BA225

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Essentials of
Negotiation
Part 01: Fundamentals of
Negotiation
Chapter 01: The Nature of Negotiation
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Style and Approach
Bargaining and negotiation are not the same.
• Bargaining describes competitive win-lose situations.
• Negotiation refers to win-win situations.
Give-and-take is important, but factors shaping the negotiation occur
before the negotiation, or shape the context around the negotiation.
The author’s insights are drawn from three sources.
• Personal experience.
• Media – television, radio, newspapers, magazines, and the Internet.
• Social science research.

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Characteristics of a Negotiation Situation
There are two or more parties.
• Between individuals, groups, or
organizations, or within groups.
There is a conflict of needs and
desires between parties.
• Each side searches for conflict
resolution.
The parties negotiate by choice.
• There are times to not engage in
negotiation.
A give-and-take is expected.
• Both sides compromise.
Parties prefer to negotiate.
• Rather than fight openly,
dominate, or break contact.
Negotiators must manage
tangibles and resolve intangibles.
• Tangibles include the price or
terms of the agreement.
• Intangibles are underlying
motivations.
• The need to “win.”
• The need to maintain a
good relationship.

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Interdependence
Working interdependently allows parties to achieve a possible outcome
that is better than they could achieve by working on their own.
Relationships between parties may be characterized in one of three ways.
• Independent parties are able to meet their own needs without the
assistance of others.
• Dependent parties must rely on others for what they need; they must
accept and accommodate to that provider’s whims and idiosyncrasies.
• When the parties depend on each other to achieve their own outcome
they are interdependent; characterized by interlocking goals.

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Types of Interdependence Affect Outcomes
The interdependence of people’s goals, and the structure of the situation,
strongly shapes negotiation processes and outcomes.
• Zero-sum, or distributive: Competitive – there is only one winner.
• The individuals are so linked together that there is a negative
correlation between their goal attainments.
• To the degree that one person achieves their goal, the other’s goal
attainment is blocked.
• In a mutual-gains situation, also known as a non-zero-sum or
integrative situation, there is a positive correlation between the goal
attainments of both parties.
• To the degree that one person achieves their goal, the other’s goals
are not necessarily blocked, and may in fact be enhanced.

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Alternatives Shape Interdependence
Evaluating interdependence also depends heavily on the desirability of
alternatives to working together.
BATNA: Best Alternative to a Negotiated Agreement.
• Whether you should or should not agree on something in a negotiation
depends upon the attractiveness of your best available alternatives.
• Negotiators must understand their own BATNA, and the other parties’.
• The value of a person’s BATNA is always relative to the possible
settlements available in the current negotiation.
• A BATNA may offer independence from, dependence on, or
interdependence with someone else.
• Every possible interdependency has an alternative – negotiators
can walk away.

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Mutual Adjustment and Concession Making
Negotiation is a process that transforms over time, and mutual adjustment
is one of the key causes of the changes that occur during a negotiation.
Negotiations often begin with statements of opening positions.
• Each party states its most preferred settlement proposal.
If the proposal isn’t readily accepted, negotiators begin to defend their own
initial proposals and critique the others’ proposals.
• Each party’s rejoinder usually suggests alterations to the other party’s
proposal and perhaps a change in their own position.
When one party agrees to make a change, a concession has been made.
• When a concession is made, the bargaining range – the range of
possible agreements between the two party’s minimally acceptable
settlements – is further constrained.

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Two Dilemmas in Mutual Adjustment
The dilemma of honesty concerns
how much truth to tell the other.
• Telling the other party
everything may give them the
opportunity to take advantage.
• Not telling the other person
anything may lead to stalemate.
The dilemma of trust is how much
to believe what the other tells you.
• If you believe everything the
other party says, then they
could take advantage of you.
• If you believe nothing they say,
you will have difficulty in
reaching an agreement.

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Outcomes and Processes
Concessions are greatly aided by trust and a belief.
• Two efforts help to create such trust and beliefs – one is based on
perceptions of outcomes and the other on perceptions of the process.
• Outcome perceptions can be shaped by managing how the
receiver views the proposed result.
• Enhance perceptions of the credibility of the process by signaling
fairness and reciprocity in proposals and concessions.

