Negotiation is the process of discussing how to reach an agreement in which different sides try to find common ground.
Primary Implication
Anytime at least two parties with differing interests try to reach a mutually acceptable outcome, a negotiation takes place. There are only five possible outcomes in every negotiation. When entering a negotiation the core question is what does a “win” look like to you? The second question is, what will cause you to “walk away” and choose not to come to an agreement with the other party?
Knowing the answer to these two questions is the first step in preparing to find a mutually acceptable outcome with someone who has differing goals and priorities.
Overview
Negotiation is a dynamic communication process in which people with opposing interests strive to find common ground. It often requires compromise to achieve a mutually acceptable solution. Having a shared understanding of the importance of finding common ground fosters a sense of collaboration and mutual respect in the negotiation process.
It’s important to remember that negotiation is not a one-sided power play. If one party only dictates terms and doesn’t consider the other’s needs, it’s an ultimatum, not a negotiation. For it to be a negotiation between two or more parties the following elements must be present:
- Mutual interest in coming to an agreement: if only one-party cares about reaching an agreement, it’s more like persuasion or instruction.
- Power Imbalance: if one party has overwhelming power and dictates the terms, it’s not a negotiation but dictation.
- Information Equality: if one party has all the information and keeps the other in the dark, it will never be a fair exchange.
- Room for Compromise: if there’s no flexibility or options on the table, it’s not a negotiation but following instructions.
Here are some examples:
- A manager explaining how a process is to be performed: there’s knowledge transfer, not an agreement being reached.
- A manager setting a start time for work: the employee might ask for later, but the manager has the final say.
- Choosing company-sponsored benefits: you might discuss options, but the owner sets the benefits menu and how much of the benefit-cost the employee shares from participating.
You know a negotiation has broken down when there is no discussion of interests. If the conversation focuses on positions and one-sided demands without exploring underlying needs, it’s unlikely to lead to a win-win.
Every negotiation will conclude with one of five outcomes:
Win/Win doesn’t mean a perfectly equal split down the middle. It’s about finding an agreement where both sides feel they’ve achieved their goals. The final agreement leaves both sides feeling satisfied with the results. It likely involves concessions with both parties getting something they value.
Imagine a negotiation between a business and a supplier. The business wants a lower price, while the supplier wants a guaranteed order volume. A Win-Win outcome would be the business agreeing to a larger order in exchange for a discounted price per unit. This benefits both sides: the business saves money, and the supplier gets a secure customer.
Lose/Win or Win/Lose is when one party clearly benefits at the expense of the other. I.e., one side wins more while the other gets less. It’s often a competitive situation in which the winning party uses pressure tactics and deception and leverages its power to get the upper hand. The losing party will feel taken advantage of and likely resentful, leading to potential future problems.
An example of a Lose/Win or Win/Lose scenario is a large asset purchase negotiation. Anytime the buyer pressures the the seller into accepting a lower price than the assets worth, the seller will be frustrated even if they felt stuck in needing to do the deal. This approach prioritizes the sale over building a mutually beneficial buyer/seller relationship.
Lose/Lose is the unfortunate scenario where both parties end up worse off than when they started. The final result is a damaged relationship as both parties leave the negotiation feeling frustrated and likely facing negative consequences.
Imagine a landlord and tenant negotiation on rent increases. If they can’t find common ground, the landlord might lose a reliable tenant and the tenant might struggle to find a new place. Both parties lose out in this scenario.
Walkaway from a negotiation occurs when the parties involved can’t find mutually beneficial common ground. It most often occurs when one party is entrenched in their initial positions with rigid expectations that can’t be met and is unwilling to adjust. When this is the case, and there is no opportunity to create a win-win, it is better to walk away.
Picture a business deal in which negotiations stall due to anger and stubbornness. Both parties walk away without an agreement, wasting time and resources, damaging their relationship, and missing out on future opportunities to work together.
Below are the most common reasons for people to negotiate:
- To Learn and Gather Information: negotiations create a way to learn more about the other party’s needs and interests, which can be valuable for future interactions.
- To Build Relationships: the negotiation process itself can foster communication, understanding, and trust, leading to stronger relationships
- To Resolve Conflict: negotiations can be a constructive way to address disagreements and find solutions to shared problems with differing needs and wants that satisfy everyone involved.
- To Reach Agreement: negotiation allows people with differing interests to find common ground and reach a mutually acceptable solution.
- To Achieve a Better Outcome: negotiation is a way to improve your position by getting something you want, whether it’s a better price, more favorable terms, or a win-win solution that creates additional value.
Negotiation is a fundamental part of human interaction. We constantly negotiate, whether for ourselves or our businesses, from buying the things we need and want to resolving problems that we can’t solve by ourselves. Those who embrace the negotiation process are people who seek to develop their communication skills, problem-solving abilities, and critical thinking while positioning themselves to experience more of life than those who forge on independently unwilling to engage others in finding new ways to improve their outcomes.
