Knight engines excalibur engine parts

ROY J. LEWICKI

DAVID M. SAUNDERS

BRUCE BARRY

NEGOTIATION Readings, Exercises and Cases

s ix th ed i t ion

sixth edition

LEW ICKI | SAU

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ERS | BARRY NEGOTIATION

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eadings, E xercises and C

ases

Negotiation is a fundamental skill, not only for successful management, but also for successful living. Negotiation: Readings, Exercises and Cases 6e takes an experiential approach to this skill and explores the major concepts and theories of the psychology of bargaining and negotiation, resulting in a text that refl ects the very best and most recent work on negotiation and the related topics of power, infl uence, and confl ict management.

Examples of new readings, exercises, and cases include: Balancing Act: How to Manage Negotiation Tensions Negotiation Ethics Four Strategies for Making Concessions Become a Master Negotiator Culture and Negotiation Investigative Negotiation Seven Strategies for Negotiating Success Ridgecrest School Dispute Bargaining Strategy in Major League Baseball

The authors have carefully organized Negotiation: Readings, Exercises and Cases 6e to coordinate closely with their newly revised text, Negotiation 6e, as well as with the shorter version of the text, Essentials of Negotiation 5e. All three texts in this series can work together to create a comprehensive learning system.

To learn more, please visit www.mhhe.com/lewickinegotiation

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Negotiation

Readings, Exercises and Cases

Sixth Edition

Roy J. Lewicki The Ohio State University

David M. Saunders Queen’s University

Bruce Barry Vanderbilt University

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NEGOTIATION: READINGS, EXERCISES AND CASES, SIXTH EDITION

Published by McGraw-Hill, a business unit of The McGraw-Hill Companies, Inc., 1221 Avenue of the Americas, New York, NY 10020. Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. Previous editions © 2007, 2003, and 1999. 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.

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Library of Congress Cataloging-in-Publication Data

Negotiation: readings, exercises, and cases / [edited by] Roy J. Lewicki, David M. Saunders, Bruce Barry.—6th ed.

p. cm. ISBN-13: 978-0-07-353031-4 (alk. paper) ISBN-10: 0-07-243255-1 1. Negotiation in business. 2. Negotiation. 3. Negotiation—Case studies. I. Lewicki, Roy J.

II. Saunders, David M. III. Barry, Bruce, 1958– HD58.6.N45 2009 658.4�052—dc22 2009039281

The Internet addresses listed in the text were accurate at the time of publication. The inclusion of a Web site does not indicate an endorsement by the authors or McGraw-Hill, and McGraw-Hill does not guarantee the accuracy of the information presented at these sites.

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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.

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iv

About the Authors

is the Abramowitz Professor of Business Ethics, and Professor of Management and Hu- man Resources at the Max. M. Fisher College of Business, The Ohio State University. He has authored or edited 32 books, as well as numerous research articles. Professor Lewicki has served as the President of the International Association of Conflict Man- agement, was the founding editor of the Academy of Management Learning and Educa- tion, and received the Academy of Management’s Distinguished Educator Award for his contributions to the field of teaching in negotiation and dispute resolution.

is dean of Queen’s School of Business. Since joining Queen’s in 2003, he has led the in- ternationalization of the school, launched two unique MBA programs and a suite of pre- experience Masters programs, and strengthened Queen’s international network with the addition of top business school partners in Europe, Asia, and South America.

Outside of Queen’s, David is the co-author of several articles on negotiation, con- flict resolution, employee voice, and organizational justice. He sits on the board of the China Europe International Business School (CEIBS) and the European Foundation for Management Development, an international business school association.

is Professor of Management and Sociology at Vanderbilt University. His research on ne- gotiation, 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 (2002–2003), and a past chair of the Academy of Management Conflict Management Division.

Roy J. Lewicki

David M. Saunders

Bruce Barry

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People negotiate every day. During an average day, they may negotiate with

• the boss, regarding an unexpected work assignment;

• subordinates, regarding unexpected overtime;

• a supplier, about a problem with raw materials inventory management;

• a banker, over the terms of a business loan;

• a government official, regarding the compliance with environmental regulations;

• a real estate agent, over the lease on a new warehouse;

• his/her spouse, over who will walk the dog;

• his/her child, over who will walk the dog (still an issue after losing the previous negotiation);

• and the dog, once out, as to whether any “business” gets done.

In short, negotiation is a common, everyday activity that most people use to influence others and to achieve personal objectives. In fact, negotiation is not only common, but also essential to living an effective and satisfying life. We all need things—resources, information, cooperation, and support from others. Others have those needs as well, sometimes compatible with ours, sometimes not. Negotiation is a process by which we attempt to influence others to help us achieve our needs while at the same time taking their needs into account. It is a fundamental skill, not only for successful management but also for successful living.

In 1985, Roy Lewicki and Joseph Litterer published the first edition of this book. As they were preparing that volume, it was clear that the basic processes of negotiation had received only selective attention in both the academic and practitioner literature. Scholars of negotiation had generally restricted examination of these processes to basic theory development and laboratory research in social psychology, to a few books writ- ten for managers, and to an examination of negotiation in complex settings such as diplomacy and labor–management relations. Efforts to draw from the broader study of techniques for influence and persuasion, to integrate this work into a broader under- standing of negotiation, or to apply this work to a broad spectrum of conflict and nego- tiation settings were only beginning to occur.

In the past twenty-five years, this world has changed significantly. There are several new practitioner organizations, such as the Society for Professionals in Dispute Resolution and the Association for Conflict Resolution, and academic professional associations such as the Conflict Management Division of the Academy of Management and the Interna- tional Association for Conflict Management that have devoted themselves exclusively to facilitating research and teaching in the fields of negotiation and conflict management. There are several new journals (Negotiation Journal, Negotiation and Conflict Manage- ment Research, International Journal of Conflict Management, International Negotiation) that focus exclusively on research in these fields. Finally, through the generosity of the Hewlett Foundation, there are a number of university centers that have devoted themselves to enhancing the quality of teaching, research, and service in the negotiation and conflict

Preface

v

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management fields. Many schools now have several courses in negotiation and conflict management—in schools of business, law, public policy, psychology, social work, educa- tion, and natural resources. Development has occurred in the practitioner side as well. Books, seminars, and training courses on negotiation and conflict management abound. And, finally, mediation has become an extremely popular process as an alternative to liti- gation for handling divorce, community disputes, and land-use conflicts. In pragmatic terms, all of this development means that as we assembled this sixth edition, we have had a much richer and more diverse pool of resources from which to sample. The net result for the student and instructor is a highly improved book of readings and exercises that contains many new articles, cases, and exercises, which represent the very best and most recent work on negotiation and the related topics of power, influence, and conflict management.

A brief overview of this book is in order. The Readings portion of the book is or- dered into seven sections: (1) Negotiation Fundamentals, (2) Negotiation Subprocesses, (3) Negotiation Contexts, (4) Individual Differences, (5) Negotiation across Cultures, (6) Resolving Differences, and (7) Summary. The next section of the book presents a col- lection of role-play exercises, cases, and self-assessment questionnaires that can be used to teach about negotiation processes and subprocesses. Complete information about the use or adaptation of these materials for several classroom formats is provided in our ac- companying web-based Instructor’s Manual, which faculty members may obtain access by contacting their local McGraw-Hill/Irwin representative, by calling (800) 634-3963 or by visiting the McGraw-Hill Web site at www.mhhe.com/lewickinegotiation

For those readers familiar with the previous edition of this book, the most visible changes in this edition are to the book’s content and organization, as follows:

• The content of this edition is substantially new. About half of the readings are new to this edition, and there are approximately ten new exercises and cases. Almost all exercises and cases have been revised and updated.

• These 7 sections parallel the 7 sections and 20 chapters of the completely revised textbook, Negotiation, 6th edition, by Lewicki, Barry and Saunders, also pub- lished by McGraw-Hill/Irwin. The text and reader can be used together, or sepa- rately. A shorter version of the text, Essentials of Negotiation, 5th edition, by Lewicki, Saunders and Barry, can also be used in conjunction with these readings book (to be published in 2010). 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/lewickinegotiation).

This book could not have been completed without the assistance of numerous people. We especially thank

• The many authors and publishers who granted us permission to use or adapt their work for this book and whom we have recognized in conjunction with specific exercises, cases, or articles.

• The many negotiation instructors and trainers who inspired several of the exercises in this book and who have given us excellent feedback on the previous editions of this book.

vi Preface

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• The staff of McGraw-Hill/Irwin, especially our current editor, Laura Spell, and our previous editors, John Weimeister, Ryan Blankenship, John Biernat, Kurt Strand and Karen Johnson; Jane Beck, Allison Cleland and Trina Hauger, editorial assistants who can solve almost any problem; Project Manager Robin Reed; and Lori Bradshaw, tireless developmental editor who turns our confusing instructions and tedious prose into eminently readable and usable volumes!

• Our families, who continue to provide us with the time, inspiration, opportunities for continued learning about effective negotiation, and the personal support required to finish this project.

