Negotiation is a process through which separate parties (entities, persons, businesses, etc), with the same end result in mind but with differing, sometimes opposing, conditions in mind, reach an agreement for how and with which conditions the end result will be reached.
To negotiate is 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. ("Negotiate." West's Encyclopedia of American Law on Gale Cengage)
A metaphorical and more complicated definition of negotiation was put forth by Jim Oliver, who said: "negotiators jointly searching a multidimensional space and then agreeing to a single point in the space" ("A Machine Learning Approach to Automated Negotiation" qtd in West's). In other words, [n]egotiation is the process of two individuals or groups reaching joint agreement about differing needs or ideas" (West's on Gale Cengage). Negotiation draws upon knowledge from diverse fields and occurs when economic transactions or disputes take place or are settled, respectively. Fields negotiators draw upon (West's):
- conflict resolution
Two styles of negotiation are recognized but it is significant to understand that no negotiation is purely one style or the other: virtually all negotiations call upon both styles of negotiation in one or more phases of the negotiation process, therefore negotiation is said to comprise a continuum. Examples of the two styles are the hostile trade or labor negotiations between employers and labor unions and an employer's friendly hiring negotiations with a desirable job candidate. The two styles are competitive and cooperative and each has a specialized system of strategy although some strategic points overlap between both.
- win-lose negotiation
- distributive bargaining
- positional negotiation
- hard bargaining
Competitive negotiation is driven by the concept that negotiation is about available resources of money and information and that resources are limited, therefore the negotiating advantage is gained when those resources--information and/or money--are divided so there is no position of strength left to the opposing negotiator. To illustrate: Skilled competitive negotiators focus their interest on the "bargaining position" and "bottom line" of the opposition. A bargaining position is defined as:
Someone's ability to get what they want when they are making a deal with someone else, based on the situation they are in (MacMillian Dictionary).
The position (i.e., situation, financial arrangement, personal or social standing, mental attitude) of a person, group, or organization in a negotiation, with respect to their ability to achieve a deal which is favourable to themselves (Collins Dictionary).
The bottom line is defined as:
The final calculation of the amount of money that a business has as profit, assets, or capital, financial elements that are significant in any negotiation scenario: the last line of a financial statement that shows the net profit or loss of a company or organization (Collins Dictionary).
Skilled competitive negotiators do these things and prepare for negotiations these ways (West's):
- give away less information
- acquire more information
- ask more questions
- create strategies to get information
- act firm
- make less generous opening offers
- are less quick to grant requests or conditions
- use confident body language
- distorted communication
- conceal feelings
- develop strategy
- plan answers to weak points
- prepare alternate strategies
West's Encyclopedia of American Law gives home buying as an example of a competitive negotiating situation:
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.
Cooperative negotiation is at the opposite end of the negotiation continuum from competitive negotiation. Cooperative bargaining is also called:
- integrative problem solving
- soft bargaining
- win-win negotiating
Cooperative negotiation is driven by the concept that negotiation is about increased net gain for both negotiating parties and that resources of money and information are to be divided as though the resources were ever expanding. Therefore the negotiating advantage is gained when those resources--information and/or money--are viewed as a shared equity. To illustrate: Skilled cooperative negotiators focus their interest on building trust and facilitating a thorough and accurate exchange of information.
Skilled cooperative negotiators do these things, prepare for negotiations these ways and have these attributes (West's):
- engage in reasonable and open communication
- assume there are common interests, benefits, and needs
- build trust between negotiators
- facilitate thorough and accurate exchange of information
- explore issues blocking negotiation as problems with solutions
- identify and isolate cooperative issues, goals, problems, and priorities
- ability in trading intelligently
- ability in proposing alternatives
- ability in selecting alternatives based on quality and mutual acceptability
- have skills in patience and listening attentively
West's Encyclopedia of American Law gives negotiating an employment contract as an example of a cooperative negotiating 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.
