Essentials of Negotiation (PDF)

Essentials of Negotiation fourth edition Roy J. Lewicki The Ohio State University Bruce Barry Vanderbilt University David M. Saunders Queen's University Boston Burr Ridge, IL Dubuque, IA Madison, WI New York San Francisco St. Louis Bangkok Bogotá Caracas Kuala Lumpur Lisbon London Madrid Mexico City Milan Montreal New Delhi Santiago Seoul Singapore Sydney Taipei Toronto ESSENTIALS OF NEGOTIATION Published by McGraw-Hill/Irwin, a business unit of The McGraw-Hill Companies, Inc., 1221 Avenue of the Americas, New York, NY, 10020. Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of The McGraw-Hill Companies, Inc., including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning. Some ancillaries, including electronic and print components, may not be available to customers outside the United States. This book is printed on acid-free paper. 1 2 3 4 5 6 7 8 9 0 DOC/DOC 0 9 8 7 6 eISBN: 0-07-738860-7 Editorial director: John E. Biernat Senior sponsoring editor: Ryan Blankenship Editorial coordinator: Allison J. Belda Marketing coordinator: Jared Harless Senior media producer: Damian Moshak Project manager: Kristin Bradley Senior production supervisor: Rose Hepburn Senior designer: Adam Rooke Media project manager: Joyce J. Chappetto Cover design: Jo Anne Schopler Typeface: 10/12 Times Roman Compositor: Techbooks Printer: R. R. Donnelley Library of Congress Cataloging-in-Publication Data Lewicki, Roy J. Essentials of negotiation/Roy J. Lewicki, Bruce Barry, David M. Saunders.–– 4th ed. p. cm. Includes index. ISBN-13: 978-0-07-310276-4 (alk. paper) ISBN-10: 0-07-310276-8 (alk. paper) 1. Negotiation in business. 2. Negotiation. I. Barry, Bruce, 1958-II. Saunders, David M. III. Title. HD58.6.L487 2007 658.4'052–dc22 2006044887 www.mhhe.com We dedicate this book to all negotiation and mediation professionals who try to make the world a better place. About The Authors Roy J. Lewicki is the Dean's Distinguished Teaching Professor and Professor of Management and Human Resources at the Max M. Fisher College of Business, The Ohio State University. He has authored or edited 24 books, as well as numerous research articles. Professor Lewicki has served as the president of the International Association of Conflict Management, and received the first David Bradford Outstanding Educator award from the Organizational Behavior Teaching Society for his contributions to the field of teaching in negotiation and dispute resolution. Bruce Barry is Professor of Management and Sociology at Vanderbilt University. His research on negotiation, influence, power, and justice has appeared in numerous scholarly journals and volumes. Professor Barry is a past president of the International Association for Conflict Management and a past chair of the Academy of Management Conflict Management Division. David M. Saunders is Dean of the School of Business at Queen's University, Canada. He has coauthored several articles on negotiation, conflict resolution, employee voice, and organizational justice. He has taught at Duke University, People's University in Beijing, China, and at McGill University in Montreal and Tokyo. Professor Saunders is currently Chair of the Canadian Federation of Business School Deans, a member of the Board of Directors of AACSB International, and member of the Board of Trustees of the European Foundation for Management Development (efmd). Preface to the Fourth Edition Welcome to the Fourth Edition of Essentials of Negotiation. Again, this book represents our response to many faculty who wanted a brief version of the longer text, Negotiation (Fifth Edition). The objective of this shorter volume is to provide the reader with the core concepts of negotiation in a more succinct version. Many faculty requested such a book for use in shorter academic courses, executive education programs, or as an accompaniment to other resource materials for courses in negotiation, labor relations, conflict management, human resource management, and the like. Overview of This Book The organization of this volume generally follows the more complete Fifth Edition of Negotiation. The fundamental difference between this and the Fifth Edition text is that this book contains only 12 chapters, while the complete Fifth Edition contains 20 chapters. The first four chapters have only been minimally shortened for this volume, because we believe that the content is essential to any negotiation course. (The shortening process includes editing out some of the more research-oriented references and descriptions, deleting many of the boxes and sidebars, and occasionally some secondary sections.) Similarly, the last chapter is reproduced in full. The other seven chapters from Negotiation have been included, but shortened by 25–50 percent each. For the instructor who was not familiar with Essentials (First, Second, and Third Editions) or Negotiation (Fifth or earlier Editions), a brief overview is in order. The first four chapters introduce the reader to “Negotiation Fundamentals.” The first chapter introduces the field of negotiation and conflict management, describes the basic problem of interdependence with other people, and briefly explores the challenges of managing that interdependence. Chapters 2 and 3 then present the two core strategic approaches to negotiation: the basic dynamics of competitive (win-lose) bargaining (Chapter 2) and the basic dynamics of integrative (win-win) negotiation (Chapter 3). Chapter 4 describes the fundamental prework that negotiators must do to get ready for a negotiation: selecting the strategy, framing the issues, defining negotiation objectives, and planning the steps one will pursue to achieve those objectives. The next four chapters describe the fundamental psychological subprocesses of negotiation: perception, cognition, emotion, communication, power, influence, and ethical judgment. In Chapter 5, we review the basic processes of perception, cognition, and emotion in negotiation; we specifically examine common cognitive and judgment biases made by negotiators, and how emotion can affect negotiations. In Chapter 6, we examine communication dynamics. We look at the ways that negotiators communicate their interests, positions, and goals, and how this information is communicated to the other. Chapter 7 focuses on power. We look at the capabilities negotiators can use to muster power to pressure the other side, so as to change his or her perspective or give in to our arguments. In Chapter 8, we examine the ethical standards and criteria that surround negotiation. The effective negotiator must recognize when ethical questions are relevant and what factors must be considered to address them effectively. The next two chapters examine the social contexts in which these negotiations occur, and which also therefore influence how they evolve. In Chapter 9, we examine how the negotiation process changes when the parties have an established relationship with each other, and how the type of relationship affects the negotiation process. We also examine the key roles played by trust, justice, and negotiator reputation in shaping negotiations. In Chapter 10, we look at multiparty negotiations, when multiple individuals must work together as a group, team, or task force to solve a complex problem or make a decision. In Chapter 11, we attempt to clarify how international and cross-cultural differences can shape the diverse ways that parties approach negotiations. Finally in Chapter 12, we present a new concluding chapter, summarizing the book's content and offering ten “best practices” principles for all negotiators. Comparison of This Book to the Third Edition of Essentials In addition to this major chapter organization, which required a more extensive treatment of subjects than in previous editions, there are several other changes worth noting: The physical layout of the book has been improved. We have tried to add more white space, a wider trim size with wider margins, and more readable charts and figures. The content of the book has been revised and updated. Every chapter was reviewed by the authors, based on extensive feedback from faculty who have used the book in previous editions. Many of the chapters have been rewritten to present the material more effectively. In our continued effort to enhance the book's readability, we have also updated and revised many of the boxes and cartoons that offer real-life perspectives on negotiation dynamics. As noted earlier, the structure of this book parallels that of a completely revised readings and classroom activities book, Negotiation: Readings, Exercises and Cases by Lewicki, Barry, and Saunders (Fifth Edition, 2007), also published by McGraw-Hill/Irwin. This text and reader can be used together, or separately. We encourage instructors to contact their local McGraw-Hill/Irwin representative for an examination copy (call 800-634-3963, or visit the Web site at www.mhhe.com). Supplementary Materials A test bank, chapter summaries, and PowerPoint transparencies have been prepared for the Essentials of Negotiation. Instructors should request these materials from a McGraw-Hill/Irwin representative. The CD-ROM also contains a number of instructional tools for the effective organization and instruction of a negotiation course. Appreciation Once again, this book could not have been completed without the assistance of many other people. We would specifically like to thank Steve Stenner, for his excellent work in editing this volume, and revising and compiling the Instructors' Manual CD-ROM. Many of our colleagues in the negotiation and dispute resolution field, whose research efforts have made the growth of this field possible, and who have used earlier edition and told us what they liked and did not like. The staff of McGraw-Hill/Irwin: Publisher John Biernat and Editor Ryan Blankenship, for their ongoing confidence and patience as we completed the works; Allison Belda, Editorial Coordinator, for solving any problem and fixing any disaster; Kristin Bradley Project Manager, for turning a jumble of words into readable text and finding (almost) every spelling and copyediting mistake; Marketing Manager Jared Harless, for continuing to promote the volume; and Joyce Chappetto, for preparing our new supplements. Our families, who continue to provide us with the time and support that we require to finish this project. Thank you one and all! Roy J. Lewicki Bruce Barry David M. Saunders Contents in Brief about the author preface 1. The Nature of Negotiation 2. Strategy and Tactics of Distributive Bargaining 3. Strategy and Tactics of Integrative Negotiation 4. Negotiation: Strategy and Planning 5. Perception, Cognition, and Emotion 6. Communication 7. Finding and Using Negotiation Power 8. Ethics in Negotiation 9. Relationships in Negotiation 10. Multiple Parties and Teams 11. International and Cross-Cultural Negotiation 12. Best Practices in Negotiations Bibliography Index CHAPTER 1 The Nature of Negotiation A Few Words about Our Style and Approach Joe and Sue Carter Characteristics of a Negotiation Situation Interdependence Mutual Adjustment Value Claiming and Value Creation Conflict Effective Conflict Management Summary Overview of the Chapters in This Book “That’s it! I’ve had it! This car is dead!” screamed Chan g Yang, pounding on the steering wheel and kicking the door shut on his 10-year-old Toysun sedan. The car had refused to start again, and Chang was going to be late for class (again)! Chang wasn’t doing well in that management class, and he couldn’t afford to miss any more classes. Recognizing that it was finally time to do something about the car, which had been having numerous mechanical problems for the last three months, Chang decided he would trade the Toysun in for another used car, one that would hopefully get him through graduation. After classes that day, he got a ride to the nearby shopping area, where there were several repair garages and used car lots. He knew almost nothing about