Roy J. Lewicki David M. Saunders Bruce Barry

Preface vii

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viii Section Three The Nature of Negotiation

viii

Section 1 Negotiation Fundamentals

1.1 Three Approaches to Resolving Disputes: Interests, Rights, and Power 1

1.2 Selecting a Strategy 14 1.3 Balancing Act: How to Manage Negotiation

Tensions 30 1.4 The Negotiation Checklist 34 1.5 Effective Negotiating Techniques: From

Selecting Strategies to Side-Stepping Impasses and Assumptions 48

1.6 Closing Your Business Negotiations 65 1.7 Defusing the Exploding Offer: The Farpoint

Gambit 72 1.8 Implementing a Collaborative Strategy 80 1.9 Solve Joint Problems to Create and Claim

Value 97 1.10 Even at Megastores, Hagglers Find No Price Is

Set in Stone 112

Section 2 Negotiation Subprocesses

2.1 Negotiating Rationally: The Power and Impact of the Negotiator’s Frame 115

2.2 Managers and Their Not-So Rational Decisions 125

2.3 When Your Thoughts Work Against You 135 2.4 Untapped Power: Emotions in Negotiation 139 2.5 Staying with No 147 2.6 Risks of E-Mail 152 2.7 Where Does Power Come From? 159 2.8 Harnessing the Science of Persuasion 168 2.9 The Six Channels of Persuasion 177 2.10 Negotiating with Liars 183 2.11 Negotiation Ethics 193 2.12 Three Schools of Bargaining Ethics 198 2.13 A Painful Close 204

Section 3 Negotiation Contexts

3.1 Staying in the Game or Changing It: An Analysis of Moves and Turns in Negotiation 211

3.2 The Soft Sell 225 3.3 Bargaining in the Shadow of the Tribe 228 3.4 The Fine Art of Making Concessions 240 3.5 The High Cost of Low Trust 244 3.6 Consequences of Principal and Agent 248 3.7 The Tension between Principals and Agents 256 3.8 When a Contract Isn’t Enough: How to

Be Sure Your Agent Gets You the Best Deal 267

3.9 This Is Not a Game: Top Sports Agents Share Their Negotiating Secrets 272

3.10 The New Boss 277 3.11 Can’t Beat Them? Then Join a

Coalition 291 3.12 Building and Maintaining Coalitions and

Allegiances throughout Negotiations 294 3.13 The Surprising Benefits of Conflict in

Negotiating Teams 298

Section 4 Individual Differences

4.1 Women Don’t Ask 301 4.2 Become a Master Negotiator 309 4.3 Should You Be a Negotiator? 317

Section 5 Negotiation across Cultures

5.1 Culture and Negotiation 321 5.2 Intercultural Negotiation in International

Business 339 5.3 American Strengths and Weaknesses 358

Contents

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Section 6 Resolving Differences

6.1 Doing Things Collaboratively: Realizing the Advantage or Succumbing to Inertia? 363

6.2 Taking Steps toward “Getting to Yes” at Blue Cross and Blue Shield of Florida 377

6.3 Taking the Stress Out of Stressful Conversations 382

6.4 Renegotiating Existing Agreements: How to Deal with “Life Struggling against Form” 391

6.5 Negotiating with Disordered People 409 6.6 When and How to Use Third-Party Help 417 6.7 Investigative Negotiation 435

Section 7 Summary

7.1 Best Practices in Negotiation 443 7.2 Getting Past Yes: Negotiating as if

Implementation Mattered 453 7.3 Seven Strategies for Negotiating Success:

Some Fancy Footwork for the Salary Pas de Deux 466

7.4 Six Habits of Merely Effective Negotiators 472

Exercises 1. The Subjective Value

Inventory (SVI) 483 2. Pemberton’s Dilemma 486 3. The Commons Dilemma 489 4. The Used Car 490 5. Knight Engines/Excalibur Engine

Parts 492 6. GTechnica—AccelMedia 493 7. Toyonda 494 8. Planning for Negotiations 495 9. The Pakistani Prunes 498

10. Universal Computer Company 499 11. Twin Lakes Mining Company 502 12. City of Tamarack 505

13. Island Cruise 508 14. Salary Negotiations 513 15. Job Offer Negotiation: Joe Tech

and Robust Routers 514 16. The Employee Exit Interview 519 17. Live8 520 18. Ridgecrest School Dispute 521 19. Bestbooks/Paige Turner 528 20. Strategic Moves and Turns 529 21. Elmwood Hospital Dispute 531 22. The Power Game 534 23. Coalition Bargaining 535 24. The Connecticut Valley School 538 25. Bakery–Florist–Grocery 541 26. The New House Negotiation 542 27. The Buena Vista Condo 544 28. Eurotechnologies, Inc. 545 29. Third-Party Conflict Resolution 552 30. AuraCall Inc. 557 31. 500 English Sentences 558 32. Sick Leave 559 33. Alpha–Beta 560 34. Galactica SUV 562 35. Bacchus Winery 563 36. Collecting Nos 564 37. A Team in Trouble 566

Cases 1. Capital Mortgage Insurance

Corporation (A) 567 2. Pacific Oil Company (A) 582 3. Negotiating on Thin Ice: The 2004–2005 NHL

Dispute (A) 610 4. Collective Bargaining at Magic

Carpet Airlines: A Union Perspective (A) 629

5. Bargaining Strategy in Major League Baseball 638

6. Midwestern::Contemporary Art 649 7. 500 English Sentences 656 8. Sick Leave 666

Contents ix

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Questionnaires 1. The Personal Bargaining

Inventory 677 2. The SINS II Scale 680 3. Six Channels of Persuasion

Survey 682 4. The Trust Scale 686 5. Communication Competence

Scale 691 6. The Cultural Intelligence Scale 693

Appendix 1. Negotiating on Thin Ice: The 2004–2005 NHL

Dispute (B) 695

Title Index 699 Name Index 701

x Contents

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Reading 1.1

Three Approaches to Resolving Disputes: Interests, Rights, and Power William L. Ury Jeanne M. Brett Stephen B. Goldberg

It started with a pair of stolen boots. Miners usually leave their work clothes in baskets that they hoist to the ceiling of the bathhouse between work shifts. One night a miner discovered that his boots were gone.1 He couldn’t work without boots. Angry, he went to the shift boss and complained, “Goddammit, someone stole my boots! It ain’t fair! Why should I lose a shift’s pay and the price of a pair of boots because the company can’t protect the property?”

“Hard luck!” the shift boss responded. “The company isn’t responsible for personal property left on company premises. Read the mine regulations!”

The miner grumbled to himself, “I’ll show them! If I can’t work this shift, neither will anyone else!” He convinced a few buddies to walk out with him and, in union solidarity, all the others followed.

The superintendent of the mine told us later that he had replaced stolen boots for miners and that the shift boss should have done the same. “If the shift boss had said to the miner, ‘I’ll buy you a new pair and loan you some meanwhile,’ we wouldn’t have had a strike.” The superintendent believed that his way of resolving the dispute was bet- ter than the shift boss’s or the miner’s. Was he right and, if so, why? In what ways are some dispute resolution procedures better than others?

In this reading, we discuss three ways to resolve a dispute: reconciling the interests of the parties, determining who is right, and determining who is more powerful. We analyze the costs of disputing in terms of transaction costs, satisfaction with outcomes, effect on the relationship, and recurrence of disputes. We argue that, in general, recon- ciling interests costs less and yields more satisfactory results than determining who is right, which in turn costs less and satisfies more than determining who is more power- ful. The goal of dispute systems design, therefore, is a system in which most disputes are resolved by reconciling interests.

1

Negotiation Fundamentals

SECTION 1

Source: “Three Approaches to Resolving Disputes: Interests, Rights, and Power,” from Getting Disputes Resolved, by William L. Ury, Jeanne M. Brett, and Stephen B. Goldberg, 1988, pp. 3–19. New York: Jossey-Bass, Inc., a subsidiary of John Wiley & Sons, Inc. Used with permission.

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Three Ways to Resolve Disputes

The Boots Dispute Dissected

A dispute begins when one person (or organization) makes a claim or demand on an- other who rejects it.2 The claim may arise from a perceived injury or from a need or aspiration.3 When the miner complained to the shift boss about the stolen boots, he was making a claim that the company should take responsibility and remedy his perceived injury. The shift boss’s rejection of the claim turned it into a dispute. To resolve a dis- pute means to turn opposed positions—the claim and its rejection—into a single out- come.4 The resolution of the boots dispute might have been a negotiated agreement, an arbitrator’s ruling, or a decision by the miner to drop his claim or by the company to grant it.

In a dispute, people have certain interests at stake. Moreover, certain relevant stan- dards or rights exist as guideposts toward a fair outcome. In addition, a certain balance of power exists between the parties. Interests, rights, and power then are three basic elements of any dispute. In resolving a dispute, the parties may choose to focus their attention on one or more of these basic factors. They may seek to (1) reconcile their underlying interests, (2) determine who is right, and/or (3) determine who is more powerful.

When he pressed his claim that the company should do something about his stolen boots, the miner focused on rights—“Why should I lose a shift’s pay and the price of a pair of boots because the company can’t protect the property?” When the shift boss responded by referring to mine regulations, he followed the miner’s lead and continued to focus on who was right. The miner, frustrated in his attempt to win what he saw as justice, provoked a walkout—changing the focus to power. “I’ll show them!” In other words, he would show the company how much power he and his fellow coal miners had—how dependent the company was on them for the production of coal.

