyone Anywhere Around the World. New York: American Management Association.
Fisher, Roger, and Ury, William, with Bruce Patton. (1991). Getting to Yes: Negotiating Agreement Without Giving In, 2nd ed. Boston: Houghton Mifflin.
Oliver, Jim R. (1996). "A Machine Learning Approach to Automated Negotiation and Prospects for Electronic Commerce." . July 31, 1996.
Negotiation (Encyclopedia of Small Business)
Negotiation describes any communication process between individuals that is intended to reach a compromise or agreement to the satisfaction of both parties. Negotiation involves examining the facts of a situation, exposing the both the common and opposing interests of the parties involved, and bargaining to resolve as many issues as possible. Negotiation takes place every day in nearly every facet of liferom national governments negotiating border disputes, to companies negotiating work agreements with labor unions, to real estate agents negotiating the sale of property, to former spouses negotiating the terms of a divorce. Small business owners are likely to face negotiations on a daily basis when dealing with customers, suppliers, employees, investors, creditors, government agencies, and even family members. Many companies train members of their sales forces in negotiation techniques, and many others hire professional negotiators to represent them in business dealings. Good negotiation requires advance preparation, a knowledge of negotiating techniques, and practice.
Regardless of the type of negotiation, experts recommend entering into it with a cooperative rather than a competitive attitude. They stress that the point of negotiating is to reach agreement rather than to achieve victory. "Any method of negotiation may be fairly judged by three criteria," Roger Fisher and William Ury wrote in their book Getting to Yes: Negotiating Agreement without Giving In. "It should produce a wise agreement if agreement is possible. It should be efficient. And it should improve or at least not damage the relationship between the parties." When one of the parties uses "hard" negotiating techniquesr bullies and intimidates the other side in order to obtain a more favorable arrangementt only creates resentment and poisons future negotiations. Instead, the idea should be to find a win/win solution that satisfies the needs and interests of both parties.
PREPARING FOR A NEGOTIATION
Good negotiation requires advance preparation, an understanding of the underlying assumptions and needs to be satisfied on both sides, a basic knowledge of human behavior, and mastery of a range of negotiating techniques, strategies, and tactics. In his book Fundamentals of Negotiating, Gerard I. Nierenberg outlined a number of steps toward adequately preparing for a negotiation. The first step is to "do your homework" about the other side. In nearly every negotiation, this will entail research to uncover their underlying motivations. In negotiating a business property lease, for example, it may be useful to find out the cost to the landlord of keeping the building vacant. The next step is to assess your own side's needs and establish objectives for the negotiation. It is important that the objectives remain relatively fluid, however, so as not to hinder the negotiation.
Another element of preparing for a negotiation involves deciding whether to use an individual or a team as your representative. This decision needs to be considered separately for every negotiation, and will always depend to some extent on what the other side is doing. A negotiating team offers a number of potential advantages. For example, it enables a small business to involve people with different areas of expertise in order to avoid misstatements of fact. Teams can also play into negotiating strategies and help gain concessions through consultation among team members. However, it is important to note that bringing extra people can be harmful to a negotiation when they do not have a distinct function. Using a single negotiator also offers some advantages. It prevents the weakening of positions that often occurs through differences of opinion within a team, and it also may help gain concessions through the negotiator's ability to make on-the-spot decisions.
The next step in preparing for a negotiation involves choosing a chief negotiator. Ideally, this person should have experience and training in negotiations, as well as a strong background in the area of the problem to be negotiated. Another important element of negotiation is selecting the meeting site. For a small business, holding the meeting on its own premises may provide a psychological advantage, plus will save on travel time and expense. It may also be helpful in enabling the negotiators to obtain approval from managers or use their own facilities to check facts and find additional information as needed. Holding a negotiation at the other side's offices, however, may help the negotiators to devote their full attention to the task at hand without distractions. It may also play into negotiating strategy by enabling the negotiators to temporarily withhold information by claiming a need to speak to higher level people or gather more information. A third alternative for a meeting site is a neutral location. Whatever site is chosen, it should be large enough to accommodate all parties and feature a telephone, comfortable chairs, visual aids, and available refreshments.
