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S I X T H E D I T I O N

R O Y J . L E W I C K I B R U C E B A R R Y D AV I D M . S A U N D E R S

NEGOTIATION Essentials of

Essentials of Negotiation

Sixth edition

Roy J. Lewicki The Ohio State University

Bruce Barry Vanderbilt University

David M. Saunders Queen’s University

ESSENTIALS OF NEGOTIATION: SIXTH EDITION

Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright © 2016 by

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Library of Congress Cataloging-in-Publication Data

Lewicki, Roy J.

Essentials of negotiation / Roy J. Lewicki, The Ohio State University,

Bruce Barry, Vanderbilt University David M. Saunders, Queen’s University. —

Sixth Edition.

pages cm

ISBN 978-0-07-786246-6 (alk. paper)

1. Negotiation in business. 2. Negotiation. I. Barry, Bruce, 1958- II.

Saunders, David M. III. Title.

HD58.6.L487 2015

658.4’052—dc2 2014041287

The Internet addresses listed in the text were accurate at the time of publication. The inclusion of a website

does not indicate an endorsement by the authors or McGraw-Hill Education, and McGraw-Hill Education

does not guarantee the accuracy of the information presented at these sites.

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iii

Dedication

We dedicate this book to all negotiation, mediation, and dispute resolution professionals who try to make the world a more peaceful and prosperous place.

And to John W. Minton (1946–2007): friend, colleague, and co-author.

iv Contents

iv

About the Authors

Roy J. Lewicki is the Irving Abramowitz Memorial Professor of Business Ethics Emer- itus and Professor of Management and Human Resources Emeritus at the Max M. Fisher

College of Business, The Ohio State University. He has authored or edited 36 books, as

well as numerous research articles and book chapters. Professor Lewicki has served as the

president of the International Association for Conflict Management, and he received its

Lifetime Achievement Award in 2013. He received the Academy of Management’s Distin-

guished Educator Award in 2005 and was recognized as a Fellow of the Organizational

Behavior Teaching Society for his contributions to the field of teaching in negotiation and

dispute resolution.

Bruce Barry is the Brownlee O. Currey Jr. Professor of Management at the Owen Graduate School of Management at Vanderbilt University. His research on negotiation,

ethics, power, influence, 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. He is associate editor of the scholarly journal Business Ethics Quarterly and sits on the editorial boards of several others.

David M. Saunders has served as Dean of Queen’s School of Business (QSB) since July 2003. Under Professor Saunders’s strategic leadership, the School has experienced

dramatic growth, including the addition of new and innovative MBA, professional mas-

ters, and executive education programs. To keep pace with this growth, he oversaw a sig-

nificant expansion to Goodes Hall, the home of the School of Business, which opened in

2012. In support of QSB’s mission to develop outstanding leaders with a global perspec-

tive, Professor Saunders has internationalized the School, adding 80 strategic partnerships

with business schools around the globe. Professor Saunders is Chair of the EQUIS Award-

ing Body, the accreditation arm of the European Foundation for Management Develop-

ment, and sits on the board of CEIBS, the China Europe International Business School.

Contents v

v

Preface

Welcome to the sixth edition of Essentials of Negotiation! Again, this book represents our response to many faculty who wanted a brief version of the longer text. Negotiation (Seventh Edition). The objective of this shorter version is to provide the reader with the core concepts

of negotiation in a more succinct presentation. Many faculty requested such a book for use in

shorter academic course, executive education programs, or as a companion to other resource

materials. It is suitable 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 Seventh Edition of

Negotiation. The fundamental difference between this and the Seventh Edition text is that this book contains only 12 chapters, while the complete Seventh 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 edit-

ing 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 is not familiar with Essentials (the first five editions) or Negotia- tion (Seventh or earlier editions), a brief overview is in order. The first five 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) negotia-

tion (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. In Chapter 5, 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 three chapters describe the fundamental psychological subprocesses of negotia-

tion: perception, cognition, and emotion; communication; and power. In Chapter 6, we review

the basic processes of perception, cognition, and emotion in negotiation, we specifically ex-

amine common cognitive and judgment biases made by negotiators, and how emotion can

affect negotiations. In Chapter 7, 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 8 focuses on power. We look at the capabilities negotia-

tors can muster power to pressure the other side, so as to change his or her perspective or give

in to our arguments.

vi Preface

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 Fifth Edition of Essentials

• All of this book has been revised and updated. The authors reviewed every chap-

ter, utilizing extensive feedback from faculty who have used the book in previous

editions. The content in some of the chapters has been reorganized to present the

material more effectively.

