NEGOTIATION

NEGOTIATION DEFINED

It is a process whereby two or more parties reach a mutually agreeable arrangement.

It is the process of making joint decisions when the parties involved have different
preferences.

It is a process in which two or more parties exchange goods or services and attempt to agree
upon the exchange rate for them.

It is a dialogue between two or more people or parties intended to reach a beneficial outcome
over one or more issues where a conflict exists with respect to at least one of these issues.
This beneficial outcome can be for all of the parties involved, or just for one or some of them.

TYPES OF NEGOTIATION

1. DISTRIBUTIVE BARGAINING is also sometimes called positional or hard-bargaining

negotiation and attempts to distribute a "fixed pie" of benefits. Distributive negotiation
operates under zero-sum conditions and implies that any gain one party makes is at the
expense of the other and vice versa. For this reason, distributive negotiation is also sometimes
called win-lose because of the assumption that one person's gain is another person's loss.

2. INTEGRATIVE BARGAINING is also called interest-based, merit-based, or principled

negotiation. It is a set of techniques that attempts to improve the quality and likelihood of
negotiated agreement by taking advantage of the fact that different parties often value various
outcomes differently. While distributive negotiation assumes there is a fixed amount of value
(a "fixed pie") to be divided between the parties, integrative negotiation attempts to create
value in the course of the negotiation ("expand the pie") by either "compensating" loss of one
item with gains from another " or by constructing or reframing the issues of the conflict in
such a way that both parties benefit ("win-win" negotiation).

TYPES OF NEGOTIATORS

1. Soft

These people see negotiation as too close to competition, so they choose a gentle style of
bargaining. The offers they make are not in their best interests, they yield to others' demands,
avoid confrontation, and they maintain good relations with fellow negotiators.

2. Hard
These people use contentious strategies to influence, utilizing phrases such as "this is my
final offer" and "take it or leave it." They make threats, are distrustful of others, insist on their
position, and apply pressure to negotiate.

3. Principled
Individuals who bargain this way seek integrative solutions, and do so by sidestepping
commitment to specific positions. They focus on the problem rather than the intentions,
motives, and needs of the people involved. They separate the people from the problem,
explore interests, avoid bottom lines, and reach results based on standards independent of
personal will.

ORGANIZATIONAL SETTINGS FOR NEGOTIATION

1. Two-party Negotiation
Manager negotiates directly with one another person.
2. Group Negotiation
Manager is part of a group whose members are negotiating.
3. Intergroup Negotiation
Manager is part of a group that is negotiating with another group.
4. Constituency Negotiation
Manager is involved in negotiation with other persons, with each party representing a
broader constituency (Collective Bargaining).

THE NEGOTIATION PROCESS

1. Developing a Strategy
2. Defining Ground Rules
3. Clarification and Justification
4. Bargaining and Problem Solving
5. Closure and Implementation

Identify BATNA: Best Alternative To a Negotiated Agreement

BATNA is an acronym that stands for Best Alternative To a Negotiated Agreement. It is
defined as the most advantageous alternative that a negotiating party can take if negotiations
fail and an agreement cannot be made. In other words, a party’s BATNA is what a party’s
alternative is if negotiations are unsuccessful. The term BATNA was originally used by
Roger Fisher and William Ury in their 1981 book entitled “Getting to Yes: Negotiating
Without Giving In.”

Importance of BATNA
BATNA is often used in negotiation tactics and should always be considered before a
negotiation take place. Therefore, it is never wise to enter into a serious negotiation without
knowing your BATNA. The value of knowing your best alternative to a negotiated agreement
is that:

1. It provides an alternative if negotiations fall through.

2. It provides negotiating power.
3. It determines your reservation point (the worst price you are willing to accept).
FOUR NEGOTIATION STRATEGIES

1. Trusting collaboration involves cooperation, give and take and compromise, and
collaborative problem solving to achieve a win-win outcome. Negotiators use this strategy
when both the relationship and the task outcomes are important. Parties can share motives,
ideals, and goals openly as they want to reach a mutually acceptable agreement that promotes
long-term relationships and continued cooperation. Using trusting collaboration in teams or
within organizations where people are mutually interdependent is essential.