The mine superintendent thought the focus should have been on interests. The miner had an interest in boots and a shift’s pay, and the company had an interest in the miner working his assigned shift. Although rights were involved (there was a question of fairness) and power was involved (the miner had the power to cause a strike), the su- perintendent’s emphasis was on each side’s interests. He would have approached the stolen boots situation as a joint problem that the company could help solve.

Reconciling Interests

Interests are needs, desires, concerns, fears—the things one cares about or wants. They underlie people’s positions—the tangible items they say they want. A husband and wife quarrel about whether to spend money for a new car. The husband’s underlying interest may not be the money or the car but the desire to impress his friends; the wife’s interest may be transportation. The director of sales for an electronics company gets into a dis- pute with the director of manufacturing over the number of TV models to produce. The director of sales wants to produce more models. Her interest is in selling TV sets; more models mean more choice for consumers and hence increased sales. The director of

2 Section One Negotiation Fundamentals

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manufacturing wants to produce fewer models. His interest is in decreasing manufac- turing costs; more models mean higher costs.

Reconciling such interests is not easy. It involves probing for deep-seated con- cerns, devising creative solutions, and making trade-offs and concessions where inter- ests are opposed.5 The most common procedure for doing this is negotiation, the act of back-and-forth communication intended to reach agreement. (A procedure is a pattern of interactive behavior directed toward resolving a dispute.) Another interests-based procedure is mediation, in which a third party assists the disputants in reaching agreement.

By no means do all negotiations (or mediations) focus on reconciling interests. Some negotiations focus on determining who is right, such as when two lawyers argue about whose case has the greater merit. Other negotiations focus on determining who is more powerful, such as when quarreling neighbors or nations exchange threats and counterthreats. Often negotiations involve a mix of all three—some attempts to satisfy interests, some discussion of rights, and some references to relative power. Negotiations that focus primarily on interests we call “interests-based,” in contrast to “rights-based” and “power-based” negotiations. Another term for interests-based nego- tiation is problem-solving negotiation, so called because it involves treating a dispute as a mutual problem to be solved by the parties.

Before disputants can effectively begin the process of reconciling interests, they may need to vent their emotions. Rarely are emotions absent from disputes. Emotions often generate disputes, and disputes, in turn, often generate emotions. Frustration un- derlay the miner’s initial outburst to the shift boss; anger at the shift boss’s response spurred him to provoke the strike.

Expressing underlying emotions can be instrumental in negotiating a resolution. Particularly in interpersonal disputes, hostility may diminish significantly if the ag- grieved party vents her anger, resentment, and frustration in front of the blamed party, and the blamed party acknowledges the validity of such emotions or, going one step fur- ther, offers an apology.6 With hostility reduced, resolving the dispute on the basis of interests becomes easier. Expressions of emotion have a special place in certain kinds of interests-based negotiation and mediation.

Determining Who Is Right

Another way to resolve disputes is to rely on some independent standard with perceived legitimacy or fairness to determine who is right. As a shorthand for such independent standards, we use the term rights. Some rights are formalized in law or contract. Other rights are socially accepted standards of behavior, such as reciprocity, precedent, equal- ity, and seniority.7 In the boots dispute, for example, while the miner had no contractual right to new boots, he felt that standards of fairness called for the company to replace personal property stolen from its premises.

Rights are rarely clear. There are often different—and sometimes contradictory— standards that apply. Reaching agreement on rights, where the outcome will determine who gets what, can often be exceedingly difficult, frequently leading the parties to turn to a third party to determine who is right. The prototypical rights procedure is

Three Approaches to Resolving Disputes: Interests, Rights, and Power 3

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adjudication, in which disputants present evidence and arguments to a neutral third party who has the power to hand down a binding decision. (In mediation, by contrast, the third party does not have the power to decide the dispute.) Public adjudication is provided by courts and administrative agencies. Private adjudication is provided by arbitrators.8

Determining Who Is More Powerful

A third way to resolve a dispute is on the basis of power. We define power, somewhat narrowly, as the ability to coerce someone to do something he would not otherwise do. Exercising power typically means imposing costs on the other side or threatening to do so. In striking, the miners exercised power by imposing economic costs on the company. The exercise of power takes two common forms: acts of aggression, such as sabotage or physical attack, and withholding the benefits that derive from a relationship, as when employees withhold their labor in a strike.

In relationships of mutual dependence, such as between labor and management or within an organization or a family, the questions of who is more powerful turns on who is less dependent on the other.9 If a company needs the employees’ work more than em- ployees need the company’s pay, the company is more dependent and hence less pow- erful. How dependent one is turns on how satisfactory the alternatives are for satisfying one’s interests. The better the alternative, the less dependent one is. If it is easier for the company to replace striking employees than it is for striking employees to find new jobs, the company is less dependent and thereby more powerful. In addition to strikes, power procedures include behaviors that range from insults and ridicule to beatings and war- fare. All have in common the intent to coerce the other side to settle on terms more sat- isfactory to the wielder of power. Power procedures are of two types: power-based negotiation, typified by an exchange of threats, and power contests, in which the parties take actions to determine who will prevail.

Determining who is the more powerful party without a decisive and potentially de- structive power contest is difficult because power is ultimately a matter of perceptions. Despite objective indicators of power, such as financial resources, parties’ perceptions of their own and each other’s power often do not coincide. Moreover, each side’s per- ception of the other’s power may fail to take into account the possibility that the other will invest greater resources in the contest than expected out of fear that a change in the perceived distribution of power will affect the outcomes of future disputes.

Interrelationship among Interests, Rights, and Power

The relationship among interests, rights, and power can be pictured as a circle within a circle within a circle (as in Figure 1). The innermost circle represents interests; the mid- dle, rights; and the outer, power. The reconciliation of interests takes place within the context of the parties’ rights and power. The likely outcome of a dispute if taken to court or to a strike, for instance, helps define the bargaining range within which a resolution can be found. Similarly, the determination of rights takes place within the context of power. One party, for instance, may win a judgment in court, but unless the judgment can be enforced, the dispute will continue. Thus, in the process of resolving a dispute, the focus may shift from interests to rights to power and back again.

4 Section One Negotiation Fundamentals

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Lumping It and Avoidance

Not all disputes end with a resolution. Often one or more parties simply decide to with- draw from the dispute. Withdrawal takes two forms. One party may decide to “lump it,” dropping her claim or giving in to the other’s claim because she believes pursuing the dispute is not in her interest, or because she concludes she does not have the power to resolve it to her satisfaction. The miner would have been lumping his claim if he had said to himself, “I strongly disagree with management’s decision not to reimburse me for my boots, but I’m not going to do anything about it.” A second form of withdrawal is avoidance. One party (or both) may decide to withdraw from the relationship, or at least to curtail it significantly.10 Examples of avoidance include quitting the organiza- tion, divorce, leaving the neighborhood, and staying out of the other person’s way.

Both avoidance and lumping it may occur in conjunction with particular dispute resolution procedures. Many power contests involve threatening avoidance—such as threatening divorce—or actually engaging in it temporarily to impose costs on the other side—such as in a strike or breaking off of diplomatic relations. Many power contests end with the loser lumping her claim or her objection to the other’s claim. Others end with the loser engaging in avoidance: leaving or keeping her distance from the winner. Similarly, much negotiation ends with one side deciding to lump it instead of pursuing the claim. Or, rather than take a dispute to court or engage in coercive actions, one party (or both) may decide to break off the relationship altogether. This is common in social contexts where the disputant perceives satisfactory alternatives to the relationship.

Lumping it and avoidance may also occur before a claim has been made, thus fore- stalling a dispute. Faced with the problem of stolen boots, the miner might have decided to lump it and not make a claim for the boots. More drastically, in a fit of exasperation, he might have walked off the job and never returned.

Three Approaches to Resolving Disputes: Interests, Rights, and Power 5

Interests

Rights

Power

FIGURE 1 | Interrelationships among Interests, Rights, and Power

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Which Approach Is “Best”?

When the miner superintendent described the boots dispute to us, he expressed a pref- erence for how to resolve disputes. In our language, he was saying that on the whole it was better to try to reconcile interests than to focus on who was right or who was more powerful. But what does “better” mean? And in what sense, if any, was he correct in believing that focusing attention on interests is better?