• The Ethics chapter was moved into the “fundamentals” section as Chapter 5.

• We have further improved the graphics format and page layout of the book to make it

visually more interesting and readable.

• We have added learning objectives to the beginning of each chapter.

• The new structure of this book will be paralleled by a major revision to our readings

and classroom activities book. Negotiation: Readings, Exercises, and Cases, Seventh Edition, edited by Roy Lewicki, Bruce Barry, and David Saunders to appear in 2015.

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 (or call

800-634-3963, or visit the Web site at www.mhhe.com).

• Instructional resources, including a test bank, chapter outlines, PowerPoint slides,

and extensive assistance on ways that new instructors can improve their teaching of

negotiation skills, are available to accompany this volume. Instructors should contact

their McGraw-Hill/Irwin representative.

Connect Plus Management

Less Managing. More Teaching. Greater Learning.

Connect® Management is McGraw-Hill’s web-based assignment and assessment platform that

connects you and your students to the coursework. Students apply what they’ve learned and

receive immediate feedback. Instructors can customize these activities and monitor student

progress. Connect Management for Essentials of Negotiation includes:

Preface vii

Simple Assignment Management and Grading

With Connect Management, creating assignments is easier than ever, so you can spend more

time teaching and less time managing. The assignment management function enables you to:

• Create and deliver assignments easily with selectable Test Bank items.

• Streamline lesson planning, student progress reporting, and assignment grading to

make classroom management more efficient than ever.

• Go paperless with the eBook and online submission and grading of student

assignments.

New! LearnSmart and SmartBookTM

LearnSmart is an adaptive study tool proven to strengthen memory recall, increase class re-

tention, and boost grades. Students are able to study more efficiently because they are made

aware of what they know and don’t know. Real-time reports quickly identify the concepts that

require more attention from individual students—or the entire class. SmartBook is the first

and only adaptive reading experience designed to change the way students read and learn.

It creates a personalized reading experience by highlighting the most impactful concepts a

student needs to learn at that moment in time. As a student engages with SmartBook, the read-

ing experience continuously adapts by highlighting content based on what the student knows

and doesn’t know. This ensures that the focus is on the content he or she needs to learn, while

simultaneously promoting long-term retention of material. Use SmartBook’s real-time reports

to quickly identify the concepts that require more attention from individual students—or the

entire class. The end result? Students are more engaged with course content, can better priori-

tize their time, and come to class ready to participate.

Instructor Library

The Connect Management Instructor Library is your repository for additional resources to im-

prove student engagement in and out of class. You can select and use any asset that enhances

your lecture. The Connect Management Instructor Library includes:

• The Instructor’s Manual: Each chapter includes an overview, learning objectives, chapter outline, and summary.

• Test Bank: Includes more than 700 questions and consists of fill in the blank, true/ false, multiple choice, and short-answer questions.

• PowerPoint: Contains figures and tables from the text plus additional graphic material.

• Web Links: Offers additional links for more information on negotiation.

