CHAPTER ONE

The Nature of Negotiation

McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
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Introduction
Negotiation is something
that everyone does, almost
daily
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Negotiations
Negotiations occur for several reasons:
• To agree on how to share or divide a limited
resource
• To create something new that neither party
could attain on his or her own
• To resolve a problem or dispute between the
parties
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Approach to the Subject
Most people think bargaining and negotiation mean the
same thing; however, we will be distinctive about the
way we use these two words:
• Bargaining: describes the competitive, win-
lose situation
• Negotiation: refers to win-win situations such
as those that occur when parties try to find a
mutually acceptable solution to a complex conflict
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Three Important Themes
1. The definition of negotiation and the basic
characteristics of negotiation situations
2. Interdependence, the relationship between people
and groups that most often leads them to negotiate
3. Understanding the dynamics of conflict and conflict
management processes which serve as a backdrop
for different ways that people approach and manage
negotiations
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Characteristics of a
Negotiation Situation
• There are two or more parties
• There is a conflict of needs and desires between two
or more parties
• Parties negotiate because they think they can get a
better deal than by simply accepting what the other
side offers them
• Parties expect a “give-and-take” process
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Characteristics of a
Negotiation Situation
• Parties search for agreement rather than:
– Fight openly
– Capitulate
– Break off contact permanently
– Take their dispute to a third party
• Successful negotiation involves:
– Management of tangibles (e.g., the price or the terms of
agreement)
– Resolution of intangibles (the underlying psychological
motivations) such as winning, losing, saving face
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Types of Interdependence
Affect Outcomes
• Interdependence and the structure of the situation
shape processes and outcomes
– Zero-sum or distributive – one winner
– Non-zero-sum or integrative – a mutual gains
situation
 Negotiation Skills

• Be prepared
• Diagnose the fundamental structure of the negotiation
• Work the BATNA (Best Alternative To a Negotiated
Agreement)
• Be willing to walk away
• Remember the intangibles
• Actively manage coalition
• Savor and protect your reputation
• Remember that rationality and fairness are relative
• Continue to learn from experience
• Master the key paradoxes
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Alternatives Shape Interdependence

• Evaluating interdependence depends heavily on the
alternatives to working together
• The desirability to work together is better for
outcomes
• Best available alternative: BATNA (acronym
for Best Alternative to a Negotiated Agreement)
 Negotiation Skills Master the key
paradoxes
• Claiming vs. creating value
• Sticking by principle vs. being resilient to the flow
• Sticking with the strategy vs. opportunistic pursuit
of new option
• Honest and open vs. closed and opaque
• Trust vs. distrust
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Interdependence
In negotiation, parties need each other to
achieve their preferred outcomes or
objectives
• This mutual dependency is called interdependence
• Interdependent goals are an important aspect of
negotiation
• Win-lose: I win, you lose
• Win-win: Opportunities for both parties to gain
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Interdependence
• Interdependent parties are characterized by
interlocking goals
• Having interdependent goals does not mean that
everyone wants or needs exactly the same thing
• A mix of convergent and conflicting goals
characterizes many interdependent relationships
 Types of Interdependence Affect
Outcomes
• Interdependence & The Structure of the Situation
shape processes and outcomes
• Zero-sum or distributive – one winner
• Non-zero-sum or integrative – mutual gains
situation
• Distributive: to the degree that one person achieves
his or her goal, the other’s goal attainment is
blocked.
• Integrative: to the degree that one person achieves
his or her goal, the other’s goals are not necessarily
blocked, and may in fact be significantly enhanced.
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Mutual Adjustment
• Continues throughout the negotiation as both parties
act to influence the other
• One of the key causes of the changes that occur
during a negotiation
• The effective negotiator needs to understand how
people will adjust and readjust and how the
negotiations might twist and turn, based on one’s own
moves and the other’s responses
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Mutual Adjustment and
Concession Making
• When one party agrees to make a change in his/her
position, a concession has been made
• Concessions restrict the range of options
• When a concession is made, the bargaining range is
further constrained
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Two Dilemmas in
Mutual Adjustment
• Dilemma of honesty
– Concern about how much of the truth to tell the other
party

• Dilemma of trust
– Concern about how much should negotiators believe
what the other party tells them
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Value Claiming and Value Creation
• Opportunities to “win” or share resources
– Claiming value: result of zero-sum or
distributive situations where the object is to gain
largest piece of resource
– Creating value: result of non-zero-sum or
integrative situation where the object is to have both
parties do well
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Value Claiming and Value Creation
• Most actual negotiations are a combination of
claiming and creating value processes
– Negotiators must be able to recognize situations that
require more of one approach than the other
– Negotiators must be versatile in their comfort and use of
both major strategic approaches
– Negotiator perceptions of situations tend to be biased
toward seeing problems as more distributive/competitive
than they really are
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Value Claiming and Value Creation
Value differences that exist between negotiators
include:
• Differences in interest
• Differences in judgments about the future
• Differences in risk tolerance
• Differences in time preferences
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Conflict
Conflict may be defined as a:
"sharp disagreement or opposition" and
includes "the perceived divergence of interest,
or a belief that the parties' current aspirations
cannot be achieved simultaneously"
 Types of Conflict Substantive conflict:

A fundamental disagreement over ends or goals to be

pursued and the means for their accomplishment. (task
oriented-dealing with organizational goals, products,
services and systems)
Emotional conflict:
Interpersonal difficulties that arise over feelings of
anger, mistrust, dislike, fear, resentment, etc. (clash of
personalities)
The substantive conflict:
The substantive conflict can be dealt with by
addressing the specific problem that is the subject of
the conflict. 
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Levels of Conflict
• Intrapersonal or intrapsychic conflict
– Conflict that occurs within an individual
• We want an ice cream cone badly, but we know that ice
cream is very fattening
• Interpersonal conflict
– Conflict is between individuals
• Conflict between bosses and subordinates, spouses,
siblings, roommates, etc.
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Levels of Conflict
• Intragroup Conflict
– Conflict is within a group
• Among team and committee members, within families,
classes etc.

