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Chapter 1
The Nature of Negotiation
Overview
This chapter is the foundation for the nature of negotiations. Friends, children, businesses,
police, nations, everyone negotiates almost daily. Negotiations occur for two reasons: (1) to
create something new that neither party could do on his or her own, or (2) to resolve a problem
or dispute between the parties. Perspectives used to understand different aspects of negotiations
include theory, research from economics, psychology, political science, communication, labor
relations, law, sociology, and anthropology.
Learning Objectives
1. Authors’ style and approach.
2. Characteristics of a negotiation situation.
3. Interdependence in negotiation.
4. Mutual adjustment throughout negotiations and making and interpreting concessions.
5. Value claiming and value creation.
6. Definition and levels of conflict.
7. Major strategies for conflict management.
I. Authors’ Style and Approach
A. Use of terminology.
1. Bargaining: describes the competitive win-lose situations (haggling).
2. Negotiation: refers to win-win situations (to find mutually acceptable solutions).
B. “Heart of Negotiation” ̶ give-and-take approach.
1. Give-and-take is extremely important, but negotiation is a very complex social
process, where many of the most important factors that shape the negotiation occur
before the negotiation, or shape the context around the negotiation.
C. Insights drawn from three sources.
1. Personal experience.
2. Media – television, radio, newspaper, magazine, and Internet.
3. Social science research.
II. Joe and Sue Carter
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An illustrative tale of negotiation.
III. Characteristics of a negotiation situation
A. Characteristics common to all negotiation situations.
1. There are two or more parties, individuals, groups or organizations.
2. There is a conflict of needs and desires between two or more parties, and the parties
must search for a way to resolve the conflict.
3. Parties negotiate because they think they can get a better deal by negotiating than by
simply accepting what the other side will voluntarily give them or let them have.
4. When negotiating, a give-and-take is expected. To reach an agreement, both sides
will modify their opening statement to find a middle ground; they compromise.
5. The parties prefer to negotiate and search for agreement rather than to fight openly,
have one side dominate and the other capitulate, permanently break off contact, or
take their dispute to a higher authority to resolve it.
6. Successful negotiation involves the management of tangibles and also the resolution
of intangibles.
a) Tangible factors: the price or the terms of agreement.
b) Intangible factors: The underlying psychological motivations that may directly or
indirectly influence the parties during a negotiation. They have an enormous
influence on negotiation processes and outcomes, so it is crucial for negotiators to
understand how they affect decision making and tangible outcomes. Examples of
intangible factors include:
(1) The need to “win” or avoid losing.
(2) The need to look “good” to those you’re representing.
(3) The need to defend an important principle or precedent in a negotiation.
(4) The need to appear “fair” or “honorable” or to protect one’s reputation; and
(5) The need to maintain a good relationship.
IV. Interdependence
A. Working interdependently allows parties to achieve a possible outcome that is better than
they could achieve by working on their own.
B. Most relationships between parties may be characterized in one of three ways:
independent, dependent, or interdependent.
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1. Independent parties are able to meet their own needs without the help and assistance
of others.
2. Dependent parties must rely on others for what they need; the dependent party must
accept and accommodate to that provider’s whims and idiosyncrasies.
3. When the parties depend on each other to achieve their own preferred outcome they
are interdependent; they are characterized by interlocking goals.
C. Types of interdependence affect outcomes.
1. The interdependence of people’s goals, and the structure of the situation in which
they are going to negotiate, strongly shapes negotiation processes and outcomes.
a) Zero-sum distributive: Competitive situation where there is only one winner.
b) Non-zero-sum integrative: Goals are linked to achieve a mutual gain.
D. Alternatives shape interdependence.
1. BATNA: Best Alternative to a Negotiated Agreement.
a) Whether you should or should not agree on something in a negotiation depends
upon the attractiveness of your best available alternatives.
b) Negotiators need to understand their BATNA, as well as the other parties’.
V. Mutual Adjustment
A. Interdependent parties have an influence on the others’ outcomes and decisions. As
parties act to influence each other in a negotiation, they engage in a mutual adjustment.
1. It is important to recognize that negotiation is a process that transforms over time, and
mutual adjustment is one of the key causes of the changes that occur during a
negotiation.
2. An example would be to look at Sue Carter’s job situation. She would like to leave
her present employer and take an available job at a large multinational bank. The job
description announced the salary as “competitive.” Her prospective manager, Max,
perceives her as a desirable candidate and is ready to offer her the job. She did not
state her minimally acceptable salary. She has decided the bank will pay no more
than necessary and that her minimum would be accepted quickly.
a) A closer look reveals that she is making her decision on how she anticipates Max
will react to her actions.
b) Sue is assessing the indirect impact of behavior on herself.
c) Sue is choosing among behavioral options with a thought: not only how they will
affect Max, but also how they will then lead Max to act toward Sue.
d) Sue knows that Max believes she will act in this way and makes her decision on
the basis of this belief.
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3. The effective negotiator needs to understand how people will adjust and readjust, and
how the negotiations might twist and turn, based on one’s own moves and the others’
responses.
4. The best strategy for successful mutual adjustment to the other is grounded in the
assumption that the more information one has about the other person, the better.
5. Mutual adjustment and concession making.
a) When one party alters his/her position based on the other party’s suggestion to do
so, a concession has been made.
b) Concessions constrain the bargaining range.
