The Art of Negotiation.
Man possesses two distinct traits of individuality and personality. Individuality makes him a unique part of the natural and social whole of the mankind. Personality gives him a unique spiritual self-determination. In the social context, man is highly interdependent on fellow beings and brings its unique personality into interactions with them.
The interaction is historically centered on his creative bargaining for exchange of goods, services and social order. Bargaining for advantage has been an essential aspect of human life. Understanding bargaining outcomes forms an important part of human and social psychology. Everyone intuitively learns the art of negotiation for survival in life. Negotiation is an important aspect of leadership and good leaders are invariably effective negotiators.
Negotiation, in the context of this article, is a formal process of bargaining in complex situations. For those who carry public or corporate responsibility and negotiate on behalf of institutions, businesses and states need to learn the art as a part of their responsibility.
Negotiation may be done to create something new that either party cannot do on its own or it may be done to resolve differences and disputes. Parties involved in the negotiation are interdependent with one another for achieving their objectives, which are often interlocked. If you are not interdependent with other parties you may not need to negotiate with them. Managing interdependence with other people is an important part of the psychological processes involved in negotiation.
In negotiation each party tries to maximize its gain. The art of negotiation leads you to maximizing your gain and equally importantly keeping the other party/parties to remain committed to the outcome. It generally is not a win-lose or a zero-sum game. Successful negotiation generally means a win-win outcome for all parties. This is essential for stability and success of the negotiated outcome.
The art of negotiation may be strengthened by the natural attributes of the negotiator's personality but to a large extent, it is a matter of conscious learning. Negotiation skills can be improved by active learning and effective preparation. It is a growing discipline in psychology and is a subject of intensive research for a better understanding of the dynamics involved. It builds extensively on decision analysis, behavioral decision theory, and game theory leading to interactive decision making.
The article aims at introducing the vast field of negotiation to generate a quest for further reading for better understanding the dynamics of negotiation to sharpen leadership and management capacities.
Preparation is the first step towards a successful negotiation: it starts with the definition of own goal(s) which leads to formulation of strategy that leads to identification of issues and stages leading onward to options and finally the tactics for conducting the negotiation.
It aims at gathering knowledge and developing an understanding of the issues as well as the working of the other parties of the negotiation. It is expected that all negotiating parties would have adequate knowledge of the agenda items but it is important that a successful negotiator has comprehensive knowledge of the broader aspects of the issues beyond the agenda items.
The negotiator needs to go over some case-studies to survey the comparative outcomes by other negotiators for similar issues. The accuracy of information and the knowledge of implications of various options/scenarios prepare, equip and guide the negotiators through the dynamic and fluid process of negotiation.
It is of vital importance to frame the theme of the dispute carefully as well as intelligently. Inappropriate wording can lead to misconception, bias or defensiveness in the minds of the other party/parties even before the start of the negotiation.
Negotiation objectives need to be defined very unambiguously. The objectives in complex situations are often interlocked and it is important to analyze scenarios with the inter-play of various permutations while defining the objectives during the preparatory work.
Then there is the strategy, tactics and plans/steps to achieve the defined objectives. The drawing of the agenda or the sequence of the deliberations may appear innocuous but this could become a cardinal point affecting the outcome. Thorough preparation leads you away from an emotional approach to negotiation, which results from limited knowledge, inadequate preparation and subjective effort.
Approach to Negotiation
Negotiation may be approached as a competitive or integrative game. The competitive approach seeks win-lose or zero-sum outcome. A win-lose game is like haggling for a bargain. Bargaining may serve some situations but has no relevance with high-stakes complex negotiations. If both parties narrowly stick to winning there is no agreement.
There is an important term that experts often use in negotiation. It is known as the "Best Alternative to No Agreement (BATNA)". One can improve the outcome by improving the BATNA and worsening that of the other party.
The timing of negotiation can also be a strategic consideration for improving the BATNA. If there is a weak BATNA, it may result in a weak outcome in case of agreement or may be more damaging in case of no agreement.
The integrative approach by comparison aims at a win-win outcome. The real life situations offer ingenuity, creativity, flexibility and diversity of scenarios for increasing the size of the pie, which may create opportunities for a win-win outcome.
Integrative approach is essentially a problem solving approach and one party alone may not be able to solve problems involved. Negotiating resources of all the parties are needed to resolve complex issues. Problem solving approach requires thorough knowledge not only of one's own imperatives and drivers but more importantly that of the other party/parties.
Problem solving approach may not be mistaken for compromising. In a compromise both parties gain less due to lack of effort as both parties may operate at the level of their BATNAs. But in problem solving they take the outcome to a higher level of gains. Figure 1 shows a Dual Concern Matrix:
(1) if we show inaction all stand to lose; (2) if we yield, we stand to lose and others gain; (3) if we contend we may stand to gain while others lose; (4) in a compromise all will gain something but all will stay short of achieving best outcomes; and finally, (5) if we adopt problem solving approach all stand to gain best outcomes.
Inter-dependence can lead to synergy where the whole is greater than the sum of its parts. This is not a prescription for all kinds of negotiations. Different situations may suit different approaches of integrating, obliging, dominating, avoiding or compromising.