Support Materials

Instructional resources—including a test bank, chapter outlines, PowerPoint slides, and ex-

tensive resource materials on teaching negotiation skills for new instructors—are available

to accompany this volume on the text-specific website, www.mhhe.com/lewickinegotiation

viii Preface

Using Create, McGraw-Hill’s custom publishing service, instruc- tors can build a text tailored to individual course needs incorporating materials from the three

texts in this series. Create allows instructors to customize teaching resources to match the way they teach! With McGraw-Hill Create, www.mcgrawhillcreate.com, you can easily re- arrange chapters; combine material from other content sources; and quickly upload content

you have written, like your course syllabus or teaching notes. Find the content you need in

Create by searching through thousands of leading McGraw-Hill textbooks. Arrange your book to fit your teaching style. Create even allows you to personalize your book’s appearance by selecting the cover and adding your name, school, and course information. Order a Create book and you’ll receive a complimentary print review copy in three to five business days or

a complimentary electronic review copy (eComp) via e-mail in about one hour. Go to www. mcgrawhillcreate.com today and register. Experience how McGraw-Hill Create empowers you to teach your students your way.

Introducing McGraw-Hill CreateTM ExpressBooks! ExpressBooks contain a combination of preselected chapters, articles, cases, or readings that serve as a starting point to help you

quickly and easily build your own text through McGraw-Hill’s self-service custom publishing

website, Create. These helpful templates are built using content available on Create and orga- nized in ways that match various course outlines across all disciplines. We understand that you

have a unique perspective. Use McGraw-Hill Create ExpressBooks to build the book you’ve only imagined! www.mcgrawhillcreate.com Instructors should also note that the authors and McGraw-Hill have partnered with

ExpertNegotiator.com. ExpertNegotiator is a set of online tools that serve both student and instructor. Students are provided with a structured negotiation preparation template, keyed

to the terminology used in the Lewicki et al. texts, to more thoroughly prepare for negoti-

ation simulations. Instructors can use the software as a course management system to pair

students for role-plays (including all role-plays in the companion volume, Negotiation Read- ings, Exercises, and Cases, 7th Edition), collect and distribute role information, and provide students with feedback on their negotiation plans. Students access the software by purchas-

ing it as a package price with any of the Lewicki et al. texts. For more information, contact

the local McGraw-Hill Education representative, and explore the power of the software at

www. ExpertNegotiator.com.

Appreciation

Once again, this book could not have been completed without the assistance of numerous

people. We especially thank

• 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

given us helpful feedback about earlier editions to improve the content of this

edition.

• The following individuals who reviewed the text and offered their helpful feedback.

• The work of John Minton, who helped shape the second, third, and fourth editions of

this book and passed away in the Fall of 2007.

• The excellent editorial assistance of Steve Stenner, specifically for his help on copy-

editing, permissions, and bibliography and for refining the test bank and PowerPoint

slides.

• The Staff of McGraw-Hill/Education, especially lead product developer Laura Spell,

senior product developer Laura Griffin, and product developer Heather Darr; director

of management and organizational behavior Michael Ablassmeir; and marketing staff

Elizabeth Trepkowski and Liz Steiner.

• Our families, who continue to provide us with the time, inspiration, and opportunities

for continued learning about effective negotiation and the personal support required

to sustain this project.

Roy J. Lewicki Bruce Barry David M. Saunders

Preface ix

x Contents

x

1. The Nature of Negotiation 1

2. Strategy and Tactics of Distributive Bargaining 28

3. Strategy and Tactics of Integrative Negotiation 60

4. Negotiation: Strategy and Planning 89

5. Ethics in Negotiation 114

6. Perception, Cognition, and Emotion 139

7. Communication 165

8. Finding and Using Negotiation Power 182

9. Relationships in Negotiation 203

10. Multiple Parties, Groups, and Teams in Negotiation 220

11. International and Cross-Cultural Negotiation 242

12. Best Practices in Negotiations 273

Bibliography 283

Index 307

Contents in Brief

Contents xi

xi

Contents

Chapter 1

The Nature of Negotiation 1

A Few Words about Our Style and Approach 3

Joe and Sue Carter 4

Characteristics of a Negotiation Situation 6

Interdependence 10

Types of Interdependence Affect Outcomes 10

Alternatives Shape Interdependence 12

Mutual Adjustment 12

Mutual Adjustment and Concession Making 14

Two Dilemmas in Mutual Adjustment 14

Value Claiming and Value Creation 15

Conflict 18

Definitions 18

Levels of Conflict 19

Functions and Dysfunctions of Conflict 19

Factors That Make Conflict Easy or Difficult to Manage 21

Effective Conflict Management 21

Overview of the Chapters in This Book 25

Endnotes 27

Chapter 2

Strategy and Tactics of Distributive Bargaining 28

The Distributive Bargaining Situation 29

The Role of Alternatives to a Negotiated Agreement 32

Settlement Point 33

Discovering the Other Party’s Resistance Point 33

Influencing the Other Party’s Resistance Point 34

Tactical Tasks 36

Assess the Other Party’s Target, Resistance Point, and Costs of Terminating Negotiations 36