6. Two dilemmas that all negotiators face in mutual adjustment:
a) Dilemma of honesty – how much of the truth to tell the other party?
b) Dilemma of trust – how much should negotiators believe what the other party tells
them?
7. Two efforts that help a negotiation create trust and beliefs:
a) Outcome perception.
b) Process perception.
8. The pattern of give-and-take is also essential to joint problem solving in most
interdependent relationships. Satisfaction with negotiation is as much determined by
the process through which an agreement is reached as with the actual outcome
obtained.
VI. Value Claiming and Value Creation
A. Distributive bargaining.
1. The purpose this type of negotiation is to claim value—to do whatever is necessary to
claim the reward or gain the largest piece possible.
B. Integrative bargaining.
1. The purpose of this approach to negotiation is to create value, or find a way for all
parties to meet their goals and share the reward.
C. Most negotiations are a combination of claiming and creating value. There are
significant implications to this:
1. Negotiators must be able to recognize situations that require more of one approach
than the other;
2. Negotiators must be versatile in their comfort and use of both strategic approaches;
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3. Negotiator perceptions of situations tend to be biased toward seeing problems as more
distributive / competitive than they really are.
D. Successful coordination of interdependence has the potential to lead to synergy, which is
the notion that “the whole is greater than the sum of its parts.”
E. Lax and Sebenius in their book “The Manager as Negotiator,” describe key differences
among negotiators:
1. Differences in interests;
2. Differences in judgments about the future;
3. Differences in risk tolerance/aversion; and
4. Differences time preference.
F. Negotiators need to be aware of the potential differences between them can serve as
barriers to reaching an agreement. Exploring common and different interests to create
value can set the foundation for a lasting agreement.
VII. Conflict
A. Definitions of conflict may be a sharp disagreement or opposition, as of interests, ideas,
etc. and includes the perceived divergence of interest or a belief that the parties’ current
aspirations cannot be achieved simultaneously (both from Pruitt and Rubin, 1986).
B. Levels of conflict:
1. Intrapersonal or intrapsychic conflict occurs within an individual. Sources of conflict
can include ideas, thoughts, emotions, values, predispositions, or drives that are in
conflict with each other.
2. Interpersonal conflict that occurs between bosses and subordinates, spouses, siblings,
or roommates.
3. Intragroup conflict is within a small group – among team and committee members
and within families, classes, fraternities and sororities and work groups.
4. Intergroup conflict between unions and management, warring nations, feuding
families, or community action groups and government authorities.
C. Functions and dysfunctions of conflict:
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1. Competitive, win-lose goals.
2. Misperception and bias.
3. Emotionality.
4. Decreased communication.
5. Blurred issues.
6. Rigid commitments.
7. Magnified difference, minimized similarities.
8. Escalation of the conflict.
D. Functions and benefits of conflict:
1. Discussing conflict makes organizational members more aware and able to cope with
problems.
2. Conflict promises organizational change and adaptation.
3. Conflict strengthens relationships and heightens morale.
4. Conflict promotes awareness of self and others.
5. Conflict enhances personal development.
6. Conflict encourages psychological development—it helps people become more
accurate and realistic in their self-appraisals.
7. Conflict can be stimulating and fun.
E. Factors that make conflict easy or difficult to manage.
VIII. Effective Conflict Management
A. The two-dimensional framework is represented as the dual concerns model. The model
postulates that individuals in conflict have two independent levels of concern:
1. Concern about their own outcomes.
2. Concern about the other’s outcomes.
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B. Five major strategies for conflict management have been identified in the dual concerns
model:
1. Contending (also called competing or dominating).
2. Yielding (also called accommodating or obliging).
3. Inaction (also called avoiding).
4. Problem solving (also called collaborating or integrating).
5. Compromising is the strategy located in the middle.
Summary
People negotiate almost daily, sometimes for major things like a new job, other times for
relatively minor things, such as who will take out the trash. Negotiations occur to create
something new or to resolve a problem or dispute between parties.
Characteristics common to all negotiation situations include two or more individuals, groups, or
organizations, interpersonal, intragroup, or intergroup process. There is a conflict of interest
between two or more parties. The parties negotiate because they think they can use some form
of influence to get a better deal. The parties prefer to search for agreement rather than fight
openly, have one side capitulate, permanently break off contact, or take their dispute to a higher
authority to resolve it. When you negotiate, expect to give and take. Successful negotiation
involves the management of intangibles and well as the resolving of intangibles.
Interdependent relationships are characterized by interlocking goals; the parties need each other
in order to accomplish their goals. A necessary step in all negotiation is to clarify and share
information about what both parties really want as outcomes. When one party accepts a change
a concession has been made. When a party makes a concession, the bargaining range is confined
closer to one or both sides’ limits or resistance point. Two dilemmas all negotiators face are
honesty and trust. Negotiators must understand the nature of the interdependence of the parties.
Negotiators are seldom identical and may include differences in interest, opinions, risk aversion,
and time preferences. The other potential consequence of interdependent relationships is
conflict, which has several levels including intrapersonal or intrapsychic, interpersonal,
intragroup and intergroup. One of the most popular areas of conflict management research and
practice has been to define the different ways that the parties themselves can manage conflict.
Each conflict management strategy has its advantages and disadvantages, and is more or less
appropriate given the type of conflict and situation in which the dispute occurs.