Competitive Negotiation Strategies
Hostile, competitive negotiation employs coercive strategic tactics to force their own advantage. The cooperative strategy of employing prenegotiation binding agreements is not allowed in competitive negotiation. Concessions, either preferential allowances to the side with the advantage or conditions forced by demands, are part of competitive negotiations. Competitive negotiators employ confrontational tactics rather than collaborative tactics and dramatically play upon emotional elements of negotiations, such as the sale of a family business when the business has failed because cultural changes in its fourth generation.
Cooperative Negotiation Strategies
Friendly, cooperative negotiation employs collaborative strategic tactics to reach benefit and advantage for both parties. Mediated discussion, or mediation,, a negotiation strategy in which a neutral third party helps the disputing parties reach an agreement, is employed to reach mutually beneficial agreements. Cooperative negotiators emphasize coalition formation in which parties with their own self-interest take action jointly for a common end. Employing prenegotiation binding agreements is a strategy that is followed: prenegotiations agreements have varying complexity of detail, from simple to detailed, and enumerate conditions and expectations of the negotiating parties. Negotiations are aided by clarifying similarities and differences in goals and priorities of the negotiating parties. [Mediation is often used in collective bargaining, a process in which a third party helps groups reach an acceptable solution, as are arbitration (judicial settlement) and conflict resolution.]
General Negotiation Strategies
According to West's, general negotiation strategies applicable to any negotiation style--competitive, cooperative or anywhere along the continuum--are:
- Maintain personal integrity.
- Be patient.
- Listen actively.
- Use simple, clear language.
- Ask many questions.
- Educate the other party.
- Observe and practice nonverbal behavior.
- Build solid relationships.
- Conserve concessions [either demanding or conceding to concessions].
- Be aware of the power of time, information, saying no, and walking away.
- Concentrate on the issues.
- Pay attention to information sources, who the decision maker is and how negotiators are rewarded.
- Be creative.
- Appeal to personal motivations and negotiating styles.
- Pay attention to power tactics.
- Control the written contract.
- Be wary of unethical negotiating tactics such as raising phony issues; extorting; planting information; and making phony demands, unilateral assumptions, or deliberate mistakes.
According to Frank Acuff in How to Negotiate Anything with Anyone Anywhere (1997) there are six steps recognized in the negotiating process.
- orientation and fact finding
- reformulation of strategies
- hard bargaining and decision making
To illustrate, [Step 1] a consumer would investigate prices of a good, such as a car, and its position in the market, then open negotiations with the seller regarding price and delivery date. [Step 2] Resistance occurs as the price and delivery date expectations come into conflict. [Step 3] Strategies of the negotiators [consumer and seller] are reformulated according to the negotiation style of each and the motivations and constraints of each side are brought to light. [Step 4] Hard bargaining based on determined and accepted motivation and constraints begins and brings issues to the surface and creative solutions are created, such as financing options, to resolve, or "counter," the problems. [Step 5] Following the resolution of problems, the written agreement is drawn up and signed. [Step 6] Follow-up may occur in terms of the seller asking for referrals to other potential buyers or in the buyer offering referrals. The six steps may be experienced differently in each actual situation depending upon where the negotiators on the competitive-cooperative negotiation continuum.
Specific Strategies for Steps 1 and 2
- 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. (West's)
Specific Strategies for Steps 3 and 4
- 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"). (West's)
Specific Strategies for Steps 5 and 6
- 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.
Negotiation takes place every day in nearly every facet of life, from 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. ("Negotiation." Encyclopedia of Small Business)
While the two extremes of negotiating style exist and are daily employed experts recommend entering negotiations with a cooperative attitude. This advice has limits, however, as the contemporary cable television show Suits, intended for adult audiences, so well illustrates, since some negotiation situations, and some negotiators, are by their very nature competitive and hostilely adversarial, such as accusations of wrong doing at the corporate level and buy-out terms for a hostile company take-over. It is well to analyze the situation carefully before entering with expectations of negotiation style. Aside from intrinsically hostile situations, experts advise that negotiations should seek a win-win cooperative resolution from which both parties benefit.
"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." ("Negotiation." Encyclopedia of Small Business)
They say further that "hard" competitive negotiating strategies that bully or intimidate create resentment and taints the relationship for potential future negotiations, should there be any, as is amply illustrated in Suits.
