The Webster Dictionary defines conflict as competition between parties in absence of shared interests, and Henry Kissinger defined negotiation as, “a process of combining conflicting positions into a common position under a decision rule of unanimity”. Business negotiations that have substantial financial consequences are competitive. To resolve the conflict, and reach an agreement that achieves your short and long-term interests, which negotiation strategy/approach should a person use? The three competitive approaches, the behavior approach, and the integrative approaches can all yield positive results. This article makes the point that you don’t have to choose just one strategy/approach. In fact, I will make the argument that you should use a blended approach. A blended approach using a win-win mind set while deploying selective tactics from all of the other approaches will consistently produce outstanding results. I have named this blended approach the Informed Approach to negotiations. The Informed Approach to negotiations is outlined in my new book, Negotiations – Prepare To Win – An Analytical Approach.
Tough negotiators who only use competitive/win-lose strategies tend to extract larger concessions from their counterparts, but are less likely to get an agreement. As a result, their overall savings from their efforts are greatly reduced when they fail to achieve agreements during some of their negotiations. Also, if the tough negotiator uses zero sum tactics to achieve good results, without allowing their counterpart to save face, the long-term relationship between the parties can be damaged beyond repair. A tough negotiator many get a large singular-point result, but if the relationship is broken in the process of achieving that result, the remaining poor relationship will never produce the type of long-term collaboration that is needed to thrive in our highly competitive world marketplace.
A great example of this type of broken relationship is the situation in Springfield, Illinois between the Republican Governor Bruce Rauner and Democratic House Leader Michael Madigan. Both parties had been deploying zero sum tough negotiation tactics over the past three years with seemingly little regard for the effects to each other. The end result was the longest period of time a state had gone without a budget in modern American history causing great damage to the state and its citizens. While these two elected officials were bickering and blaming each other, the state’s bond rating continued to fall, state universities cut programs and staff, schools closed early, and people left the state. But, disruptive tactics can be productive and do not have to be harmful to long term goals and relationships when deployed professionally with facts and data. The professional negotiator wants to achieve their goals without “showing-up” their counterpart, knowing that they will likely be sitting across the table with the same person at some point in the future. Competitive/Win-lose strategies can be categorized into three different approaches. I have outlined below a summary of these competitive/win-lose approaches and how I have incorporated their concepts into the Informed Approach.
1 – Structural Approach – This approach focuses on the use of power. The concept of leveraging a strong BATNA, Best Alternative To a Negotiated Agreement, comes into play here. The knowledge of how strong your BATNA is compared to your counterpart’s BATNA will insure you will not walk away from a deal you should accept, and also not accept a deal you should walk away from. The relative BATNA investigation is a must do preparatory activity for all negotiations which I include in the Informed Approach, but is only one of multiple potential leverage points that a negotiator should consider using. A strong BATNA leverage point should be deployed confidently and as aggressively as needed, but not in a highly corrosive way. It is also very important to know if your BATNA is weak. When you have a weak BATNA, the more ambiguity you can create with your counterpart regarding your true BATNA condition the better.
2 – Strategic Approach – This approach is based on the belief that people will make rational decisions to maximize their outcomes. Specifically, people will balance the “cost” of certain actions against the probability of those actions achieving their goals. The strategic approach is also based on the belief that cooperation between parties is more likely when those two parties have a high probability to meet again, and when trust has been established between the two parties. I have found these concepts to be true and complementary with the Integrative/Win-Win Approach. As an example, in the Informed Approach, the importance of having a good reputation, dealing with people honestly, and presenting accurate data are foundational requirements. In practice, I know I have been able to achieve greater savings than my competitors from the same vendors, because the vendors trusted me. They knew if business conditions changed during the length of the agreement that I would listen to their concerns and treat them fairly. As a result, I got up-front near-term cost reductions that the vendor did not have to “hang onto” in case business conditions changed. Other companies who did not have as trusting of a relationship with the vendors were never offered the up-front savings.
3 – Concession Exchange Approach – This approach is exactly how it sounds and it stresses to initially ask for much more than you are willing to accept. There is nothing wrong with asking for more than you are willing to settle for, but the request has to be based in reality and reasonability. In the Informed Approach, I show the practitioner how to quantify their leverage points by making reasonable assumptions allowing them to create justifiable and aggressive proposals.
