How to Negotiate Effectively

Cite this article as:"How to Negotiate Effectively," in The Business Professor, updated August 6, 2019, last accessed July 7, 2020,


What are the Steps to Learn to Negotiate Effectively?

1. Prepare

Preparation is imperative to an optimal level of performance in any given task or undertaking. Negotiations is no different. Preparing for a negotiation requires examination of the situation, oneself, and the counterparty. The objective is to identify the interests, goals, reservations, and influences that will affect the negotiation. This allows the negotiator to develop a strategy and more effectively manage the negotiation process.

2. Identify the context and fundamental structure of the negotiation.

The context of the negotiation involves identifying the interests or objective at issue and the factual circumstances that will affect the negotiation process. This might include information about the interests at stake, the exigency of the circumstances, the method of communication, etc. Notably, you will identify whether the negotiation is primarily distributive or integrative in nature. Determining whether a negotiation is fundamentally “win-lose” or “win-win” is the first step in beginning to develop a strategy to address the situation.

3. Identify the substantive and procedural interests in the negotiation.

  • Creating Value vs Claiming Value – Often, a negotiation begins with “creating”, rather than claiming, value. This entails identifying the value (interests or objectives) that should be (or could be) included in the negotiation. Recall, “expanding the pie” and looking for ways to create additional value for both parties allows for flexibility and overall greater benefit in the negotiation. The creation stage is followed by the value claiming stage. In this stage the parties are attempting to further their own objectives or interests by securing value for themselves. In reality, the creating and claiming value stages are often intermingled, as the parties are only able to ideate upon (brainstorm or generate) a particular interest that is of value to a party after efforts to claim value have begun.
  • Principles vs Interests – Much of the negotiation process is marked by adjusting one’s position and making concessions to accommodate a mutually acceptable outcome. There is an inherent conflict between an individual’s principle-based constraints. That is, an individual may be willing to make concessions with regard to their interests or objectives in the negotiation but not be willing to make concessions with regard to their principles (such as ethics). Understanding and being able to maneuver between such conflict is often necessary.
  • Fairness – Individuals negotiate with the purpose of advancing their positions (interests or objectives). As such, negotiators are oriented to act in their best interests. This must be balanced against the counterparty’s perception of fairness, as this will affect negotiator’s reputation and the on-going relationship with the counterparty. To balance these competing objectives, negotiators can seek to align their interests in the negotiation with their understood ethics and principles of fairness. This may include interpreting the counterparty’s understanding of fairness and seeking to align one’s negotiation strategy and tactics with those perceptions.
  • Strategic Disposition – Often negotiators will approach a negotiation with an intended or identified strategy. Ineffective negotiators will lock themselves to this strategy without an intention or willingness to alter the strategy. The problem with this tendency is that one strategy may work well in one negotiation and not in another. Effective negotiators keep an open mind and are willing to pivot in their negotiating strategy.
  • Extent of Disclosure – Parties to a negotiation generally seek to conceal information about their strategy and alternatives in a negotiation. It is, however, important to disclose information that is relevant and necessary for parties to adequately arrive at a desired outcome. The questions for the negotiator become, “what and how much information should I disclose?” In general, the disclosure of information should be used to manage the perceptions and expectations of the counterparty. A related, yet distinct, question is, “how much information should I withhold?” This becomes important when the information withheld creates a misunderstanding or misimpression with the counterparty. There is a fine line between competitive strategy and dishonest behavior. Remember, failure to adequately disclose material information may constitute fraud (criminal or civil).
  • Trust vs Distrust – Trust is any relationship is generally built upon a party’s perception of the other party. This can come from relationship, position, reputations, or course of dealing. Distrust is a condition where trust does not exist and the party has some indication that the party may not be worth of trust. Distrust arises pursuant to the same conditions. While distrust protects an individual and their position in the negotiation, building trust between the parties can facilitate communication and benefit each party in the negotiation.

4. Focus upon the BATNA

A party will only negotiate if she believes that she can improve her position (with regard to her interests or objectives) by negotiating. In some instances, a party will not fully understand that a negotiation could lead to improvement of their position. This is often the case when a party perceives her relationship with the other party is independent with regard to her interests or objectives. Improving one’s position is necessarily dependent upon the outcome of a situation in the absence of negotiation. This is an individual’s alternative or best alternative to a negotiated agreement (BATNA). The BATNA is the source of power in the negotiations. Understanding one’s own BATNA is essential to effective negotiation. It sets the point at which you should be willing to walk away. The counterparty’s perception of your BATNA (assuming you have not disclosed it) is your power in the negotiation. With this in mind, you must actually be willing and resolute to walk away in the event your alternative is the favorable option. Further, a negotiator has a distinct advantage by understanding another party’s BATNA. Likewise, the counterparty’s BATNA is her source of power. Understanding her BATNA will allow the negotiator to make an offer (and subsequent concessions) that are relevant to the counterparty’s BATNA. It will also allow the negotiator to attempt to influence the counterparty’s BATNA or perception of the advantages to the BATNA.

