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DIGEST THIS! THE ESSENTIAL IDEA:
Want to negotiate effectively? Winning all of the pie (win-lose) or equally sharing the pie (compromise) has its price. Damaged relations and sacrificial lambs are the cost of a win. Principled negotiation seeks to get us to a “True Yes” by fundamentally understanding that it’s our DIFFERING INTERESTS in the pie that should be exploited for ALL sides to win. While some love the crust, others love the meat – meaning we can all be genuinely satisfied – we can all WIN-WIN.
- No communication = no negotiation
- Be “soft on the people” but “hard on the problem”
- Like it or not, you are a negotiator
- Why the world needs more conflict not less
- Why the Third Way leads to win-win solutions
- Don’t strive to divide the pie – unravel the orange instead!
- How an orange can reveal your true interests
- Focus on WHY not WHAT
- The power of Plan B – your BATNA
WHAT IS NEGOTIATION?
- Negotiation is the means of getting what you want from others via back and forth communication to reach an agreement. Communication is key.
- Effective negotiation is not about giving in. It is not about compromise.
- Effective negotiation is not about insisting on your view in order to win.
- Negotiation does not require compromising your principles.
- Negotiation power is not a zero-sum game – effective negotiation does not have to mean win/lose.
- Effective negotiation involves identifying mutual interests and finding ways to address differences.
THE NEED FOR CONFLICT
- Traditionally, decision-making has been based on hierarchical top-down orders. In today’s world this has changed.
- “Like it or not, you are a negotiator”. From morning to night, we negotiate with practically everyone we meet whether it be formally or informally. This could be over a date to meet friends, who will carry out certain tasks, salary negotiations, purchases and sales, etc.
- Negotiation occurs due to our differences, interests and priorities.
- The aim is not to eliminate conflict – it is an inevitable and useful part of life, leading to insights, understanding and change.
- “Few injustices are addressed without serious conflict”. And thus, the world needs more conflict, not less.
- The challenge is to transform the way we deal with conflict – from destructive and adversarial to side by side problem solving – by striving for “win-win” solutions. By “Getting to Yes”.
THE THIRD WAY
- Like a boiled egg, people often employ one of two modes of negotiation – soft or hard.
- Soft negotiators make concessions easily to reach agreement to maintain the relationship. They can, however, end up feeling exploited and bitter. By being too nice, too trusting of the other side to do best by them, by yielding too much, they superficially maintain the relationship but sacrifice their own interests in the process.
- Hard negotiators tend to favour winning at all odds – the ultimate goal being victory over the other side – at the expense of maintaining good relations between parties in the process. Each side engages in positional bargaining, maintaining their stance and making minimal concessions. A battle of wills can be inefficient process – it encourages tactics such as dragging one’s feet, threatening to walk out, stonewalling, using sheer willpower to force the other to change, to give in. Anger and resentment arise, and relationships can be destroyed in the process. Even in “winning”, a person’s ego may be satisfied by the win, but their true underlying interests may still remain unmet.
- There is however a “third way” of negotiating – “Principled Negotiation”.
PRINCIPLED NEGOTIATION – A FOCUS ON INTERESTS
- The Orange Conundrum: In a kitchen, there are 2 chefs both wanting the last remaining orange for their recipe. Positional bargaining would see a battle of wills ensue, each chef maintaining their fixed individual stance that its vital that they have the orange, perhaps resulting in ongoing argument but no agreement, or with one chef eventually wearing down the other side into giving it up, or just simply taking it, causing resentment. Or, they may focus on compromise and decide to divide the orange into 2 parts, seemingly fair as both receive an equal share, but neither feeling fully satisfied.
- A focus on insisting or compromise can leave both parties feeling that they have lost. Splitting the difference between final positions does not truly bring a solution that meets the real needs of both sides – it can be arbitrary and meaningless.
- Principled negotiation finds a solution to The Orange Conundrum, by focusing on the underlying interests of each party involved.
- When both chefs talk and find out WHY each one wants the orange, they soon realise they each other differing interests – one chef wants the fruit of the orange to make juice, the other wants the rind to make a cake. The chefs realise that their differing but compatible interests mean they can identify a win-win solution, and both be completely satisfied.
- A focus on positions (on WHAT) rather than interests – the WHY under the WHAT – can mask what each side truly wants.
