Negotiation 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.
It is aimed to resolve points of difference, to gain advantage for an individual or collective, or to craft outcomes to satisfy various interests. It is often conducted by putting forward a position and making small concessions to achieve an agreement. The degree to which the negotiating parties trust each other to implement the negotiated solution is a major factor in determining whether negotiations are successful. In many cases, negotiation is not a zero-sum game, allowing for cooperation to improve the results of the negotiation.
People negotiate daily, often without considering it a negotiation.[page needed] Negotiation occurs in organizations, including businesses, non-profits, and within and between governments as well as in sales and legal proceedings, and in personal situations such as marriage, divorce, parenting, etc. Professional negotiators are often specialized, such as union negotiators, leverage buyout negotiators, peace negotiator, or hostage negotiators. They may also work under other titles, such as diplomats, legislators, or brokers.
Negotiation can take a wide variety of forms, from a trained negotiator acting on behalf of a particular organization or position in a formal setting to an informal negotiation between friends. Negotiation can be contrasted with mediation, where a neutral third party listens to each side's arguments and attempts to help craft an agreement between the parties. It can also be compared with arbitration, which resembles a legal proceeding. In arbitration, both sides make an argument as to the merits of their case and the arbitrator decides the outcome. This negotiation is also sometimes called positional or hard-bargaining negotiation.
Negotiation theorists generally distinguish between two types of negotiation. Different theorists use different labels for the two general types and distinguish them in different ways.
Distributive negotiation 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 results in another person's loss. Distributive negotiation examples include haggling prices on an open market, including the negotiation of the price of a car or a home.
In a distributive negotiation, each side often adopts an extreme position, knowing it will not be accepted--and then uses a combination of guile, bluffing, and brinkmanship to cede as little as possible before reaching a deal. Distributive bargainers conceive of negotiation as a process of distributing a fixed amount of value. A distributive negotiation often involves people who have never had a previous interactive relationship, nor are they likely to do so again in the near future.
In the distributive approach each negotiator fights for the largest possible piece of the pie, so it may be quite appropriate--within certain limits--to regard the other side more as an adversary than a partner and to take a somewhat harder line.
Integrative negotiation 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 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 often attempts to create value in the course of the negotiation ("expand the pie").
Integrative negotiation often involves a higher degree of trust and the forming of a relationship. It can also involve creative problem-solving that aims to achieve mutual gains. It is also sometimes called win-win negotiation.
In the integrative approach, unlike the distributive approach, parties seek to find an arrangement that is in the best interest of both sides. A good agreement is not one with maximum gain, but optimum gain. Gains in this scenario are not at the expense of the other, but with him.
A common negotiation technique in integrative negotiations involves trading one favor for another, commonly referred to as logrolling. It focuses on the underlying interests of the parties rather than their arbitrary starting positions, approaches negotiation as a shared problem rather than a personalized battle, and insists upon adherence to objective, principled criteria as the basis for agreement.
Perspective taking in integrative negotiation can be helpful for a few reasons, including that it can help self-advocating negotiators to seek mutually beneficial solutions, and it increases the likelihood of logrolling (when a favor is traded for another i.e. quid pro quo). Social motivation can increase the chances of a party conceding to a negotiation. While concession is mandatory for negotiations, research shows that people who concede more quickly, are less likely to explore all integrative and mutually beneficial solutions. Therefore, conceding reduces the chance of an integrative negotiation.
However, negotiators need not sacrifice effective negotiation in favor of a positive relationship between parties. Rather than conceding, each side can appreciate that the other has emotions and motivations of their own and use this to their advantage in discussing the issue. In fact, perspective-taking can help move parties toward a more integrative solution. Fisher et al. illustrate a few techniques that effectively improve perspective-taking in their book Getting to Yes, and through the following, negotiators can separate people from the problem itself.
Additionally, negotiators can use certain communication techniques to build a stronger relationship and develop more meaningful negotiation solution.