Manage the Other Party’s Impressions 38

Modify the Other Party’s Perceptions 40

Manipulate the Actual Costs of Delay or Termination 41

Positions Taken during Negotiation 42

Opening Offers 43

Opening Stance 44

Initial Concessions 44

Role of Concessions 45

Pattern of Concession Making 47

Final Offers 48

Closing the Deal 49

Provide Alternatives 49

Assume the Close 49

Split the Difference 49

Exploding Offers 50

Sweeteners 50

Hardball Tactics 50

Dealing with Typical Hardball Tactics 51

Typical Hardball Tactics 52

Chapter Summary 58

Endnotes 58

Chapter 3

Strategy and Tactics of Integrative Negotiation 60

An Overview of the Integrative Negotiation Process 60

Creating a Free Flow of Information 61

Attempting to Understand the Other Negotiator’s Real Needs and Objectives 62

xii Contents

Emphasizing the Commonalities between the Parties and Minimizing the Differences 62

Searching for Solutions That Meet the Needs and Objectives of Both Sides 63

Key Steps in the Integrative Negotiation Process 63

Step 1: Identify and Define the Problem 64

Step 2: Surface Interests and Needs 67

Step 3: Generate Alternative Solutions 70

Step 4: Evaluate and Select Alternatives 76

Factors That Facilitate Successful Integrative Negotiation 80

Some Common Objective or Goal 81

Faith in One’s Problem-Solving Ability 81

A Belief in the Validity of One’s Own Position and the Other’s Perspective 82

The Motivation and Commitment to Work Together 82

Trust 83

Clear and Accurate Communication 85

An Understanding of the Dynamics of Integrative Negotiation 86

Chapter Summary 86

Endnotes 87

Chapter 4

Negotiation: Strategy and Planning 89

Goals—The Focus That Drives a Negotiation Strategy 90

Direct Effects of Goals on Choice of Strategy 90

Indirect Effects of Goals on Choice of Strategy 91

Strategy versus Tactics 92

Accommodation, Competition, and Collaboration 92

Getting Ready to Implement the Strategy: The Planning Process 93

1. Defining the Negotiating Goal 97

2. Defining the Major Issue Related to Achieving the Goal 97

3. Assembling the Issues, Ranking Their Importance, and Defining the Bargaining Mix 99

4. Defining the Interests 100

5. Knowing Your Alternatives (BATNAs) 101

6. Knowing Your Limits, Including a Resistance Point 101

7. Analyzing and Understanding the Other Party’s Goals, Issues, and Resistance Points 102

8. Setting One’s Own Targets and Opening Bids 104

9. Assessing the Social Context of Negotiation 106

10. Presenting the Issues to the Other Party: Substance and Process 110

Chapter Summary 113

Endnotes 113

Chapter 5

Ethics in Negotiation 114

A Sampling of Ethical Quandaries 114

What Do We Mean by “Ethics,” and Why Do They Matter in Negotiation? 116

Ethics Defined 116

Applying Ethical Reasoning to Negotiation 117

Ethics versus Prudence versus Practicality versus Legality 117

What Questions of Ethical Conduct Arise in Negotiation? 119

Contents xiii

Ethically Ambiguous Tactics: It’s (Mostly) All about the Truth 120

Identifying Ethically Ambiguous Tactics and Attitudes toward Their Use 122

Deception by Omission versus Commission 125

The Decision to Use Ethically Ambiguous Tactics: A Model 126

Why Use Deceptive Tactics? Motives and Consequences 126

The Power Motive 126

Other Motives to Behave Unethically 128

The Consequences of Unethical Conduct 129

Explanations and Justifications 131

How Can Negotiators Deal with the Other Party’s Use of Deception? 133

Chapter Summary 137

Endnotes 137

Chapter 6

Perception, Cognition, and Emotion 139

Perception 140

Perception Defined 140

Perceptual Distortion 140

Framing 142

Types of Frames 143

How Frames Work in Negotiation 144

Another Approach to Frames: Interests, Rights, and Power 145

The Frame of an Issue Changes as the Negotiation Evolves 147

Cognitive Biases in Negotiation 150

1. Irrational Escalation of Commitment 151

2. Mythical Fixed-Pie Beliefs 151

3. Anchoring and Adjustment 152

4. Issue Framing and Risk 152

5. Availability of Information 153

6. The Winner’s Curse 153