- Principled negotiation looks for complimentary interests and mutual gains.
- The aim is to strengthen (or not further harm) the relationship even as each side may disagree on a topic.
- Where interests conflict, the outcome is determined by an objective standard e.g. market value.
4 MAIN FACETS OF PRINCIPLED NEGOTIATION
1) PEOPLE: SEPARATE THE PEOPLE FROM THE PROBLEM
- Participants should see themselves as working on the same side to attack the problem collaboratively, not on opposing sides attacking each other.
- Be “soft on the people” but “hard on the problem”.
- In a negotiation it can be important to satisfy interests as well build a good relationship for the future. E.g. an antiques dealer wants to make a good profit from a sale AND turn a customer into a regular one.
- To disentangle people from a problem, you will need to address: A) perception, B) emotion, and C) communication.
- A) PERCEPTION – differences in a conflict are defined by the way each side perceives the problem – conflict often lies not in objective reality but in how each side views reality.
- Having curiosity about perception – about how the other side perceives the problem – opens up paths to a solution. The ability to see the situation as the other side sees it, is one of the most important skills a negotiator can possess. Understanding another’s view and empathising with it does not mean having to agree with it.
- Make space to discuss each other’s perceptions. Don’t fall into blame which leads to defensiveness. You are trying to uncover the facts of the situation and substantive issues seeking resolution.
- B) EMOTIONS It’s important to allow emotions and grievances to be expressed – it can free the conversation from the burden of unexpressed emotions, making it easier to tackle the substance of the problem together.
- The relationship can be strengthened even through differences by acknowledging emotions sensitively, treating “the other side” with respect, and allowing understanding on both sides.
- However, be wary of allowing the conversation to spiral into a negative cycle.
- Be aware that emotions are driven by the following factors and trampling insensitively on any of these tends to generate strong negative emotions. 1) autonomy – desire to make your own choices and control your own fate, 2) appreciation – desire to be recognised and valued, 3) belonging – desire to be accepted as part of a group 4) role – desire to have a meaningful purpose, 5) status – desire to be fairly seen and acknowledged, 6) identity – desire for one’s self-image or self-respect to be maintained.
- C) COMMUNICATION – Without communication there is no negotiation.
- Negotiation is a back and forth process of communication in order to reach agreement.
- Whatever you say, be aware that the other side will almost always hear something different, particularly when caught up in emotion, or may misunderstand.
- Active listening helps to overcome this – repeat back what you have understood from the conversation and clarify any areas of misunderstanding.
- Speak about yourself, not the other side. Describe a situation and its impact from your own point of view – rather than explaining or condemning the motivations or intentions of the other side. A statement about how you feel is difficult to challenge.
- The best time for handling conflicts is before they come – by establishing good ongoing relationships and communication, that will cushion conflicts and differences when they come. A good working relationship is one that can cope with differences.
2) INTERESTS: FOCUS ON INTERESTS NOT POSITIONS
- A position is the demand from a party (the WHAT they want) e.g. to sell a home at no less than £X. Interests are the underlying reasons for adopting a position (the WHY) e.g. to pay for their grandmother’s care.
- Knowing the WHY is more revealing than the WHAT as it can lead to more creative solutions that truly provide a remedy (e.g. to sell the main house on the property allowing their grandmother to move into the smaller separate annexe, raising enough funds for in-home care without having to move away).
- RADIO STATION EXAMPLE – A businessman had submitted several offers for the purchase of a radio station, but all offers were rejected. He was about to give up, but decided to enquire further and in doing so, learned that the real interest of the minority owner was not in selling (money was not her real interest) but was in continuing to manage the radio station and be a part owner. The solution – the businessman bought only the share of the business needed for beneficial tax reasons (saving almost a million dollars) and kept the minority owner as manager. Understanding the seller’s underlying interests greatly enhanced the buyer’s negotiating power.
- A focus on interests rather than position directs attention to an integrative approach – to collaboratively creating a solution that satisfies the collective interests of both sides, that is best for all.
- We tend to assume that because a party’s position is opposed to ours (e.g. landlord wants higher rent, tenant wants lower rent), their underlying interests must also opposed, which is not necessarily the case. E.g. a landlord and tenant both want stability, both want a well-maintained apartment. By focusing on mutual interests, it may be possible to find a creative solution that satisfies both sides.
