How do you frame up (identify the key characteristics of) a negotiation?
A negotiation should begin by framing up the negotiation from the point of view of both parties. While a party will generally know or be able to identify key characteristics of their own position, she will have to use direct and indirect assessment methods to uncover the characteristics of the other party’s position. If she is unable to uncover these characteristics, she will generally estimate or make assumptions about these positions. Framing up a distributive negotiation should proceed as follows:
- Interests – Each party should seek to understand the extent or degree of importance that each party places on a particular interests. While the interests in a distributive negotiation are usually limited and in direct conflict, there may be an opportunity to integrate other interests into the negotiation. This would allow the negotiators to convert the negotiation in a an integrative negotiation in which interests are traded off to achieve greater value.
- Reservation Point (Resistance Point) – A negotiator’s resistance point is generally equal to her best alternative to a negotiated agreement (BATNA). This is a negotiator’s bare minimum value that she is willing to accept in a negotiation. If the terms of the negotiation cannot meet or exceed the reservation point, the negotiator may walk away from the negotiation. It is incredibly important for a party to recognize her reservation point and prevent another party from discovering it. If the reservation point is not given, negotiators generally derive the reservation point from the alternatives available to a negotiated outcome.
- Alternatives – Alternatives are the options or paths that a negotiator may choose rather than reach an agreement with the other party. Negotiators focus on the best alternative(s) to a negotiated agreement, also known as the BATNA. BATNAs are very important in both distributive and integrative processes because they define whether the terms of negotiation are better than another possibility outside of the present negotiation. To be a BATNA, these other options must meet the negotiator’s needs and be more favorable than could be otherwise negotiated.
- Target Point – The target point is a “aspiration point” for the outcome of the negotiation that meets a party’s objectives or desires. The target point is generally at a point that the negotiator believes is potentially achievable. That is, it should be a realistic objective. The target point may be very subjective depending on the negotiation and the cognitive characteristics of negotiator.
- Zone of Potential Agreement (ZOPA) – Each party’s reservation point establishes the ZOPA. In theory, any point in this zone is a potential outcome of the negotiation. Any adjustments or concessions in the negotiation will take place within this range. It is important to note that a party’s ZOPA is subject to change as the negotiation develops. The bargaining zone can be positive or negative. A positive zone gives the opportunity for reaching an agreement. A negative ZOPA does not allow for a negotiated agreement. For example, if a buyer is willing to pay up to $7 and the seller is willing to sell for as little as $5, there is a positive ZOPA. If the seller will not take less than $8 and the buyer cannot pay more than $6, there is a negative ZOPA. In a negative bargaining zone, parties should pursue other alternatives. If parties fail to reach agreement in a positive bargaining zone, the result is suboptimal.
- Bargaining Range – The bargaining range is established by the points from which the parties begin to negotiate (their “anchor points”). The bargaining range will be constricted by concessions during the bargaining process. The bargaining range may be wider than the ZOPA; however, to reach a negotiated agreement, the bargaining range must constrict within the ZOPA.
- Settlement Point – This is the negotiated outcome of a successful negotiation. The settlement point always falls within the Zone of Potential Agreement and provides a measurement point for assessing a negotiator’s success in the negotiation. The amount or extent of interests or value claimed by a negotiator beyond her reservation point is known as the “negotiator’s surplus”. Both parties to a negotiation will have a surplus; however, a comparison of negotiator surplus will indicate which party was more successful in the negotiation.
- Suboptimal Outcome – If the parties fail to reach an agreement within the ZOPA there is a suboptimal outcome. It may result from one party walking away from the negotiation or accepting a settlement point that is outside of the ZOPA. In any event, one or both parties will be in an inferior position or reap less value than was possible.
Once the negotiator develops an understanding (or makes assumptions) about the her own position and the other party’s position, she can develop a strategy. The remaining attributes of the negotiation that may affect strategy are the applicable constraints. Constraints on a negotiation are innumerable. These are generally contextual in nature and unique to the specific negotiation. Some commonly understood constraints might include: location of the negotiators, language or communication ability, cultural influences on the negotiator, medium of communication (phone, internet, teleconference, etc.), team or cohort communications, third party veto or decision-making authority, etc.