2. Firm competition is appropriate when you do not care about the long-term relationship
with the other party but the outcome is important. It is an aggressive win-lose strategy in
which managers concentrate on imposing their own solution. Using firm competition as a
negotiating strategy requires access to power, organizational support, and the willingness to
forgo future relationships.

3. Open Subordination should be used when the task or substance of the negotiation is not
as important as the relationship. It involves yielding to the other party on all or most points
and openly accepting the other’s solutions. Open subordination may be the only option when
managers do not have much power or leverage to negotiate. However, they can also use this
strategy when they have power but want to create goodwill or reduce hostilities when conflict
is high. For instance, it is important for many start-up operations and small businesses to have
well-known clients, however unreasonable they may be, to gain access to other high profile
customers.

4. Active Avoidance involves refusing to negotiate, as the negotiator does not care about
either the task or the relationship. In this case, one neither seeks to win nor to lose. The
individual is simply not party to the exchange and interaction. Often managers avoid
negotiating because they have no stake in the results.
FIVE (5) NEGOTIATION STYLES
1. Negotiation Style: Compete
A competitive negotiation style follows the model of “I win, you lose.” Competitive
negotiators tend to do whatever it takes to reach their desired agreement – even when it
comes at the expense of another person or entity. They are results-oriented and focused on
achieving short-term goals quickly. Their desire for success motivates them, though the
process of negotiation can blind them to potentially harmful impacts.
Competitive negotiators use all tools possible to boost their negotiation success, including:

 Their position within a company structure

 Their personality and humor
 Aggression
 Their economic prowess
 Their company’s strength and size
 Their brand’s visibility and influence

2. Negotiation Style: Collaborate

In contrast, a collaborative negotiation style follows the “I win, you win” model.
Collaborative negotiators focus on making sure all parties have their needs met in an
agreement. They value strengthening, establishing, and building relationships without
compromising their company’s best interests.
Collaborative negotiators often evolve into this negotiation style from another. As time goes
on and a negotiator gains confidence in reaching agreements, they become more comfortable
advocating for their needs. They also become skilled in finding a mutually beneficial balance
between their needs and the other party’s.
3. Negotiation Style: Compromise
Many students of negotiation styles confuse the collaborative style with the compromising
one. Unlike the “win-win” collaborative style, the compromising negotiation style follows a
“I win/lose some, you win/lose some” model. When reaching the terms of the agreement,
compromisers often relinquish some terms in favor of gaining others.
For example, if two governments are trying to reach a trade agreement, a compromiser might
give the other government greater access to their country’s dairy market to gain protections
for digital media trade. Simply put, a compromising negotiation style is a form of bargaining.
Compromisers split the agreement’s value between the two parties versus finding a solution
so that everyone benefits from an agreement’s full value. A competitive negotiator can easily
take advantage of a compromising negotiator.
4. Negotiation Style: Avoid
An avoiding negotiation style follows a “I lose, you lose” model. People who identify with
the avoiding negotiation style highly dislike conflict and tend to talk in vague terms about the
issue at hand rather than the issue itself. If an agreement is reached and an avoiding
negotiator dislikes the outcome, they may try to take revenge on the opposite party before the
party even knows that they were unhappy with the agreement.
Since avoiders dislike conflict and struggle with direct communication, they come off as
passive-aggressive. This can cause rifts in interpersonal business relationships. Avoidance is
a typical reaction when a negotiator is pitted against someone who is highly competitive.
Avoiding negotiation styles work best in situations where the negotiation concerns a matter
that is trivial to both parties. In conflict resolution, avoiding negotiators work best in
situations where the investment of time to resolve the issue outweighs the outcome of the
discussion.
5. Negotiation Style: Accommodate
An accommodating negotiating style follows the “I lose, you win” model – which does not
seem to be in a negotiator’s best interest. Accommodating negotiators are the direct opposite
of competitive negotiators. They focus on preserving relationships and building a friendly
rapport by sacrificing some of their company’s interests in favor of the opposite party’s
interests.
Accommodators tend to try to win people over by giving in to their requests. They tend to
share more information than they should. They are often well-liked by their colleagues
because of their kindness – but kindness doesn’t work in every negotiation situation.