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Value Claiming and Value Creation
The structure of the interdependence shapes the strategies and tactics
negotiators employ.
Negotiators use win-lose
strategies in distributive situations.
• In distributive bargaining, the
negotiator accepts the ‘one
winner’ concept and pursues
action to be the winner.
• The purpose of this type of
negotiation is to claim value.
Negotiators use win-win strategies
in integrative situations.
• Integrative negotiation attempts
solutions so both parties can
achieve their goals.
• The purpose of the negotiation
is to create value.

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Implications of Claiming and Creating Value
Most negotiations are a combination of claiming and creating value, and
there are significant implications to this.
Negotiators must be able to recognize when to
use more of one approach than the other.
Negotiators must be versatile in their use of both
strategic approaches.
Negotiator perceptions tend to see problems as
more distributive than they really are.
• People tend to overuse distributive strategies.
• As a consequence, negotiators often leave
unclaimed value on the negotiation table.
Successful
coordination of
interdependence
has the potential to
lead to synergy,
which is the notion
that “the whole is
greater than the
sum of its parts.”

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Value Creation and Negotiator Differences
Value may be created in numerous ways, and the heart of the process
lies in exploiting the differences between the negotiators.
• Differences in interests.
• Finding compatibility is often the key to value creation.
• Differences in judgments about the future.
• People differ in their perception of future value of an item.
• Differences in risk tolerance.
• A company with a cash flow problem can assume little risk.
• Differences in time preference.
• One negotiator may want to realize gains now, while the other may
be happy to defer gains into the future.

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Conflict – Definitions
Conflict arises:
• From the strongly divergent needs of the two parties.
• From misperceptions and misunderstandings.
• When the two parties are working toward the same goal and generally
want the same outcome.
• When both parties want very different outcomes.
Conflict is a disagreement or opposition, and includes the belief that the
parties’ current needs cannot be achieved simultaneously.

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Levels of Conflict
Intrapersonal or intrapsychic conflict.
• Conflict occurs within an individual.
Interpersonal conflict.
• This is conflict between individuals.
Intragroup conflict.
• This is conflict within a group.
Intergroup conflict.
• This is conflict between organizations, ethnic groups, warring nations,
or feuding families or within splintered, fragmented communities.
• Negotiations at this level are the most complex.

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Functions and Dysfunctions of Conflict
Elements that contribute to conflict’s destructive image.
Competitive, win-lose goals. Emotionality.
Misperception and bias. Blurred issues.
Decreased communication. Rigid commitments.
Magnified difference, minimized similarities. Conflict escalation.
Conflict’s productive aspects.
• Discussion raises awareness and coping ability.
• Conflict leads to change and adaptation.
• Conflict strengthens relationships and morale.
• Conflict promotes awareness of self and others.
• Conflict enhances personal development.
• Conflict encourages psychological development.
• Conflict can be stimulating and fun.
The objective is
not to eliminate
conflict but to learn
how to manage it
to control the
destructive
elements while
enjoying the
productive
aspects.

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Figure 1.2: Conflict Diagnostic Model
Source: Reprinted from Leonard Greenhalgh, Managing Conflict, Sloan Management Review 27, no. 6 (1986), pp. 45–51.
Dimension Difficult to Resolve Easy to Resolve
Issue in question Matter of “principle” Divisible issue
Size of stakes Large Small
Interdependence Zero sum Positive sum
Continuity of interaction Single transaction Long-term relationship
Party structure Disorganized Organized
Third parties No neutral party available Powerful third party available
Conflict progress Unbalanced Balanced

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Figure 1.3: The Dual Concerns Model
Access the text alternative for this image.
Source: Reprinted from Dean G. Pruitt, Jeffrey Z. Rubin, and Sung H. Kim, Social Conflict: Escalation, Stalemate, and Settlement, 2nd ed. (New York: The McGraw-Hill Companies, 1994).

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© McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom.
No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education.