cars, and didn’t think he needed to—all he needed was reliable transportation to get him through the next 18 months. A major international airline company is close to bankruptcy. The fear of terrorism, a number of new “budget-fare’’ airlines, and rising costs for fuel have all put the airline under massive economic pressure. The company seeks $800 million in wage and benefit cuts from the pilots’ union, the third round of cuts in two years, in order to head off the bankruptcy. Rebuffed by the chief union negotiator for the pilots, the company seeks to go directly to the officers of the Air Line Pilots Association to discuss the cuts. If the pilots do not agree to concessions, it is unlikely that other unions—flight attendants, mechanics, and so on—will agree, and bankruptcy will be inevitable. Janet and Jocelyn are roommates. They share a one-bedroom apartment in a big city where they are both working. Janet, an accountant, has a solid job with a good company, but she has decided that it is time to go back to school to get her MBA. She has enrolled in Big City University’s evening MBA program and is now taking classes. Jocelyn works for an advertising company and is on the fast track. Her job not only requires a lot of travel, but also requires a lot of time socializing with clients. The problem is that when Janet is not in evening class, she needs the apartment to read and study and has to have quiet to get her work done. However, when Jocelyn is at the apartment, she talks a lot on the phone, brings friends home for dinner, and is either getting ready to go out for the evening or coming back in very late (and noisily!). Janet has had enough of this disruption and is about to confront Jocelyn. Thousands of demonstrators opposed to the policies of a nation’s government seek to protest a national political convention that will nominate the government’s leader to run for reelection. City police forbid protesters from demonstrating near the convention site and authorize a protest location under a crumbling urban expressway, half a mile away from the convention. In response, demonstration organizers request permission to hold a rally in one of the city’s major metropolitan parks. The city attempts to ban the demonstration because that park was recently relandscaped at a major expense to the city, and it fears the mass of demonstrators will ruin the work. Each side attempts negotiation but also pursues complex legal maneuvers to get the courts on their side. In pursuit of Middle East peace and the establishment of a permanent Palestinian state, the leader of the State of Israel declares his intention to withdraw from Gaza. Such withdrawal would mean abandoning Israeli housing settlements that the government has sponsored in the Gaza territory. To accommodate the Israeli settlers now living in these settlements, the government authorizes building new housing sites near Jerusalem, buildings that would encroach on land currently held by Palestinians. Each side accuses the other of bad faith negotiating: The Palestinians say the Israelis are violating a jointly developed, two-year-old “road map for peace,” which specified that existing settlements would not be extended; the Israelis say the continued Palestinian violence and terrorism against Israelis shattered that road map long ago. Terrorism, violence, and settlement construction continue unabated. Ashley Johnson is one of the most qualified recruits this year from a top-25 business school. She is delighted to have secured a second interview with a major consumer goods company, which has invited her to its headquarters city and put her up in a four-star hotel that is world-renowned for its quality facilities and service. After getting in late the night before due to flight delays, she wakes at 7:30 AM to get ready for an 8:00 AM breakfast meeting with the senior company recruiter. She steps in the shower, grabs the water control knob to turn it, and the knob falls off in her hand! There is no water in the shower at all; apparently, repairmen started a repair job on it, turned the water off somewhere, and left the job unfinished. Ashley panics at the thought of how she is going to deal with this crisis and look good for her breakfast meeting in 30 minutes. Do these incidents look and sound familiar? These are all examples of negotiation—negotiations that are about to happen, are in the process of happening, or have happened in the past and created consequences for the present. And they all serve as examples of the problems, issues, and dynamics that we will address throughout this book. People negotiate all the time. Friends negotiate to decide where to have dinner. Children negotiate to decide which television program to watch. Businesses negotiate to purchase materials and to sell their products. Lawyers negotiate to settle legal claims before they go to court. The police negotiate with terrorists to free hostages. Nations negotiate to open their borders to free trade. Negotiation is not a process reserved only for the skilled diplomat, top salesperson, or ardent advocate for an organized lobby; it is something that everyone does, almost daily. Although the stakes are not usually as dramatic as peace accords or large corporate mergers, everyone negotiates; sometimes people negotiate for major things like a new job, other times for relatively minor things, such as who will wash the dishes. Negotiations occur for several reasons: (1) to agree on how to share or divide a limited resource, such as land, or property, or time; (2) to create something new that neither party could do on his or her own, or (3) to resolve a problem or dispute between the parties. Sometimes people fail to negotiate because they do not recognize that they are in a negotiation situation. By choosing options other than negotiation, they may fail to achieve their goals, get what they need, or manage their problems as smoothly as they might like to. People may also recognize the need for negotiation but do poorly because they misunderstand the process and do not have good negotiating skills. After reading this book, we hope you will be thoroughly prepared to recognize negotiation situations; understand how negotiation works; know how to plan, implement, and complete successful negotiations; and, most importantly, be able to maximize your results. A Few Words about Our Style and Approach Before we begin to dissect the complex social process known as negotiation, we need to say several things about how we will approach this subject. First, we will be careful about how we use terminology in this book. For most people, bargaining and negotiation mean the same thing; however, we will be quite distinctive in the way we use the two words. We will use the term bargaining to describe the competitive, win-lose situations such as haggling over price that happens at a yard sale, flea market, or used car lot; we will use the term negotiation to refer to win-win situations such as those that occur when parties are trying to find a mutually acceptable solution to a complex conflict. Second, many people assume that the “heart of negotiation” is the give-and- take process used to reach an agreement. While that give-and-take process is extremely important, negotiation is a very complex social process; many of the most important factors that shape a negotiation result do not occur during the negotiation; they occur before the parties start to negotiate, or shape the context around the negotiation. In the first few chapters of the book, we will examine why people negotiate, the nature of negotiation as a tool for managing conflict, and the primary give-and-take processes by which people try to reach agreement. In the remaining chapters, we examine some of the many ways that the differences in substantive issues, the people involved, the processes they follow, and the context in which negotiation occurs enrich the complexity of the dynamics of negotiation. Third, our insights into negotiation are drawn from three sources. The first is our experience as negotiators ourselves and the rich number of negotiations that occur every day in our own lives and in the lives of people around the world. The second source is the media—television, radio, newspaper, magazine, and Internet—that report on actual negotiations every day. We will use quotes and examples from the media to highlight key points, insights, and applications throughout the book. Finally, the third source is the wealth of social science research that has been conducted on numerous aspects of negotiation. This research has been conducted for over 50 years in the fields of economics, psychology, political science, communication, labor relations, law, sociology, and anthropology. Each discipline approaches negotiation differently. Like the parable of the blind men who are attempting to describe the elephant by touching and feeling different parts of the animal, each social science discipline has its own theory and methods for studying elements of negotiation, and each tends to emphasize some parts and ignore others. Thus, the same negotiation events and outcome may be examined simultaneously from several different perspectives.1 We draw from all these research traditions in our approach to negotiation. When we need to acknowledge the authors of a major theory or set of research findings, we will use an endnote; complete references for that work can be found in the bibliography at the end of the book. We began this chapter with several examples of negotiations—future, present, and past. To further develop the reader’s understanding of the foundations of negotiation, we will develop a story about a husband and wife—Joe and Sue Carter—and a not-so-atypical day in their lives. In this day, they face the challenges of many major and minor negotiations. We will then use that story to highlight three important themes: 1. The definition of negotiation and the basic characteristics of negotiation situations. 2. An understanding of interdependence, the relationship between people and groups that most often leads them to need to negotiate. 3. The definition and exploration of the dynamics of conflict and conflict management processes, which will serve as a backdrop for different ways that people approach and manage negotiations. Joe and Sue Carter The day started early, as usual. Over breakfast, Sue Carter raised the question of where she and her husband, Joe, would go for their summer vacation. She wanted to sign up for a tour of the Far East being sponsored by her college’s alumni association. However, two weeks on a guided tour with a lot of other people he barely knew was not what Joe had in mind. He needed to get away from people, crowds, and schedules, and he wanted to charter a sailboat and cruise the New England coast. The Carters had not argued (yet), but it was clear they had a real problem here. Some of their friends handled problems like this by taking separate vacations. With both of them working full-time, though, Joe and Sue did agree that they would take their vacation together. Moreover, they were still not sure whether their teenage children—Tracy and Ted—would go with them. Tracy really wanted to go to a gymnastics camp, and Ted wanted to stay home and do yard work in the neighborhood so he could get in shape for the football team and buy a motor scooter with his earnings. Joe and Sue couldn’t afford summer camp and a major vacation, let alone deal with the problem of who would keep an eye on the children while they were away. As Joe drove to work, he thought about the vacation problem. What bothered Joe most was that there did not seem to be a good way to manage the conflict productively. With some family conflicts, they could compromise but, given what each wanted this time, a simple compromise didn’t seem obvious. At other times they would flip a coin or take turns—that might work for choosing a restaurant (Joe and Ted like steak houses, Sue and Tracy prefer Chinese), but it