negotiation

n.

The act or process of negotiating: successful negotiation of a contract; entered into labor negotiations.

Process of bargaining that precedes an agreement. Successful negotiation generally results in a Contract between the parties. See also Arbitration; Mediation.

The process of bargaining that precedes an agreement. Successful negotiation generally results in a Contract between the parties.
Example: Nelson wishes to purchase a property from Newman. Nelson is willing to pay up to a certain price and desires certain Conditions placed on the sale. Newman will accept anything over a certain price and may be willing to help finance the purchase for a higher price. In negotiation Nelson and Newman attempt to come to an agreement over the price and conditions. When they agree, a sales contract is Executed.

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.

Negotiation Styles

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 negotiation— also called adversarial, noncooperative, distributive bargaining, positional, or hard bargaining— is 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 solutions—such as creative financing or dealer trades—are 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:

Initial Stages

• 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.

Middle Stages

• 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").

Ending Stages

• 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.

International Negotiating

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

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.

Summary

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.

Bibliography

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." http://opim.wharton.upenn.edu/-oliver27/papers/jmis.ps. July 31, 1996.

[Article by: DONNA L. MCALISTER-KIZZIER]

noun

The act or process of dealing with another to reach an agreement: parley, talk (often used in plural). See words.

[Ge]

The way in which people match their understanding of the world, their aspirations, and their interpretation of their place in it with social reality and what their senses tell them.

A method of dispute resolution where either the parties themselves or the representatives of each party attempt to settle conflicts without resort to the courts; an impartial third party is not involved. Compare arbitration; mediation.

Negotiation, or bargaining, happens when two or more parties communicate in order to reach an agreement on a mutually acceptable outcome in a situation where they need jointly to achieve a goal that is not available to either party alone and their preferences for outcomes are usually negatively related, i.e. one party's gain is often the other party's loss. It is a complex, competitive, and interactive activity that is influenced by a variety of factors, including cognition, perception, emotion, motivation, and interpersonal skills, and the context in which the negotiation occurs.

The dominant framework for understanding fundamental negotiation strategy is the dual concerns model (Rubin, Pruitt, and Kim 1994). An early version of the dual concerns model was proposed as the Managerial Grid (Blake and Mouton 1964), and was reinterpreted by Thomas (1976). The model postulates that individuals in negotiation have two somewhat independent concerns: a concern for realizing one's own substantive outcomes in the negotiation, and a concern for helping the other party achieve their outcomes, usually in order to strengthen a positive working relationship with the other party. The strength of one's concerns on each of these two dimensions dictates one of five major strategies. Contending (i.e. competing or dominating) is the strategy to consider when one has a strong concern for one's own outcome and has little concern about the other's outcomes. Negotiators employing a contending strategy try to obtain the best outcome possible only for themselves. Negotiators using a yielding (i.e. accommodating or obliging) strategy show little interest in attaining their own outcomes but strongly care that the other party achieves their goals, possibly in order to build a stronger future relationship with the other party. The third strategy, inaction (i.e. avoiding), occurs when negotiators have little interest in achieving either their own outcomes or the other's outcomes and is equal to retreating or withdrawing from the negotiation. When negotiators show high concern for attaining their own outcomes and a high concern for whether the other party attains his or her outcomes, they pursue a collaborative or problem-solving strategy, in order to maximize their joint outcome and to reach a 'win–win' situation. Finally, negotiators pursue a compromising strategy when they display a moderate effort to pursue their own outcomes and a similarly moderate amount of effort to help the other party achieve his or her outcomes and strengthen the relationship (Lewicki et al. 2003).

Since parties negotiate largely to enhance their own outcomes, the two most common strategic approaches are competing (contending) and collaborating (problem solving). Thus, the dominant choice confronting the negotiator is whether the relationship with the other party is important or not. These two negotiation approaches are also called distributive (competitive or claiming value) vs. integrative (collaborative, problem solving, or creating value). In distributive bargaining, negotiators believe that there is a limited, controlled amount of key resources to be distributed — a 'fixed-pie' situation. One party's gain is anticipated to be at the cost of the other's. Moreover, each negotiator attempts to maximize his or her outcome at the expense of the other party, and assumes that no long-term relationship with the other party is desired. A classic prototype for a distributive bargaining process is the sale of a used automobile, where the seller tries to persuade the buyer to purchase the auto at the highest possible price and the buyer attempts to buy the auto at the lowest possible price. In order effectively to execute a distributive bargain, it is recommended that each party identify three key points. First, the party should have a target point (or a 'goal'), the point at which a negotiator would like to conclude negotiations. Second, negotiators should identify a resistance point or bottom line — the least acceptable deal he or she would accept and still consummate the negotiation. Finally, negotiators should set an opening offer, where they intend to begin the negotiation, and what they would consider to be the most optimistic settlement. As the process unfolds, parties exchange their initial offers, and then engage in a process of concessions as each moves towards their target, but go no further than their resistance point. The spread between the parties' resistance points is called the 'bargaining range' or 'settlement range'. When the buyer's resistance point is above the seller's (i.e. the lowest price the seller will accept is within the range of what the buyer will pay), any price in that bargaining range is acceptable to both parties and agreement can be reached. A fourth point that is important to parties in a distributive negotiation is their alternative — that is, another deal they could do away from the table with another party. Thus, a buyer probably has an alternative used car he can buy from another seller and the seller hopefully has an alternative buyer. Alternatives are important because they give the negotiator power to walk away from a negotiation when the emerging deal is not likely to be acceptable. Thus in distributive bargaining, the fundamental strategy for a negotiator is to push for a settlement close to the other party's resistance point, to persuade the other party to change his or her resistance point, to get the other party to think that this settlement is the best that is possible, and/or to convince the other party that one has a strong alternative available. Many books and articles have been written on the tactics and execution of this approach (see Lewicki et al. 2003).

