If everyone, individual or company, had everything they want, there would be no particular reason to approach others to derive gains through negotiation, bargaining, or collaborative decision-making. In the real world, we do not have everything; the resources we control or influence do not serve all of our interests.
Unless we can find and reach agreements with - other parties who have the capacity to respond to our interests, those needs will not be satisfied. Moreover, we are far more likely to find agreeable counterparties for joint decision-making if we have something to offer which serves interests important to them.
The Positional Approach to Negotiation
Some parties' negotiation styles leave them stuck in a quagmire; unilateral decision-making and 'non-negotiable' demands such people make offer them very little leeway for achieving favorable results. When parties say, "My way or the highway," they put themselves into a position from which they cannot extricate themselves without losing face. This is true in international diplomacy as well as when a parent tries to reach agreement with a fifteen-year-old child.
When parties adopt a position, locking themselves into a very narrow range of 'acceptable' outcomes, they often conclude that the most appropriate approach to negotiation is to treat the process as competitive - where the outcome has to yield winners and losers. The short-term thinking that underlies this approach tends to vitiate the likelihood of truly serving the long-term interests of the 'winner' in a win/lose competitive negotiation even if the short-term objectives are achieved. Someone emerging from negotiation feeling like a 'loser' is may try to avoid fulfilling his/her obligations under the agreement.
A Fanciful History of NegotiationA potted history of the process of reaching agreement might say that in the old days, when two property owners had a disagreement they would hire knights to determine who was right. The process was called waging war. Several centuries ago, someone invented lawyers, and as a consequence the process of determining who's right in a dispute became one of waging law. Negotiation, using this line of reasoning, could be viewed as waging peace. However, if negotiation is viewed as a means for determining who is right, it retains the underlying sense that as a consequence of the process, some parties end up winning and others emerge as losers.
In warfare or litigation - or the use of negotiation as a tool that yields winners and losers - competition is the best description of what's taking place. While the pursuit of war and law - as well as sports and other human activities - may tend to be competitive, it makes far more sense to recognize that negotiation is not a competitive sport.
One step in negotiation's history, advancing it beyond the competitive view, was the development of what too many people call the win/win approach. Win/win sounds as if it yields a result where each party walks away from the bargaining table satisfied that the gains achieved by the negotiating parties are equal. This is certainly a more civilized way to reach agreement than the positional bargaining approach. However, a more realistic, real-world description of interest-based negotiation would say it is a process that yields an agreement each party will willingly fulfill.
Why Parties CompeteThe primary objective of competition is to 'beat the other guy'. While this approach makes a great deal of sense in many areas of life, since negotiation should yield willing commitment among the parties to an agreement, any process that leaves a party feeling like a loser will reduce the 'loser's' enthusiasm for honoring - and fulfilling the deal. If commitment and fulfillment do not ultimately result from the bargaining process, no deal has actually been reached and the bargaining/negotiation has been a failed exercise.
People can make a case for adopting a negotiation strategy that leads to a deal which falls apart. The party who is 'stood up' by another party who reneges on a deal may be creating an appearance of moral high ground that might be used as leverage in future dealings with the 'reneging' party - or may gain a sympathy vote from other negotiation partners.
Who's In Charge Here?Most people would like to be in a position where they are in charge of all the resources they need to meet their objectives. Vertically integrated businesses were developed with that very end in view - with automobile manufacturers owning everything from the mines yielding raw materials to distribution facilities and manufacturer-controlling dealer networks. A similar approach led to the development of cartels that may have had a variety of owners controlling different elements of an overall industry - but who also shared interlocking arrangements to cooperate. In these cases, there were likely to be winners and losers. The manufacturers won and the customers generally had to accept what they were offered. Henry Ford's comment that buyers of his cars could have 'any color they wanted, as long as it was black.' was an outstanding example of this approach.
