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CHAPTER 1
The Nature of Negotiation
Introduction
Negotiation is something
that everyone does, almost
daily
Negotiations
• Negotiations occur for several reasons:
• To agree on how to share or divide a limited
resource
• To create something new that neither party
could attain on his or her own
• To resolve a problem or dispute between the
parties
Approach to the Subject
Most people think bargaining and negotiation
mean the same thing; however, we will be
distinctive about the way we use these two
words:
• Bargaining: describes the competitive, win-lose
situation
• Negotiation: refers to win-win situations such as
those that occur when parties try to find a
mutually acceptable solution to a complex
conflict

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Three Important Themes
1. The definition of negotiation and the basic
characteristics of negotiation situations
2. Interdependence, the relationship between
people and groups that most often leads them
to negotiate
3. Understanding the dynamics of conflict and
conflict management processes which serve as
a backdrop for different ways that people
approach and manage negotiations

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Characteristics of a
Negotiation Situation

• There are two or more

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parties
• There is a conflict of needs
and desires between two
or more parties
• Parties negotiate because
they think they can get a
better deal than by simply
accepting what the other
side offers them
• Parties expect a “give and
take” process
Characteristics of a
Negotiation Situation
• Parties search for agreement rather than:
• Fight openly
• Capitulate
• Break off contact permanently
• Take their dispute to a third party
• Successful negotiation involves:
• Management of tangibles (e.g., the price or the terms of
agreement)
• Resolution of intangibles (the underlying psychological
motivations) such as winning, losing, saving face
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Interdependence
In negotiation, parties need each other to achieve their
preferred outcomes or objectives
• This mutual dependency is called
interdependence
• Interdependent goals are an important aspect of
negotiation
• Win-lose: I win, you lose
• Win-win: Opportunities for both parties to gain

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Interdependence
• Interdependent parties are characterized by interlocking goals
• Having interdependent goals does not mean that everyone
wants or needs exactly the same thing
• A mix of convergent and conflicting goals characterizes many
interdependent relationships

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 Types of Interdependence
Affect Outcomes
• Interdependence and the structure of the situation
shape processes and outcomes
• Zero-sum or distributive – one winner
• Non-zero-sum or integrative – mutual gains situation

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Alternatives Shape Interdependence
• Evaluating interdependence depends heavily on the
alternatives to working together
• The desirability to work together is better for outcomes
• Best available alternative: BATNA (acronym for Best
Alternative to a Negotiated Agreement)

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Mutual Adjustment
• Continues throughout the negotiation as both
parties act to influence the other
• One of the key causes of the changes that occur
during a negotiation
• The effective negotiator needs to understand
how people will adjust and readjust and how the
negotiations might twist and turn, based on
one’s own moves and the other’s responses

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 Mutual Adjustment and
Concession Making
• When one party agrees to make a change in his/her
position, a concession has been made
• Concessions restrict the range of options
• When a concession is made, the bargaining range is
further constrained

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 Two Dilemmas in
Mutual Adjustment
• Dilemma of honesty
• Concern about how much of the truth to tell the other
party
• Dilemma of trust
• Concern about how much negotiators should believe what
the other party tells them

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Value Claiming and Value Creation
• Opportunities to “win” or share resources
• Claiming value: result of zero-sum or distributive
situations where the object is to gain largest piece of
resource
• Creating value: result of non-zero-sum or integrative
situation where object is to have both parties do well

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Value Claiming and Value Creation
• Most actual negotiations are a combination of
claiming and creating value processes
• Negotiators must be able to recognize situations that
require more of one approach than the other
• Negotiators must be versatile in their comfort and use
of both major strategic approaches
• Negotiator perceptions of situations tend to be biased
toward seeing problems as more distributive/
competitive than they really are

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Value Claiming and Value Creation
Value differences that exist between negotiators include:
• Differences in interest
• Differences in judgments about the future
• Differences in risk tolerance
• Differences in time preferences

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Conflict
Conflict may be defined as a:
"sharp disagreement or opposition" and includes "the
perceived divergence of interest, or a belief that the parties'
current aspirations cannot be achieved simultaneously"

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Levels of Conflict
• Intrapersonal or intrapsychic conflict
• Conflict that occurs within an individual
• We want an ice cream cone badly, but we know that ice cream is
very fattening

• Interpersonal conflict
• Conflict is between individuals
• Conflict between bosses and subordinates, spouses, siblings,
roommates, etc.

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Levels of Conflict
• Intragroup Conflict
• Conflict is within a group
• Among team and committee members,
within families, classes etc.
• Intergroup Conflict
• Conflict can occur between organizations, warring nations,
feuding families, or within splintered, fragmented communities
• These negotiations are the most complex

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Functions of Conflict
1. Makes organizational members more aware and able
to cope with problems through discussion.
2. Promises organizational change and adaptation.
3. Strengthens relationships and heightens morale.
4. Promotes awareness of self and others.
5. Enhances personal development.
6. Encourages psychological development—it helps
people become more accurate and realistic in their
self-appraisals.
7. Can be stimulating and fun.