What “Better” Means: Four Possible Criteria

The different approaches to the resolution of disputes—interests, rights, and power— generate different costs and benefits. We focus on four criteria in comparing them: transaction costs, satisfaction with outcomes, effect on the relationship, and recurrence of disputes.11

Transaction Costs For the mine superintendent, “better” meant resolving disputes without strikes. More generally, he wanted to minimize the costs of disputing—what may be called the transaction costs. The most obvious costs of striking were economic. The management payroll and the overhead costs had to be met while the mine stood idle. Sometimes strikes led to violence and the destruction of company property. The miners, too, incurred costs—lost wages. Then there were the lost opportunities for the company: a series of strikes could lead to the loss of a valuable sales contract. In a fam- ily argument, the costs would include the frustrating hours spent disputing, the frayed nerves and tension headaches, and the missed opportunities to do more enjoyable or use- ful tasks. All dispute resolution procedures carry transaction costs: the time, money, and emotional energy expended in disputing; the resources consumed and destroyed; and the opportunities lost.12

Satisfaction with Outcomes Another way to evaluate different approaches to dispute resolution is by the parties’ mutual satisfaction with the result. The outcome of the strike could not have been wholly satisfactory to the miner—he did not receive new boots— but he did succeed in venting his frustration and taking his revenge. A disputant’s satis- faction depends largely on how much the resolution fulfills the interests that led her to make or reject the claim in the first place. Satisfaction may also depend on whether the disputant believes that the resolution is fair. Even if an agreement does not wholly ful- fill her interests, a disputant may draw some satisfaction from the resolution’s fairness.

Satisfaction depends not only on the perceived fairness of the resolution, but also on the perceived fairness of the dispute resolution procedure. Judgments about fairness turn on several factors: how much opportunity a disputant had to express himself; whether he had control over accepting or rejecting the settlement; how much he was able to partic- ipate in shaping the settlement; and whether he believes that the third party, if there was one, acted fairly.13

Effect on the Relationship A third criterion is the long-term effect on the parties’ re- lationship. The approach taken to resolve a dispute may affect the parties’ ability to work together on a day-to-day basis. Constant quarrels with threats of divorce may seriously

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weaken a marriage. In contrast, marital counseling in which the disputing partners learn to focus on interests in order to resolve disputes may strengthen a marriage.

Recurrence The final criterion is whether a particular approach produces durable res- olutions. The simplest form of recurrence is when a resolution fails to stick. For exam- ple, a dispute between father and teenage son over curfew appears resolved but breaks out again and again. A subtler form of recurrence takes place when a resolution is reached in a particular dispute, but the resolution fails to prevent the same dispute from arising between one of the disputants and someone else, or conceivably between two different parties in the same community. For instance, a man guilty of sexually harass- ing an employee reaches an agreement with his victim that is satisfactory to her, but he continues to harass other women employees. Or he stops, but other men continue to harass women employees in the same organization.

The Relationship among the Four Criteria These four different criteria are interre- lated. Dissatisfaction with outcomes may produce strain on the relationship, which con- tributes to the recurrence of disputes, which in turn increases transaction costs. Because the different costs typically increase and decrease together, it is convenient to refer to all four together as the costs of disputing. When we refer to a particular approach as high- cost or low-cost, we mean not just transaction costs but also dissatisfaction with outcomes, strain on the relationship, and recurrence of disputes.

Sometimes one cost can be reduced only by increasing another, particularly in the short term. If father and son sit down to discuss their conflicting interests concerning curfew, the short-term transaction costs in terms of time and energy may be high. Still, these costs may be more than offset by the benefits of a successful negotiation—an improved relationship and the cessation of curfew violations.

Which Approach Is Least Costly?

Now that we have defined “better” in terms of the four types of costs, the question re- mains whether the mine superintendent was right in supposing that focusing on interests is better. A second question is also important: when an interests-based approach fails, is it less costly to focus on rights or on power?

Interests versus Rights or Power A focus on interests can resolve the problem un- derlying the dispute more effectively than can a focus on rights or power. An example is a grievance filed against a mine foreman for doing work that contractually only a miner is authorized to do. Often the real problem is something else—a miner who feels un- fairly assigned to an unpleasant task may file a grievance only to strike back at his fore- man. Clearly, focusing on what the contract says about foremen working will not deal with this underlying problem. Nor will striking to protest foremen working. But if the foreman and miner can negotiate about the miner’s future work tasks, the dispute may be resolved to the satisfaction of both.

Just as an interests-based approach can help uncover hidden problems, it can help the parties identify which issues are of greater concern to one than to the other. By trading off issues of lesser concern for those of greater concern, both parties can gain from the

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resolution of the dispute.14 Consider, for example, a union and employer negotiating over two issues: additional vacation time and flexibility of work assignments. Although the union does not like the idea of assignment flexibility, its clear priority is additional vaca- tion. Although the employer does not like the idea of additional vacation, he cares more about gaining flexibility in assigning work. An agreement that gives the union the vacation days it seeks and the employer the flexibility in making work assignments would likely be satisfactory to both. Such joint gain is more likely to be realized if the parties focus on each side’s interests. Focusing on who is right, as in litigation, or on who is more powerful, as in a strike, usually leaves at least one party perceiving itself as the loser.

Reconciling interests thus tends to generate a higher level of mutual satisfaction with outcomes than determining rights or power.15 If the parties are more satisfied, their relationship benefits and the dispute is less likely to recur. Determining who is right or who is more powerful, with the emphasis on winning and losing, typically makes the re- lationship more adversarial and strained. Moreover, the loser frequently does not give up, but appeals to a higher court or plots revenge. To be sure, reconciling interests can sometimes take a long time, especially when there are many parties to the dispute. Gen- erally, however, these costs pale in comparison with the transaction costs of rights and power contests such as trials, hostile corporate takeovers, or wars.

In sum, focusing on interests, compared to focusing on rights or power, tends to produce higher satisfaction with outcomes, better working relationships, and less recur- rence, and may also incur lower transaction costs. As a rough generalization, then, an interests approach is less costly than a rights or power approach.

Rights versus Power Although determining who is right or who is more powerful can strain the relationship, deferring to a fair standard usually takes less of a toll than giving in to a threat. In a dispute between a father and teenager over curfew, a discussion of independent standards such as the curfews of other teenagers is likely to strain the relationship less than an exchange of threats.

Determining rights or power frequently becomes a contest—a competition among the parties to determine who will prevail. They may compete with words to persuade a third-party decision maker of the merits of their case, as in adjudication; or they may compete with actions intended to show the other who is more powerful, as in a proxy fight. Rights contests differ from power contests chiefly in their transaction costs. A power contest typically costs more in resources consumed and opportunities lost. Strikes cost more than arbitration. Violence costs more than litigation. The high transaction costs stem not only from the efforts invested in the fight but also from the destruction of each side’s resources. Destroying the opposition may be the very object of a power con- test. Moreover, power contests often create new injuries and new disputes along with anger, distrust, and a desire for revenge. Power contests, then, typically damage the relationship more and lead to greater recurrence of disputes than do rights contests. In general, a rights approach is less costly than a power approach.

Proposition

To sum up, we argue that, in general, reconciling interests is less costly than determining who is right, which in turn is less costly than determining who is more powerful. This

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proposition does not mean that focusing on interests is invariably better than focusing on rights and power, but simply means that it tends to result in lower transaction costs, greater satisfaction with outcomes, less strain on the relationship, and less recurrence of disputes.

Focusing on Interests Is Not Enough

Despite these general advantages, resolving all disputes by reconciling interests alone is neither possible nor desirable. It is useful to consider why.

When Determining Rights or Power Is Necessary

In some instances, interests-based negotiation cannot occur unless rights or power pro- cedures are first employed to bring a recalcitrant party to the negotiating table. An envi- ronmental group, for example, may file a lawsuit against a developer to bring about a negotiation. A community group may organize a demonstration on the steps of the town hall to get the mayor to discuss its interests in improving garbage collection service.

In other disputes, the parties cannot reach agreement on the basis of interests be- cause their perceptions of who is right or who is more powerful are so different that they cannot establish a range in which to negotiate. A rights procedure may be needed to clar- ify the rights boundary within which a negotiated resolution can be sought. If a dis- charged employee and her employer (as well as their lawyers) have very different estimations about whether a court would award damages to the employee, it will be dif- ficult for them to negotiate a settlement. Nonbinding arbitration may clarify the parties’ rights and allow them to negotiate a resolution.

Just as uncertainty about the rights of the parties will sometimes make negotiation difficult, so too will uncertainty about their relative power. When one party in an ongo- ing relationship wants to demonstrate that the balance of power has shifted in its favor, it may find that only a power contest will adequately make the point. It is a truism among labor relations practitioners that a conflict-ridden union–management relation- ship often settles down after a lengthy strike. The strike reduces uncertainty about the relative power of the parties that had made each party unwilling to concede. Such long- term benefits sometimes justify the high transaction costs of a power contest.

In some disputes, the interests are so opposed that agreement is not possible. Focusing on interests cannot resolve a dispute between a right-to-life group and an abortion clinic over whether the clinic will continue to exist. Resolution will likely be possible only through a rights contest, such as a trial, or a power contest, such as a demonstration or a legislative battle.

When Are Rights or Power Procedures Desirable?