A more open market, with a larger number of participants means that consumers of business-to-business services or products or individual end user customers have far more choice in how they can achieve their objectives. In this sort of market, parties can choose their negotiating partners based on their perception of which potential suppliers or clients are likely to offer them the best deal.
People and businesses have to make an additional choice; they have to determine what they need and then who or what organization is most likely to be worth dealing with in order to get that need fulfilled. Figuring out who's got what to offer, whether it be attractive price, on-time delivery, or quality products is a critical set of homework to undertake before initiating negotiation.
Eyes on the Prize - CommitmentOne crucial challenge is determining whether a potential negotiation partner can be depended upon to 'deliver the goods' in ways that will serve the acknowledged objectives of the initiating party. A further test of that is the extent to which one can depend on other parties to fulfill the commitments they make. Unless a promise made is a promise kept, the bargaining process ends up as a failed exercise.
The fairness of the negotiation process has a significant impact on whether promises made will indeed be fulfilled. If one or more parties feel they've been treated unfairly, they are likely to look for ways to 'weasel out' of the deal - or they are likely to think twice before agreeing to negotiate with an unfair party a second time. The old saw, 'If you cheat me once, shame on you. If you cheat me twice, shame on me,' certainly applies to the long-term impacts of unfair, misleading, or oppressive negotiation strategies and tactics.
Using force, trickery, or heavy-handed tactics can often pay off in competitive environments. No one would think of fielding a big league professional basketball team made up of players who can barely see over their cars' steering wheels. In sports, competitive advantage based on skill, size, or even psychological tactics can often yield a greater likelihood of success.
Competing For SuccessIn the market, where the issue is competition among companies in the same line of business - or even competition among colleagues within a company who are all aiming at gaining advantage over their peers for promotion, better territories, or other rewards - a level playing field may be trumped by other inequalities among the players. A company with better capitalization, a better product, more attractive prices, or other advantages should, on balance, be more successful than its competitors lacking those advantages.
Whether in sports or business, competition tends to reward those with more power or skill or other strengths; competition yields winners and losers. A negotiation process that yields winners and losers is likely to have the long-term effect of turning-off the losing party's willingness to fulfill the agreement he or she was forced to accept - and reducing the likelihood that a losing party will want to negotiate with the winner in the future. Thus, if it is treated as a competition, the negotiation process may yield short-term gains for some parties, but long-term gains are not a likely result.
One can imagine a variety of possible scenarios involving negotiation where competition is an element underlying the reasons one party negotiates with another: Employees compete to climb the career ladder - often by negotiating with their bosses or human resource personnel and trying to get ahead of colleagues. Vendors negotiate with buyers to make a sale; their success generally means that other vendors fail to sell their products. In each of these situations, the negotiation is about convincing another party that one individual or vendor adds greater value than others. The aim of at least one of the parties to those negotiations is to make sure those other individuals or organizations are beaten in the competition to get ahead.
Competing To Feed EgosWhen money is involved, some people look at negotiation as a competition between the parties to see who can get the best price. 'Beating down' one's opponent in price negotiations often seems to include such elements as ego gratification, bragging rights, or even simply saving corporate dollars. None of these is a morally bad objective, but if they underlie negotiation strategies or tactics, they can damage the very same sorts of interests on the other side. Everyone has an ego, and a negotiator who thrives on bruising the egos of others runs the risk of creating short-term offense and reducing the possibility of long-term gains.Competitive Bargaining and Relationships
If you recognize that almost every negotiation is an episode in an ongoing relationship, you are also recognizing that while a party may get better results one time, perhaps the next time with the same negotiation partner will yield more for them. Obviously you don't always negotiate with the very same individuals or organizations, but since you need to collaborate with colleagues, family members, and neighbors - as well as repeat customers and suppliers, a very large proportion of your negotiation partners are 'repeaters'. Treating those frequent negotiation counterparts as competition rather than as partners in collaborative decision-making defeats significant possible gains that can be available from using negotiation to reach agreements.