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Dysfunctions of Conflict
1. Competitive, win-lose goals
2. Misperception and bias
3. Emotionality
4. Decreased communication
5. Blurred issues
6. Rigid commitments
7. Magnified differences, minimized similarities
8. Escalation of conflict

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The Dual Concerns Model

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Styles of Conflict Management
1 Contending
• Actors pursue own outcomes strongly, show little concern
for other party obtaining their desired outcomes
2 Yielding
• Actors show little interest in whether they attain own
outcomes, are quite interested in whether the other party
attains their outcomes
3 Inaction
• Actors show little interest in whether they attain own
outcomes, little concern about whether the other party
obtains their outcomes

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Styles of Conflict Management
4 Problem solving
• Actors show high concern in obtaining own outcomes, as well as
high concern for the other party obtaining their outcomes
5 Compromising
• Actors show moderate concern in obtaining own outcomes, as
well as moderate concern for the other party obtaining their
outcomes

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Negotiation Skills

Have you ever bargained for something? Describe your

experience. Was it successful?

• What communication skills are necessary for successful

negotiations?
2. Negotiation essentials

communication skills:
• a positive attitude
• beliefs can affect outcomes
• => believe that you deserve what you want
to get
2. Negotiation essentials

communication
skills:
• state your
desires and
concerns clearly
• listen carefully to
the other party’s
desires and
concerns
2. Negotiation essentials

• knowledge of the negotiation process

• know how to break down an issue into separate
parts
• negotiate or bargain for who gets each part
• know how to address common interests for mutual
gains
2. Negotiation essentials

• An understanding of
human behaviour
• know what motivates
you and the other party
• be aware of what
matters to you and to
the other party
• know how to apply all
relevant
communication skills
2. Negotiation essentials

• knowledge of the
negotiation
subject
• inform yourself
about the subject
of negotiation
• do some research
into the options
prior to
negotiation
2. Negotiation essentials

• Using creativity
• solve problems creatively
• find innovative solutions
3. Fairness standards

Consider the following three fairness standards

that should guide any negotiation:
• the standard of equity
• people are rewarded based on merit and effort invested
• the standard of equality
• each person gets an equal share, regardless of their
contribution
• the standard of need
• the person with the greatest need gets the largest percentage
5. Negotiation factors

There are four basic factors that impact

negotiation:
• the outcome
• the goal you want to achieve
• the items / issues for which you are
negotiating
• compromise may be essential (i.e. give up
one half of the items you need in order to
get the other half)
5. Negotiation factors

There are four basic factors that impact

negotiation:
• the relationship
• may be as important as the outcome
• your relationship with the other party is an
integral part of the negotiation process
5. Negotiation factors

There are four basic factors that impact

negotiation:
• the time
• time constraints heavily impact negotiation
• time pressures may lead to less desirable
outcomes
5. Negotiation factors

There are four basic factors that impact

negotiation:
• the transaction costs
• money, time, energy, wear and tear, stress
etc.
• know when to stop bargaining and settle the
negotiation
6. Bargaining: positional v principled

As a negotiator, you may assume:

• a positional bargaining stance, in which you
• take sides
• form camps
• fail to build rapport
• begin to fight over your position
• may go to extremes
• automatically have a debate
• cannot use your influence tactics to build a bridge
6. Bargaining: positional v principled

As a negotiator, you may assume:

• a principled bargaining stance, in which you
• look for what you have in common with the other
party
• negotiate on merits
• separate the people from the problem
• focus on interests rather than positions
• come up with a variety of options before making a
decision
• use objective standards to evaluate results
7. Negotiation outcomes

Anticipate how a negotiation will end, before

deciding how to start it. Your choice of tactics
and strategies will determine the outcome:
• win / win
• an optimum occasion
• both the issues and the relationships matter equally
• may be time-consuming
7. Negotiation outcomes

Anticipate how a negotiation will end, before

deciding how to start it. Your choice of tactics
and strategies will determine the outcome:
• win / lose
• the issues matter more than the relationship
• time is needed to wear down the other side
• synonymous to getting the best deal
7. Negotiation outcomes

Anticipate how a negotiation will end, before

deciding how to start it. Your choice of tactics
and strategies will determine the outcome:
• lose / win
• long-term bonds are more important than
momentary issues
7. Negotiation outcomes

Anticipate how a negotiation will end, before

deciding how to start it. Your choice of tactics
and strategies will determine the outcome:
• lose / lose
• sometimes, the best solution
• the issues are less important to both parties
• transaction costs are the most important