Although reconciling interests is generally less costly than determining rights, only adjudication can authoritatively resolve questions of public importance. If the 1954 Supreme Court case, Brown v. Board of Education (347 U.S. 483), outlawing racial segregation in public schools, had been resolved by negotiation rather than by adjudica- tion, the immediate result might have been the same—the black plaintiff would have attended an all-white Topeka, Kansas, public school. The societal impact, however,

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would have been far less significant. As it was, Brown laid the groundwork for the elim- ination of racial segregation in all of American public life. In at least some cases, then, rights-based court procedures are preferable, from a societal perspective, to resolution through interests-based negotiation.16

Some people assert that a powerful party is ill-advised to focus on interests when dealing regularly with a weaker party. But even if one party is more powerful, the costs of imposing one’s will can be high. Threats must be backed up with actions from time to time. The weaker party may fail to fully comply with a resolution based on power, thus requiring the more powerful party to engage in expensive policing. The weaker party may also take revenge—in small ways, perhaps, but nonetheless a nuisance. And revenge may be quite costly to the more powerful if the power balance ever shifts, as it can quite unexpectedly, or if the weaker party’s cooperation is ever needed in another domain. Thus, for a more powerful party, a focus on interests, within the bounds set by power, may be more desirable than would appear at first glance.

Low-Cost Ways to Determine Rights and Power

Because focusing on rights and power plays an important role in effective dispute reso- lution, differentiating rights and power procedures on the basis of costs is useful. We distinguish three types of rights and power procedures: negotiation, low-cost contests, and high-cost contests. Rights-based negotiation is typically less costly than a rights contest such as court or arbitration. Similarly, power-based negotiation, marked by threats, typically costs less than a power contest in which those threats are carried out.

Different kinds of contests incur different costs. If arbitration dispenses with proce- dures typical of a court trial (extensive discovery, procedural motions, and lengthy briefs), it can be much cheaper than going to court. In a fight, shouting is less costly than physical assault. A strike in which workers refuse only overtime work is less costly than a full strike.

The Goal: An Interests-Oriented Dispute Resolution System

Not all disputes can be—or should be—resolved by reconciling interests. Rights and power procedures can sometimes accomplish what interests-based procedures cannot. The problem is that rights and power procedures are often used where they are not nec- essary. A procedure that should be the last resort too often becomes the first resort. The goal, then, is a dispute resolution system that looks like the pyramid on the right in Figure 2: most disputes are resolved through reconciling interests, some through deter- mining who is right, and the fewest through determining who is more powerful. By contrast, a distressed dispute resolution system would look like the inverted pyramid on the left in Figure 2. Comparatively few disputes are resolved through reconciling interests, while many are resolved through determining rights and power. The challenge for the systems designer is to turn the pyramid right side up by designing a system that promotes the reconciling of interests but also provides low-cost ways to determine rights or power for those disputes that cannot or should not be resolved by focusing on interests alone.

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Three Approaches to Resolving Disputes: Interests, Rights, and Power 11

Endnotes 1. In order to steer between the Scylla of sexist language and the Charybdis of awkward

writing, we have chosen to alternate the use of masculine and feminine pronouns.

2. This definition is taken from W. L. F. Felstiner, R. L. Abel, and A. Sarat, “The Emergence and Transformation of Disputes: Naming, Blaming, Claiming.” Law and Society Review 15 (1980–81), pp. 631–54. The article contains an interesting discussion of disputes and how they emerge.

3. See W. L. F. Felstiner, R. L. Abel, and A. Sarat, “The Emergence and Transformation of Disputes: Naming, Blaming, Claiming.”

4. In speaking of resolving disputes, rather than processing, managing, or handling disputes, we do not suggest that resolution will necessarily bring an end to the fundamental conflict underlying the dispute. Nor do we mean that a dispute once resolved will stay resolved. Indeed, one of our criteria for contrasting approaches to dispute resolution is the frequency with which disputes recur after they appear to have been resolved. See S. E. Merry, “Dis- puting Without Culture,” Harvard Law Review 100 (1987), pp. 2057–73; A. Sarat, “The ‘New Formalism’ in Disputing and Dispute Processing,” Law and Society Review 21 (1988), pp. 695–715.

5. For an extensive discussion of interests-based negotiation, see R. Fisher and W. L. Ury, Getting to Yes (Boston: Houghton Mifflin, 1981). See also D. A. Lax and J. K. Sebenius, The Manager as a Negotiator (New York: Free Press, 1986).

6. S. B. Goldberg and F. E. A. Sander, “Saying You’re Sorry,” Negotiation Journal 3 (1987), pp. 221–24.

FIGURE 2 | Moving from a Distressed to an Effective Dispute Resolution System

Interests

Rights

Power

Power

Rights

Interests

Distressed System Effective System

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12 Section One Negotiation Fundamentals

7. We recognize that in defining rights to include both legal entitlements and generally ac- cepted standards of fairness, we are stretching that term beyond its commonly understood meaning. Our reason for doing so is that a procedure that uses either legal entitlements or generally accepted standards of fairness as a basis for dispute resolution will focus on the disputants’ entitlements under normative standards, rather than on their underlying inter- ests. This is true of adjudication, which deals with legal rights; it is equally true of rights- based negotiation, which may deal with either legal rights or generally accepted standards. Since, as we shall show, procedures that focus on normative standards are more costly than those that focus on interests, and since our central concern is with cutting costs as well as realizing benefits, we find it useful to cluster together legal rights and other normative standards, as well as procedures based on either.

8. A court procedure may determine not only who is right but also who is more powerful, since behind a court decision lies the coercive power of the state. Legal rights have power behind them. Still, we consider adjudication a rights procedure, since its overt focus is de- termining who is right, not who is more powerful. Even though rights, particularly legal rights, do provide power, a procedure that focuses on rights as a means of dispute resolu- tion is less costly than a procedure that focuses on power. A rights-based contest, such as adjudication, which focuses on which disputant ought to prevail under normative standards, will be less costly than a power-based strike, boycott, or war, which focuses on which dis- putant can hurt the other more. Similarly, a negotiation that focuses on normative criteria for dispute resolution will be less costly than a negotiation that focuses on the disputants’ relative capacity to injure each other. Hence, from our cost perspective, it is appropriate to distinguish procedures that focus on rights from those that focus on power.

9. R. M. Emerson, “Power-Dependence Relations,” American Sociological Review 27 (1962), pp. 31–41.

10. A. O. Hirschman, Exit, Voice, and Loyalty: Responses to Declines in Firms, Organizations, and States (Cambridge, MA: Harvard University Press, 1970). Exit corresponds with avoidance, loyalty with lumping it. Voice, as we shall discuss later, is most likely to be re- alized in interests-based procedures such as problem-solving negotiation and mediation.

11. A fifth evaluative criterion is procedural justice, which is perceived satisfaction with the fairness of a dispute resolution procedure. Research has shown that disputants prefer third- party procedures that provide opportunities for outcome control and voice. See E. A. Lind and T. R. Tyler, The Social Psychology of Procedural Justice (New York: Plenum, 1988); and J. M. Brett, “Commentary on Procedural Justice Papers,” in R. J. Lewicki, B. H. Shep- pard, and M. H. Bazerman (eds.), Research on Negotiations in Organizations (Greenwich, CT: JAI Press, 1986), pp. 81–90. We do not include procedural justice as a separate evaluation criterion for two reasons. First, unlike transaction costs, satisfaction with outcome, effect on the relationship, and re- currence, procedural justice is meaningful only at the level of a single procedure for a sin- gle dispute. It neither generalizes across the multiple procedures that may be used in the resolution of a single dispute nor generalizes across disputes to construct a systems-level cost. The other costs will do both. For example, it is possible to measure the disputants’ sat- isfaction with the outcome of a dispute, regardless of how many different procedures were used to resolve that dispute. Likewise, it is possible to measure satisfaction with outcomes

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Three Approaches to Resolving Disputes: Interests, Rights, and Power 13

in a system that handles many disputes by asking many disputants about their feelings. Second, while procedural justice and distributive justice (satisfaction with fairness of outcomes) are distinct concepts, they are typically highly correlated. See E. A. Lind and T. R. Tyler, The Social Psychology of Procedural Justice (New York: Plenum, 1988).

12. O. E. Williamson, “Transaction Cost Economics: The Governance of Contractual Rela- tions,” Journal of Law and Economics 22 (1979), pp. 233–61; and J. M. Brett and J. K. Rognes, “Intergroup Relations in Organizations,” in P. S. Goodman and Associates, Designing Effective Work Groups (San Francisco: Jossey-Bass, 1986), pp. 202–36.

13. For a summary of the evidence of a relationship between procedural and distributive justice—that is, satisfaction with process and with outcome—see E. A. Lind and T. R. Tyler, The Social Psychology of Procedural Justice (New York: Plenum, 1988). Lind and Tyler also summarize the evidence showing a relationship between voice and satisfaction with the process. For evidence of the effect of participation in shaping the ultimate resolu- tion beyond simply being able to accept or reject a third party’s advice, see J. M. Brett and D. L. Shapiro, “Procedural Justice: A Test of Competing Theories and Implications for Managerial Decision Making,” unpublished manuscript.

14. D. A. Lax and J. K. Sebenius, The Manager as Negotiator.

15. The empirical research supporting this statement compares mediation to arbitration or adjudication. Claimants prefer mediation to arbitration in a variety of settings: labor- management (J. M. Brett and S. B. Goldberg, “Grievance Mediation in the Coal Industry: A Field Experiment,” Industrial and Labor Relations Review 37 (1983), pp. 49–69), small claims disputes (C. A. McEwen and R. J. Maiman, “Small Claims Mediation in Maine: An Empirical Assessment,” Maine Law Review 33 (1981), pp. 237–68), and divorce (J. Pearson, “An Evaluation of Alternatives to Court Adjudication,” Justice System Journal 7 (1982), pp. 420–44).