- Try to understand the other side’s interests. The basic human interests we all tend to have can be a good starting point – the need for security, economic well-being, sense of belonging.
3) OPTIONS: MANY ALTERNATIVES COULD PROVIDE A SATISFACTORY SOLUTION
- Allow space for creativity – broaden the scope of the problem space by generating a range of potential options before seeking agreement
- Often people go into a negotiation thinking they are looking for the one best answer, which can narrow the focus of discussions, and lead to dead ends and incomplete solutions.
- Instead, recognise that interests could be satisfied by many solutions. Allow for creative options to be presented without the need to commit to any, without judgement.
- Seeing the other side’s preference for an option without commitment can aid in finding a satisfying solution for all, by helping to further elicit their real interests. This option can be further refined or combined with other options collaboratively in the interests of a comprehensive solution.
4) CRITERIA: ENSURE THE FINAL AGREEMENT IS BASED ON AN OBJECTIVE STANDARD
- To ensure good relations going forward, and the durability of a solution limiting the risk of any retractions or lack of follow-through, the aim is to devise a solution that leaves each party feeling truly satisfied. No party should leave feeling cheated.
- Objective standards (criteria) can be used to achieve such solutions. For example, a fair price for the sale of a property can be determined by assessing market value for a similar house in the same area.
- Objective standard examples include market value, expert opinion, custom, law, replacement cost, depreciated book value, competitive prices, precedent, community practice, tradition, moral standards, scientific judgement, voting, equal treatment, and seeking involvement of a 3rd party e.g. mediation.
- Using standard, fair objective criteria, process or principles to reach agreement is particularly important where interests conflict.
- E.g. For a dispute in rental price between a landlord (wants a higher rent) and tenant (wants a lower rent) employ market research to decide – what is the average price for a similar flat in the same area?
- E.g. where 2 factions of union leadership cannot agree on a certain wage proposal, they can agree to submit the decision to a membership vote.
- E.g. If the other side presents an offer e.g. a $2000 dollar pay rise, ask “On what (fair/objective standard) was this calculation made?“
- Never yield to pressure to adopt an agreement, only to principle.
THE WISEST SOLUTIONS
- The wisest solutions produce maximum gain for you at minimum cost to the other side, and these are often produced only when the interests for both sides are clear.
- To reach an agreement that meets your own self-interest, you need to develop a solution that also appeals to the self-interest of the other side.
- Therefore, it is vitally important that each side advocate for their interests and not be too conciliatory.
- Where a permanent agreement is not possible, consider undertaking a provisional or temporary agreement and period for review. A provisional agreement could break down the problem into smaller more manageable parts.
- Check whether the person you are negotiating with has full authority to come to a decision – they may need to go back to their superior or other party for agreement which will have an influence on the scope of your discussions and any agreement that can be made.
- Agreement is easier when all sides involved feel ownership of the idea. Get them involved early on. When people feel they have been part of the process of a decision they are more likely to accept the end result. The feeling of participation in the process is one of the most important factors in whether a proposal is accepted – i.e. the process is the result.
DEAL OR NO DEAL: THE BATNA
- What do you do when the other side in a negotiation won’t budge from their final offer despite all efforts? Ensure you have identified your BATNA – Best Alternative to a Negotiated Agreement.
- Essentially your BATNA is your PLAN B.
- Negotiation isn’t really about wealth, political connections, physical strength, resources etc. The real question for each side is “are the consequences of not reaching agreement more disastrous than reaching agreement?”
- This depends on having identified your BATNA before negotiating – the option you will pursue should agreement not be possible.You can use your BATNA to assess any proposed agreement to determine whether the offer on hand is better or worse than your BATNA.
- Having a BATNA will give you confidence in the negotiating process, to fully present and defend your interests without giving in, in order to be conciliatory.
- Examples of BATNAs
- Brexit – it can be argued that the UK’s BATNA was preparations for a no-deal Brexit.
- Purchases – if you are buying an item, your BATNA could be purchasing your 2nd preference item if you cannot negotiate your preferred price for your first preference item.
- Strike – as a union your BATNA could be to organise a strike if you cannot reach agreement through talks.
- Legal Process – going to court if you can’t reach a settlement, if you are likely to win and obtain a higher settlement after costs.
- Minimum sales price – you can set a minimum limit at which you will sell an item – e.g. at cost or no lower than X amount.