Integrated negotiation is a strategic approach to influence that maximizes value in any single negotiation through the astute linking and sequencing of other negotiations and decisions related to one's operating activities.
This approach in complex settings is best executed by mapping out all potentially relevant negotiations, conflicts and operating decisions in order to integrate helpful connections among them, while minimizing any potentially harmful connections (see examples below).
An alternative approach to integrated negotiation is to assume each negotiation or operating activity is standalone.
Integrated negotiation is not to be confused with integrative negotiation, a different concept (as outlined above) related to a non-zero sum approach to creating value in negotiations.
Integrated negotiation was first identified and labeled by international negotiator and author Peter Johnston in his book Negotiating with Giants.
One of the examples cited in Johnston's book is that of J. D. Rockefeller deciding where to build his first major oil refinery. Instead of taking the easier, cheaper route from the oil fields to refine his petroleum in Pittsburgh, Rockefeller chose to build his refinery in Cleveland. Why? Because rail companies would be transporting his refined oil to market. Pittsburgh had just one major railroad, meaning it could dictate prices in negotiations, while Cleveland had three railroads that Rockefeller knew would compete for his business, potentially reducing his costs significantly. The leverage gained in these rail negotiations more than offset the additional operating costs of sending his oil to Cleveland for refining, helping establish Rockefeller's empire, while undermining his competitors who failed to integrate their core operating decisions with their negotiation strategies.
Other examples of integrated negotiation include the following:
When a party pretends to negotiate, but secretly has no intention of compromising, the party is considered negotiating in bad faith. Bad faith is a concept in negotiation theory whereby parties pretend to reason to reach settlement, but have no intention to do so, for example, one political party may pretend to negotiate, with no intention to compromise, for political effect.
Bad faith negotiations are often used in political science and political psychology to refer to negotiating strategies in which there is no real intention to reach compromise, or a model of information processing. The "inherent bad faith model" of information processing is a theory in political psychology that was first put forth by Ole Holsti to explain the relationship between John Foster Dulles' beliefs and his model of information processing. It is the most widely studied model of one's opponent. A state is presumed implacably hostile, and contra-indicators of this are ignored. They are dismissed as propaganda ploys or signs of weakness. Examples are John Foster Dulles' position regarding the Soviet Union, or Hamas's position on the state of Israel.[neutrality is disputed]
There are many different ways to categorize the essential elements of negotiation.
One view of negotiation involves three basic elements: process, behavior and substance. The process refers to how the parties negotiate: the context of the negotiations, the parties to the negotiations, the tactics used by the parties, and the sequence and stages in which all of these play out. Behavior refers to the relationships among these parties, the communication between them and the styles they adopt. The substance refers to what the parties negotiate over: the agenda, the issues (positions and - more helpfully - interests), the options, and the agreement(s) reached at the end.
Another view of negotiation comprises four elements: strategy, process, tools, and tactics. Strategy comprises the top level goals - typically including relationship and the final outcome. Processes and tools include the steps to follow and roles to take in preparing for and negotiating with the other parties. Tactics include more detailed statements and actions and responses to others' statements and actions. Some add to this persuasion and influence, asserting that these have become integral to modern day negotiation success, and so should not be omitted.
A skilled negotiator may serve as an advocate for one party to the negotiation. The advocate attempts to obtain the most favorable outcomes possible for that party. In this process the negotiator attempts to determine the minimum outcome(s) the other party is (or parties are) willing to accept, then adjusts their demands accordingly. A "successful" negotiation in the advocacy approach is when the negotiator is able to obtain all or most of the outcomes their party desires, but without driving the other party to permanently break off negotiations.
Skilled negotiators may use a variety of tactics ranging from negotiation hypnosis, to a straightforward presentation of demands or setting of preconditions, to more deceptive approaches such as cherry picking. Intimidation and salami tactics may also play a part in swaying the outcome of negotiations.