• Intergroup Conflict
– Conflict can occur between organizations, warring nations,
feuding families, or within splintered, fragmented
communities
– These negotiations are the most complex
Levels of Conflict Inter-
Organizational conflict
• Occurs in the competition and rivalry that
characterize firms operating in the same markets.
• Occurs between unions and organizations
employing their members.
• Occurs between government regulatory agencies
and organizations subject to their surveillance.
• Occurs between organizations and suppliers of raw
materials.
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Dysfunctions of Conflict
1. Competitive, win-lose goals
2. Misperception and bias
3. Emotionality
4. Decreased communication
5. Blurred issues
6. Rigid commitments
7. Magnified differences, minimized similarities
8. Escalation of conflict
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Functions and Benefits of Conflict
1. Makes organizational members more aware and
able to cope with problems through discussion.
2. Promises organizational change and adaptation.
3. Strengthens relationships and heightens morale.
4. Promotes awareness of self and others.
5. Enhances personal development.
6. Encourages psychological development—it helps
people become more accurate and realistic in their
self-appraisals.
7. Can be stimulating and fun.
Styles of Conflict Management

Although conflicts can be managed in a variety of

ways, individuals’ CMS are typically based on a two-
dimensional typology, the so called “dual concern
model”: concern for self (assertiveness dimension)
and concern for other’s interests and outcomes
(cooperative dimension) (Pruitt & Rubin, 1986).
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The Dual Concerns
Model
 Problem Solving

• Actors show high concern in obtaining own

outcomes, as well as high concern for the other
party obtaining their outcomes
• Negotiators pursue this approach when-Issues are
complex
• Time is available
• Working together will facilitate maximizing joint
outcome: resources
• Synthesis of ideas are needed to provide better
solution
 Problem Solving

• Problem solving approach is also known as

collaborating or Integrating approach
• Main aim of this approach is to -Seeking the
satisfaction of everyone’s Concerns by working
through differences
• Finding and solving problems so everyone gains as
a result.
• The advantage of problem solving approach is that
they yield the best outcomes.
• Mutually beneficial outcomes are more likely to
last, to improve the parties relationship, and to
benefit the wider society.
 Contending

• Actors pursue own outcomes strongly, show little

concern for other party obtaining their desired
outcomes.
• Contending approach is also known as Dominating
or Competing approach.
• Contention seeks to persuade the other party to
agree to a solution that favors one's own interests.
• Negotiators pursue this approach when issue is
important to you, speedy decisions are needed,
unfavourable decision may be costly to you, or you
are not looking for a long term relationship with
the other party.
 Yielding
• Actors show little interest in whether they attain own
outcomes, are quite interested in whether the other party
attains their outcomes.
• Yielding approach is also known as Accommodating or
Obliging Strategy
• Yielding involves lowering one’s own aspirations and to
‘let the other win’ and gain what he/she wants.
• Yielding is an effective way to close negotiations when
issues are unimportant and time pressures are high.
• You are willing to give up something in exchange for
something from the other party in future.
• Preserving relation is important.It seems to be a strange
strategy.
 Inaction

• Actors show little interest in whether they attain

own outcomes, little concern about whether the
other party obtains their outcomes.
• Also known as ‘Avoiding Strategy’.
• Negotiators pursue this approach when-Issue is
trivial.
• The strategy of inaction is usually used to increase
time pressure on the other party.
• Inaction is often synonymous with withdrawal or
passivity. The party prefers to retreat, be silent, or
do nothing.
 Compromising

• Actors show moderate concern in obtaining own

outcomes, as well as moderate concern for the
other party obtaining their outcomes.
• Negotiators pursue this approach when-Goals of
parties are mutually exclusive
• Parties are equally powerful
• Integrating and dominating styles are not
successful
• Temporary solution
• Mutually Exclusive: two events cannot happen at
the same time.
Compromising In compromising
approach, parties:
• work toward partial satisfaction of everyone’s
concerns.
• Seek acceptable rather than optimal solutions so
that no one totally wins or loses.
• Pruitt and Rubin (1986) do not identify
compromising as a viable strategy. According to
them:
• Parties are going for lazy problem solving
involving a half- hearted attempt to satisfy the two
parties interest.
• Yielding approach pursued by both the parties.
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The Dual Concerns
Model
 Conclusion

These four processes are central to any negotiation.

More recent writing, although still strongly committed
to problem solving, has been careful to stress that each
conflict management approaches has its advantages
and disadvantages and can be more or less appropriate
to use given the type of interdependence and conflict
context.