Bargaining is a central element of the negotiation process. In effect, you are saying to your negotiation partner, "If you promise to..., then I promise to..." The success of that bargaining activity is based on trust. Unless the negotiation partners can trust one another to deliver as promised, the bargaining does not yield a durable agreement. Treating one's counterpart as an opponent rather than as a partner in a collaborative process decreases the likelihood of reaching an agreement that contains the fundamental element of commitment.
Information Is the Fundamental Asset of Every NegotiationIn the bargaining process one must accept that information is the commodity that moves between the parties more than any other. One needs information about price, product specifications, delivery and a host of other elements of the deal. A competitive approach undercuts the likelihood that the information that moves between the parties will be reliable - and thus convincing.
When negotiating parties trade information, they have the opportunity to narrow their focus to assure that the commitments that are made reflect common understandings. If each party only listens to his or her points, each runs the risk of being participants in a pair (or more if there are more parties) of dueling monologues. It is all well and good to understand oneself - but unless negotiating parties understand one another, even if they shake hands or sign a contract, each may walk away thinking there has been agreement on a specific deal that is not the same one to which other parties have agreed.
To avoid wasting time and effort to reach a mutually-incomprehensible deal, negotiators have to bifurcate themselves, focusing first and foremost on their own interests, keeping a close eye on the process - particularly its fairness - and most significantly, soaking up every bit of information they can learn from or about the interests of their negotiation partners. In a competition, parties may spy on each other with the aim of undercutting their opponents' capacity to utilize resources to gain a satisfactory result. In collaborative decision-making, the objective of spying - of gathering information - is to build mutual comprehension and increase the likelihood of ending up on the same page and thus reaching an agreement that means the same thing to each party.
Part of the obligation of negotiators is to pay attention to details. An agreement that reflects lack of mutual understanding can cause one set of problems - with each party fulfilling a different deal. Agreements that contain surprises present a similar problem; if one party attempts to pull the wool over another's eyes, that can also motivate attempts to get out of a bad deal and perhaps even a soured relationship.
Can Our Choice Of Negotiation Partners Make It A Competitive Process?
We don't negotiate with competitors - it is often illegal and, even if not, it is likely to be against our interests. Our obligation to ourselves and our constituents (those who depend on us) is to gain advantage over competitors. Clearly, negotiating with competitors can yield gains when the issue under discussion is a joint venture, merger, or acquisition. Competitors who negotiate to divide up market share, set monopolistic prices, or otherwise restrain trade are really not negotiating; the legal term in Anglo-Saxon law is 'conspiring'.
Negotiating with colleagues in order to bring about buy-in can be crucial to building teams within companies - and reducing cross-silo or inter-tribal warfare. Internal negotiations that work lead to greater success when the time comes for external negotiations with customers, suppliers, or others outside our company. When an external party discovers there is a lack of agreement within an organization, most often this offers the external party a temptation to divide and conquer and, in so doing, do some degree of harm to the interests of the other negotiating party.
In a market characterized by cost-cutting and penny-pinching, longstanding supplier/customer relationships are jeopardized as negotiators - or their constituents - make price the determining issue rather than long-term value, return on investment, or dependability. This trend has led to many corporate decisions that reward purchasing people when they force suppliers to cut prices. One might argue that such price-cutting marching orders are an incentive to buyers to get competitive with their vendors, only winning by taking a threatening approach, "If you don't cut prices, we'll go somewhere else for widgets." This competitive approach is combat; it is not negotiation.
One of my clients, dominant in its business sector, recognizes the risks of developing a reputation for heavy-handedness in its dealings with suppliers. They have made a corporate decision that beating up on suppliers on price alone will have long-term negative consequences. The client has made a commitment not to behave like the proverbial 700-pound gorilla. Their buyers are encouraged to collaborate with suppliers to develop creative ways to bring costs down in ways that help protect - if not maintain - supplier profits.
