By James A. Baker
Founder and Chairman
Depending on the circumstances, negotiations can be direct or complex, adversarial or collaborative. In the modern business world, it is often desirable to conduct a collaborative, non-adversarial negotiation with a “win-win” outcome in order to build and preserve cordial relationships between business partners. However, you would not want to try for a “win-win” negotiation when haggling with a used car salesman. It is critical to be aware of what kind of negotiation you are going into and plan your strategy accordingly.
The Two Types of Negotiations
The primary distinction between negotiations is the desired outcome. There are basically two ways to approach negotiation: making sure that you win and they lose, or working toward a mutually beneficial and satisfactory solution. We will explore the differences between these two types of negotiation and how best to distinguish one from the other.
Dividing the Pie
The type of negotiation with one winner and one loser has several names, including positional, distributive, or competitive negotiation; fixed-pie negotiation, and zero-sum game. In this type of negotiation, both parties start as adversaries and tend to remain that way throughout the process. Manipulative tactics are common. The parties are inflexibly positional, often ignoring the real issues and needs behind their positions.
This type of negotiation is sometimes called a “fixed-pie” negotiation because the outcome is often conceptualized as a pie, of which each party wants the biggest piece. Because the pie does not change size, the party who gets the biggest piece wins and the other loses – there is no chance of a win-win outcome. It can also be termed a “distributive” negotiation because the pie is distributed between the parties, or a “zero-sum game” because any gain on one side results in a comparable loss on the other: total gains less total losses will equal zero.
Buying a used car is the classic example of a fixed-pie negotiation, which gives us some hints about what really distinguishes this type of negotiation.
One Issue and Two Positions: In the used-car transaction, the only issue is price, and there are two positions: the buyer wants to pay as little as possible, and
the salesman wants to get as much as he can.
Thus, in a fixed-pie negotiation, we see that there is one main issue, with no complex underlying interests, and there are no tradeoffs. Each side is only working to maximize their gain at the other’s expense.
No Relationship: There is not likely to be an ongoing relationship between the buyer and the used car salesman. The negotiation is competitive and adversarial.
In a fixed-pie negotiation, neither party cares about the other party’s level of satisfaction or whether they are happy with the outcome. This can lead to very aggressive negotiation, hard bargaining, and manipulative tactics.
Growing the Pie
A potential win-win negotiation is sometimes called principled, collaborative, or integrative negotiation. In this type of negotiation, both parties work towards developing or maintaining a long-term, cooperative relationship, in which both parties can gain mutual satisfaction. In this type of negotiation, the key is to “grow the pie” and find a mutually beneficial solution. As the parties have different needs, it is possible for both to get everything they need and accomplish a win-win.
A collaborative or win-win negotiation differs from the fixed-pie scenario.
Multiple Issues and Flexible Positions: There are several issues to negotiate around, with underlying motivations and interests.
Tradeoffs, concessions and compromises are possible. Discussing multiple issues is key to finding out what each party really wants and working to increase the size of the pie.
Ongoing Relationship: The other party is someone with whom you want to maintain a good working relationship.
If the parties or their companies will be dealing with each other again in the future, a mutually satisfying outcome is beneficial. You don’t rake a partner over the coals unless you want to lose their business!
Which Type of Negotiation Is It?
There may be times when you will only be interested in getting a bigger slice of pie – if you don’t have a relationship with the other party, it’s a one-time deal, and there is only one issue at stake. In most business negotiations, however, you will have an ongoing relationship, a more complex situation, and you will need to work for a win-win. Make sure you know which type of negotiation you are getting into before you start!
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