Value Creation in Negotiation

How can you make the most of integrative negotiation?

By — on / Negotiation Skills


Many people say they dread negotiating and avoid it whenever they can. Why? Typically, because they view negotiation as a competition in which one party’s gains come at the expense of the other party. What we often overlook, however, is the fact that most negotiations allow for both collaboration and competition. Add the collaborative element of negotiation to the table, and the process becomes not only more enjoyable but also more rewarding.

A small number of negotiations are distributive, or single-issue negotiations. A negotiation over a used car, for example, may involve a single issue of price. In a distributive negotiation or value-claiming negotiation, you are indeed competing with the other party for a finite amount of resources to see who can get the better deal.

Far more commonly, however, negotiations involve multiple issues. Negotiations involving multiple issues are known as integrative negotiations, or value-creating negotiations because they allow parties to integrate various sources of value through tradeoffs and other creative dealmaking strategies. Even in a negotiation over a used car, for example, you might be able to look beyond price to identify other issues to add to the discussion. If you have a PR business, you might negotiate a lower price in return for giving the dealership some PR advice—potentially a beneficial tradeoff for both parties.

Negotiation Skills

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3 guidelines for creating value in negotiation

How can you make the most of integrative negotiations, creating as much value as possible to then divide? Here are three guidelines from experts at the Program on Negotiation at Harvard Law School:

1. Capitalize on differences.

When negotiators encounter differences with other parties, they tend to view this as a roadblock. In fact, differences more often are opportunities to create value in negotiation, write Harvard Business School professor Max H. Bazerman and the University of California, Berkeley professor Don A. Moore in their book Judgment in Managerial Decision Making. By making tradeoffs on their different preferences—a process known as logrolling—negotiators gain more of what they want by giving away something they care about less. For example, you might negotiate a lower per-item price in return for faster payment or a larger order.

Beyond preferences, negotiators can capitalize on many other types on differences between them. With contingent contracts, for example, you can create value based on your different predictions about the future in a negotiation. If you are negotiating with a contractor over an addition to your house, and you believe the contractor is unlikely to finish by the deadline she stipulates, you might propose that you pay her a higher price for on-time completion and a lower price in the event the project is delayed. If the contractor believes her estimate is accurate, she should be happy to take the bet.

2. Ask questions and share information.

Negotiators often get stuck because they remain focused on their stated interests, such as a lengthy closing period. You should be able to break through such impasses by asking your counterpart lots of questions to identify his underlying interests. “Can you tell me why you need so much time to close?” you might say, for instance. It could turn out that your counterpart has hidden interests that are ripe for trade-off. For example, if he has a legitimate reason for delaying the closing, you might agree to give him the extra time he needs in exchange for a better price to compensate you for production delays.

You can also move beyond impasse by volunteering information about your own hidden interests. Although you shouldn’t give away your bottom line or other information that would put you at a bargaining disadvantage, you should feel comfortable giving away relatively minor information that focuses on the trades you are willing to make, according to Bazerman and Moore. Do so incrementally, inviting the other side to reciprocate by sharing information about their own preferences.

3. Negotiate multiple issues simultaneously.

Negotiators often think they are being well-organized when they methodically work through a checklist of key issues—such as delivery date, price, service terms, financing—one at a time. In fact, by negotiating one issue at a time, they are preventing themselves from capitalizing on their differences with trades across issues.

A better approach is to discuss multiple issues simultaneously in negotiation. Ask the other party to agree that nothing is settled until everything is settled, a mindset that will encourage you to look for tradeoffs across your different preferences. Then put together package offers that communicate your preferred outcome across issues, advise Bazerman and Moore.

Integrative negotiations don’t require you to make sacrifices in the name of cooperation. On the contrary, they allow you (and your counterpart) to get more of what you want by identifying what each party values most. Once you have expanded the pie of value, you are in a good position to claim as much of that value as you can for yourself.

Which of these ways do you find works best to create value in negotiation?


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