7. Overconfidence 153

8. The Law of Small Numbers 154

9. Self-Serving Biases 154

10. Endowment Effect 155

11. Ignoring Others’ Cognitions 156

12. Reactive Devaluation 156

Managing Misperceptions and Cognitive Biases in Negotiation 156

Mood, Emotion, and Negotiation 157

Chapter Summary 163

Endnotes 163

Chapter 7

Communication 165

What Is Communicated during Negotiation? 165

1. Offers, Counteroffers, and Motives 166

2. Information about Alternatives 166

3. Information about Outcomes 167

4. Social Accounts 167

5. Communication about Process 167

Are Negotiators Consistent or Adaptive? 168

Does It Matter What Is Said Early in the Negotiation? 168

Is More Information Always Better? 168

How People Communicate in Negotiation 169

Characteristics of Language 169

Use of Nonverbal Communication 170

Selection of a Communication Channel 172

How to Improve Communication in Negotiation 174

The Use of Questions 174

Listening 176

Role Reversal 178

xiv Contents

Special Communication Considerations at the Close of Negotiations 179

Avoiding Fatal Mistakes 179

Achieving Closure 179

Chapter Summary 180

Endnotes 180

Chapter 8

Finding and Using Negotiation Power 182

Why Is Power Important to Negotiators? 182

A Definition of Power 183

Sources of Power—How People Acquire Power 185

Informational Sources of Power 186

Power Based on Personality and Individual Differences 188

Power Based on Position in an Organization (Structural Power) 190

Power Based on Relationships 196

Contextual Sources of Power 197

Dealing with Others Who Have More Power 199

Chapter Summary 201

Endnotes 201

Chapter 9

Relationships in Negotiation 203

Challenging How Relationships in Negotiation Have Been Studied 203

Negotiations in Communal Sharing Relationships 207

Key Elements in Managing Negotiations within Relationships 208

Reputation 208

Trust 210

Justice 213

Relationships among Reputation, Trust, and Justice 217

Repairing a Relationship 217

Chapter Summary 218

Endnotes 218

Chapter 10

Multiple Parties, Groups, and Teams in Negotiation 220

The Nature of Multiparty Negotiations 220

Differences between Two-Party Negotiations and Multiparty Negotiations 221

What Dynamics Can Make a Multiparty Negotiation Effective? 226

Managing Multiparty Negotiations 228

The Prenegotiation Stage 228

The Formal Negotiation Stage—Managing the Process and Outcome 231

The Agreement Stage 237

Chapter Summary 240

Endnotes 240

Chapter 11

International and Cross-Cultural Negotiation 242

What Makes International Negotiation Different? 244

Environmental Context 244

Immediate Context 247

Conceptualizing Culture and Negotiation 249

Culture as Learned Behavior 249

Culture as Shared Values 250

Culture as Dialectic 253

Culture in Context 253

The Influence of Culture on Negotiation: Managerial Perspectives 254

Definition of Negotiation 254

Contents xv

Negotiation Opportunity 254

Selection of Negotiators 255

Protocol 255

Communication 256

Time Sensitivity 256

Risk Propensity 257

Groups versus Individuals 257

Nature of Agreements 258

Emotionalism 258

The Influence of Culture on Negotiation: Research Perspectives 258

Effects of Culture on Negotiation Outcomes 259

Effects of Culture on Negotiation Process and Information Exchange 261

Effects of Culture on Negotiator Cognition 263

Effects of Culture on Negotiator Ethics and Tactics 264

Culturally Responsive Negotiation Strategies 265

Weiss’s Culturally Responsive Strategies 266

Low Familiarity 267

Moderate Familiarity 267

High Familiarity 268

Chapter Summary 269

Endnotes 269

Chapter 12

Best Practices in Negotiations 273

1. Be Prepared 273

2. Diagnose the Fundamental Structure of the Negotiation 274

3. Identify and Work the BATNA 275

4. Be Willing to Walk Away 276

5. Master the Key Paradoxes of Negotiation 276

Claiming Value versus Creating Value 276

Sticking by Your Principles versus Being Resilient Enough to Go with the Flow 277

Sticking with Your Strategy versus Opportunistically Pursuing New Options 277

