Whenever we are trying to reach a goal and need the help of another party who has different preferences, we negotiate.
In most negotiations, we face two goals: value claiming and value creating. Value can be defined as anything you would like to get out of a negotiation, whether it be more dollars, a consulting contract, a new rug, an end to conflict, and so on.
Value claiming, also known as distributive negotiation or single-issue negotiation, involves trying to get as much of the pre-existing value on the negotiating table for yourself—and away from the other party. An example would be haggling over the price of a rug at a foreign bazaar. Value creation, or integrative negotiation, involves looking beyond the most obvious issue, such as price, for new sources of value that can be brought to the table to expand the pie. For example, when negotiating for a job, you might move beyond salary to include issues such as vacation time, responsibilities, flex time, and so on to create value for both parties.
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At times, a negotiation will have only a distributive component—that is, there are only opportunities to claim value and not create value. You might have difficulty finding other issues to add to the mix when haggling for that rug, for example. Far more often, however, there are hidden sources of value you can add to the discussion to create value.
To succeed at the bargaining table, professional negotiators become effective at both distributive negotiation and integrative negotiation. Ideally, you should be able to create more value by negotiating trades across issues and then claim the lion’s share of that value for yourself through distributive negotiation strategies.
Prepare for value claiming
Here are four key steps you can take to improve your negotiating skills and thoroughly prepare to claim value, from Northwestern University professor Leigh L. Thompson’s book The Mind and Heart of the Negotiator:
- Assess and improve your BATNA. In negotiation, your best alternative to a negotiated agreement, or BATNA, is often your strongest source of power. When you have a strong alternative, you will be ready to walk away from any deal that is inferior to your BATNA. Wise negotiators not only assess their BATNA before negotiating but spend considerable time working to try to improve it. For example, a job candidate might continue to search for other jobs while negotiating a particular offer, or might try to negotiate one or more offer at the same time.
- Calculate—but do not disclose—your reservation point. In negotiation, your reservation point is typically a figure or offer that represents what you need to get at the table that will prevent you from pursuing your BATNA. For example, if you have a job offer for $70,000 a year from Firm A, and hope to do better in negotiations with Firm B, you would determine the lowest amount (such as $75,000 or $80,000) Firm B could offer you to convince you to take the job. Because your reservation point, also known as your walkaway point or bottom line, is the least amount you are willing to accept, it is generally wise not to share it or your BATNA with your counterpart across the table, even if you trust and like the other party, lest they take advantage of this information.
- Research the other party’s BATNA and reservation point. It’s important not only to determine your own BATNA and reservation point, but to estimate your counterpart’s BATNA and reservation point. This knowledge will help you determine how far you can push the other side. You can make these estimates by thinking about and researching the other party’s alternatives and resources, such as how much they might have to spend and what other negotiating opportunities might arise for them.
- Evaluate the ZOPA. When you have a sense of each party’s reservation point, you will be able to evaluate the zone of possible agreement, or ZOPA. The ZOPA encompasses the range of all possible deals that both parties would find acceptable, explain Harvard Business School professors Deepak Malhotra and Max H. Bazerman in their book Negotiation Genius. For example, if you, as a job candidate, would accept a minimum of $75,000 from a firm, and your research suggests they might pay you as much as $85,000, then the ZOPA is $75,000-85,000. Your ZOPA will also help you set an ambitious but realistic target, such as $85,000.
By undertaking this type of analysis, you are well positioned for effective value claiming in both distributive negotiation and integrative negotiation.