Negotiation is the art and science of securing agreements between two or more parties who are interdependent and who are seeking to maximize their outcomes. Situations that require negotiation aren’t limited to business; you likely engage in dozens of negotiations every day with your spouse, partner, family, friends, and colleagues.
The negotiation process
In a business negotiation, you have to make choices that impact the likelihood of achieving a successful outcome for your own business. To get the best outcome, it’s important to know the steps involved in the negotiation process. No matter which negotiation tactic you choose, the process is the same and consists of eight stages:
- Preparation stage: establish objectives and limits.
- Preliminary stage: exchange professional information with the other party and establish the ground rules and tone of the negotiation.
- Information stage: exchange views with the other party.
- Exploration stage: establish what each party wants and where agreements and disagreements lie.
- Bargaining stage: both parties let it be known they are willing to move toward concession.
- Packaging stage: identify agreeable trades and make proposals that offer concessions.
- Closing stage: agree on the details of the accepted proposal and confirm the agreement.
- Follow-up stage: sustain the terms of the agreement and, in most cases, maintain the relationship.
While many negotiations are straightforward, some will be among the most complex and difficult challenges you face in your career. Your success depends on planning, preparation, and choosing the right strategy. These four types of business negotiations are the most common:
Four business negotiation tactics
Negotiation through agents
Although we typically think of negotiations occurring directly between two or more principals, we often overlook the many situations where negotiations take place indirectly, through the use of representatives – otherwise known as agents.
Ordinarily, negotiations conducted between principals are preferable to negotiations through representatives. When the relationship between the two negotiating parties is fundamentally cooperative, agents are typically unnecessary. When the relationship is fundamentally flawed or irreparable, representative negotiation plays an important and necessary role.
When is it best to use agents?
Agent expertise makes a favourable agreement more likely, especially in complex negotiations with esoteric subject matter. In addition, agents are emotionally detached from the dispute, which is especially important in an emotionally charged conflict between principals. As a result, agents have the freedom to use negotiating tactics that principals may be reluctant to use or unable to employ.
When is it best not to use agents?
Have you ever played the telephone game? By having additional parties involved in the negotiation process, the risk of distortion of information and miscommunication is heightened. In addition, principals may become reliant on their agent to communicate with the other party at the conclusion of the negotiation if the relationship is fragmented.
Distributive or zero-sum negotiation
Distributive negotiation is an adversarial type of negotiation where it is assumed that a gain for one party results in a loss to the other party. Distributive negotiation is also known as a “zero-sum” negotiation because the assets or the resources which need to be distributed are fixed. In a distributive negotiation, maintaining the relationship is generally not a concern. Common negotiating tactics in a distributive situation include bluffing, claiming limited authority, reluctance, and intimidation.
The most effective negotiators in a distributive situation are those who spend time preparing to negotiate. Specifically, a negotiator should determine their best alternative to a negotiated agreement, also known as “BATNA.” It’s a contingency plan if it becomes apparent that the goal won't be achieved through negotiation.
It’s important to note that your reputation as a negotiator makes a difference: negotiators with a reputation for being purely distributive have worse outcomes than those who do not have such a reputation.
Integrative or interest-based negotiation
Integrative negotiations – sometimes referred to as “interest-based” negotiations – are the polar opposite of distributive negotiations. In an integrative negotiation, it isn’t about winners and losers – it’s about aligning resources appropriately and creating value. An integrative negotiation is possible when the parties have some shared interests or opportunities to realize mutual gains through concessions across multiple issues. These are the kind of negotiations common between clients, suppliers, and colleagues. In these types of negotiations, it is important to maintain a positive relationship. The element of trust plays an important role in integrative negotiations.
Multi-party negotiations involve three or more parties. These negotiations add layers of complexity which need to be managed skillfully – there are more issues, more perspectives, and more arguments for certain outcomes. In multi-party negotiations, procedures must be established regarding how issues are treated (singly or as bundles), how to make decisions, how to move forward – even how to decide whose turn is it to speak.
Multi-party, multi-issue deliberations tend to involve the formation of coalitions, esp. blocking coalitions. Recognizing the fragility of coalitions is an important aspect of multi-party negotiations.
Practice your negotiation skills
While it’s useful to study different business negotiation strategies, the only way to become a skilled negotiatior is to practice negotiating. The Ivey’ Academy’s Strategic Business Negotiations Program provides you with the tools, templates, and strategies to enter business negotiations with confidence. You’ll be exposed to a wide variety of negotiations, including one-on-one and group-on-group negotiations, negotiations with multi-parties, and one-off and repeated negotiations. It’s more than new knowledge and ideas. You will practice and refine your negotiation skills and receive valuable feedback on your newly-acquired negotiation skills - in an entirely risk-free environment. By rehearsing different negotiation situations, you’ll be prepared for whatever comes your way when you engage in a real negotiation at your workplace.
About The Ivey Academy at Ivey Business School
The Ivey Academy at Ivey Business School is the home for executive Learning and Development (L&D) in Canada. It is Canada’s only full-service L&D house, blending Financial Times top-ranked university-based executive education with talent assessment, instructional design and strategy, and behaviour change sustainment.
Rooted in Ivey Business School’s real-world leadership approach, The Ivey Academy is a place where professionals come to get better, to break old habits and establish new ones, to practice, to change, to obtain coaching and support, and to join a powerful peer network.