seemed unwise in this case because of how much money was involved and how important vacation time was to them. In addition, flipping a coin might make someone feel like a loser, an argument could start, and in the end nobody would really feel satisfied. Walking through the parking lot, Joe met his company’s purchasing manager, Ed Laine. Joe was the head of the engineering design group for MicroWatt, a manufacturer of small electric motors. Ed reminded Joe that they had to settle a problem created by the engineers in Joe’s department: The engineers were contacting vendors directly rather than going through MicroWatt’s purchasing department. Joe knew that purchasing wanted all contacts with a vendor to go through them, but he also knew that his engineers badly needed technical information for design purposes and that waiting for the information to come through purchasing slowed things considerably. Ed Laine was aware of Joe’s views about this problem, and Joe thought the two of them could probably find some way to resolve it if they really sat down to work on it. Joe and Ed were also both aware that upper management expected middle managers to settle differences among themselves; if this problem “went upstairs” to senior management, it would make both of them look bad. Shortly after reaching his desk, Joe received a telephone call from an automobile salesman with whom he had been talking about a new car. The salesman asked whether Sue wanted to test-drive it. Joe wasn’t quite sure that Sue would go along with his choice; Joe had picked out a sporty luxury import, and he expected Sue to say it was too expensive. Joe was pleased with the latest offer the salesman had made on the price but thought he might still get a few more concessions out of him, so he introduced Sue’s likely reluctance about the purchase, hoping that the resistance would put pressure on the salesman to lower the price and make the deal “unbeatable.” As soon as Joe hung up the phone, it rang again. It was Sue, calling to vent her frustration to Joe over some of the procedures at the local bank where she worked as a senior loan officer. Sue was frustrated working for an old “family- run” bank that was not very automated, heavily bureaucratic, and slow to respond to customer needs. Competitor banks were approving certain types of loans within three hours while Sue’s bank still took a week. Sue had just lost landing two big new loans because of the bank’s slowness and bureaucratic procedures, and this was becoming a regular occurrence. But whenever she tried to discuss the situation with the bank’s senior management, she was met with resistance and a lecture on the importance of the bank’s “traditional values.” Most of Joe’s afternoon was taken up by the annual MicroWatt budget planning meeting. Joe hated these meetings. The people from the finance department came in and arbitrarily cut everyone’s figures by 30 percent, and then all the managers had to argue endlessly to try to get some of their new- project money reinstated. Joe had learned to work with a lot of people, some of whom he did not like very much, but these people from finance were the most arrogant and arbitrary number crunchers imaginable. He could not understand why the top brass did not see how much harm these people were doing to the engineering group’s research-and-development efforts. Joe considered himself a reasonable guy, but the way these people acted made him feel like he had to draw the line and fight it out for as long as it took. In the evening, Sue and Joe attended a meeting of their town’s Conservation Commission, which, among other things, was charged with protecting the town’s streams, wetlands, and nature preserves. Sue is a member of the Conservation Commission, and Sue and Joe both strongly believe in sound environmental protection and management. This evening’s case involved a request by a real estate development firm to drain a swampy area and move a small creek to build a new regional shopping mall. All projections showed that the new shopping mall would attract jobs and revenue to the area and considerably increase the town’s treasury. The new mall would keep more business in the community and discourage people from driving 15 miles to the current mall, but opponents—a coalition of local conservationists and businessmen—were concerned that it would significantly hurt the downtown business district and do major harm to the natural wetland and its wildlife. The debate raged for three hours and the commission agreed to continue hearings the following week. As Joe and Sue drove home from the council meeting, they discussed the things they had been involved in that day. Each privately reflected that life is kind of strange—sometimes things go very smoothly and other times things seem much too complicated. As they went to sleep later, they each thought about how they might have approached certain situations differently during the day and were thankful they had a relationship where they could discuss things openly with each other. But they still didn’t know what they were going to do about that vacation. Characteristics of a Negotiation Situation The Joe and Sue Carter story highlights the variety of situations that can be handled by negotiation. Any of us might encounter one or more of these situations over the course of a few days or weeks. Negotiation situations have fundamentally the same characteristics, whether they are peace negotiations between countries at war, business negotiations between buyer and seller or labor and management, or an angry guest trying to figure out how to get a hot shower before a critical interview. Those who have written extensively about negotiation argue that there are several characteristics common to all negotiation situations.2 1. There are two or more parties—that is, two or more individuals, groups, or organizations. Although people can “negotiate” with themselves—as when someone debates whether to spend a Saturday afternoon studying, playing tennis, or going to the football game—we consider negotiation as a process between individuals, within groups, and between groups. In the Carter story, Joe negotiates with his wife, the purchasing manager, and the auto salesman, and Sue negotiates with her husband, the senior management at the bank, and the Conservation Commission, among others. Both still face an upcoming negotiation with the children. 2. There is a conflict of needs and desires between two or more parties—that is, what one wants is not necessarily what the other one wants—and the parties must search for a way to resolve the conflict. Joe and Sue face negotiations over vacations, management of their children, budgets, automobiles, company procedures, and community practices for issuing building permits and preserving natural resources, among others. 3. The parties negotiate by choice! That is, they negotiate because they think they can get a better deal by negotiating than by simply accepting what the other side will voluntarily give them or let them have. Negotiation is largely a voluntary process. We negotiate because we think we can improve our outcome or result, compared with not negotiating or simply accepting what the other side offers. It is a strategy pursued by choice; seldom are we required to negotiate. There are times to negotiate and times not to negotiate (see Box 1.1 for examples of when we should not negotiate). Our experience is that most individuals in Western culture do not negotiate enough—that is, we assume a price or situation is nonnegotiable and don’t even bother to ask or to make a counteroffer! BOX 1.1 When You Shouldn’t Negotiate There are times when you should avoid negotiating. In these situations, stand your ground and you’ll come out ahead. When you’d lose the farm: If you’re in a situation where you could lose everything, choose other options rather than negotiate. When you’re sold out: When you’re running at capacity, don’t deal. Raise your prices instead. When the demands are unethical: Don’t negotiate if your counterpart asks for something you cannot support because it’s illegal, unethical, or morally inappropriate. When your character or your reputation is compromised, you lose in the long run. When you don’t care: If you have no stake in the outcome, don’t negotiate. You have everything to lose and nothing to gain. When you don’t have time: When you’re pressed for time, you may choose not to negotiate. If the time pressure works against you, you’ll make mistakes, and you may fail to consider the implications of your concessions. When under the gun, you’ll settle for less than you could otherwise get. When they act in bad faith: Stop the negotiation when your counterpart shows signs of acting in bad faith. If you can’t trust their negotiating, you can’t trust their agreement. In this case, negotiation is of little or no value. Stick to your guns and cover your position, or discredit them. When waiting would improve your position: Perhaps you’ll have a new technology available soon. Maybe your financial situation will improve. Another opportunity may present itself. If the odds are good that you’ll gain ground with a delay, wait. When you’re not prepared: If you don’t prepare, you’ll think of all your best questions, responses, and concessions on the way home. Gathering your reconnaissance and rehearsing the negotiation will pay off handsomely. If you’re not ready, just say “no.” Source: J. C. Levinson, M. S. A. Smith, and O. R. Wilson, Guerrilla Negotiating: Unconventional Weapons and Tactics to Get What You Want (New York: John Wiley, 1999), pp. 22–23. This material is used by permission of John Wiley & Sons, Inc. 4. When we negotiate we expect a “give-and-take” process that is fundamental to the definition of negotiation itself. We expect that both sides will modify or move away from their opening statements, requests, or demands. Although both parties may at first argue strenuously for what they want—each pushing the other side to move first—ultimately both sides will modify their opening position in order to reach an agreement. This movement may be toward the “middle” of their positions, called a compromise. Truly creative negotiations may not require compromise, however; instead the parties may invent a solution that meets the objectives of all parties. Of course, if the parties do NOT consider it a negotiation, then they don’t necessarily expect to modify their position and engage in this give and take (see Box 1.2). BOX 1.2 Sign in a New York Deli “For those of you who need to haggle over the price of your sandwich, we will gladly raise the price so we can give you a discount!” 5. The parties prefer to negotiate and search for agreement rather than to fight openly, have one side dominate and the other capitulate, permanently break off contact, or take their dispute to a higher authority to resolve it. Negotiation occurs when the parties prefer to invent their own solution for resolving the conflict, when there is no fixed or established set of rules or procedures for how to resolve the conflict, or when they choose to bypass those rules. Organizations and systems invent policies and procedures for addressing and managing those procedures. Video rental stores have a policy for what they should charge if a rental is kept too long. Normally, people just pay the fine. They might be able to negotiate a fee reduction, however, if they have a good excuse for why the video is being returned late. Similarly, attorneys negotiate or plea-bargain for their clients who would rather be assured of a negotiated settlement than take their chances with a judge and jury in the courtroom. Similarly, the courts may prefer to negotiate as well to clear the case off the docket and assure some punishment. In the Carter story, Joe pursues negotiation rather than letting his wife decide where to spend the vacation; pressures the salesman to reduce the price of the car, rather than paying the quoted price; and argues with the finance group about the impact of the budget cuts, rather than simply accepting them without question. Sue uses negotiation to try to change the bank’s loan review procedures rather than accepting the status quo, and she works to change the shopping mall site plan to make conservationists and businesses happy, rather than letting others decide it or watch it go to court. 