Being Too Honest and Open versus Being Too Closed and Opaque 278

Being Too Trusting versus Being Too Distrusting 278

6. Remember the Intangibles 278

7. Actively Manage Coalitions—Those Against You, For You, and Unknown 280

8. Savor and Protect Your Reputation 281

9. Remember That Rationality and Fairness Are Relative 281

10. Continue to Learn from Your Experience 282

Endnotes 282

Bibliography 283 Index 307

1

The Nature of Negotiation

1

CHAPTER 1

Objectives

1. Understand the definition of negotiation, the key elements of a negotiation process, and the distinct types of negotiation.

2. Explore how people use negotiation to manage different situations of interdependence—that is, that they depend on each other for achieving their goals.

3. Consider how negotiation fits within the broader perspective of processes for managing conflict.

4. Gain an overview of the organization of this book and the content of its chapters.

“That’s it! I’ve had it! This car is dead!” screamed Chang 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—the international union—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,

2 Chapter 1 The Nature of Negotiation

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 com-

ing back in very late (and noisily!). Janet has had enough of this disruption and is about to

confront Jocelyn.

A country’s government is in a financial crisis, created by a good old-fashioned

“smackdown” between the newly re-elected president and the legislature. The president

insists that taxes must be raised to pay for ongoing government services, particularly the

taxes of the richest 1 to 2 percent of the taxpayers. In contrast, a majority of the elected leg-

islature, whose political party favors the wealthy, insists that the president cut government

spending instead! Moreover, a group of the legislators have taken a public “pledge” to not

agree to any tax increases and fear losing their jobs in the next election if they give in on their pledge. If the crisis is not resolved in a few days, a financial doomsday is predicted.

Ashley Johnson is one of the most qualified recruits this year from a top-25 ranked

business school. She is delighted to have secured a second interview with a major con-

sumer 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 6:45 a.m. to get ready for a 7:30 a.m.

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 the shower, turned all 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 45 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 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 ac-

cords or large corporate mergers, everyone negotiates; sometimes people negotiate for

major things like a new job, other times for relatively minor things like who will take out

the garbage.

Negotiations occur for several reasons: (1) to agree on how to share or divide a limited

resource, such as land, or money, 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 negotia-

tion 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. Peo-

ple may also recognize the need for negotiation but do poorly because they misunderstand

A Few Words about Our Style and Approach 3

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 negotia-

tion 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 briefly define

negotiation. Negotiation is “a form of decision making in which two or more parties talk

with one another in an effort to resolve their opposing interests.”1 Moreover, 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 the price of that item 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 pro-

cess used to reach an agreement. While that give-and-take process is extremely impor-

tant, 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 the many ways that differences in the

substantive issues, the people involved, the processes they follow, and the context in which

negotiation occurs enrich the complexity of the dynamics of negotiation. We will return to

a more complete overview of the book at the end of this chapter.