Legitimacy/power of the negotiator is an important aspect of negotiation that can also lead to increasing the size of the pie. Everything in real-life complex negotiations is not black or white. There are intermingled shades, inter-bedded dimensions and inter-locking objectives. Perspectives and opportunities keep varying in the dynamic flow of a negotiating process. It is a fluid battle of wits, like the game of chess. (There is a big difference though; chess is bound in closed box logic but the real life situations are often unbounded and open-ended.) As every move in chess creates a new situation for a different response negotiation continues to create new situation for a dynamic process.
A competent negotiator with knowledge, exposure and responsibility in real life could add new dimensions and seek different permutations of achieving the defined objectives. The legitimacy or authority or power or responsibility or commitment of a negotiator is a crucial factor for successful negotiation. Power can provide the negotiator leverages to persuade and pressurize the other party to a more favorable outcome.
There are three major sources of power: information and expertise; control over negotiating team/resources; and negotiator's position in the organization. For an integrative approach to yield an outcome both negotiators need full freedom within their defined objectives. Greater the degrees of freedom more are the chances for increasing the size of pie and achieving optimal and lasting results.
What Makes an Outcome Optimal or Successful?
Negotiation is successful when its outcome is better than the BATNA of all the parties involved. Successful negotiations build relationships that could be used to advantage for future opportunities. Developing understanding and building relationship may even be stated as parts of objectives for the negation.
Negotiation involves the psychological sub-processes of perception, cognition, dynamics of communication, persuasion and leveraging, and ethical judgment.
Perception is making sense or picture from the stimuli received through the sensory inputs. Perception leads to the response that a negotiator makes. Intuitively information may be perceived and potentially distorted in the perception process leading to systemic errors in responses. Intuition in negotiation may result from inadequate preparation and lack of effort during negotiation. Intuition does not lead to problem solving and is not an appropriate approach in important negotiations.
One has to guard against the intuitive approach at any stage of the process. During the flow of a negotiating process new information may be exchanged, unforeseen points raised and tactics played to throw the opposing negotiator off balance that leads to its adopting an intuitive approach.
Strategies that could be used against Intuition
1) Identifying situations that call for extra vigilance and slower, more conscious, effortful, logical and deliberate negotiations, and keep updating the list.
2) Avoiding getting into time pressure that usually leads to intuitive responses. Typically real estate agents or the car dealers create time-pressure to extract better deals.
3) Partitioning negotiation into multiple sessions, patience often generates significant dividends. It may be unnecessary or difficult to complete complex negotiations in one session. It is better to structure a process that allows rethinking for re-strategizing.
4) Adopting an outsider lens, when a negotiator uses an insider lens for making judgment while deeply immersed in a particular context or situation, he tends to rely on intuitive judgment. By contrast when a negotiator uses an outsider lens of being removed or detached from a particular situation, he uses a rational approach. The insider focuses only on the current situation, while the outsider is better at integrating information across multiple episodes and dimensions. Sometime it may be helpful to actually engage an outsider as consultant/adviser for keeping an outsider perspective.
It would be helpful to illustrate this point by a so-called Prisoner's Dilemma where-in rational but uncoordinated and self-interested behavior can result in awful outcomes.
* The District Attorney knows that the two prisoners are indeed guilty of a crime (that carries a punishment of 5 years), but he does not have acceptable evidence to convince the jury. The prisoners too know this fact.
* The prisoners are kept separated and cannot communicate with each other at all.
* The District Attorney speaks to each prisoner separately and gives him a choice of Confessing or Not Confessing: (1) if both don't confess they would one year each. (2) If both confess they get three years each. (3) If one confesses and the other does not, the confessor gets off scot-free and the non-confessor gets the maximum punishment of five years. Figure 2 illustrates the Prisoner's Dilemma. If each prisoner confesses hoping to get scot free following intuition and self-interest and thus both end up confessing, both get 3 years each. In a win-win case both do not confess and both get away lightly with one year only as a case of problem solving for minimum punishment.
Communication is the essence of psychological processes of negotiation. It may be one of the most important factors of success in negotiation. Communication is the response actualized by the cognitive process of perception. A good communicator can say difficult things in a manner that does not provoke emotional or irrational responses. Cultural considerations are important for understanding the tactics and building the confidence.
Ethical Standards in Negotiations
Negotiators are often faced with the ethical question of what information they aught to share during the course of a negotiation. The ethics may vary from situation to situation; a few standards advocated by philosophers are presented:
* End-Result Ethics practice is based on the thinking that ends justify the means. The rightness of an action is determined by considering the consequences. It raises the concern of how does one judge the consequences in their entirety.
* Rule Ethics emphasize that decisions be based commonly on moral rules or standards or principles. Accordingly, the rightness of an action is determined by considering the laws and standards. It raises the concern of what rules are to be followed.
* Social Contract Ethics are based on community and culture. Societies and organizations determine what is ethically appropriate for them. The rightness of the action is determined by considering social norms and customs of the community. It raises the concern of establishing the general will of the community and is opposed by those who challenge the morality of the existing social order.
* Personalistic Ethics suggest that people are guided by their own conscience while making a determination. Thus the rightness of an action is determined by one's own conscience. This raises the concerns of uniformity and cohesiveness.
Negotiators may use each of these approaches to evaluate various strategies and tactics.
For crucially important situations matching a negotiator in asset value, knowledge, communication, wit, energy, exposure and commitment with the objectives is crucially important. The negotiator should have the ability to see the whole but feel the parts. Let the person have the required information, resources, time and opportunity to prepare thoroughly and carry the legitimacy and power to seek the best outcome.