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What procedures are considered best practices in a distributive negotiation?
As previously discussed, a distributive negotiation is generally competitive in nature. One party gains in a negotiation at the expense of the other party. Distributive negotiations can, nonetheless, be successful when there is a positive zone of potential agreement (ZOPA). Generally, issues threatening the success of a distributive negotiations arise because of how the pie is sliced. Below is a proposed approach for dealing with a distributive bargaining situation.
• Step 1: Determine the interest or benefit at stake.
• Step 2: Assess your BATNA (and seek to improve it).
• Step 3: Determine your reservation point (do not reveal it).
• Step 4: Research the counterparty’s BATNA and estimate her reservation point.
• Step 5: Determine your target point (be realistic, but optimistic).
• Step 6: Assess your strategic position and objectives. In a separate section, we discuss developing a strategic plain. The process begins with setting a strategic orientation (cooperative, competitive, aggressive, deliberate, etc.) You must also assess your strategic objectives (such as building trust, establishing a relationship, appealing to logic, etc.). Finally, you will develop a plan for achieving your objectives in a way consistent with your strategic orientation. This will include general efforts you will undertake and the tactics you will employ.
• Step 7: Set your Anchor. If you have a strong understanding of the interests and position of the other party, make the first offer. If you are clueless about the other side’s position, you may need to let the other party open. Just remember, your first offer represents the most important anchor point – so anchor high (but maintain reason). If the other party makes the first offer that is outside of your best understanding of the ZOPA, you will need to immediately re-anchor above your target point.
⁃ Note: Avoid the winner’s curse, situation in which a negotiator makes an offer that is immediately accepted by the opponent, thus signaling the fact that the negotiator offered too much. Avoid boulwarism, a bargaining style in which one’s first offer is one’s final offer.
• Step 8: Plan your concessions. Based upon your perception of the situation and the other party, develop a plan for how you will approach concessions. You may follow a pattern. For example, you could plan to make multiple small concessions followed by a large concession to signal a “bottom line” or final negotiation point. Any plan should concern the extent of concession (small or large) and the frequency or timing.
• Step 9: Make a final offers. The final offer should express to the other side that there is no further room for negotiation. As previously noted, a major concession following multiple smaller concessions can signal a final offer without expressing it. In some instances, you may want to simply state that this is your final offer. If the counterparty’s final offer is not acceptable, try to shift focus and appear not to recognize it.
⁃ Note: Do not fall for the “let’s split the difference” ploy, unless it benefits you. Early in the negotiation, this is generally a bad idea. One party inevitably leaves value on the table. This tactic can, however, be useful if the parties reach an impasse in final offers.
• Discussion: Do you think that taking a logical and organized approach to all negotiations is possible or advisable? Can you think of any other steps to include in the planning process? Can you see how each of the elements covered in framing up a negotiation are at plan when planning?