Another negotiation tactic is bad guy/good guy. Bad guy/good guy is when one negotiator acts as a bad guy by using anger and threats. The other negotiator acts as a good guy by being considerate and understanding. The good guy blames the bad guy for all the difficulties while trying to get concessions and agreement from the opponent.
The best alternative to a negotiated agreement, or BATNA is the alternative option a negotiator holds should the current negotiation fails and does not reach agreement. The quality of a BATNA has the potential to improve a party's negotiation outcome. Understanding one's BATNA can empower an individual and allow him or her to set higher goals when moving forward. One of the best strategy while going into a negotiation is to ensure that you have a strong BATNA, and if not, have tools equipped that can help you made the other side's BATNA weak. One of the major mistakes made by new negotiators is to disclose their BATNA at first without having had any discussion with the other side. This can jeopardise your position in the negotiation, as your negotiation might have been weaker than the other sides, and such disclosure puts you at a weaker spot in the negotiation. The best strategy is to ask a lot of questions to develop, if not an exact, but a guess about the other sides BATNA to know your position in the negotiation.
Kenneth W. Thomas identified five styles or responses to negotiation. These five strategies have been frequently described in the literature and are based on the dual-concern model. The dual concern model of conflict resolution is a perspective that assumes individuals' preferred method of dealing with conflict is based on two themes or dimensions
Based on this model, individuals balance the concern for personal needs and interests with the needs and interests of others. The following five styles can be used based on individuals' preferences depending on their pro-self or pro-social goals. These styles can change over time, and individuals can have strong dispositions towards numerous styles.
Three basic kinds of negotiators have been identified by researchers involved in The Harvard Negotiation Project. These types of negotiators are: soft bargainers, hard bargainers, and principled bargainers.
Researchers from The Harvard Negotiation Project recommend that negotiators explore a number of alternatives to the problems they face in order to reach the best solution, but this is often not the case (as when you may be dealing with an individual using soft or hard bargaining tactics) (Forsyth, 2010).
Tactics are always an important part of the negotiating process. More often than not they are subtle, difficult to identify and used for multiple purposes. Tactics are more frequently used in distributive negotiations and when the focus in on taking as much value off the table as possible. Many negotiation tactics exist. Below are a few commonly used tactics.
Auction: The bidding process is designed to create competition. When multiple parties want the same thing, pit them against one another. When people know that they may lose out on something, they want it even more. Not only do they want the thing that is being bid on, they also want to win, just to win. Taking advantage of someone's competitive nature can drive up the price.
Brinksmanship: One party aggressively pursues a set of terms to the point where the other negotiating party must either agree or walk away. Brinkmanship is a type of "hard nut" approach to bargaining in which one party pushes the other party to the "brink" or edge of what that party is willing to accommodate. Successful brinksmanship convinces the other party they have no choice but to accept the offer and there is no acceptable alternative to the proposed agreement.
Bogey: Negotiators use the bogey tactic to pretend that an issue of little or no importance is very important. Then, later in the negotiation, the issue can be traded for a major concession of actual importance.
Chicken: Negotiators propose extreme measures, often bluffs, to force the other party to chicken out and give them what they want. This tactic can be dangerous when parties are unwilling to back down and go through with the extreme measure.
Defence in Depth: Several layers of decision-making authority is used to allow further concessions each time the agreement goes through a different level of authority. In other words, each time the offer goes to a decision maker, that decision maker asks to add another concession to close the deal.
Deadlines: Give the other party a deadline forcing them to make a decision. This method uses time to apply pressure to the other party. Deadlines given can be actual or artificial.
Flinch: Flinching is showing a strong negative physical reaction to a proposal. Common examples of flinching are gasping for air, or a visible expression of surprise or shock. The flinch can be done consciously or unconsciously. The flinch signals to the opposite party that you think the offer or proposal is absurd in hopes the other party will lower their aspirations. Seeing a physical reaction is more believable than hearing someone saying, "I'm shocked."