When negotiators expect a future relationship with the other party, or wish to maximize the joint outcome between the parties, they are more likely to employ a collaborative negotiating approach. Because the parties have had a history of past interaction and expect to work with the other in the future, they should be less willing to act competitively, because this approach is likely to harm the relationship with the other. Instead, a collaborative (integrative) approach allows both parties to achieve their goals. The tactics of integrative negotiation include: a focus on needs and interests rather than positions; an effort to discover the interests of both sides; an open exchange of information and ideas; an effort to brainstorm and find creative ways to meet as many interests as possible; and a use of independent standards to determine whether the proposed settlement is fair (see Fisher, Ury, and Patton 1991, Lewicki et al. 2003). In an integrative bargaining situation, it is critical to generate mutual trust between parties to assure adequate information sharing and collaboration.

In either negotiation process, how negotiators perceive and frame a situation and an outcome has a huge influence on the negotiation process and reaction to the final outcome. The most scrutinized and understood framing effect is the gain–loss frame (Tversky and Kahneman 1981), in which an outcome can be perceived as a gain or loss compared to a reference outcome that is judged neutral. Decision theorists have found that people are more loss averse, i.e. the pain of losing the same amount of value exceeds the pleasure of gaining the same. Furthermore, in any given situation, there are almost always multiple possible reference points to compare to, therefore the same problem and outcome can be framed differently. Negotiations in which the outcomes are framed as losses tend to produce fewer concessions, reach fewer agreements, and perceive outcomes as less fair than negotiations in which the outcomes are framed as gains. Hence a successful negotiator should be able to understand both positive and negative framing of the situation and present it strategically to their opponent and at the same time avoid being framed by the opponent. There are other cognitive biases that influence negotiators' success. For example, many negotiators assume that all negotiations only involve a fixed pie and pit their own gain against the opponent's benefit. Consequently, many negotiators fail to explore integrative negotiation opportunities because of this 'fixed-pie belief'. Another bias is called the 'winner's curse'. When a negotiator makes an offer that is immediately accepted by the opponent, this response signals that the negotiator may have offered too much, which makes the negotiator feel discomfort about a negotiation victory that came too easily (Thompson 1998).

The outcome of a negotiation is also influenced greatly by each party's real or perceived power, which is the ability to influence the other party or bring about outcomes they desire. Common sources of power for a negotiator come from the information and expertise that may change the other party's point of view, the amount of control over resources, and the negotiator's legitimate power (rank or title of office). Another source of power derives from the negotiator's alternative (BATNA — best alternative to a negotiated agreement). Negotiators with attractive BATNAs can set higher reservation prices for themselves and have the power to walk away from the negotiation table when the offers are too low.

As in many other social interactions, negotiators should pay close attention to ethical standards. Ethics are rules or standards for what kind of behaviour is right or wrong in a negotiation situation. Ethics in negotiation are mostly about truth telling — how honest, candid, and disclosing a negotiator should be. Arriving at a clear, precise, effective negotiated agreement depends on the willingness of the parties to share accurate information about their own true preferences, priorities, and interests. At the same time, because negotiators may also be interested in maximizing their self-interest, they may want to disclose as little as possible about their positions.

(Published 2004)

— Roy J. Lewicki/Chongwei Wang

Bibliography
• Blake, R. R., and Mouton, J. S. (1964). The Managerial Grid: Key Orientations for Achieving Production through People.
• Fisher, R., Ury, W. L., and Patton, B. (1991). Getting to Yes: Negotiating Agreement without Giving in (2nd edn.).
• Lewicki, R. J., Barry, B., Saunder, D. M., and Minton, J. W. (2003). Negotiation (4th edn.).
• Rubin, J. Z., Pruitt, D. G., and Kim, S. H. (1994). Social Conflict: Escalation, Stalemate, and Settlement.
• Thomas, K. W. (1976). 'Conflict and conflict management'. In Dunnette, M. D. (ed.), Handbook of Industrial and Organizational Psychology.
• Thompson, L. (1998). The Mind and Heart of the Negotiator.
• Tversky, A., and Kahneman, D. (1981). 'The framing of decisions and the psychology of choice'. Science, 211.

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Quotes:

"Negotiating in the classic diplomatic sense assumes parties more anxious to agree than to disagree." - Dean Acheson

"The one sure way to conciliate a tiger is to allow oneself to be devoured." - Konrad Adenauer

"The fellow who says he'll meet you halfway usually thinks he's standing on the dividing line." - Orlando A. Battista

"When a man says that he approves something in principal, it means he hasn't the slightest intention of putting it in practice." - Otto Von Bismarck

"Grant graciously what you cannot refuse safely and conciliate those you cannot conquer." - Charles Caleb Colton

"Most people I ask little from. I try to give them much, and expect nothing in return and I do very well in the bargain." - Francois FeNelon

See more famous quotes about Negotiation

Common misspelling(s) of negotiation

• negociation
• negotation