Fundamentals of Negotiating by Gerard I. Nierenberg outlines the preparatory steps in addition to those discussed above. The first step is fact gathering, which may include financial information relevant to the other party's business operations. The second step is to assess your needs and objectives while being sure to keep objectives relatively "fluid" thus more open to negotiation. The third step is deciding who your negotiator will be, whether yourself, another individual, a team of negotiators, and if a team, deciding who the chief negotiator will be. A potentially overlooked but important fourth step is to choose the negotiation site, if it open for selection, though some, like a car dealership, are not generally open to site selection.
Negotiation Process, Fisher and Ury
Fisher and Ury advise that the negotiation process follow the four tenets of "principled negotiation":
- Separate the people from the problem.
- Focus on interests rather than positions.
- Generate a variety of options before deciding what to do.
- Base the result on objective criteria ... [so as not to] feel that they have been taken advantage of.
- forbearance, or "patience pays": employing any kind of delay or adjournment
- present a fait accompli: this presents a final offer that the other side then decides upon
- the reversal: a switch in positions that seems to represent the opposite of the original position, such as yielding on a point of lesser importance--allowing a concession on that point--in order to more easily attain the main objective
- the feint or feinting: moving negotiations to emphasize one issue in order to distract attention form the main issue
- set limits on the negotiations for time, negotiators, locations, or other factors
- changing participants in a negotiation if there seems to be an impasse, as can occur in labor-corporation union negotiations
- piece-by-piece negotiating: break the larger objectives into constituent parts to negotiate them piece by piece
- role play: trading sides to try to see the issues from the other's perspective ("Negotiation." Encyclopedia of Small Business)
"Negotiation." Encyclopedia of Business and Finance. Ed. Allison McClintic Marion. Vol. 2. Gale Cengage, 2001.
"Negotiate." West's Encyclopedia of American Law. Vol. 7. Gale Cengage, 2005.
"Negotiation." Encyclopedia of Small Business. Ed. Kevin Hillstrom and Laurie Collier Hillstrom. Vol. 2. Gale Cengage, 2002.
Acuff, Frank L. How to Negotiate Anything with Anyone Anywhere Around the World. New York: American Management Association, 1997.
Cooperative and Competitive styles of negotiation aim to ultimately come to a problem resolution. In the cooperative style, the negotiator seeks for a win-win situation. The competitive style is a one-sided approach where only one benefits more than another. Overall, they can be effective styles when employed for the proper reasons. Here are some of their differences:
- All parts listen to one another; all aim to seek benefit for one another so there is better, open communication
- The want for the common good gears toward a friendlier, most satisfying atmosphere.
- Parties share roles, assign tasks, and share responsibilities for the good of everyone involved.
- Rather than plan, cooperative negotiators collaborate. This gives validity to each of the members and their unique attributes.
- Examples of cooperative strategies include a) role playing solutions, b) lunch collaborations, c) team building problem solving activities, d) group-based analysis, e) horizontal and vertical sharing.
The competitive negotiation strategy is more complicated because it is limited to the points of view, needs, and wants of a few. The insistence of one party to dominate over another brings about potentially chaotic situations such as:
- Miscommunication, in the form of false interpretations and empty promises. Once miscommunication begins, the whole meeting goes hayward.
- Antagonism caused by one party's obvious want to dominate occurs mainly because the other party does not feel validated or respected.
- Lack of communication also entails the dimming of boudaries and the absence of delimitations that could enforce more effective productivity. People will not want to trust each other's abilities, nor will they trust anything discussed.
- One party will feel threatened by the other.
- Rather than collaborative efforts, there will be more power struggles and a tendency for survival of the fittest rather than mutual cooperation towards a goal.
- Examples of competitive negotiation include a) pre-conditioned agendas, b) false pretenses, c) pre-planned dynamics d) debate and arguing.
Keep in mind that, according to Qin, Johnson and Johnson in "Cooperative versus Competitive Efforts in Problem Solving" (1995), cooperative groups continuously outperformed competitive groups in mostly every area. The reason behind it is mainly based on communication and common goal; on the way that roles are shared and on the common goal of the group as a whole.