Good Guy/Bad Guy: The good guy/bad guy approach is typically used in team negotiations where one member of the team makes extreme or unreasonable demands, and the other offers a more rational approach. This tactic is named after a police interrogation technique often portrayed in the media. The "good guy" appears more reasonable and understanding, and therefore, easier to work with. In essence, it is using the law of relativity to attract cooperation. The "good guy" appears more agreeable relative than the "bad guy."
Highball/Lowball: Depending on whether selling or buying, sellers or buyers use a ridiculously high, or ridiculously low opening offer that is not achievable. The theory is that the extreme offer makes the other party reevaluate their own opening offer and move close to the resistance point (as far as you are willing to go to reach an agreement). Another advantage is that the party giving the extreme demand appears more flexible when they make concessions toward a more reasonable outcome. A danger of this tactic is that the opposite party may think negotiating is a waste of time.
The Nibble: Nibbling is asking for proportionally small concessions that haven't been discussed previously just before closing the deal. This method takes advantage of the other party's desire to close by adding "just one more thing."
Snow Job: Negotiators overwhelm the other party with so much information that they have difficulty determining what information is important, and what is a diversion. Negotiators may also use technical language or jargon to mask a simple answer to a question asked by a non-expert.
Mirroring: When people get on well, the outcome of a negotiation is likely to be more positive. To create trust and a rapport, a negotiator may mimic or mirror the opponent's behavior and repeat what they say. Mirroring refers to a person repeating the core content of what another person just said, or repeating a certain expression. It indicates attention to the subject of negotiation and acknowledges the other party's point or statement. Mirroring can help create trust and establish a relationship.
Scotting: A tactic of lowering one's voice to create a position of power. This technique was pioneered by a veteran businessman, M. G. Scott, and saw tremendous success in railway machinery price negotiations.
Communication is a key element of negotiation. Effective negotiation requires that participants effectively convey and interpret information. Participants in a negotiation communicate information not only verbally but non-verbally through body language and gestures. By understanding how nonverbal communication works, a negotiator is better equipped to interpret the information other participants are leaking non-verbally while keeping secret those things that would inhibit his/her ability to negotiate.
Non-verbal "anchoring" In a negotiation, a person can gain the advantage by verbally expressing a position first. By anchoring one's position, one establishes the position from which the negotiation proceeds. In a like manner, one can "anchor" and gain advantage with nonverbal (body language) cues.
Reading non-verbal communication Being able to read the non-verbal communication of another person can significantly aid in the communication process. By being aware of inconsistencies between a person's verbal and non-verbal communication and reconciling them, negotiators can to come to better resolutions. Examples of incongruity in body language include:
The way negotiation partners position their bodies relative to each other may influence how receptive each is to the other person's message and ideas.
Emotions play an important part in the negotiation process, although it is only in recent years that their effect is being studied. Emotions have the potential to play either a positive or negative role in negotiation. During negotiations, the decision as to whether or not to settle rests in part on emotional factors. Negative emotions can cause intense and even irrational behavior, and can cause conflicts to escalate and negotiations to break down, but may be instrumental in attaining concessions. On the other hand, positive emotions often facilitate reaching an agreement and help to maximize joint gains, but can also be instrumental in attaining concessions. Positive and negative discrete emotions can be strategically displayed to influence task and relational outcomes and may play out differently across cultural boundaries.
Dispositional affects affect various stages of negotiation: which strategies to use, which strategies are actually chosen, the way the other party and their intentions are perceived, their willingness to reach an agreement and the final negotiated outcomes.Positive affectivity (PA) and negative affectivity (NA) of one or more of the negotiating sides can lead to very different outcomes.