Third, our insights into negotiation are drawn from three sources. The first is our per-

sonal 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 nego-

tiation. This research has been conducted for almost 60 years in the fields of economics,

psychology, political science, communication, labor relations, law, sociology, and anthro-

pology. 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

outputs 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.2 When standing alone, each perspective is clear but limited; com-

bined, we begin to understand the rich and complex dynamics of this amazing animal.

4 Chapter 1 The Nature of Negotiation

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 the

standard social science research process of citing their work in the text by the author’s

name and the date of publication of their work; complete references for that work can be

found in the bibliography at the end of the book. When we have multiple sources to cite,

or anecdotal side comments to make, that information will appear in an endnote at the end

of each chapter.

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 negotia-

tions. 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 Southeast Asia 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 tak-

ing 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. And Sue was already “on the record” as being opposed to the motor

scooter, for obvious safety reasons.

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

Joe and Sue Carter 5

make someone feel like a loser, an argument could start, and in the end nobody would re-

ally 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 en-

gineers 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 the

purchasing department 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 expen-

sive and not very fuel efficient. 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 frus-

tration 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 the loss of the salary bonus that landing a big loan would bring. But when-

ever 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 Commis-

sion, 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

6 Chapter 1 The Nature of Negotiation

case involved a request by a real estate development firm to drain a swampy area and move

a small creek into an underground pipe in order 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 tax 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

the new mall 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 finally, the com-

mission agreed to continue the 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 . . . or that motor scooter.

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. As we defined earlier, negotiation is a process by which two or more parties attempt to resolve their opposing interests. Thus, as we will point out later on this

chapter, negotiation is one of several mechanisms by which people can resolve conflicts.

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 be-

fore a critical interview. Those who have written extensively about negotiation argue that

there are several characteristics common to all negotiation situations:3

1. There are two or more parties—that is, two or more individuals, groups, or organiza- tions. Although people can “negotiate” with themselves—as when someone debates

in their head 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.4 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 about the vacation . . . and

that motor scooter.

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.

Characteristics of a Negotiation Situation 7

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 negoti-

ating. 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 be-

cause it’s illegal, unethical, or morally

inappropriate—for example, either paying

or accepting a bribe. 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,

you give in too quickly, and you may fail

to consider the implications of your con-

cessions. When under the gun, you’ll set-

tle 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 oppor-

tunity 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 conces-

sions on the way home. Gathering your

reconnaissance and rehearsing the nego-

tiation will pay off handsomely. If you’re

not ready, just say “no.”

Source: J. Conrad Levinson, Mark S. A. Smith, Orvel Ray Wilson, Guerrilla Negotiating: Unconventional Weapons and Tactics to Get What You Want (New York: John Wiley & Sons, Inc., 1999), pp. 22–23.

7

8 Chapter 1 The Nature of NegotiationSign 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!”

BOX 1.2

4. When we negotiate, we expect a “give-and-take” process that is fundamental to our understanding of the word “negotiation.” 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. However, truly creative negotiations may not

require compromise; 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).

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. Equipment rental services

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 equipment 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,

save money and assure some payment of a fine rather than risk having the defendant

set free on some legal technicality. 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 pro-

cedures, rather than accepting the status quo, and she works to change the shopping

mall site plan to make both conservationists and businesses happy, rather than letting

others decide it or watch it go to court. But what about that motor scooter . . . ?

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 (a) the need to

“win,” beat the other party, or avoid losing to the other party; (b) the need to look

“good,” “competent,” or “tough” to the people you represent; (c) the need to defend

8

Characteristics of a Negotiation Situation 9

an important principle or precedent in a negotiation; and (d) the need to appear “fair,”

or “honorable” or to protect one’s reputation; or (e) the need to maintain a good re-

lationship with the other party after the negotiation is over, primarily by maintaining

trust and reducing uncertainty.5 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 prob-

lem because he needs Ed’s support in the upcoming budget negotiations, but Joe also

doesn’t want to look weak to his department’s engineers, who expect him to support

them. Thus, for Joe, the important intangibles are preserving his relationship with Ed

Laine and looking strong and “tough” to his engineers.