16. Some commentators argue that court procedures are always preferable to a negotiated set- tlement when issues of public importance are involved in a dispute (see, for example, O. M. Fiss, “Against Settlement,” Yale Law Journal 93 (1984), pp. 1073–90), and all agree that disputants should not be pressured into the settlement of such disputes. The extent to which parties should be encouraged to resolve disputes affecting a public interest is, how- ever, not at all clear. See H. T. Edwards, “Alternative Dispute Resolution: Panacea or Anathema?” Harvard Law Review 99 (1986), pp. 668–84.

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14

Reading 1.2

Selecting a Strategy Roy J. Lewicki Alexander Hiam Karen W. Olander

After you have analyzed your own position and that of the other party and have looked at the contextual issues of the negotiation, you are ready to select a strategy to use in ne- gotiating with the other party. This lengthy preparation allows you to negotiate strategi- cally, adopting a style and plan that are best suited to the situation. As we have noted before, most people skip this preparation; as a result, they negotiate blind. The right strategy greatly improves your odds of a successful outcome.

In this chapter, we will look at five basic strategies that can be used for negotiation. Each strategy applies to a particular set of circumstances and has its own advantages and disadvantages. If you have done your homework, you will be well prepared for selecting the appropriate strategy or combination of strategies for a particular negotiation situation. Note that we say combination of strategies. Most negotiations involve a mixture of issues, and each may be best handled with a different strategy. There is usually no single “best” strategy. Variations in the positions of the parties and the context of the negotiation will affect each negotiation differently. And as negotiations continue over time, each side will make adjustments that may call for shifts or changes of strategy by the other side.

Key Factors That Determine the Types of Strategies

The five basic types of negotiating strategies depend on your combination of preferences for two basic concerns: the relationship with the other negotiator and the outcome of the negotiation itself. The strength or importance of each of these two concerns, and their relative priority, should direct the selection of the optimal negotiation strategy. The other party may select a strategy in a similar manner. If they do not, you will want to give se- rious consideration as to whether you should share this strategic negotiating model with them. Your chances of a good outcome are often better if both parties agree to play by the same rules. The interaction of the two parties’ choices will further influence the negotiation process that actually occurs, and this will have dramatic impact on the outcomes. We will now describe each of these concerns.

Relationship Concerns

First, how important is your past and future relationship with the other party? How have the two of you gotten along in the past, and how important is it for the two of you to get along, work together, and like each other in the future? Perhaps it is very important. Per- haps it does not matter at all. Perhaps it is somewhere between these extremes. If main- taining a good relationship with the other party is important to you, then you should

Source: “Selecting a Strategy,” from Think Before You Speak, by Roy J. Lewicki, Alexander Hiam, and Karen W. Olander, 1996, pp. 54–75. New York: John Wiley & Sons, Inc. Used with permission.

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negotiate differently than if the relationship is unimportant, or if it is unlikely that you can repair the relationship.

The importance of the relationship between the two parties will be affected by a number of factors: (1) whether there is a relationship at all; (2) whether that relationship is generally positive or negative (whether the two of you have gotten along well or poorly in the past); (3) whether a future relationship is desirable; (4) the length of the re- lationship and its history, if one exists; (5) the level of and commitment to the relation- ship; (6) the degree of interdependence in the relationship; and (7) the amount and extent of free, open communication between the parties.

For example, if you are negotiating the purchase of a new car, you may never have met the salesperson before and may not expect to have a continuing relationship. There- fore, your relationship concerns are low. However, if your business uses a fleet of cars and you expect to work with this person on deals in the future, your relationship con- cerns are high, and this will affect negotiations. Or if you are buying the car from your neighbor, and want to continue to have a good relationship with that person, you may negotiate differently than if you are buying it from a stranger.

In the case of a party with whom you have an ongoing relationship, it may be congenial, or it may be antagonistic if earlier negotiations have been hostile. If it is a congenial relationship, you may wish to keep it that way, and avoid escalating emotions. If the relationship has a history of hostility, you may prefer not to negotiate, or you may want to lower the emotional level in the negotiations. This is important if you expect the relationship to continue in the future.

Outcome Concerns

The second factor affecting negotiating strategy is the importance of the outcome of the negotiation. How important is it for you to achieve a good outcome in this negotiation? Do you need to win on all points to gain the advantage? Or is the outcome of only mod- erate importance? Or does the outcome not really matter in this negotiation? For exam- ple, let us return to the car-buying example. If you are buying a car from a dealer, price may be the most important factor, and you may have absolutely no interest at all in the relationship. If you are buying the car from your neighbor, and you want to keep a good relationship with your neighbor, then you might not press as hard to get a good price. Fi- nally, if you are buying the car from your mother simply so that she doesn’t have to worry about it any more, you probably are most concerned about the relationship and care very little about the outcome.

Most of the planning and preparation described in the earlier chapters have focused on the outcome. Hence we will not say much more about outcome concerns here. The impor- tant message in this chapter, however, is that the priority of each of the two negotiating con- cerns, relationship and outcome, will direct the strategy you choose to use for a particular negotiation. The relationship may be your top priority, especially if there is a relationship history and you want to maintain the relationship. In contrast, in many other negotiations, the outcome is the most important factor, as in the example of buying a car. Or relationship and outcome may both be important. This will require working together with the other party in some fashion to effect a result. If the relationship concerns have a strong influence on the

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matter at hand, and you decide to emphasize them over the outcome, then you will select a different strategy than you would select where the outcome is more important.

If we show the relationship and outcome concerns on a graph, with high and low pri- orities for each represented, it looks like Figure 1. The vertical axis represents your degree of concern for the relationship, and the horizontal axis represents your degree of concern for the outcome. When we look at the various quadrants created by different levels of concern for relationship and outcome, five distinctly different strategies emerge:

1. Avoiding (lose–lose): This strategy is shown in the lower left of the diagram. In this strategy, the priorities for both the relationship and the outcome are low. Nei- ther aspect of the negotiation is important enough for you to pursue the conflict further. You implement this strategy by withdrawing from active negotiation, or by avoiding negotiation entirely.

2. Accommodating (lose to win): This strategy is represented in the upper left of the diagram, where the importance of the relationship is high and the importance of the outcome is low. In this situation, you “back off” your concern for the outcome to preserve the relationship; you intentionally “lose” on the outcome dimension in order to “win” on the relationship dimension.

3. Competitive (win–lose): The lower right of the diagram represents high concern for the outcome and low concern for the relationship. You use this strategy if you want to win at all cost, and have no concern about the future state of the relationship.

4. Collaborative (win–win):1 The upper right part of the diagram defines a strategy where there is a high priority for both the relationship and the outcome. In this strategy, the parties attempt to maximize their outcomes while preserving or

16 Section One Negotiation Fundamentals

FIGURE 1 | Negotiation Strategies

High

High

Low

Low

Accommodating

Lose to win

Collaborative

Win–win

Avoiding

Lose–lose

Competitive

Win at all cost Win–lose

Compromise

Split the difference Importance of Relationship

Importance of Outcome

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enhancing the relationship. This result is most likely when both parties can find a resolution that meets the needs of each.

5. Compromising (split the difference): In the middle is an area we will call a com- promising, or “satisficing,” strategy. It represents a combination approach that is used in a variety of situations. For example, it is often used when the parties cannot achieve good collaboration, but still want to achieve some outcomes and/or preserve the relationship. Thus, for example, if the parties cannot achieve good collaboration but do not want to pursue the outcome and abandon the con- cern for the relationship (or vice versa), then a compromising strategy can be effective. It is also often used when the parties are under time pressure and need to come to a resolution quickly. Each party will give in somewhat to find a common ground.

These brief descriptions are ideal or “pure” negotiating situations where there may be only one issue at stake. In contrast, most real-life negotiation situations are frequently complex, and thus are often best addressed by using a mix of strategies. Remember, too, that the other party will be formulating a negotiating strategy. You will find your analy- sis of the other party helpful when you are selecting the appropriate strategy for a par- ticular situation, because you may want to adjust your strategy choice based on what you expect the other to do. If the parties are able to agree on one strategy, negotiations will be easier. In real-life situations, however, each party may start with a different strategy.

We now look at the five basic negotiating strategies in detail. Although you may be inclined to use one particular strategy, it is a good idea to study the components of each strategy carefully. In this way, you can be prepared for the other party’s moves, if they use a different strategy than you anticipated.

Avoiding Strategy (Lose–Lose)

The avoiding strategy is used infrequently, but has merit in certain situations. Our nick- name of this strategy is actually a misnomer, since an active choice of an avoiding strat- egy is not necessarily a “loss” on either the relationship or the outcome. However, since we tend to refer to the more active pursuits of relationship and outcomes as “winning,” we will call the avoiding strategy a “loss” in terms of the outcome and the relationship.

