Positional/Distributive Negotiations

Distributive negotiations involve a fixed pie. There is only so much to go around, and each party wants as big a slice as possible. An example of a distributive negotiation is haggling over the price of a car with a car salesman. In this type of negotiation, the parties are less interested in forming a relationship or creating a positive impression.

Distributive relationships involve:

       ·          Keeping information confidential. For example, you don’t want a car salesman to know how badly you need a new car or how much you are willing to pay.

       ·          Trying to extract information from the other party. In a negotiation, knowledge truly is power. The more you know about the other party’s situation, the stronger your bargaining position is.

       ·          Letting the other party make the first offer. It might be just what you were planning to offer yourself!

Principled/Integrative Negotiations

Integrative negotiations are based on cooperation. Both parties believe they can walk away with something they want without giving up something important. The dominant approach in integrative negotiations is problem solving.

Integrative negotiations involve:

       ·          Multiple issues. This allows each party to make concessions on less important issues in return for concessions from the other party on more important issues.

       ·          Information sharing. This is an essential part of problem solving.

       ·          Bridge building. The success of integrative negotiations depends on a spirit of trust and cooperation.

The Negotiation Process

Preparation

       ·          Identify your key commitments

Exchanging Information

       ·          Outline Your Opening Position

       ·          Decide whether this will be High Ball or Low Ball

       ·          Ensure that this position is realistic

       ·          Allow for movement within whatever opening position you adopt

       ·          Confirm all agreements reached and positions offered

Bargaining

       ·          Question for Information

       ·          Challenge other side for justifications of their position

       ·          Examine and Test their commitment

       ·          Present Your Key Commitments

       ·          Explore Key Commitments

       ·          Summarise Arguments and Seek Acceptance

       ·          Identify and Highlight Common Ground

       ·          Be Prepared to Concede

       ·          Begin with those of Low Priority and seek High Priority Items

       ·          Never Concede on More than possible by your Brief

       ·          Use your Concessions Wisely

Closing

       ·          Emphasise the benefits to both parties

       ·          Carefully introduce the consequences of not reaching agreement to both parties and losing what has been agreed so far

       ·          Timing is Essential

       ·          Take Care when making a Final Offer. Be sure that it is consistent with your brief.

       ·          A Small Traded Offer is often better. A small move by them in return for an extra movement by you.

Before you begin a negotiation, you need to define what you hope to get out of it, what you will settle for, and what you consider unacceptable. You also need to prepare yourself personally.

Establishing your WATNA and BATNA

In most negotiations, the parties are influenced by their assumptions about what they think are the alternatives to a negotiated agreement. Often the parties have an unrealistic idea of what these alternatives are, and they are unwilling to make concessions because they think they can do just as well without negotiating. If you do not have a clear idea of your WATNA and BATNA, you will negotiate poorly based on false notions about what you can expect without an agreement.

The WATNA is what is often referred to as the ‘worst case scenario’ and is something that any sensible person will think about before embarking on a new initiative. What if it goes wrong? How will we deal with that? How you feel about the WATNA will dictate how flexible you need to be (and therefore will be) in negotiations. If your WATNA is something that would be difficult for you to accept, but the likelihood of it happening is small, you might not feel compelled to give up much in negotiations. If you could have the ideal situation, the ‘blue sky’ scenario, negotiations would not be necessary. To focus on the negotiations with a sense of purpose, your WATNA is important.

The BATNA is almost more important than the WATNA. If you look at your situation in the absence of a negotiated agreement, and find it almost unthinkable, you will be pressed to enter negotiations in the hope of getting a satisfactory agreement. The word ‘satisfactory’ is important here. Is the WATNA better than satisfactory? Is the BATNA worse? Generally, people only enter negotiations because they feel they must. They arrive at this conclusion based on analysis of their WATNA and BATNA.

Identifying your WAP

In any negotiation, it is important that you keep your WAP to yourself, especially if it is significantly less than your initial offer. If the other party knows that you will be willing to take a lot less than you are offering, then you will be negotiating from a position of weakness. If the other party knows, or has an idea of your WAP, then it stops being your WAP and simply becomes your price.

Once you have set your WAP, it is essential to keep to it. A walk away price becomes meaningless if you are not prepared to walk away should it not be met.

A warning against setting your WAP unrealistically low is that the other party will not take you seriously if you are a pushover in negotiations. They will seek to test you at every turn.