If your requests are not based on any facts and are unreasonable, your counterpart will not take you seriously, and you will never find yourself in the “trading zone”. The trading zone is a point in the negotiation when both parties have reason to be optimistic there is a potential deal to be made. Susskind introduced this concept in his book, Good For You Great For Me. Raiffa, in The Art and Science of Negotiation, also presented a similar concept called Zone of Agreement; and Fisher, Ury, and Patton used a similar concept called the Zone of Possible Agreement (ZOPA) in their book, Getting To Yes. All three of these concepts speak to the same condition. Your minimal acceptance level is less than your counterpart’s maximum concession level making a deal possible.
A good negotiator will not only get into the trading zone and make a deal, but they will use facts, data, and logic to expand their counterpart’s zone increasing the benefit they achieve. I have done this in practice and observed the light go on in the head of the person sitting across the table from me. The light that I have often observed was a recognition by my counterparts on how they could justify giving me additional concessions, and see a path to a potential deal. Teaching practitioners how to calculate what their trading zone should be, and how to influence their counterpart to expand their trading zone, are two of the primary principles of the Informed Approach.
Behavioral Approach –This approach focuses on negotiators’ personalities and characteristics as the deciding variables in determining the outcome of a negotiation. The approach categorizes people into four motivation orientations. Those orientations are the individualistic, the altruistic, the cooperative, and the competitive. A visual aid of how these four orientations sit along the two dimensions of: interest in relationships and interest in organizational outcomes is provided below. This approach also recognizes the widely accepted understanding that tough negotiators are more likely to achieve their goals, but are also more likely not to achieve any agreement.
| HIGH | |||
| COMPETITIVE | COOPERATIVE | ||
| INTEREST IN ORGAN. | |||
| INDIVIDUALISTIC | ALTRUISTIC | ||
| LOW | HIGH | ||
| INTEREST IN RELATIONSHIPS | |||
In my Informed Approach, the focus is on being a strong advocate using data, knowledge, and facts. When focusing on data and facts you can be a strong advocate for your organization without tearing down the person sitting across the table from you. The win-lose approaches would fall mostly into the competitive or individualistic segments depending on the person. The collaborative approach would fall squarely in the cooperative segment. My Informed Approach is best represented by straddling the competitive and cooperative orientations achieving the sweet spot of potential collaboration while insuring you are not taken advantage of because you were unprepared for the negotiation. A person who has an altruistic or an individualistic orientation should not have any negotiation responsibilities as part of their job function.
Integrative Approaches focus on Win-Win potentials. In 1981 Fisher and Ury made famous their Win-Win Principled Negotiations approach in their book, Getting To Yes: Negotiating Agreement Without Giving In. In 1991 Fisher and Ury teamed up with Patton to release a second edition of this popular book. The integrative approaches stress the importance of the free exchange of information, group problem solving, and increasing the size of the deal so that more benefits are available to divide up. Below I provide a summary of the seven elements of a Principled Negotiation, and how they are also interrogated into the Informed Approach to negotiation.
1 – Focus on interest not positions. A simple, yet effective way, to demonstrate this concept is the example of two people wanting an orange for two different interests. One person wants the orange to eat the fruit and the other person wants the orange to use the peel for baking. If the two-people focused on their positions of wanting the orange an agreement may never materialize or one person will be very disappointed with the outcome. But, when each are willing to explore the interests for why the other person wants the orange, a path to an agreement becomes very visible with both parties being satisfied with the outcome. In my Informed Approach, I stress the need to stand in your counterpart’s shoes and help them create their story to sell the deal, that you want, to their organization. This creative problem solving can best be accomplished by exploring what their deal interests are. Then by identifying all the benefits, of the deal that you want, that speak to those interests. A skilled negotiator will also be able to identify other benefits of the deal to their counterpart that they had not thought of. In effect, the skilled negotiator will expand their counterpart’s deal interests.
An example of this in practice is how I would convince vendors during a negotiation to take strategic stock positions on lower cost raw materials, and share the cost reductions with my organization. Holding inventory in recent years has been a big taboo because the vendor will experience added inventory carrying cost. But, I would show how the additional inventory carrying cost would be exceeded by their additional profits driven by a lower cost of raw materials. I would also provide the vendor the benefit/security of receiving a longer-term blanket purchase order to consume the material over an agreed upon set of time. In exchange, we would receive long term lower priced components generating huge favorable purchase price variances and ultimately lower standard costs on our products.