Why would one choose an avoiding strategy? Because negotiations can be costly (in time, money, and relationships) and there are many cases where negotiators would have been better off to drop the matter entirely! The person employing an avoiding strat- egy basically sees negotiation as a waste of time—or not worth pursuing. This person may feel that his or her needs can be met without negotiating. In addition, this person may decide that the outcome has very low value and that the relationship is not impor- tant enough to develop through the negotiation. As a result, the party reasons that nei- ther the relationship nor the outcome is sufficiently important (at least compared with the costs) and so takes no action or simply refuses to negotiate.

If the “avoider” refuses to negotiate when the other party wants to, this may have a negative effect on the relationship. Even when the outcome is unimportant, many people

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will prefer to avoid angering the other party. A more moderate method of avoidance may be to not raise any objections to the proceedings, or simply to not show up. If the other party insists on negotiations, and it is important to preserve the relationship, then you might switch to an accommodating strategy.

The avoiding strategy also is a possibility when a party can pursue a very strong alternative outcome. If a strong alternative is available, the person may choose not to negotiate. For example, if you are looking at two different houses to buy, and both meet your needs, you may choose not to negotiate with one seller because you feel the price is too high and the person is inflexible. So you simply select your alternative and pursue an avoiding strategy in the first negotiation.

Alternatives can provide you with bargaining power in other situations, as we will see. If you have no alternatives, or only weak ones, you may also choose not to negoti- ate. We will discuss alternatives in more depth later in this chapter.

Accommodating Strategy (Lose to Win)

An accommodating strategy is used when the relationship is more important than the outcome of the negotiation. The person using this strategy may prefer to primarily con- centrate on building or strengthening a relationship. Since other people are usually happy when we give them what they want, we may simply choose to avoid focusing on the outcome and give it to the other side, thus making them happy. A second reason is that we may want something else in the future. Since many social relationships are built on rather informal expectations and rules of exchange,2 giving something away now may create the expectation that they need to give us what we want later on. So we give them their preferences now to obtain a better future outcome. A short-term loss is ex- changed for a long-term gain.

For example, in a manager–employee relationship, the employee may want to es- tablish a good relationship with the boss now to have a good evaluation, a raise, or a bet- ter position in the future. The employee may choose an accommodating strategy and not push for a salary increase now, at her three-month review, if it is expected that this will put her in a better position for a raise at the six-month review.

The accommodating strategy may be used to encourage a more interdependent re- lationship, to increase support and assistance from the other, or even to cool off hostile feelings if there is tension in the relationship. If the relationship is ongoing, then it may be particularly appropriate to “back down” now, to keep communication lines open and not pressure the opponent to give in on something that they do not want to discuss. In most cases, this strategy is short term—it is expected that accommodation now will cre- ate a better opportunity to achieve outcome goals in the future. For example, a manager might not urge an employee to take on an extra task right now if the employee is over- loaded with projects and the manager can find another person to complete the task, especially if the manager knows that a big project is coming next week, and everyone is going to have to put in overtime.

In a long-term negotiation or over a series of negotiations, it may happen that one side constantly gives in. This precedent may be noted by the other side and seen as accommodating behavior (which it is). It should not be construed as an invitation to the

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other party to be competitive. But sometimes it is. If this happens to you, the other party will begin to compete and take advantage of your guard being down. You will need to learn how to use damage control and reconnection strategies to overcome these problems.

The accommodating strategy is not usually considered a formal strategy in negoti- ation. Many negotiation books do not even mention accommodation as a viable strategy; however, most of these books also are based on “high outcome concern” strategies (competing or collaborating) and spend less time on specific strategies to improve or strengthen the relationship. There are two important times to consider an accommodat- ing strategy: first, if the outcome is not very important to you, or pursuing the outcome is likely to create too much tension and animosity, and second, if your primary objective is to improve the relationship. In addition, you might decide to switch to an accommo- dating strategy during negotiations, particularly when they reach a point where you no longer wish to press for a resolution.

Competitive Strategy (Win to Lose)

When many people think of negotiation and bargaining, this is the strategy they think of. The competitive strategy is used frequently, so it is important to understand how it works, even if you do not plan to use it yourself.

In a competitive strategy, the outcome of the negotiation is more important than the relationship. Because the outcomes (resources, gains, profits, etc.) are seen as fi- nite and limited in amount or size, the person engaging in a competitive strategy wants to get as much of those outcomes as possible. (We will use the term competition to de- note the person using the competitive strategy.) We call this strategy win to lose be- cause it is likely that while competitors may gain on the outcome, they strain and endanger the relationship between the parties. The thinking and goals in this strategy are short term: to maximize the magnitude of the outcome right now, and to not care about either the long-term consequences of this strategy or the relationship. The rela- tionship with the other party does not matter, for one of several reasons: (1) this may be a one-time negotiation with no future relationship, (2) the future relationship may not be important, (3) the relationship exists, but was poor to begin with, or (4) the other party may have a reputation for hard bargaining or dishonesty, and this strategy is adopted for defensive reasons. At any rate, this strategy is undertaken with the as- sumption that the future relationship with the other party is unimportant, but the spe- cific outcome is important.

The competitive strategy tends to emphasize the differences between the parties, promoting a “we/they” attitude. Thus the relationship during negotiation in a competi- tive situation will be characterized by lack of trust and even by conflict. This contrasts with the collaborative strategy in which differences are minimized and similarities emphasized.

The goal in the competitive strategy is to get the other party to give in, and thus to satisfy the competitor’s needs now. It is based on the “I win, you lose” concept. The competitor will do anything to accomplish the objectives and obtain as much of the pie as possible. This can include a variety of behaviors, including hardball tactics.

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Critical Factors in a Competitive Strategy

A Well-Defined Bargaining Range In a competitive strategy, each side has a bargain- ing range, which consists of a starting point, a target, and an ending point or walkaway. Bargaining occurs because the line bargaining range for each party is different. During bargaining, you attempt to bring the two ranges into overlap so that each party is satisfied.

The starting point is announced or inferred as the negotiations begin. Starting points will be different for the two parties. In new car negotiations, for example, the buyer will have a lower starting point, the seller, a higher one. Usually the buyer makes gradual concessions upward, while the seller will make gradual concessions downward, with the expectation that the two will be able to meet somewhere in the middle. In labor negotiations, labor is usually expected to ask “high” and management to offer “low,” again with the expectation that concessions on each side will result in finding a meeting ground.

Both parties will have a walkaway point, which is the cutoff point, beyond which they will not go. The walkaway point of the other party is usually not known, and is not stated. In fact, they will actively try to keep you from learning their walkaway point, be- cause if you knew it, you would offer them something slightly above it and expect that they would agree! If talks break off because this point has been reached, then you may surmise that the walkaway point of the other party was probably close to, or at, the last offer that the other side made. If this point is not reached, and the parties agree to a resolution, this point may never be known. In future chapters, we will explore ways of discovering competitors’ walkaway points and learn how to turn this knowledge into better outcomes.

As long as the bargaining range for one party in some way overlaps with that of the other party, then there is room for bargaining. (By overlap, we mean that the most the buyer is willing to offer is above the least the seller is willing to accept.) If the ranges do not overlap (and this may not be known at the beginning of the negotiations), then there may be no successful negotiation. The parties will need to decide whether to adjust their bargaining ranges, or to end negotiations.

A Good Alternative An alternative or BATNA3 (best alternative to a negotiated agreement) is an option that can be pursued if the current negotiation fails. It is an out- come outside the scope of the negotiation with this other party, and can be pursued if it appears more attractive than any potential outcome from this negotiation. Alternatives are good to have because they can be weighed against the value of any particular out- come from this negotiation, to decide which is most advantageous. Not only is an alter- native an evaluative tool, it is also a power tool that can be introduced into negotiations in the manner of “I have this alternative that is equally good and costs less. Can you improve on what I will get if I pursue my alternative?”

Alternatives interact with walkaway points to influence the choices you make. For example, say you currently make $25,000 in your job and you are job hunting. You de- cide that you want to find a job making at least $30,000. What do you do if you find a job you like, but it pays only $28,000? Do you take it or not? If there are no other such jobs available (no alternatives) because the economy is sluggish, then you might take the $28,000 job. However, if many alternative jobs are available for the taking, then you may

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hold out for a higher salary. On the other hand, suppose you lose your $25,000 job and you are offered $24,000 for another similar job. Will you take it? Perhaps under these circumstances, you will be more likely to do so. In any negotiation, it is wise to be well- informed of your alternatives and, wherever possible, to use them to your advantage.

Tactics The competitive strategy is also characterized by a number of tactics calculated to enhance the competitor’s position and place the other party at a disadvantage. These include behavioral tactics such as bluffing, being aggressive, and threatening, which can give the competitor power over the other party. While these tactics work sometimes, they also have the problem that they can potentially backfire on the person using them, so they must be employed carefully.

Results and Drawbacks of Using a Competitive Strategy

The competitive strategy can be successful, in spite of being one-sided. People using this strategy usually come away from a negotiation with the belief that they obtained the best that they could.