6. Successful negotiation involves the management of tangibles (e.g., the price or the terms of agreement) and also the resolution of intangibles. Intangible factors are the underlying psychological motivations that may directly or indirectly influence the parties during a negotiation. Some examples of intangibles are (1) the need to “win,” beat the other party, or avoid losing to the other party; (2) the need to look “good,” “competent,” or “tough” to the people you represent; (3) the need to defend an important principle or precedent in a negotiation; and (4) the need to appear “fair,” or “honorable” or to protect one’s reputation. Intangibles are often rooted in personal values and emotions. Intangible factors can have an enormous influence on negotiation processes and outcomes; it is almost impossible to ignore intangibles because they affect our judgment about what is fair, or right, or appropriate in the resolution of the tangibles. For example, Joe may not want to make Ed Laine angry about the purchasing problem because he needs Ed’s support in the upcoming budget negotiations, but Joe also doesn’t want to lose face to his engineers, who expect him to support them. Thus, for Joe, the important intangibles are preserving his relationship with Ed Laine and looking “tough” to his engineers. Interdependence One of the key characteristics of a negotiation situation is that the parties need each other in order to achieve their preferred objectives or outcomes. That is, either they must coordinate with each other to achieve their own objectives, or they choose to work together because the possible outcome is better than they can achieve by working on their own. When the parties depend on each other to achieve their own preferred outcome they are interdependent. Most relationships between parties may be characterized in one of three ways: independent, dependent, or interdependent. Independent parties are able to meet their own needs without the help and assistance of others; they can be relatively detached, indifferent, and uninvolved with others. Dependent parties must rely on others for what they need; since they need the help, benevolence, or cooperation of the other, the dependent party must accept and accommodate to that provider’s whims and idiosyncrasies. For example, if an employee is totally dependent on an employer for a job and salary, the employee will have to either do the job as instructed and accept the pay offered, or do without. Interdependent parties, however, are characterized by interlocking goals—the parties need each other in order to accomplish their objectives. For instance, in a project management team, no single person could complete a complex project alone; the time limit is usually too short, and no individual has all the skills or knowledge to complete it. For the group to accomplish its goals, each person needs to rely on the other project team members to contribute their time, knowledge, and resources and to synchronize their efforts. Note that having interdependent goals does not mean that everyone wants or needs exactly the same thing. Different project team members may need different things, but they must work together for each to accomplish their goals. This mix of convergent and conflicting goals characterizes many interdependent relationships. Types of Interdependence Affect Outcomes The interdependence of people’s goals, and the structure of the situation in which they are going to negotiate, strongly shapes negotiation processes and outcomes. When the goals of two or more people are interconnected so that only one can achieve the goal—such as running a race in which there will be only one winner—this is a competitive situation, also known as a zero-sum, or distributive, situation, in which “individuals are so linked together that there is a negative correlation between their goal attainments.”3 Zero-sum, or distributive, situations are also present when parties are attempting to divide a limited or scarce resource, such as a pot of money, a fixed block of time, and the like. To the degree that one person achieves his or her goal, the other’s goal attainment is blocked. In contrast, when parties’ goals are linked so that one person’s goal achievement helps others to achieve their goals, it is a mutual-gains situation, also known as a non-zero-sum or integrative situation, where there is a positive correlation between the goal attainments of both parties. If one person is a great music composer and the other is a great writer of lyrics, they can create a wonderful Broadway musical hit together. The music and words may be good separately, but fantastic together. To the degree that one person achieves his or her goal, the other’s goals are not necessarily blocked, and may in fact be significantly enhanced. The strategy and tactics that accompany each type of situation are discussed further in the section “Value Claiming and Value Creation” and in Chapters 2 and 3. BOX 1.3 The Used Car “Hey, Paul, would you come on over to my place a little before three?” Orlo asked his neighbor during a phone call. “I’ve got someone coming over to look at the old Cadillac, and I need some competition... just act interested.” When the prospect showed up, he saw two men poking around under the hood. Orlo greeted him, and introduced him to Paul who glanced up and grunted. After a quick tour of the car, the prospect was obviously interested. “You mind if I take it for a spin?” he ventured. Orlo looked at Paul. Paul shrugged his shoulders, “Sure. Remember, I was here first.” The prospect returned, impressed with the roominess and comfortable ride. “OK, how much do you want?” Orlo quoted the price listed in the newspaper, and Paul objected, “Hey!” The prospect stuck out his hand. “I’ll take it!” Orlo looked sheepishly at Paul and shook the now-buyer’s hand. After the new owner left, Paul said, “I can’t believe that he paid you that much for that old car!” Source: Leigh Steinberg, Winning with Integrity (New York: Random House, 1998), p. 47. Alternatives Shape Interdependence We noted at the beginning of this section that parties choose to work together because the possible outcome is better than what may occur if they do not work together. Evaluating interdependence therefore also depends heavily on the desirability of alternatives to working together. Roger Fisher, William Ury, and Bruce Patton, in their popular book Getting to Yes: Negotiating Agreement without Giving In, stress that “whether you should or should not agree on something in a negotiation depends entirely upon the attractiveness to you of the best available alternative.”4 They call this alternative a BATNA (Best Alternative to a Negotiated Agreement) and suggest that negotiators need to understand their own BATNA and the other party’s BATNA. The value of a person’s BATNA is always relative to the possible settlements available in the current negotiation. A BATNA may offer independence, dependence, or interdependence with someone else. A student who is a month away from graduation and has only one job offer at a salary far lower than he hoped has the choice of accepting that job offer or unemployment; there is little chance that he is going to influence the company to pay him much more than their starting offer. A student who has two offers has a choice between two future interdependent relationships; not only does he have a choice, but he can probably use each job offer to attempt to improve the agreement by playing the employers off against each other. Remember that every possible interdependency has an alternative; negotiators can always say “no” and walk away, although the alternative might not be a very good one. See Box 1.3 for a lesson on how one party manipulates the perception of his possible BATNA to get the other to agree. We will further discuss the role and use of BATNAs in Chapters 2, 3, 4, and 7. Mutual Adjustment When parties are interdependent, they have to find a way to resolve their differences. Both parties can influence the other’s outcomes and decisions, and their own outcomes and decisions can be influenced by the other.5 This mutual adjustment continues throughout the negotiation as both parties act to influence the other.6 It is important to recognize that negotiation is a process that transforms over time, and mutual adjustment is one of the key causes of the changes that occur during a negotiation.7 Let us return to Sue Carter’s job in the small community bank. Rather than continuing to have her loans be approved late, which means she loses the loan and doesn’t qualify for bonus pay, Sue is thinking about leaving the small bank and taking a job with Intergalactic Bank in the next city. Her prospective manager, Max, thinks Sue is a desirable candidate for the position and is ready to offer her the job. Max and Sue are now attempting to establish Sue’s salary. The job description announced the salary as “competitive.” After talking with her husband Joe and looking at statistics on bank loan officers’ pay in the state, Sue identified a salary below which she will not work ($50,000) and hopes she might get considerably more. But because Intergalactic Bank has lots of job applicants and is a very desirable employer in the area, Sue has decided not to state her minimally acceptable salary; she suspects that the bank will pay no more than necessary and that her minimum would be accepted quickly. Moreover, she knows that it would be difficult to raise the level if it should turn out that $50,000 was considerably below what Max would pay. Sue has thought of stating her ideal salary ($65,000), but she suspects that Max will view her as either presumptuous or rude for requesting that much. Max might refuse to hire her, or even if they agreed on salary, Max would have formed an impression of Sue as a person with an inflated sense of her own worth and capabilities. Let’s take a closer look at what is happening here. Sue is making her decision about an opening salary request based in part on what bank loan officers are paid in the area, but also very much on how she anticipates Max will react to her actions. Sue recognizes that her actions will affect Max. Sue also recognizes that the way Max acts toward her in the future will be influenced by the way her actions affect him now. As a result, Sue is assessing the indirect impact of her behavior on herself. Further, she also knows that Max is probably alert to this and will look upon any statement by Sue as reflecting a preliminary position on salary rather than a final one. To counter this expected view, Sue will try to find some way to state a proposed salary that is higher than her minimum, but lower than her “dream” salary offer. Sue is choosing among opening requests with a thought not only to how they will affect Max but also to how they will lead Max to act toward Sue. Further, Sue knows that Max believes she will act in this way and makes her decision on the basis of this belief. The reader may wonder if people really pay attention to all these layers of nuance and complexity or plot in such detail about their negotiation with others. Certainly people don’t do this most of the time, or they would likely be frozen in inactivity while they tried to puzzle through all the possibilities. However, this level of thinking can help anticipate the possible ways negotiations might move as the parties move, in some form of mutual adjustment, toward agreement. The effective negotiator needs to understand how people will adjust and readjust, and how the negotiations might twist and turn, based on one’s own moves and the others’ responses. It might seem that the best strategy for successful mutual adjustment to the other is grounded in the assumption that the more information one has about the other person, the better. There is the possibility, however, that too much knowledge only confuses.8 For example, suppose Sue knows the average salary ranges for clerical, supervisory, and managerial positions for banks in her state and region. Does all this information help Sue determine her actions or does it only confuse things? In fact, even with all of this additional information, Sue may still not have reached a decision about what salary she should be paid, other than a minimum figure below which she will not go. This state of affairs is typical to many negotiations. Both parties have defined their outer limits for an acceptable settlement (how high or low they are willing to go), but within that range, neither has determined what the preferred number should be. The parties need to exchange information, attempt to influence each other, and problem solve. They must work toward a solution that takes into account each person’s requirements and, hopefully, optimize the outcomes for both.9 Mutual Adjustment and Concession Making Negotiations often begin with statements of opening positions. Each party states its most preferred settlement proposal, hoping that the other side will simply accept it, but not really believing that a simple “yes” will be forthcoming from the other side (remember our key definitional element of negotiation as the expectation of give-and-take). If the proposal isn’t readily accepted by the other, negotiators begin to defend their own initial proposals and critique the others’ proposals. Each party’s rejoinder usually suggests alterations to the other party’s proposal and perhaps also contains changes to his or her own position. When one party agrees to make a change in his or her position, a concession has been made.10 Concessions restrict the range of options within which a solution or agreement will be reached; when a party makes a concession, the bargaining range (the difference between the preferred acceptable settlements) is further constrained. For instance, Sue would like to get a starting salary of $65,000, but she scales her request down to $60,000, thereby eliminating all possible salary options above $60,000. Before making any concessions to a salary below $60,000, Sue probably will want to see some willingness on the part of the bank to improve their salary offer. Two Dilemmas in Mutual Adjustment Deciding how to use concessions as signals to the other side and attempting to read the signals in the other’s concessions are not easy tasks, especially when there is little trust between negotiators. Two of the dilemmas that all negotiators face, identified by Harold Kelley,11 help explain why this is the case. The first dilemma, the dilemma of honesty, concerns how much of the truth to tell the other party. (The ethical considerations of these dilemmas are discussed in Chapter 9.) On the one hand, telling the other party everything about your situation may give that person the opportunity to take advantage of you. On the other hand, not telling the other person anything about your needs and desires may lead to a stalemate. Just how much of the truth should you tell the other party? If Sue told Max that she would work for as little as $50,000 but would like to start at $60,000, it is quite possible that Max would hire her for $50,000 and allocate the extra money that he might have paid her elsewhere in the budget.12 If, however, Sue did not tell Max any information about her salary aspirations, then Max would have a difficult time knowing Sue’s aspirations and what she would consider an attractive offer. BOX 1.4 The Importance of Aligning Perceptions Having information about your negotiation partner’s perceptions is an important element of negotiation success. When your expectations of a negotiated outcome are based on faulty information, it is likely that the other party will not take you seriously. Take, for example, the following story told to one of the authors: At the end of a job interview, the recruiter asked the enthusiastic MBA student, “And what starting salary were you looking for?” The MBA candidate replied, “I would like to start in the neighborhood of $125,000 per year, depending on your benefits package.” The recruiter said, “Well, what would you say to a package of five weeks’ vacation, 14 paid holidays, full medical and dental coverage, company matching retirement fund up to 50 percent of your salary, and a new company car leased for your use every two years … say, a red Corvette?” The MBA sat up straight and said, “Wow! Are you kidding?” “Of course,” said the recruiter. “But you started it.” Kelley’s second dilemma is the dilemma of trust: how much should negotiators believe what the other party tells them? If you believe everything the other party says, then he or she could take advantage of you. If you believe nothing that the other party says, then you will have a great deal of difficulty in reaching an agreement. How much you should trust the other party depends on many factors, including the reputation of the other party, how he or she treated you in the past, and a clear understanding of the pressures on the other in the present circumstances. If Max told Sue that $52,000 was the maximum he was allowed to pay her for the job without seeking approval “from above,” should Sue believe him or not? As you can see, sharing and clarifying information is not as easy as it first appears. The search for an optimal solution through the processes of giving information and making concessions is greatly aided by trust and a belief that you’re being treated honestly and fairly. Two efforts in negotiation help to create such trust and beliefs—one is based on perceptions of outcomes and the other on perceptions of the process. Outcome perceptions can be shaped by managing how the receiver views the proposed result. If Max convinces Sue that a lower salary for the job is relatively unimportant given the high potential for promotion associated with the position, then Sue may feel more comfortable accepting a lower salary. Perceptions of the trustworthiness and credibility of the process can be enhanced by conveying images that signal fairness and reciprocity in proposals and concessions (see Box 1.4). When one party makes several proposals that are rejected by the other party and the other party offers no proposal, the first party may feel improperly treated and may break off negotiations. When people make a concession, they trust the other party and the process far more if a concession is returned. In fact, the belief that concessions will occur in negotiations appears to be almost universal. During training seminars, we have asked negotiators from more than 50 countries if they expect give-and-take to occur during negotiations in their culture; all have said they do. This pattern of give-and-take is not just a characteristic of negotiation; it is also essential to joint problem solving in most interdependent relationships.13 Satisfaction with negotiation is as much determined by the process through which an agreement is reached as with the actual outcome obtained. To eliminate or even deliberately attempt to reduce this give-and-take—as some legal and labor–management negotiating strategies have attempted14—is to short-circuit the process, and it may destroy both the basis for trust and any possibility of achieving a mutually satisfactory result. Value Claiming and Value Creation Earlier, we identified two types of interdependent situations—zero-sum and non- zero-sum. Zero-sum, or distributive, situations are ones where there can be only one winner or where the parties are attempting to get the larger share or piece of a fixed resource, such as an amount of raw material, money, time, and the like. In contrast, non-zero-sum, or integrative or mutual gains, situations are ones where many people can achieve their goals and objectives. The structure of the interdependence shapes the strategies and tactics that negotiators employ. In distributive situations negotiators are motivated to win the competition and beat the other party or to gain the largest piece of the fixed resource that they can. In order to achieve these objectives, negotiators usually employ win-lose strategies and tactics. This approach to negotiation—called distributive bargaining—accepts the fact that there can only be one winner given the situation and pursues a course of action to be that winner. The purpose of the negotiation is to claim value—that is, to do whatever is necessary to claim the reward, gain the lion’s share, or gain the largest piece possible.15 An example of this type of negotiation is purchasing a used car or buying a used refrigerator at a yard sale. We fully explore the strategy and tactics of distributive bargaining, or processes of claiming value, in Chapter 2, and some of the less ethical tactics that can accompany this process in Chapter 9. In contrast, in integrative situations the negotiators should employ win-win strategies and tactics. This approach to negotiation—called integrative negotiation—attempts to find solutions so both parties can do well and achieve their goals. The purpose of the negotiation is to create value—that is, to find a way for all parties to meet their objectives, either by identifying more resources or finding unique ways to share and coordinate the use of existing resources. An example of this type of negotiation might be planning a wedding so that the bride, groom, and both families are happy and satisfied, and the guests have a wonderful time. We fully explore the strategy and tactics of integrative, value creating negotiations in Chapter 3. It would be simple and elegant if we could classify all negotiation problems into one of these two types and indicate which strategy and tactics are appropriate for each problem. Unfortunately, most actual negotiations are a combination of claiming and creating value processes. The implications for this are significant: 1. Negotiators must be able to recognize situations that require more of one approach than the other: those that require predominantly distributive strategy and tactics, and those that require integrative strategy and tactics. Generally, distributive bargaining is most appropriate when time and resources are limited, when the other is likely to be competitive, and when there is no likelihood of future interaction with the other party. Every other situation should be approached with an integrative strategy. 2. Negotiators must be versatile in their comfort and use of both major strategic approaches. Not only must negotiators be able to recognize which strategy is most appropriate, but they must be able to use both approaches with equal versatility. There is no single “best,” “preferred,” or “right” way to negotiate; the choice of negotiation strategy requires adaptation to the situation, as we will explain more fully in the next section on conflict. Moreover, if most negotiation issues or problems have components of both claiming and creating values, then negotiators must be able to use both approaches in the same deliberation. 