CHALLENGES FOR AN EFFECTIVE NEGOTIATION

 The biggest challenge to negotiation is when individuals are not ready to

understand the second party at all. There are individuals who only think about their
interests and tend to ignore the interest and needs of the other.
 Lack of time is also a major challenge to effective negotiation. One should never be
in a hurry. You need time to convince others. Never be in a rush to purchase things or
close a deal. Analyze things carefully and then only come to conclusions.
 Going unprepared for a negotiation is unacceptable. Don’t underestimate the
second party. One should do his home work carefully. Check out even the smallest
details before going for a negotiation. Don’t think that the other person is not as smart
as you, he can ask you anything and remember even he will try his level best to
convince you. You need to have valid answers for his questions.
 Lack of patience also leads to a bad negotiation. Every individual has the right to
express his views and one should not interfere in his speech. You might not agree to
him but at least listen to him first. Sit with the second party and make him realize how
the deal would benefit you as well as him. If possible take a note pad and a pen with
you to explain things in a better way. Carry all the necessary documents which you
might require at the time of negotiation.
 Criticism, sarcasm, derogatory remarks are the biggest threats to an effective
negotiation. Never ever say anything which might hurt others. Remember everyone is
here to do business and make profits, so be logical and justified. Don’t get too
involved and over emotional. One should be a little diplomatic and intelligent for an
effective negotiation.
 Avoid last minute changes as it result in confusions and misunderstandings. The two
parties must be very clear on what they expect from each other, and must stick to it.
 Don’t change statements every now and then. Once a conclusion is reached or a deal
is cracked, it’s always better to sign an agreement in presence of both the parties.
 Being too rigid is one of the biggest challenges to an effective negotiation. Be a little
flexible. Compromise to your best extent possible and don’t crib always. One should
adopt a positive attitude and try his level best to adjust with each other and find out a
solution which will satisfy all. Only price is not important, other factors like quality,
brand name, durability must also be taken into consideration.
 Lack of confidence is again one of the major threats to negotiation. Don’t forget to
make an eye contact with the person sitting on the other side of the table. It’s
important to be serious but that does not mean you will not even greet the other
person. Be straightforward and crisp in your communication. Take care of your
dressing and appearance as well.

ISSUES IN NEGOTIATION
 Gender differences in negotiating styles
 Cultural Differences in negotiating styles

ELEMENTS OF A SUCCESSFUL NEGOTIATION

 Start from a place of partnership; assume good intent and start from a place of
trust. What does this mean? When you broach the subject with your manager or the key
decision maker who can influence your wages, disclose more behind your thinking and
rationale instead of starting from an oppositional/ zero sum position. Antiquated thinking
around negotiations assumes that when sitting at the proverbial “negotiation table” that
one must be at odds with who they are negotiating with. This is no longer accurate in most
settings. Especially when you think about the fact that you have been working for and
producing great output for the organization/manager in question.
 Know the story behind your unique strengths; this is a very important one and
most probably the most difficult because it sets you up as the hero or heroine in your own
story so it requires some reflection on your part. Storytelling can have profound impacts
on influencing individuals in almost any setting and demonstrating how you have created
value for the organization, but more importantly, how you will continue to deliver value to
the organization based on your unique strengths can go a long way when negotiating for
more.
 Time it appropriately; try to align it with the organization’s annual or biannual pay
review or performance discussion period. This also ensures their ability to quickly
integrate your input into their review and potentially can lead to a faster outcome.
 Do your research; It always helps to have some data, so to that end equip yourself
with some pay data. Most organization’s use pay for use market and benchmarking data
that you wouldn’t necessarily have access to, but it doesn’t hurt to go in with something so
you can quote it if necessary.