Negotiations that rely on a competitive strategy can be costly and time-consuming, especially if each party holds out for all its demands. Much time is spent researching, pressuring, and “psyching out” the other party. Further time is consumed making moves and countermoves, trying to figure out what the other party will do. Competitive strate- gies are often compared with strategies used in chess, military warfare, and other tactical, competitive battles. The time spent in these activities is very different from alternative uses of that time; for example, in the collaborative model, this same time could be spent on mutual exploration of issues, sharing of information, and an attempt to find mutually acceptable solutions.

Time and goodwill may also be lost if the competitor anticipates that the other party will be competitive and prepares a competitive strategy. If the other party had not in- tended to be competitive, they may switch strategies when they discover that you have decided to be competitive, thus escalating emotions and increasing conflict. Not only do you lose time, but you may have alienated the other party, hurt the relationship, and toughened them so that they are now willing to give you far less than they might have on the outcome dimension.

A major problem with the competitive strategy is that it is frequently used by inexpe- rienced or untrained negotiators who believe that competition is the only viable strategy. They may be missing opportunities by automatically selecting the competitive strategy. It is important to select a strategy only after thorough investigation of the issues, an under- standing of what strategy the other party is likely to pursue, and some clear decisions about the relative importance of the outcomes and the relationship with the other party.

Likewise, it is possible to underestimate the other parties in a competitive situation. Remember that they, too, have adopted the mission to win at all costs. When using a com- petitive strategy, we tend to underestimate the strength, wisdom, planning, and effectiveness of the other party and assume that even though they are preparing to be competitive too, we can beat them at their game! If you do not pay close attention to their behavioral and verbal clues, you may set yourself up for manipulation by the other party.

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Finally, we need to beware of something called the self-fulfilling prophecy. A self- fulfilling prophecy is something we believe so strongly that we actually make it come true. It often happens in negotiation when one party expects the other to behave in a particular way, and as a result, actually makes the party behave that way. This tends to come true if the other party is using the competitive strategy because they think you are. Anticipating that the other is going to be competitive, we prepare to be competitive ourselves. The cues we give off in this preparation—our language, tone of voice, gestures, and behaviors—let the other party believe that we intend to be competitive. So they behave competitively, which only assures us that our initial assumptions were right.

The Collaborative Strategy (Win–Win)

A collaborative strategy is one in which both parties consider the relationship and the outcome to be equally important. This strategy is also referred to as cooperative or win–win.4 In a collaborative strategy, the parties to the negotiation either begin with compatible goals or are willing to search for ways to pursue their goals so that both can gain. This is in sharp contrast to the competitive strategy, in which the parties believe their goals are mutually exclusive, and only one side can win. The relationship between the parties is very likely an ongoing one, with some established history of give-and-take, so that the parties trust each other and know that they can work together. In addition, collaborative strategies are often initiated when the parties know that they want to es- tablish long-term goals for particular outcomes and for the relationship. For example, many local governments are finding that they simply cannot sustain the operating costs of the past, especially in view of the voters’ unwillingness to accept higher taxes. Know- ing that city budgets have to be cut, departments need to work collaboratively, with each department taking a cut, and try to find creative ways to help each other stay in the black or at least minimize the red.

To make this strategy work, both parties to the negotiation must be willing to use the collaborative strategy; if only one side employs it, and the other uses a different one, the chances are that both parties cannot achieve both an optimal outcome and preserve or enhance their working relationship. A collaborative strategy is particularly appropri- ate within an organization, when two parties have common ground, or in situations where two parties have the same customers, same clients, same suppliers, or same service personnel. In any of these cases, the parties have or want to establish a working relationship, and to keep it working smoothly.

For a collaborative strategy to work, there must be a high degree of trust, openness, and cooperation. The parties look for common needs and goals and engage in mutually supportive behavior to obtain them. Both parties realize that they are interdependent and that their cooperative effort can solve the problems and meet the needs of both sides.

In collaboration, communication between parties is open and accurate. This con- trasts greatly with the competitive strategy, in which the negotiators have a high level of distrust and guard information carefully to prevent the other side from obtaining the advantage.

The parties in a collaborative endeavor have support from their constituencies. The constituencies trust the parties to find common ground and support them in doing so.

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Doing so may mean not achieving absolutely everything the constituency wanted on the substantive issues, and the constituency has to accept this as valid. In contrast, in the competitive strategy, the constituencies usually push the negotiator to get everything he or she can, regardless of the future of the relationship.

Collaborating parties respect deadlines and are willing to renegotiate the time frame if necessary to achieve their goals. Contrast this with the competitive strategy, where time is used as an obstacle or as a power ploy to accomplish one’s own ends.

The collaborative strategy is hard work, but the results can be rewarding. It takes extra time and creativity to build trust and to find win–win solutions. But the outcome and relationship results are usually better for both parties.

Keys to Successful Collaboration

The collaborative strategy has traditionally been underutilized, because most people do not understand the fine points of the strategy and because it is less familiar than the com- petitive strategy. Many negotiations are based on the competitive model, which is the way most people view negotiation—as a competitive situation where one is better off being suspicious of the other, and the fundamental object is to get all the goodies.

Of key importance in a collaborative strategy is commitment. Both parties need to be committed to (1) understanding the other party’s needs and objectives; (2) providing a free flow of information, both ways; and (3) finding the best solution(s) to meet the needs of both sides.5

Understanding the other party’s goals and needs is critical to the collaborative strategy. We suggested that this is important in competitive strategy as well, but for very different reasons. In a competitive strategy, you may know or think you know what the other party wants; but your objective in learning this is to facilitate your own strategy development, and also to strategize how to beat the other side by doing better than them or denying them what they want to achieve. In a collaborative strategy, your objective is to understand their goals and needs so that you can work with them to achieve their goals as well as your own. Good collaboration frequently requires not only understand- ing their stated objectives, but their underlying needs—why they want what they want. In the collaborative strategy, both parties must be willing to ask questions and listen carefully to the answers, to learn about the other’s needs.

Second, to provide a free flow of information, both parties must be willing to vol- unteer information. The information has to be as accurate and as comprehensive as pos- sible. Both sides need to understand the issues, the problems, the priorities, and the goals of the other. They need to fully understand the important context factors in the ne- gotiation. Compare this with the competitive strategy, in which information is closely guarded, or, if shared, often distorted.

Finally, having listened closely to each other, the parties can then work toward achieving mutual goals that will satisfy both parties. To do this, the parties will need to minimize their differences and emphasize their similarities. They will need to focus on the issues and work at keeping personalities out of the discussions. Collaborative goals differ from competitive goals. In competition, the goal is obtaining the largest share of the pie, at any cost, without giving away any information or conceding on any issue. In

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collaboration, each party must be willing to redefine its perspective in light of the col- laboration, knowing that the whole can be greater than the sum of the parts. In this light, having a strong knowledge of the problem area is a definite advantage. While a lack of information can be overcome, starting out with the knowledge is definitely an asset.

To achieve success, each party from the beginning must send signals to the other that will help build trust between and among those negotiating.

Obstacles to the Collaborative Strategy

Both parties to a negotiation must be willing to collaborate if this strategy is to be suc- cessful. It will be difficult, if not impossible, to employ collaborative strategy under the following circumstances:

• One party does not see the situation as having the potential for collaboration.

• One party is motivated only to accomplish its own ends.

• One party has historically been competitive; this behavior may be hard to change.

• One party expects the other to be competitive and prepares for negotiation based on this expectation.

• One party wants to be competitive and rationalizes this behavior.

• One party may be accountable to a constituency that prefers the competitive strategy.

• One party is not willing to take the time to search for collaborative items.

• The negotiation or bargaining mix may include both competitive and collaborative issues. (Sometimes, the two parties can collaborate on collaborative issues and com- pete on competitive issues. Our experience, however, is that competitive processes tend to drive out collaborative processes, making collaboration harder to achieve.)

Most of the foregoing obstacles reflect a conflict between the parties’ preferences for strategy. It may be possible to get the other party to take a different stance if it ap- pears to be desirable in light of the information. Communication is of major importance when you are trying to establish a collaborative relationship.

Compromising Strategy

Ultimately, most negotiating situations are mixed; some bargaining elements are com- petitive in nature, and others can be approached collaboratively. There are times when the relationship is only somewhat important, and the outcomes are only somewhat important. This is where the fifth strategy comes in.

The compromising strategy may be thought of as an “adequate for most occa- sions” approach to negotiation. In this strategy, each side will have to modify its priorities for the relationship and for the preferred outcome(s). In both cases, the parties are making a decision that compromising is preferred because, on the one hand, both parties gain something (an advantage over accommodation or competi- tion), both parties gain something (as opposed to nothing—an advantage over avoid- ing), and yet compromising does not require all the intentional effort required for collaboration. For example, if a manufacturing facility has a mandate to contain

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costs, the union and the factory representatives (whose relationship is usually com- petitive) will want to find an acceptable way to achieve this. The union will want to avoid layoffs. The company may propose a wage freeze. So the two parties may agree on a small wage increase offset by a decrease of the labor pool by attrition rather than layoffs; this is a compromise.

While negotiators usually don’t start off planning a compromise (particularly if a competitive or collaborative strategy is possible), compromising is often seen as an acceptable “second choice.” There are three major reasons to choose a compromising strategy (particularly as a “default” alternative to other strategies):