Part 3.

05/ Choose Our Strategy

We can consciously choose either a win-win or a win-lose strategy (positional bargaining based on power).
The bargaining process is simple, well known and almost intuitive that unfortunately sometimes works. At its core are two positions (around a single issue, usually price) and either some compromise or no deal (one party is walking away). No one really wants to leave, so this game continues until a compromise is reached or both parties realise there’s no common ground. Bargaining consists only of commitments (positional offers or counteroffers) and alternatives (threats to walk away).
Bargaining can be hard (based on alternatives) or soft (based on commitments). Most bargainers are somewhere in between [MK: please don’t call them “balanced”]. Both styles risk over- or under-using the BATNA and killing a deal that can be saved and vice versa.

Hard negotiators are about the material value of the deal. It’s a positional game starting with extreme positions, making few but demanding many concessions, rejecting most offers, and often threatening to leave. Hard negotiators risk killing opportunities for future relationships.
Soft negotiators also want value but focus on the relationship as the long-term source of value. They open with what they present as a “fair” offer (in reality – trying to maximise their own value) and try to convince the other party to take it. They give away value hoping that next time they will capture it back, but usually make the same mistake again in order to maintain this “abusive” relationship. [MK: Or there’s a risk that the next time is too far in the future and the composition of the negotiation teams will substantially change.]

The “in between” negotiations depend on the relevance of the deal (important vs trivial), context (professional vs personal – it’s emotionally easier to bargain for a third party rather than oneself), power (more vs less), duration of the relationship (short term vs long), nature of relationship (friend, foe, boss, etc.). However, any combination of hard and soft bargaining is reactive and sacrifices value.
The negotiation (actually – bargaining!) tension: bargained savings vs relationship, can’t have both. One doesn’t have to accept it (see below how).

Win-Win Strategies

Interest-based. Drop positions, look at interests. Need to make sure several options are generated, otherwise it’s a position game over unilateral options all over again.
Mutual gains. Focus on the creative effort to generate options that will benefit everyone involved. The risk is that creating more options leads to bargaining over them.
Principled. Both parties focus on win-win only in making decisions, but the more decisions there are – the easier it is to lose focus.
Value negotiation. Also principled, but with a focus on value. Can be hijacked by win-lose moves if no other win-win options are available. Too many choices can become overwhelming and reduce the quality of our decisions. Value negotiation provides a clarity of purpose (value) and a practical method to apply win-win principles (risk-reward).
There is always more than one negotiation going on. In fact, there are three negotiations going on all at once:

Relationship (trust) – includes interdependence and trust. Engaging the other party is essential.
Substance (value) – in emotional/behavioural negotiations it may be absent.
Communication (process) – finding the most efficient process to negotiate.

They key takeaway is that all these three negotiations make one big negotiation but must be performed separately. At the same time, Relationship and Communication negotiations’ ultimate purpose is to pursue better value for the Substance negotiation. [MK: this is strongly based on the assumption that each party negotiates for its own benefit and allows the opposite party to do the same.] A move in one negotiation may impact the others. The direction of the three negotiations should be the same, although the speeds may vary. It’s better to proactively monitor the status of the negotiations (especially if they happen over a period of time) to check the direction and the progress.
In win-lose scenarios each of these three negotiations is used as a power source:

Relationship —> manipulation of the opposing party’s emotions and relationship to extract value.
Substance —> power difference to be used against the other party.
Communication —> information asymmetry, manipulation and disguise; asking another party to commit before seeing the real numbers.

Hard bargainers focus on the substance negotiations; soft bargainers – on the relationships (using charisma, false compliments, or gifts). Both concentrate on one negotiation at the expense of the other two.

The Three Negotiations

Substance negotiation – every move must focus on increasing value, not power. This reduces the ability to make a unilateral power move making the party vulnerable to such actions from an opposite party.

Not just power moves attract counter power moves, but also the mere suspicion of potential power moves cause fear-based pre-emptive strikes. Focusing on potential retaliation shifts attention from value creation.
Power is bargaining’s insurance policy against fear, but the price is lower overall value; power doesn’t translate into value easily. If the perceived power difference between the parties is relatively small, this insurance is not needed.
Focus on value is hard, but super important, when another party keeps concentrating on power, or offers easy power moves. Use the “be positive but not naïve” mantra: use the dialogue pattern.
Every move a negotiator makes can be perceived as a value or power move. Power moves are unilateral moves to benefit one party at another party’s expense. Hence, the parties need to turn any potential unilateral move into a dialogue – a proactive positive reciprocation: if something goes their way, something should come our way, and vice versa. If we talk – we listen, if we ask questions – we answer questions, if they ask for a concession – we ask for one.
Reciprocating value-focused moves rewards good behaviour and inspires similar moves in the future.
Speaking in a monologue is dangerous and impractical because it creates the inability for another party to talk and ask questions. This behaviour (making unprotected moves by offering something hoping that another party will reciprocate) is borderline naïve. Talking too much is not better than not talking at all.
A party can score extra trust points if it interrupts another party to inform them that they can’t reciprocate an unwanted move (the alternative is just enjoying the show).

Relationship negotiation – seek independent solutions for each of the three negotiations. It gets harder to mix the negotiations to an advantage and there’s a risk of prioritising relationship over value. This may cause getting to “yes” more quickly than necessary or not saying “no” to the wrong requests.

Quite often substance concessions are made with a hope to start a relationship, and more often than not – in vain.
Mixing the three negotiations rewards bad behaviour and invites more of it. (Yes, it’s hard to tell the boundaries precisely.)
Avoid trading between negotiations. The most obvious example is threatening to walk away to one’s BATNA, which may get more money today at the expense of the long-term relationships.
The key is creating relationship options based on relationship interests, and so on. Each negotiation may even have its own meetings focusing just on this kind.

Communication negotiation – increase the information available as this increases the value potential of the negotiation. This reduces the opportunity for information asymmetry power moves (unethical behaviour), but the risk is that both parties start trusting each other’s information so much that they stop independently verifying it (complacency).

Information asymmetry – whether intentional or not – is the source of many misunderstandings and conflicts. Less information means more biases and decision mistakes leading to less potential value on the table.
The best way to promote it is to continuously look for ambiguities, assumptions, indecisions, or gaps in knowledge.
Good negotiators know what verifiable information they need to have on hand before making a decision; it’s a strategic duty to find out if something is suspicious, inconsistent, unclear, ambiguous or assumed.
Some information can’t be shared due to confidentiality, but it’s possible to create a safe sharing environment where some non-confidential info can still be shared.
Information exchange shouldn’t look like a unilateral interrogation pattern, it should be a dialogue.

Part 5.

Course Notes: Continuous Business Learning

Value Negotiation: How to Finally Get the…