3. Negotiator perceptions of situations tend to be biased toward seeing problems as more distributive/competitive than they really are. Accurately perceiving the nature of the interdependence between the parties is critical for successful negotiation. Unfortunately, most negotiators do not accurately perceive these situations. People bring baggage with them to a negotiation: past experience, personality, moods, habits, and beliefs about how to negotiate. These elements dramatically shape how people perceive an interdependent situation, and these perceptions have a strong effect on the subsequent negotiation. Moreover, research has shown that people are prone to several systematic biases in the way they perceive and judge interdependent situations. While we discuss these biases extensively in Chapter 5, the important point here is that the predominant bias is to see interdependent situations as more distributive or competitive than they really are. As a result, there is a tendency to assume a negotiation problem is more zero-sum than it may be and to overuse distributive strategies for solving the problem. As a consequence, negotiators often leave unclaimed value at the end of their negotiations because they failed to recognize opportunities for creating value. The tendency for negotiators to see the world as more competitive and distributive than it is, and to underuse integrative, creating-value processes, suggests that many negotiations yield suboptimal outcomes. At the most fundamental level, successful coordination of interdependence has the potential to lead to synergy, which is the notion that “the whole is greater than the sum of its parts.” There are numerous examples of synergy. In the business world, many research-and-development joint ventures are designed to bring together experts from different industries, disciplines, or problem orientations to maximize their innovative potential beyond what each company can do individually. Examples abound of new technologies in the areas of medicine, communication, computing, and the like. In these situations, interdependence was created between two or more of the parties, and the creators of these enterprises, who successfully applied the negotiation skills discussed throughout this book, enhanced the potential for successful value creation. Value may be created in numerous ways, and the heart of the process lies in exploiting the differences that exist between the negotiators.16 The key differences among negotiators include these: Differences in interests. Negotiators seldom value all items in a negotiation equally. For instance, in discussing a compensation package, a company may be more willing to concede on a signing bonus than on salary because the bonus occurs only in the first year, while salary is a permanent expense. An advertising company may be quite willing to bend on creative control of a project, but very protective of control over advertising placement. Finding compatibility in different interests is often the key to unlocking the puzzle of value creation. Differences in judgments about the future. People differ in their evaluation of what something is worth or the future value of an item. For instance, is that piece of swamp land a good or bad investment of your hard-earned income? Some people can imagine the future house site and swimming pool, whereas others will see it as a bug-infested flood control problem. Real estate developers work hard to identify properties where they see future potential that current owners fail to recognize. Differences in risk tolerance. People differ in the amount of risk they are comfortable assuming. A young, single-income family with three children can sustain less risk than a mature, dual-income couple without children. A company with a cash flow problem can assume less risk of expanding its operations than one that is cash rich. Differences in time preference. Negotiators frequently differ in how time affects them. One negotiator may want to realize gains now while the other may be happy to defer gains into the future; one needs a quick settlement while the other has no need for any change in the status quo. Differences in time preferences have the potential to create value in a negotiation. For instance, a car salesman may want to close a deal by the end of the week in order to be eligible for a special company bonus, while the potential buyer intends to trade his car in “sometime in the next six months”. In summary, while value is often created by exploiting common interests, differences can also serve as the basis for creating value. The heart of negotiation is exploring both common and different interests to create this value and employing such interests as the foundation for a strong and lasting agreement. Differences can be seen as insurmountable, however, and in that case serve as barriers to reaching agreement. As a result, negotiators must also learn to manage conflict effectively in order to manage their differences while searching for ways to maximize their joint value. Managing conflict is the focus of the next section. Conflict A potential consequence of interdependent relationships is conflict. Conflict can result from the strongly divergent needs of the two parties or from misperceptions and misunderstandings. Conflict can occur when the two parties are working toward the same goal and generally want the same outcome or when both parties want very different outcomes. Regardless of the cause of the conflict, negotiation can play an important role in resolving it effectively. In this section, we will define conflict, discuss the different levels of conflict that can occur, review the functions and dysfunctions of conflict, and discuss strategies for managing conflict effectively. Definitions Conflict may be defined as a “sharp disagreement or opposition, as of interests, ideas, etc.” and includes “the perceived divergence of interest, or a belief that the parties’ current aspirations cannot be achieved simultaneously.”17 Conflict results from “the interaction of interdependent people who perceived incompatible goals and interference from each other in achieving those goals.”18 Levels of Conflict One way to understand conflict is to distinguish it by level. Four levels of conflict are commonly identified: 1. Intrapersonal or intrapsychic conflict. These conflicts occur within an individual. Sources of conflict can include ideas, thoughts, emotions, values, predispositions, or drives that are in conflict with each other. We want an ice cream cone badly, but we know that ice cream is very fattening. We are angry at our boss, but we’re afraid to express that anger because the boss might fire us for being insubordinate. The dynamics of intrapsychic conflict are traditionally studied by various subfields of psychology: cognitive psychologists, personality theorists, clinical psychologists, and psychiatrists. Although we will occasionally delve into the internal psychological dynamics of negotiators (e.g., in Chapter 5), this book generally doesn’t address intrapersonal conflict. 2. Interpersonal conflict. A second major level of conflict is between individuals. Interpersonal conflict occurs between workers, spouses, siblings, roommates, or neighbors. Most of the negotiation theory in this book is drawn from studies of interpersonal negotiation and directly addresses the management and resolution of interpersonal conflict. 3. Intragroup conflict. A third major level of conflict is within a group— among team and work group members and within families, classes, living units, and tribes. At the intragroup level, we analyze conflict as it affects the ability of the group to make decisions, work productively, resolve its differences, and continue to achieve its goals effectively. 4. Intergroup conflict. The final level of conflict is intergroup—between organizations, ethnic groups, warring nations, or feuding families or within splintered, fragmented communities. At this level, conflict is quite intricate because of the large number of people involved and the multitudinous ways they can interact with each other. Negotiations at this level are also the most complex. Functions and Dysfunctions of Conflict Most people initially believe that conflict is bad or dysfunctional. This belief has two aspects: first, that conflict is an indication that something is wrong, broken, or dysfunctional, and, second, that conflict creates largely destructive consequences. Deutsch and others19 have elaborated on many of the elements that contribute to conflict’s destructive image: 1. Competitive, win-lose goals. Parties compete against each other because they believe that their interdependence is such that goals are in opposition and both cannot simultaneously achieve their objectives. Competitive goals lead to competitive processes to obtain those goals.20 2. Misperception and bias. As conflict intensifies, perceptions become distorted. People come to view things consistently with their own perspective of the conflict. Hence, they tend to interpret people and events as being either with them or against them. In addition, thinking tends to become stereotypical and biased—parties endorse people and events that support their position and reject outright those who oppose them. 3. Emotionality. Conflicts tend to become emotionally charged as the parties become anxious, irritated, annoyed, angry, or frustrated. Emotions overwhelm clear thinking, and the parties may become increasingly irrational as the conflict escalates. 4. Decreased communication. Productive communication declines with conflict. Parties communicate less with those who disagree with them and more with those who agree. The communication that does occur is often an attempt to defeat, demean, or debunk the other’s view or to strengthen one’s own prior arguments. 5. Blurred issues. The central issues in the dispute become blurred and less well defined. Generalizations abound. The conflict becomes a vortex that sucks in unrelated issues and innocent bystanders. The parties become less clear about how the dispute started, what it is “really about,” or what it will take to solve it. 6. Rigid commitments. The parties become locked into positions. As the other side challenges them, parties become more committed to their points of view and less willing to back down from them for fear of losing face and looking foolish. Thinking processes become rigid, and the parties tend to see issues as simple and “either/or” rather than as complex and multidimensional. 7. Magnified differences, minimized similarities. As parties lock into commitments and issues become blurred, they tend to see each other— and each other’s positions—as polar opposites. Factors that distinguish and separate them from each other become highlighted and emphasized, while similarities that they share become oversimplified and minimized. This distortion leads the parties to believe they are further apart from each other than they really may be, and hence they may work less hard to find common ground. 