THE NEGOTIATION PROCESS
Fisher and Ury recommend conducting negotiations according to the process of "principled negotiation." Their method has four main tenets:
- Separate the people from the problem. The idea should be for both sides to work together to attack a problem, rather than attacking each other. To achieve this goal, it is necessary to overcome emotional responses and set aside egos.
- Focus on interests rather than positions. The natural tendency in many negotiationsor example, dickering over the price to be paid for an antiques for both sides to state a position and then move toward middle ground. Fisher and Ury warn against confusing people's stated positions with their underlying interests, and claim that positions often tend to obscure what people truly hope to gain through negotiation.
- Generate a variety of options before deciding what to do. The pressure involved in any type of negotiation tends to narrow people's vision and inhibit their creativity, making it difficult to find optimal solutions to problems. Instead, Fisher and Ury suggest developing a wide range of possible solutions as part of the negotiating process. These possible solutions should attempt to advance shared interests and reconcile differences.
- Base the result on objective criteria. No one will be happy with the result of a negotiation if they feel that they have been taken advantage of. The solution is to find and apply some fair standard to the problem in order to guarantee a mutually beneficial result.
Fisher and Ury's principles provide a good overall guide for the actual negotiation process. In his book, Nierenberg offered a number of other tips and strategies that may be effective in promoting successful negotiations. For example, it may be helpful to ask questions in order to form a better understanding of the needs and interests of the other side. The questions must be phrased diplomatically and timed correctly in order to avoid an antagonistic response. The idea is to gain information and uncover basic assumptions without immediately taking positions. Nierenberg stressed the importance of listening carefully to the other side's responses, as well as studying their facial expressions and body language, in order to gain quality information.
Nierenberg noted that good negotiators will employ a variety of means to accomplish their objectives. Small business owners should be aware of some of the more common strategies and techniques that they may see others apply or may wish to apply themselves. One common strategy is forbearance, or "patience pays," which covers any sort of wait or delay in negotiations. If one side wishes to confer in private, or adjourn briefly, they are employing a strategy of forbearance. Another common strategy is to present a fait accompli, or come to a final offer and leave it up to the other side to decide whether to accept it. In a simple example, a small business owner may scratch out one provision in a contract that he or she finds unacceptable, then sign it and send it back. The other party to the contract then must decide whether to accept the revised agreement. Nierenberg warns that this strategy can be risky, and encourages those who employ it to carefully appraise the consequences first.
Another possible negotiating strategy is reversal, which involves taking a position that seems opposed to the original one. Similarly, feinting involves apparently moving in one direction in order to divert attention from the true goal. For example, a negotiator may give in on a point that is not very important in order to make the real objective more attainable. Another strategy involves setting limits on the negotiation, whether with regards to time, the people involved, or other factors. It is also possible to change the participation in the negotiation if it seems to be at an impasse. For example, a neutral third party may be enlisted to help, or one or two people from each side may be sent off to continue the negotiation separately. It may also be helpful to break down the problem into small pieces and tackle them one by one. Another strategy might be to trade sides for a short time and try to view the situation from each other's perspective. All of these techniques may be applied either to gain advantage or to push forward a negotiation that has apparently reached an impasse.
Cohen, Herb. You Can Negotiate Anything. Bantam Books, 1980.
Fisher, Roger, and William Ury. Getting to Yes: Negotiating Agreement without Giving In. 2nd ed. Penguin, 2000.
Latz, Marty. "Are They Irrational or Are They Faking It? Negotiating a Business Deal with an Irrational Party." Orlando Business Journal. January 5, 2001.
Nierenberg, Gerard I. Fundamentals of Negotiating. New York: Hawthorn Books, 1977.
Whitaker, Leslie, and Elizabeth Austin. The Good Girl's Guide to Negotiating: How to Get What You Want at the Bargaining Table. Little, Brown, 2000.