General Negotiation June 4, 2020

Understanding Types of Negotiations for Effective Negotiating

Success in negotiation starts with understanding what kind of negotiation you are dealing with. Fundamentally, every negotiation is fundamentally about finding and distributing value. This article will help you understand how to think about both value and how we distribute it in new ways.

Your goal as a negotiator is to start by asking the right questions in order to understand what each side values most and to identify which resources are on the table (including some that are not obvious) that could be distributed in ways that lead to a successful deal.

Karrass provides well-researched and innovative strategies for taking apart the negotiating process to understand not only the standard realities of negotiation but also the generally ignored elements that we tend to forget about. When we talk about distributive vs. integrative negotiation, for example, we can easily forget that only very few negotiations are truly limited to the options that seem available to us. Great negotiators bring to bear creative strategies to identify and introduce new kinds of value that lead to better Both-Win^® successes.

Research shows that these techniques, paired with a nuanced understanding of how to select and deploy strong teams are what makes the difference between and adequate outcome and an unqualified success.

Below are some key questions to help you understand how both value and resources figure into your negotiation.

How Many Resources Are At Hand? Distributive vs. Integrative Negotiation

While many negotiation resources will offer tools for distributive negotiation, only Karrass provides the crucial tools for identifying how and how often negotiators can bring new kinds of value to the table, thereby moving from a distributive to an integrative mode. By understanding how to add elements of value to the range of resources for distribution, a negotiator gains a better foothold in the negotiation process and is able to clear a path toward a more successful outcome in which both sides are happy.

Start by asking yourself: are we dealing with a fixed set of options or are there other add-ons that could be brought to the table, from either side? Very often, we make the mistake of assuming we are in a fixed-resources situation. While that is sometimes the case, in many cases there are other variables that can be brought to bear. Identifying whether this is a possibility and understanding how to bring these to the table not only opens up the negotiation to new Both-Win^® possibilities, it also provides leverage to better set the terms for negotiation.

Success in either scenario requires a specific set of techniques. Failing to understand which kind of negotiation you are engaged in will mean losing ground and leaving money on the table.

Distributive Negotiation

If the options are limited -- if there is a fixed pie, so to speak, then there are only a limited number of resources -- or pieces of pie -- to go around. This is called distributive negotiation. Distributive negotiation is most common in a one-time, limited context, and may be the case when you are negotiating the price of a single piece of unique equipment, for example, in a marketplace with little to no competition. 

Before accepting that this is the case, however, spend a little time researching whether there really aren’t any other elements of value that could be brought to the table to provide some room for adjustment. For example, even if the material resources are limited, other elements like timelines, transportation, extraneous costs, and sourcing might all offer some possible places to provide or demand incentives.

When the pie really is limited, strategic positioning of value becomes more important than ever. Challenging prices can mean finding creative solutions with the limited resources at hand.

For example, distributive negotiation sometimes means we need to go back to talk with our own organization to try to identify whether every demand made by engineers or managers is really of top-notch value. This is the time to reconsider whether X widget or Y incentive is really necessary, because such fixed expectations from within one’s own organization limit the options on the table.

Integrative Negotiation

When there are ways to bring in other possible resources like adjustments to delivery timelines or add-on benefits to sweeten the deal, this is called integrative negotiation. Most negotiations include some integrative elements. Identifying these elements is key to strengthening your position while also moving from a win-lose mentality to a Both-Win^® situation in which both sides stand to gain and the terms of negotiation open up in your favor if you can effectively identify and strategically deploy these elements.

In other words, the pie is almost never truly fixed. Even if you are negotiating in a very limited marketplace, consider whether a lower price might be attainable if you are able to efficiently lower the cost for the other side by utilizing some of your own resources to house or transport the equipment under negotiation.]

In classical integrative negotiation, in which many options are at hand for negotiation, success comes down to having the best grasp of all the strategies available and of how best to deploy them to create value.

By the same token, it can be very effective to force the other side to create value. It may be useful to create a bogey by setting absolute limits on prices or other potential concessions. Defending a price or imposing a time pressure can force the other side to become creative in identifying potential new opportunities.

For the greatest success, an organization must consider how best to play to its strengths by identifying who to put at the table.

Who is at the Table?

We risk losing value every time we fail to understand that there are more people at the table than simply those in front of us. Typically, negotiation training teaches us to address the people at the table in front of us. This is a very formulaic and limited approach that tends to reinforce our blind spots. While there may only be one person in front of us, in truth there are always others lingering behind the scenes. Understanding who is behind the scenes and how they factor in provides new ways of identifying and distributing value on both sides.

Effective Negotiating: One-on-One Negotiation

On the occasions when we find ourselves involved in a one-on-one negotiation, we may tend to default to a more limited view of both the value and the distributive possibilities available to us. One-on-one negotiations tend to end more quickly, as research by Chester Karrass has shown. We may see a shop owner or a lone engineer across from us and either lower our expectations or assume that there is little to no value to create here. More often than not, this leads to less favorable outcomes.

However, it bears remembering that even the small shop owner is working with distributors of some sort, so it’s worth exploring whether the rug or small appliance you’re haggling over might not be available in a different form from a distributor and whether there may be a way to give the shop owner a slice of the profits while procuring what you really want with efficient cost savings.

This is even more effective in negotiating large-scale purchases or sales. Sometimes we might find ourselves working out a deal with an engineer or manager in a small single-product organization. Here, a creative approach to identifying value can be especially effective. A buyer or seller should understand the structure -- whether small- or large-scale -- of the entity they’re negotiating with because even as those at the table representing the buyer are tasked with coming to a deal, these negotiators are also subject to their own motivations within their organization.

Effective Negotiating: Team Negotiation

The same research from Chester Karrass that found that one-on-one negotiation is detrimental also provided insights into why and how teams offer specific advantages in negotiation.

Well-organized teams can cut down on the tendency for personal feelings to interfere with success and they can be deployed strategically. Perhaps most crucially, research shows that they tend to set higher goals and are also more likely to achieve them.

In team organization, a clear understanding of roles is crucial: Who will take the lead at the beginning? Who will ensure that communication within the team’s organization keeps things running smoothly? Who could play the role of the hold-out? Clear roles not only avoid chaos or mixed messages, they also magnify the strengths of each team member and make an organization more nimble in reacting to the demands or strategies they face in a negotiation.

Teams that bring together experts from different areas from within an organization can facilitate better knowledge-gathering and also smooth the transition to implementation. Expertise also often opens up new possibilities for identifying under-recognized value. Such a team is also particularly agile when it becomes necessary to break a deadlock, as long as the team is functioning well.

Making good sense of the other side in a team negotiation is just as key as organizing a strong team. In a large-scale negotiation with a buyer, a seller should understand the corporate structure of the entity they’re negotiating with because even as those at the table representing the buyer are tasked with coming to a deal, these negotiators are also subject to their own motivations within their organization.

Even more than in one-on-one negotiating, in team negotiations with larger organizations, harnessing an understanding of how negotiators are positioned in relation to their organization could lead to some unanticipated possibilities like offering a concession that costs little but raises the profile for the team across the table within their own organization.