8. Escalation of the conflict. As the conflict progresses, each side becomes more entrenched in its own view, less tolerant and accepting of the other, more defensive and less communicative, and more emotional. The net result is that both parties attempt to win by increasing their commitment to their position, increasing the resources they are willing to spend to win, and increasing their tenacity in holding their ground under pressure. Both sides believe that by adding more pressure (resources, commitment, enthusiasm, energy, etc.), they can force the other to capitulate and admit defeat. As most destructive conflicts reveal, however, nothing could be further from the truth! Escalation of the conflict level and commitment to winning can increase so high that the parties will destroy their ability to resolve the conflict or ever be able to deal with each other again. These are the processes that are commonly associated with escalating, polarized, “intractable” conflict (see also “Managing Negotiation Impasses,” on the Web site for this text). However, conflict also has many productive aspects.21 Figure 1.1 outlines some productive aspects of conflict. From this perspective, conflict is not simply destructive or productive; it is both. The objective is not to eliminate conflict but to learn how to manage it to control the destructive elements while enjoying the productive aspects. Negotiation is a strategy for productively managing conflict. Factors That Make Conflict Easy or Difficult to Manage Figure 1.2 presents a conflict diagnostic model. This model offers some useful dimensions for analyzing any dispute and determining how easy or difficult it will be to resolve. Conflicts with more of the characteristics in the “difficult to resolve” column will be harder to settle, while those that have more characteristics in the “easy to resolve” column will be settled quicker. FIGURE 1.1 Functions and Benefits of Conflict FIGURE 1.2 Conflict Diagnostic Model Effective Conflict Management Many frameworks for managing conflict have been suggested, and inventories have been constructed to measure negotiator tendencies to use these approaches.22 Each approach begins with a similar two-dimensional framework and then applies different labels and descriptions to five key points. We will describe these points using the framework proposed by Dean Pruitt, Jeffrey Rubin, and S. H. Kim.23 The two-dimensional framework presented in Figure 1.3 is called the dual concerns model. The model postulates that people in conflict have two independent types of concern: concern about their own outcomes (shown on the horizontal dimension of the figure) and concern about the other’s outcomes (shown on the vertical dimension of the figure). These concerns can be represented at any point from none (representing very low concern) to high (representing very high concern). The vertical dimension is often referred to as the cooperativeness dimension, and the horizontal dimension as the assertiveness dimension. The stronger their concern for their own outcomes, the more likely people will be to pursue strategies located on the right side of the figure, whereas the weaker their concern for their own outcomes, the more likely they will be to pursue strategies located on the left side of the figure. Similarly, the stronger their concern for permitting, encouraging, or even helping the other party achieve his or her outcomes, the more likely people will be to pursue strategies located at the top of the figure. The weaker their concern for the other party’s outcomes, the more likely they will be to pursue strategies located at the bottom of the figure. Although we can theoretically identify an almost infinite number of points within the two-dimensional space based on the level of concern for pursuing one’s own and the other’s outcomes, five major strategies for conflict management have been commonly identified in the dual concerns model: FIGURE 1.3 The Dual Concerns Model 1. Contending (also called competing or dominating) is the strategy in the lower right-hand corner. Actors pursuing the contending strategy pursue their own outcomes strongly and show little concern for whether the other party obtains his or her desired outcomes. As Pruitt and Rubin (1986) state, “[P]arties who employ this strategy maintain their own aspirations and try to persuade the other party to yield” (p. 28). Threats, punishment, intimidation, and unilateral action are consistent with a contending approach. 2. Yielding (also called accommodating or obliging) is the strategy in the upper left-hand corner. Actors pursuing the yielding strategy show little interest or concern in whether they attain their own outcomes, but they are quite interested in whether the other party attains his or her outcomes. Yielding involves lowering one’s own aspirations to “let the other win” and gain what he or she wants (see cartoon). Yielding may seem like a strange strategy to some, but it has its definite advantages in some situations. 3. Inaction (also called avoiding) is the strategy in the lower left-hand corner. Actors pursuing the inaction strategy show little interest in whether they attain their own outcomes, as well as little concern about whether the other party obtains his or her outcomes. Inaction is often synonymous with withdrawal or passivity; the party prefers to retreat, be silent, or do nothing. © 2002 The New Yorker Collection from cartoonbank.com. All Rights Reserved. 4. Problem solving (also called collaborating or integrating) is the strategy in the upper right-hand corner. Actors pursuing the problem-solving strategy show high concern for attaining their own outcomes and high concern for whether the other party attains his or her outcomes. In problem solving, the two parties actively pursue approaches to maximize their joint outcome from the conflict. 5. Compromising is the strategy located in the middle of Figure 1.3. As a conflict management strategy, it represents a moderate effort to pursue one’s own outcomes and a moderate effort to help the other party achieve his or her outcomes. Pruitt and Rubin do not identify compromising as a viable strategy; they see it “as arising from one of two sources—either lazy problem solving involving a half-hearted attempt to satisfy the two parties’ interests, or simple yielding by both parties.”24 However, because other scholars who use versions of this model (see endnote 25) believe that compromising represents a valid strategic approach to conflict, we have inserted it in Pruitt, Rubin, and Kim’s framework in Figure 1.3. Much of the early writing about conflict management strategies—particularly the work in the 1960s and 1970s—had a strong normative value bias against conflict and toward cooperation.25 Although the models suggested the viability of all five strategic approaches to managing conflict, problem solving was identified as the distinctly preferred approach. These writings stressed the virtues of problem solving, advocated using it, and described how it could be pursued in almost any conflict. However, more recent writing, although still strongly committed to problem solving, has been careful to stress that each conflict management strategy has its advantages and disadvantages and can be more or less appropriate to use given the type of interdependence and conflict context (see Figure 1.4). Summary In this chapter, we have set the groundwork for a thorough and detailed examination of the negotiation process. We began with examples—examples from the news of events around the world and examples from our everyday experience. We used these examples to introduce the variety of negotiations that occur daily and to discuss how we will present material in this book. We then turned to the extended example of a day in the life of Joe and Sue Carter and showed how negotiations permeate daily experience. We also used this example to help define the key parameters of a negotiation situation. Our definition and these examples lead us to explore four key elements of the negotiation process: managing interdependence, engaging in mutual adjustment, creating or claiming value, and managing conflict. Each of these elements is foundational to understanding how negotiation works. Managing interdependence is about the parties understanding the ways they are dependent on each other for attaining their goals and objectives. Mutual adjustment introduces the ways parties begin to set goals for themselves in a negotiation and adjust to goals stated by the other party in order to emerge with an agreement that is satisfactory to both. Claiming and creating value are the processes by which parties handle negotiation opportunities to share or “win” a scarce resource or to enhance the resource so both sides can gain. Finally, managing conflict helps negotiators understand how conflict is functional and dysfunctional. It involves some basic strategies to maximize the benefits of conflict and limit its costs. FIGURE 1.4 Styles of Handling Interpersonal Conflict and Situations Where They Are Appropriate or Inappropriate These four processes are central to any negotiation, and they serve as the foundation for our expanded treatment of this subject. In the remainder of this chapter, we provide an overview of our broader approach by introducing the overall organization and chapters in the book. Overview of the Chapters in This Book Each chapter in this book can be related to the introductory examples we used at the beginning of the chapter. The book is organized into 12 chapters. The first four chapters address the fundamentals of negotiation. In addition to this first overview chapter, Chapters 2 and 3 explore the basic strategy and tactics of distributive bargaining and integrative negotiation. Chapter 4 explores how parties can plan and prepare a negotiation strategy and effectively anticipate their encounter with the other negotiator. The next four chapters explore critical negotiation subprocesses. In Chapter 5, we discuss how a negotiator’s perceptions, cognitions, and emotions tend to shape (and often bias) the way the negotiator views and interprets bargaining interaction. Chapter 6 examines the processes by which negotiators effectively communicate their interests, positions, and goals, and make sense of the other party’s communications. Chapter 7 focuses on power in negotiation; the chapter begins by defining the nature of power, and discussing some of the dynamics of using it in negotiation, followed by an exploration of the key sources of power available to most negotiators. (on the text’s Web site, the section entitled “Influence” examines the way negotiators actually exert influence—how they use the tools of communication and power to bring about desired attitude and behavior changes in the other party.) Finally, in Chapter 8, we discuss whether there are, or should be, accepted ethical standards to guide negotiations. We identify the major ethical dimensions raised in negotiation, describe the ways negotiators tend to think about these choices, and provide a framework for making informed ethical decisions. Much of our discussion thus far assumes that the negotiation parties do not have an established long-term relationship. Chapter 9 looks at the way that established relationships impact current negotiations, and considers three major concerns–– reputations, trust, and fairness—that are particularly critical to effective negotiations within a relationship. In Chapter 10, we examine how negotiations change when there are multiple parties at the table—such as negotiating within groups and teams—attempting to achieve a collective agreement or group consensus. In Chapter 11, we examine how different languages and national culture changes the “ground rules” of negotiation. This chapter discusses some of the factors that make international negotiation different, and how national culture affects the rhythm and flow of negotiation. In (the Web site section entitled “Managing Negotiation Impasses,” we examine ways that parties can deal with failures to complete negotiations successfully. We address situations where negotiations become especially difficult, often to the point of impasse, stalemate, or breakdown. We explore the fundamental mistakes that often create these impasses, and discuss strategies that negotiators can use to get things back on track.) Finally, in Chapter 12, we reflect on negotiation at a broad level. We look back at the broad perspective we have provided, and suggest 10 best practices for those who wish to continue to improve their negotiation skills. Endnotes 1. Hochberg and Kressel, 1996; Oliver, Balakrishnan, and Barry, 1994; Olekalns, Smith, and Walsh, 1996; Weiss, 1997. 2. See Lewicki, 1992; Rubin and Brown, 1975. 3. Deutsch, 1962, p. 176. 4. Fisher, Ury, and Patton, 1991. 5. Goffman, 1969; Pruitt and Rubin, 1986; Raven and Rubin, 1973; Ritov, 1996. 6. Alexander, Schul, and Babakus, 1991; Donohue and Roberto, 1996; Eyuboglu and Buja, 1993; Pinkley and Northcraft, 1994. 7. Gray, 1994; Kolb, 1985; Kolb and Putnam, 1997. 8. Beisecker, Walker, and Bart, 1989; Raven and Rubin, 1973. 9. Fisher, Ury, and Patton, 1991; Follett, 1940; Nash, 1950; Sebenius, 1992; Sen, 1970; Walton and McKersie, 1965. 10. Pruitt, 1981. 11. Kelley, 1966. 12. We are not suggesting that Max should do this; rather, because the long-term relationship is important in this situation, Max should ensure that both parties’ needs are met. see Chapter 3 for an expanded discussion of this point. 13. Kimmel, Pruitt, Magenau, Konar-Goldband, and Carnevale, 1980; Putnam and Jones, 1982; Weingart, Thompson, Bazerman, and Carroll, 1990. 