Integrative Negotiation
Monday, November 25, 2013
Picture the following: It's time to buy a new car, and you're in the showroom at a local dealer.
You're interested in a car priced at $19,000, with an initial payment of 20%, and the rest as an interest-free loan over three years.
You think you can get a better price, but the salesperson isn't prepared to lower it.
So, how can you get a better overall price for yourself while also making your offer more attractive to the dealer?
You think of another option and say to the salesperson, "I like the car, but I want to change the deal to something that's more beneficial to both of us. For your price of $19,000, I'd like you to include three years of free servicing. If you do that, I'll pay you 50% of the price up front, and the rest over just two years."
This is an example of integrative negotiation. The situation has changed from a "win-lose" (a dollar you win is a dollar they lose, and vice versa) to a "win-win" (a better dollar deal for both parties).
In effect, you move toward a deal that makes the "negotiating pie" bigger, rather than continue to fight over how to cut up the existing "pie." The car dealer makes a sale with better cash flow, which outweighs the cost of servicing. And you get your car with a lower total cost of ownership because three years of servicing, which you'll need anyway, will be free.
What is Integrative Negotiation?
An easy way to define integrative negotiation is to compare it with its counterpart, distributive negotiation . Distributive negotiation is what people traditionally consider negotiation to be: both sides fight over the price of a fixed package of goods or services, and they try to hide their real positions and objectives in order to gain an advantage.
In contrast, integrative negotiation uses more creative thinking. Instead of assuming that someone has to lose, you find ways for everyone to win. Integrative negotiation emphasizes building a good relationship in order to increase the chances of everyone getting what they want, rather than playing games and trying to fool the other side to win at their expense.
When is it a Good Choice?
Both integrative and distributive negotiation have their place, and it's quite possible for all parties negotiating in either style to be satisfied with the final outcome. Knowing which one to use depends on two main things: whether you're likely to meet the other party again in another round of negotiation; and how far you, or the person you're negotiating with, can come up with creative solutions to the problem you're facing.
If the current negotiating session is the only time you'll ever deal with the other party, and if there's little or no chance for a creative deal, distributive negotiation may be best. For example, if you're selling your house, then fighting for every dollar may be justifiable. You don't need to maintain a relationship with the buyer for the future, and you're selling something that's precisely defined (except, perhaps, for a few light fixtures or repairs).
However, if you think you might need to deal with the other party again, then building a constructive relationship can be to your advantage. Here, it can be a smart move to encourage everyone to use integrative negotiation to work toward a win-win solution.
In the final analysis, there will probably always be some distributive bargaining in the process, because even after you've made the pie bigger with integrative negotiation, you still need to share the pie.
Integrative Negotiation Techniques
There are several ways to go about the "creating" part of a deal, before you move on to the "claiming" phase that involves distributive bargaining. You can use more than one in any specific negotiation.
Expand the pie – Add to the package of goods and services, or restructure the payment, so that all parties can achieve their objectives. This happened in our car purchase example.
Find new solutions – Restate the problem to invent new options that meet each party's needs. In terms of car sales, this is what dealers are doing when they offer financing packages as an alternative to full payment up front.
Trade favors – Split the primary issue to achieve a "highly preferred solution" on one issue for one party, and another "highly preferred solution" on another issue for the other party. For example, your partner and you need to buy one car, but you each have different selection criteria. You settle on advantageous purchase terms (you really like to get a bargain), with top safety ratings (your partner's key issue), and you both accept more modest performance and more limited luggage space.
Match compensation – One party can compensate the other for accepting the first party's preferences, according to the perceived value of the inconvenience or disadvantage. Let's look at our car example. In return for the dealer accepting your request for free servicing (a small cost to the dealer), you compensate the dealer by paying more money up front and improving the dealer's cash flow.
Lower the cost of compliance – Minimize the costs and inconvenience to one party. For example, the dealer could offer to buy your old car to save you the trouble of trying to sell it.
Tip:
Before you make your proposals to the other party, think about how acceptable your proposals are likely to be to them. With good preparation, your proposals are more likely to be well-received, keeping the negotiation process moving forward smoothly.
Avoiding Potential Problems
There are various challenges in using integrative negotiation well.
Negotiators who have a distributive negotiating background sometimes tend to be concerned exclusively with their own needs. They have to overcome this, and they also need to handle the nagging fear that the other parties are manipulating the situation to their own advantage.
Another issue is that it's human nature to consider our own preferences to be "right" and the different preferences of other people to be "wrong". And as a result, we can end up mistakenly "attack the person" when we should be "attacking the problem".
With good communication that encourages openness and makes the problem less personal, you can reduce, or even prevent, these difficulties.
Tip:
Integrative negotiation doesn't always involve money. For example, it can be used for two people in an office who can't agree on whether to open or close the window. At this level, any decision is likely to leave one of the two people dissatisfied. However, when the people discuss their real interests, they discover that one person wants some fresh air, while the other wants to avoid air blowing directly into the room. The integrative solution is to redefine the problem and find a win-win solution: open a window in the room next door to get fresh air with no draft.
Key Points
Integrative negotiation's win-win approach often makes it more suitable in situations where you'll have an ongoing relationship with the other party, or where you're able to develop creative solutions to a problem.
It requires a different attitude from the win-lose basis of distributive negotiation. People using it need to take the time and make the effort needed to develop creative solutions to a problem, and need to explore one another's wants sufficiently well to find a solution that's mutually acceptable.