If the dealings between corporate buyers and their suppliers degenerates into competition, where only one party emerges as a winner, that could have the long-term effect of driving suppliers out of business thus consolidating the supplier base, reducing competition, and ultimately, increasing prices. Purchasing agents often complain about problems dealing with sole suppliers; if beating down prices puts vendors out of business, that hastens the arrival of the buyer's nightmare of "monopoly suppliers". Using the win/lose approach to negotiation becomes self-defeating.
Are These Competitive Tactics?
There are some approaches to negotiation that might be viewed as competitive, but need to be looked at in broader terms in order to understand how activities you undertake to strengthen your bargaining power do not necessarily change a negotiation from a fair to an unfair process.
Bluffing, for example, needs to be contrasted with lying. It is similar to the distinction between positional (my way or the highway) bargaining and interest-based negotiation. When one tells a lie to mislead another party, if that lie is caught, the liar's credibility is damaged and he or she has to live with the consequences. On the other hand, a negotiator may bluff another party - not by saying something that is false, but rather by making a risky proposal and then being prepared to accept the consequences if that proposal is accepted.
Similarly, a distinction needs to be drawn between spying and information gathering. Since information is the basic commodity that travels between negotiating parties, the more information one gathers in advance of formal negotiations, the better-prepared one is to negotiate effectively. One does not want to get caught spying, stealing proprietary information or obtaining information in a dishonest or underhanded manner. Stealing data or other information wipes out a negotiator's credibility and decreases the likelihood of an agreement among the parties. On the other hand, there is so much information available in libraries, on the Web, and through other legitimate means, the information gathering process is an element of due diligence that all decision-makers must undertake as responsible individuals.
Coalition building is especially important in multi-party, multi-issue negotiation. Finding out which other parties are likely to be supportive of one's own interests, what it will take to bring about other parties' buy-in to agreement may well yield divisions among the total group of parties to a potential agreement. Learning how best to bring parties together beforehand, which parties need to be convinced - and what will convince them - could raise the risk of some feelings of competition. However, if the information gathered in the coalition building process is used to increase the likelihood of buy-in, a better agreement should result.
Does The Past Have A Future?We often tell clients that, "In negotiation, the past has no future." Parties cannot change the past by negotiation - although many cling to the hope that changing others' interpretation of past occurrences will improve future relations. Whether unpleasantness in the past has occurred within a family or between national groups, competing for more sympathy is unlikely to change the future nearly as much as accepting that a) different folks have contrary views of who's at fault and b) it's time to look for complementary ways to improve whatever will happen next. Old hurts don't disappear, nor can they be ignored. Rather than hold a competition over who's got the more lachrymose history, in business and the rest of life, a focus on the future is far more likely to yield positive results.
The Letter C
Many points of analysis in negotiation can be described using words beginning with C. Interests that underlie the positions taken by parties can be Common, Complementary, or in Conflict. The decision-making process may be Combative, Competitive, or Collaborative. Using collaborative techniques to find complementary interests can lead to Commitment; the outcome of successful negotiation.
Competitive negotiation yields winners and losers and reduces the likelihood losing parties will be fully committed to the resulting agreement. If the agreement falls apart, the negotiation must be deemed a failure. If parties are compelled to fulfill their part of the agreement but end up with a bad taste in their mouth, they will approach future negotiations with the winner with reluctance, paranoia, and distrust. The long-term consequences of competitive negotiation are unfavorable, yielding reduced enthusiasm and commitment as well as damaged relationships. Negotiation is about how the parties are going to bring about added value from having worked together; it is not a competitive sport.
Steven P. Cohen, author of Negotiating Skills for Managers (McGraw-Hill, 2002) is president of The Negotiation Skills Company, Inc., a firm that provides coaching and training in the global marketplace. More information about Cohen and his company can be found at www.negotiationskills.com. Cohen is an adjunct Professor at the International Business School of Brandeis University in the United States.
By Steven P. Cohen
© Capital ME 2007
