Stages in negotiation

Types of negotiations

There are basically two types of negotiation. Distributive (competitive, or win-lose) negotiations involve a situation where the negotiating parties have directly opposing goals, or at least there is some sort of conflict, often regarding price or how limited resources should be shared. What is important is getting the best deal possible. Any gains made by party A are regarded as a loss by party B.

Integrative or win-win negotiation is characterized by discussion and exploration where parties focus on what they have in common; they actively seek outcomes where A and B both gain. The aim of win-win negotiation is to find a solution that is acceptable to both parties. Both sides take away something positive from the deal.

Most negotiations are neither wholly distributive nor wholly integrative; it is more of a continuum. One of the key skills of any negotiator is the ability to recognize potential for moving away from a win-lose situation to win-win.

The outcome of the negotiation conference may be a compromise satisfactory to both sides, a standoff (failure to reach a satisfactory compromise) or a standoff with an agreement to try at a later time.

Negotiation begins when there is a counter offer made to the original proposal. The counter offer changes one of the variables: price, deliverables, terms or conditions. In the process of negotiations, an acceptable solution must be found. Otherwise, one party, or both, will walk-away from the proposal. The negotiation ends with no agreement reached.

Effective negotiations occur when each party understands the other’s interests and through collaboration, both parties reach a mutually acceptable solution. Collaboration, not competitiveness, or compromise is the key to building long-term relationships and optimizing results.

Phase I. Before the negotiation

• Preparation. First determine what you want to get of the negotiation; what do you think the other party wants; what you must have and what you are willing to give (bargaining chips).
• Information gathering. Gather facts about the other party, learn about their needs.
• Relationship building: getting to know the other party, understanding how you and the other are similar and different.

Phase 2. During the Negotiation

• Information using: Both parties present the starting proposal. They should listen for new ideas, think creatively to handle conflict and create co-operative environment.
• Bidding: the process of making moves from one’s ideal position to the actual outcome. Bidding is the process by which each party states their opening offer, and then makes moves in that offer, towards a middle ground.
• Closing the deal: Both parties formalize agreement in a written contract or letter of intent.

Phase 3. After the Negotiation

• Implementing the agreement: Determining whoneeds to do what once the hands are shaken and the document signed.

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