Even before the negotiation process starts, people in a positive mood have more confidence, and higher tendencies to plan to use a cooperative strategy. During the negotiation, negotiators who are in a positive mood tend to enjoy the interaction more, show less contentious behavior, use less aggressive tactics and more cooperative strategies. This in turn increases the likelihood that parties will reach their instrumental goals, and enhance the ability to find integrative gains. Indeed, compared with negotiators with negative or natural affectivity, negotiators with positive affectivity reached more agreements and tended to honor those agreements more. Those favorable outcomes are due to better decision making processes, such as flexible thinking, creative problem solving, respect for others' perspectives, willingness to take risks and higher confidence. Post-negotiation positive affect has beneficial consequences as well. It increases satisfaction with achieved outcome and influences one's desire for future interactions. The PA aroused by reaching an agreement facilitates the dyadic relationship, which brings commitment that sets the stage for subsequent interactions.
PA also has its drawbacks: it distorts perception of self performance, such that performance is judged to be relatively better than it actually is. Thus, studies involving self reports on achieved outcomes might be biased.
Negative affect has detrimental effects on various stages in the negotiation process. Although various negative emotions affect negotiation outcomes, by far the most researched is anger. Angry negotiators plan to use more competitive strategies and to cooperate less, even before the negotiation starts. These competitive strategies are related to reduced joint outcomes. During negotiations, anger disrupts the process by reducing the level of trust, clouding parties' judgment, narrowing parties' focus of attention and changing their central goal from reaching agreement to retaliating against the other side. Angry negotiators pay less attention to opponent's interests and are less accurate in judging their interests, thus achieve lower joint gains. Moreover, because anger makes negotiators more self-centered in their preferences, it increases the likelihood that they will reject profitable offers. Opponents who get really angry (or cry, or otherwise lose control) are more likely to make errors: make sure they are in your favor. Anger does not help achieve negotiation goals either: it reduces joint gains and does not boost personal gains, as angry negotiators do not succeed. Moreover, negative emotions lead to acceptance of settlements that are not in the positive utility function but rather have a negative utility. However, expression of negative emotions during negotiation can sometimes be beneficial: legitimately expressed anger can be an effective way to show one's commitment, sincerity, and needs. Moreover, although NA reduces gains in integrative tasks, it is a better strategy than PA in distributive tasks (such as zero-sum). In his work on negative affect arousal and white noise, Seidner found support for the existence of a negative affect arousal mechanism through observations regarding the devaluation of speakers from other ethnic origins." Negotiation may be negatively affected, in turn, by submerged hostility toward an ethnic or gender group.
Research indicates that negotiator's emotions do not necessarily affect the negotiation process. Albarrac?n et al. (2003) suggested that there are two conditions for emotional affect, both related to the ability (presence of environmental or cognitive disturbances) and the motivation:
According to this model, emotions affect negotiations only when one is high and the other is low. When both ability and motivation are low, the affect is identified, and when both are high the affect is identified but discounted as irrelevant to judgment. A possible implication of this model is, for example, that the positive effects PA has on negotiations (as described above) is seen only when either motivation or ability are low.
Most studies on emotion in negotiations focus on the effect of the negotiator's own emotions on the process. However, what the other party feels might be just as important, as group emotions are known to affect processes both at the group and the personal levels. When it comes to negotiations, trust in the other party is a necessary condition for its emotion to affect, and visibility enhances the effect. Emotions contribute to negotiation processes by signaling what one feels and thinks and can thus prevent the other party from engaging in destructive behaviors and to indicate what steps should be taken next: PA signals to keep in the same way, while NA points that mental or behavioral adjustments are needed.
Partner's emotions can have two basic effects on negotiator's emotions and behavior: mimetic/ reciprocal or complementary. For example, disappointment or sadness might lead to compassion and more cooperation. In a study by Butt et al. (2005) that simulated real multi-phase negotiation, most people reacted to the partner's emotions in reciprocal, rather than complementary, manner. Specific emotions were found to have different effects on the opponent's feelings and strategies chosen:
Negotiation is a rather complex interaction. Capturing all its complexity is a very difficult task, let alone isolating and controlling only certain aspects of it. For this reason most negotiation studies are done under laboratory conditions, and focus only on some aspects. Although lab studies have their advantages, they do have major drawbacks when studying emotions:
While negotiations involving more than two parties is less often researched, some results from two-party negotiations still apply with more than two parties. One such result is that in negotiations it is common to see language similarity arise between the two negotiating parties. In three-party negotiations, language similarity still arose, and results were particularly efficient when the party with the most to gain from the negotiation adopted language similarities from the other parties.