Tags:
Communication, Communication Skills, Skills
You're interested in a car priced at $19,000, with an initial payment of 20%, and the rest as an interest-free loan over three years.
You think you can get a better price, but the salesperson isn't prepared to lower it.
So, how can you get a better overall price for yourself while also making your offer more attractive to the dealer?
You think of another option and say to the salesperson, "I like the car, but I want to change the deal to something that's more beneficial to both of us. For your price of $19,000, I'd like you to include three years of free servicing. If you do that, I'll pay you 50% of the price up front, and the rest over just two years."
This is an example of integrative negotiation. The situation has changed from a "win-lose" (a dollar you win is a dollar they lose, and vice versa) to a "win-win" (a better dollar deal for both parties).
In effect, you move toward a deal that makes the "negotiating pie" bigger, rather than continue to fight over how to cut up the existing "pie." The car dealer makes a sale with better cash flow, which outweighs the cost of servicing. And you get your car with a lower total cost of ownership because three years of servicing, which you'll need anyway, will be free.
What is Integrative Negotiation?
An easy way to define integrative negotiation is to compare it with its counterpart, distributive negotiation . Distributive negotiation is what people traditionally consider negotiation to be: both sides fight over the price of a fixed package of goods or services, and they try to hide their real positions and objectives in order to gain an advantage.
In contrast, integrative negotiation uses more creative thinking. Instead of assuming that someone has to lose, you find ways for everyone to win. Integrative negotiation emphasizes building a good relationship in order to increase the chances of everyone getting what they want, rather than playing games and trying to fool the other side to win at their expense.
When is it a Good Choice?
Both integrative and distributive negotiation have their place, and it's quite possible for all parties negotiating in either style to be satisfied with the final outcome. Knowing which one to use depends on two main things: whether you're likely to meet the other party again in another round of negotiation; and how far you, or the person you're negotiating with, can come up with creative solutions to the problem you're facing.
If the current negotiating session is the only time you'll ever deal with the other party, and if there's little or no chance for a creative deal, distributive negotiation may be best. For example, if you're selling your house, then fighting for every dollar may be justifiable. You don't need to maintain a relationship with the buyer for the future, and you're selling something that's precisely defined (except, perhaps, for a few light fixtures or repairs).
However, if you think you might need to deal with the other party again, then building a constructive relationship can be to your advantage. Here, it can be a smart move to encourage everyone to use integrative negotiation to work toward a win-win solution.
In the final analysis, there will probably always be some distributive bargaining in the process, because even after you've made the pie bigger with integrative negotiation, you still need to share the pie.
Integrative Negotiation Techniques
There are several ways to go about the "creating" part of a deal, before you move on to the "claiming" phase that involves distributive bargaining. You can use more than one in any specific negotiation.
Expand the pie – Add to the package of goods and services, or restructure the payment, so that all parties can achieve their objectives. This happened in our car purchase example.
Find new solutions – Restate the problem to invent new options that meet each party's needs. In terms of car sales, this is what dealers are doing when they offer financing packages as an alternative to full payment up front.
Trade favors – Split the primary issue to achieve a "highly preferred solution" on one issue for one party, and another "highly preferred solution" on another issue for the other party. For example, your partner and you need to buy one car, but you each have different selection criteria. You settle on advantageous purchase terms (you really like to get a bargain), with top safety ratings (your partner's key issue), and you both accept more modest performance and more limited luggage space.
Match compensation – One party can compensate the other for accepting the first party's preferences, according to the perceived value of the inconvenience or disadvantage. Let's look at our car example. In return for the dealer accepting your request for free servicing (a small cost to the dealer), you compensate the dealer by paying more money up front and improving the dealer's cash flow.
Lower the cost of compliance – Minimize the costs and inconvenience to one party. For example, the dealer could offer to buy your old car to save you the trouble of trying to sell it.
Tip:
Before you make your proposals to the other party, think about how acceptable your proposals are likely to be to them. With good preparation, your proposals are more likely to be well-received, keeping the negotiation process moving forward smoothly.
Avoiding Potential Problems
There are various challenges in using integrative negotiation well.
Negotiators who have a distributive negotiating background sometimes tend to be concerned exclusively with their own needs. They have to overcome this, and they also need to handle the nagging fear that the other parties are manipulating the situation to their own advantage.
Another issue is that it's human nature to consider our own preferences to be "right" and the different preferences of other people to be "wrong". And as a result, we can end up mistakenly "attack the person" when we should be "attacking the problem".
With good communication that encourages openness and makes the problem less personal, you can reduce, or even prevent, these difficulties.
Tip:
Integrative negotiation doesn't always involve money. For example, it can be used for two people in an office who can't agree on whether to open or close the window. At this level, any decision is likely to leave one of the two people dissatisfied. However, when the people discuss their real interests, they discover that one person wants some fresh air, while the other wants to avoid air blowing directly into the room. The integrative solution is to redefine the problem and find a win-win solution: open a window in the room next door to get fresh air with no draft.
Key Points
Integrative negotiation's win-win approach often makes it more suitable in situations where you'll have an ongoing relationship with the other party, or where you're able to develop creative solutions to a problem.
It requires a different attitude from the win-lose basis of distributive negotiation. People using it need to take the time and make the effort needed to develop creative solutions to a problem, and need to explore one another's wants sufficiently well to find a solution that's mutually acceptable.