It is not enough to know that lower raw material costs will lower the vendor’s manufacturing costs. You need to know how to calculate what the lower costs should be to make sure you receive a fair amount of the cost reduction. In my book, I show the reader several different methods how to estimate what their lower costs should be.
2 – Remember You Are Dealing with People. People skills are foundational requirements in the Informed Approach. I devote a whole chapter in my book on how to use and read body language and people skills. Negotiations are by their nature competitive, but that does not mean they have to be destructive. When you come into a negotiation well prepared with facts and data you will receive your counterpart’s respect, and then when you show your willingness to consider issues from their perspective you gain their willingness to become full participants. A path to a deal then often becomes apparent quickly. Treating people with respect and gaining the respect of your counterparts are foundational requirements of the Informed Approach.
3 – Alternatives – Here is where Competitive and Interrogative Approaches have cross over. The Structural Approach stresses the concept Best Alternative To a Negotiated Agreement and the Integrative Win Win Approach recognizes the importance of that concept in this element. As I stated previously, I also include the requirement to investigate and strengthen your relative BATNA to your counterpart’s BATNA as a potential leverage point in the Informed Approach.
4 – Identifying Options – Brainstorming using the free exchange of information with your counterpart is described in this element as a method to generate solutions that meet both parties’ interests. In the second stage of a negotiation, the Back and Forth Stage that I outline in my book, options are certainly discussed, but I do not advocate complete transparency with your counterpart. It is not your job to divulge the weak spots of your positions and I advocate to never disclose them voluntarily.
5 – Criteria – This element address the need to identify objective criteria that will be used to make decisions and how to divide-up the pie. There is nothing wrong with using “objective” criteria to make decisions, but when you are deciding/negotiating what objective criteria will be used, you are negotiating for your portion of the deal! You must be a well-prepared, effective advocate for your organization or you will most likely end up getting a small slice. In the Informed Approach, I outline several methods on how to use objective criteria. Some of the methods I outline deal with using currency exchange rates, cost of raw materials websites, documented quantity per unit rates, and what criteria should be used when conducting competitive bid auctions.
6 – Commitments – Are the people you are negotiating with capable of honoring the commitments they make during the negotiation? When you are negotiating with the same companies/people over several years you will know if the person is capable of honoring commitments, and you will avoid entering into negotiations with the wrong people. But, when dealing with new companies, negotiating with people that have the proper authority can sometimes be a challenge. In fact, some unethical organizations will use the tactic of initially sending in “lower level” employees, who gives the impression that they have the proper authority to honor commitments, then try to change a deal, that you thought was made, because the “Supervisor” will not sign off on the commitments of the lower level person. This tactic is called escalation and it should not be tolerated. The Informed Approach outlines several methods to combat this unethical tactic. The Informed Approach also discusses how to properly document a deal so that it is legally binding.
7 – Communication – Good communication skills can change and improve opinions on proposals, and help avoid misunderstandings. The Informed Approach commits great attention to communication skills and outlines methods on how to convey that you are listening and understanding what other people are saying. It is also important to point out that when you have the respect and trust of your counterpart the pathway for good communication has already been laid. Practicing ethics that are beyond reproach is a foundational requirement of my Informed Approach, for the very (but not the only) reason of needing trusted communication paths during a negotiation.
The Informed Approach to Negotiation, which is outlined in my book, Negotiations – Prepare To Win – An Analytical Approach, is a comprehensive negotiation process that accommodates the best aspects of the competitive, behavioral, and integrative approaches. In addition to the benefit of having all possible tools available to deploy during a negotiation, the Informed Approach provides a process template to follow that has a proven track record. For more information regarding my book and the Informed Approach to negotiation visit https://gregorytaylorconsulting.com/about/
References
Karrass, 1995. Give and Take. Harper Business.
Fisher and Ury, 1981. Getting to Yes: Negotiating Agreement Without Giving In. Penguin Books.
Raiffa, 1982. The Art and Science of Negotiation. Belknap Press.
Fisher, Ury, and Patton, 1991. Getting to Yes: Negotiating Agreement Without Giving In. Revised Second Edition. Penguin Books.
Alfredson and Cungu’, 2008. Negotiation Theory and Practice. Easypol
Susskind, 2014. Good For You Great For Me. Public Affairs.