Due to globalization and growing business trends, negotiation in the form of teams is becoming widely adopted. Teams can effectively collaborate to break down a complex negotiation. There is more knowledge and wisdom dispersed in a team than in a single mind. Writing, listening, and talking, are specific roles team members must satisfy. The capacity base of a team reduces the amount of blunder, and increases familiarity in a negotiation.
However, unless a team can appropriately utilize the full capacity of its potential, effectiveness can suffer. One factor in the effectiveness of team negotiation is a problem that occurs through solidarity behavior. Solidarity behavior occurs when one team member reduces his or her own utility (benefit) in order to increase the benefits of other team members. This behavior is likely to occur when interest conflicts rise. When the utility/needs of the negotiation opponent does not align with every team member's interests, team members begin to make concessions and balance the benefits gained among the team.
Intuitively, this may feel like a cooperative approach. However, though a team may aim to negotiate in a cooperative or collaborative nature, the outcome may be less successful than is possible, especially when integration is possible. Integrative potential is possible when different negotiation issues are of different importance to each team member. Integrative potential is often missed due to the lack of awareness of each member's interests and preferences. Ultimately, this leads to a poorer negotiation result.
Thus, a team can perform more effectively if each member discloses his or her preferences prior to the negotiation. This step will allow the team to recognize and organize the team's joint priorities, which they can take into consideration when engaging with the opposing negotiation party. Because a team is more likely to discuss shared information and common interests, teams must make an active effort to foster and incorporate unique viewpoints from experts from different fields. Research by Daniel Thiemann, which largely focused on computer-supported collaborative tasks, found that the Preference Awareness method is an effective tool for fostering the knowledge about joint priorities and further helps the team judge which negotiation issues were of highest importance.
Many of the strategies in negotiation vary across genders, and this leads to variations in outcomes for different genders, often with women experiencing less success in negotiations as a consequence. This is due to a number of factors, including that it has been shown that it is more difficult for women to be self-advocating when they are negotiating. Many of the implications of these findings have strong financial impacts in addition to the social backlash faced by self-advocating women in negotiations, as compared to other advocating women, self-advocating men, and other advocating men. Research in this area has been studied across platforms, in addition to more specific areas like women as physician assistants. The backlash associated with this type of behavior is attributed to the fact that to be self-advocated is considered masculine, whereas the alternative, being accommodating, is considered more feminine. Males, however, do not appear to face any type of backlash for not being self-advocating.
This research has been supported by multiple studies, including one which evaluated candidates participating in a negotiation regarding compensation. This study showed that women who initiated negotiations were evaluated more poorly than men who initiated negotiations. In another variation of this particular setup, men and women evaluated videos of men and women either accepting a compensation package or initiating negotiations. Men evaluated women more poorly for initiating negotiations, while women evaluated both men and women more poorly for initiating negotiations. In this particular experiment, women were less likely to initiate a negotiation with a male, citing nervousness, but there was no variation with the negotiation was initiated with another female.
Research also supports the notion that the way individuals respond in a negotiation varies depending on the gender of the opposite party. In all-male groups, the use of deception showed no variation upon the level of trust between negotiating parties, however in mixed-sex groups there was an increase in deceptive tactics when it was perceived that the opposite party was using an accommodating strategy. In all-female groups, there were many shifts in when individuals did and did not employ deception in their negotiation tactics.
The word "negotiation" originated in the early 15th century from the Old French and Latin expressions "negociacion" and "negotiationem". These terms mean "business, trade and traffic". By the late 1590s negotiation had the definition, "to communicate in search of mutual agreement." With this new introduction and this meaning, it showed a shift in "doing business" to "bargaining about" business.