14. Raiffa, 1982; Selekman, Fuller, Kennedy, and Baitsel, 1964. 15. Lax and Sebenius, 1986. 16. Ibid. 17. Pruitt and Rubin, 1986, p. 4. 18. Hocker and Wilmot, 1985. 19. Deutsch, 1973. 20. As mentioned earlier, however, the goals may not actually be in opposition, and the parties need not compete. Perception is more determinant than reality. 21. Coser, 1956; Deutsch, 1973. 22. Filley, 1975; Hall, 1969; Rahim, 1983, 1992; Thomas, 1992; Thomas and Kilmann, 1974. 23. Pruitt, Rubin, and Kim, 1994. 24. Ibid. 25. Lewicki, Weiss, and Lewin, 1992. CHAPTER 2 Strategy and Tactics of Distributive Bargaining The Distributive Bargaining Situation Fundamental Strategies Tactical Tasks Positions Taken during Negotiation Closing the Deal Hardball Tactics Chapter Summary Eighteen months ago Larry decided to move closer to where he works. Following this decision to move, he put his condo on the market and started to look for a new one—but with no results. Fourteen months later, Larry finally received an offer to buy his condo and, after a brief negotiation, settled on the selling price. Because he had not yet found a condo to buy, he postponed closing the sale for six months to give himself additional time to look. The buyer, Barbara, was not happy about having to wait that long because of the inconvenience and the difficulty of getting a bank to guarantee an interest rate for a loan so far in advance. Larry adjusted the price so Barbara would accept this postponement, but it was clear that she would be much happier if he could move the date closer. There were relatively few condos on the market in the area where Larry wanted to live, and none of them was satisfactory. He jokingly said that unless something new came on the market, he would be sleeping in a tent on the town common when the leaves turned in the fall. Two months later a condo came on the market that met his requirements. The seller, Megan, set the asking price at $145,000, which was $10,000 above what Larry hoped to pay but $5,000 below the most he would be willing to pay. Larry knew that the more he paid for the condo, the less he would have to make some very desirable alterations, buy draperies and some new furniture, and hire a moving company. This illustration provides the basic elements of a distributive bargaining situation. It is also called competitive, or win-lose, bargaining. In a distributive bargaining situation, the goals of one party are usually in fundamental and direct conflict with the goals of the other party. Resources are fixed and limited, and both parties want to maximize their share. As a result, each party will use a set of strategies to maximize his or her share of the outcomes to be obtained. One important strategy is to guard information carefully—one party tries to give information to the other party only when it provides a strategic advantage. Meanwhile, it is highly desirable to get information from the other party to improve negotiation power. Distributive bargaining is basically a competition over who is going to get the most of a limited resource, which is often money. Whether or not one or both parties achieve their objectives will depend on the strategies and tactics they employ.1 For many, the strategies and tactics of distributive bargaining are what negotiation is all about. Images come to mind of smoke-filled rooms packed with men arguing and fighting for their points of view. Many people are attracted to this view of negotiation and look forward to learning and sharpening an array of hard-bargaining skills; others are repelled by distributive bargaining and would rather walk away than negotiate this way. They argue that distributive bargaining is old-fashioned, needlessly confrontational, and destructive. There are three reasons that every negotiator should be familiar with distributive bargaining. First, negotiators face some interdependent situations that are distributive, and to do well in them they need to understand how they work. Second, because many people use distributive bargaining strategies and tactics almost exclusively, all negotiators need to understand how to counter their effects. Third, every negotiation situation has the potential to require distributive bargaining skills when at the “claiming value” stage.2 Understanding distributive strategies and tactics is important and useful, but negotiators need to recognize that these tactics can also be counterproductive and costly. Often they cause the negotiating parties to focus so much on their differences that they ignore what they have in common.3 These negative effects notwithstanding, distributive bargaining strategies and tactics are quite useful when a negotiator wants to maximize the value obtained in a single deal, when the relationship with the other party is not important, and when they are at the claiming value stage of negotiations. Some of the tactics discussed in this chapter will also generate ethical concerns.4 Do not assume that the other party shares your ethical values when negotiating. While you may not believe that it is ethical to use some of the tactics discussed in this chapter, other negotiators will be quite comfortable using them. Alternatively, you may be comfortable using some tactics that make other negotiators uneasy. Some of the tactics discussed are commonly accepted as ethical when bargaining distributively (portraying your best alternative deal as more positive than it really is, for instance), whereas other tactics are generally considered unacceptable (see the discussion of typical hardball tactics later in this chapter). The discussion of strategies and tactics in this chapter is intended to help negotiators understand the dynamics of distributive bargaining and thereby obtain a better deal. A thorough understanding of these concepts will also allow negotiators who are by nature not comfortable with distributive bargaining to manage distributive situations proactively. Finally, an understanding of these strategies and tactics will help negotiators at the claiming value stage of any negotiation. The Distributive Bargaining Situation To describe how the distributive bargaining process works, we will return to our opening example of Larry’s condo purchase. Several prices were mentioned: (1) Megan’s asking price, (2) the price Larry would like to pay for a condo, and (3) the price above which Larry would not buy the condo. These prices represent key points in the analysis of any distributive bargaining situation. Larry’s preferred price is the target point, the point at which a negotiator would like to conclude negotiations—his optimal goal. The target is also sometimes referred to as a negotiator’s aspiration. The price beyond which Larry will not go is the resistance point, a negotiator’s bottom line—the most he will pay as a buyer (for a seller, it’s the smallest amount she will settle for). It is also sometimes referred to as a reservation price. Finally, the asking price is the initial price set by the seller; Larry might decide to counter Megan’s asking price with his initial offer —the first number he will quote to the seller. Using the condo purchase as an example, we can treat the range of possible prices as a continuum (see Figure 2.1). FIGURE 2.1 The Buyer’s View of the House Negotiation How does Larry decide on his initial offer? There are many ways to answer this question. Fundamentally, however, to make a good initial offer Larry must understand something about the process of negotiation. In Chapter 1, we discussed how people expect give-and-take when they negotiate, and Larry needs to factor this into his initial offer. If Larry opened the negotiation at his target point ($135,000) and then had to make a concession, this first concession would have him moving away from his target point to a price closer to his resistance point. If he really wants to achieve his target, he should make an initial offer that is lower than his target point to create some room for making concessions. At the same time, the starting point cannot be too far from the target point. If Larry made the first offer too low (e.g., $100,000), Megan might break off negotiations, believing him to be unreasonable or foolish. Although judgments about how to determine first offers can often be quite complex and can have a dramatic influence on the course of negotiation, let us stay with the simple case for the moment and assume that Larry decided to offer $133,000 as a reasonable first offer—less than his target point and well below his resistance point. In the meantime, remember that although this illustration concerns only price, all other issues or agenda items for the negotiation have starting, target, and resistance points. Both parties to a negotiation should establish their starting, target, and resistance points before beginning a negotiation. Starting points are often in the opening statements each party makes (i.e., the seller’s listing price and the buyer’s first offer). The target point is usually learned or inferred as negotiations get under way. People typically give up the margin between their starting points and target points as they make concessions. The resistance point, the point beyond which a person will not go and would rather break off negotiations, is not known to the other party and should be kept secret.5 One party may not learn the other’s resistance point even after the end of a successful negotiation. After an unsuccessful negotiation, one party may infer that the other’s resistance point was near the last offer the other was willing to consider before the negotiation ended. DILBERT ©UFS. Reprinted by permission. FIGURE 2.2 The Buyer’s View of the House Negotiation (Extended) The parties’ starting and resistance points are usually arranged in reverse order, with the resistance point being a high price for the buyer and a low price for the seller. Thus, continuing the illustration, Larry would have been willing to pay up to $150,000 for the condo Megan listed at $145,000. Larry can speculate that Megan may be willing to accept something less than $145,000 and might well regard $140,000 as a desirable figure. What Larry does not know (but would dearly like to) is the lowest figure that Megan would accept. Is it $140,000? $135,000? Larry assumes it is $130,000. Megan, for her part, initially knows nothing about Larry’s position but soon learns his starting point when he offers $133,000. Megan may suspect that Larry’s target point is not too far away (in fact it is $135,000, but Megan doesn’t know this) but has no idea of his resistance point ($150,000). This information—what Larry knows or infers about Megan’s positions—is represented in Figure 2.2. The spread between the resistance points, called the bargaining range, settlement range, or zone of potential agreement, is particularly important. In this area the actual bargaining takes place, for anything outside these points will be summarily rejected by one of the two negotiators. When the buyer’s resistance point is above the seller’s—he is minimally willing to pay more than she is minimally willing to sell for, as is true in the condo example—there is a positive bargaining range. When the reverse is true—the seller’s resistance point is above the buyer’s, and the buyer won’t pay more than the seller will minimally accept—there is a negative bargaining range. In the condo example, if Megan would minimally accept $145,000 and Larry would maximally pay $140,000, then a negative bargaining range would exist. Negotiations that begin with a negative bargaining range are likely to stalemate. They can be resolved only if one or both parties are persuaded to change their resistance points or if someone else forces a solution upon them that one or both parties dislike. However, because negotiators don’t begin their deliberations by talking about their resistance points (they’re discussing initial offers and demands instead), it is often difficult to know whether a p

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