5. Identify the constraints affecting the negotiation.

Numerous factors outside of the context of the negotiation may affect (or constrain) a negotiator. A skilled negotiator will seek to identify these factors and adjust her negotiation strategy and tactics to deal with them accordingly. By their very nature, some influences on the negotiator are not obvious and may be difficult to discover. Like a counterparty’s reservation point, a negotiation (either personally or via a third party) must observe, communicate, and investigate to uncover these factors. In many cases, the only way to discover the factors affecting a negotiator is for her to reveal them as part of the negotiation or other communications. Examples of factors affecting the negotiation might include: cognitive aspects (logic, emotion, predisposition, bias, ethics or principles, etc.).

6. Develop a strategy to address the counterparty’s interests.

Strategy is generally made up of an orientation as to how to deal with the situation (e.g., such as being argumentative), a plan of action (or inaction) in the situation, and an objective or desired outcome. In developing a strategy, you will have to take into account the heuristics, ethical concerns, and cognitive dispositions of the other party. The actual strategic plan that results is generally a plan of communication that addresses the various personal and contextual constraints on the negotiation. Common constraints include:

  • Managing Relationships, Trust, and Reputation – Negotiations take place in the context of relationships. The relationship may be one of a single interaction/deal/transaction or it may be an on-going. Negotiations should keep in mind the nature of the relationship and take into consideration the need to maintain a relationship into the future. In new and on-going relationships, a negotiator’s reputation is important. A positive reputation can facilitate a counterparty’s willingness to negotiate, the communication in the relationship, trust, and the development of an on-going relationship. Further, reputation transcends the immediate parties and negotiation and affects negotiations with other parties. As such, a negotiator must work actively to foster relationships and build reputation. Tips for building a relationship include: pursuing fairness, acting ethically, avoiding perceptions of dishonesty, and demonstrating competency. Demonstrating competency may include seeking integrative bargains, expanding the pie, demonstrative creativity in the negotiation, and reaching mutually acceptable outcomes.
  • Exercising control over teams or coalitions – The context of a negotiation may change if carries out as part of a team. This is true for intergroup and intragroup negotiation. Also, in any multi-party negotiation, it is common for coalitions to form. A coalition is an alignment of efforts by two or more parties in a negotiation to achieve a common interest or to further or thwart the interests of one or more third parties. As such, coalitions or counterparties may be in favor of or against the negotiator. Negotiators must be able to recognize when coalitions are forming and their objectives. Generally, a negotiator should recognize three types of coalitions and their potential effects.
  • Addressing any Ethical Concerns – Ethics are personal in nature. They are related to morality and distinct from legality.
  • Mitigating conflicts arising from cross-cultural negotiations – Cultures have different values, outlooks, and customs. Understanding these are essential to addressing another party’s needs or interests.
  • Managing the medium of communication – Communication practice varies based upon the method of communication between individuals. Examples of distance media include audio (voice) or visual (written, drawn, photographed, recorded) representations.

Focus on your plan on communication and how you will address the cognitive disposition of the counterparty with regard to the interests at stake.

7. Review and choose tactics for implementing your strategic plan.

Strategy is a plan or orientation toward an objective. Tactics are the specific actions taken to carry out a strategy or achieve an objective. For example, winning the hearts and minds of the people is a strategy. Another strategy would be to scare them into submission. Tactics to win the hearts and minds may be to carry out charity work. A tactic for scaring people into submission may be to point a weapon at them. These are extreme examples to demonstrate how a tactic is undertaken in furtherance of a strategy.

8. Practice

You may have heard the adage, “when you have a hammer, everything looks like a nail.” To become a proficient negotiator, it requires practice. Not just any practice – but directed practice. This is the type of concentrated effort that consciously seeks to improve or hone skills rather than achieve a particular outcome. Eventually, like any other activity that requires repetition to achieve proficiency, you will be competent, confidence, and find yourself in control of most negotiations. Your directed practice should include the following:

  • Arming yourselves with an understanding of the negotiation contexts and frameworks is the first step.
  • Next, you must learn the strategies and tactics that correspond with a given situation and counterparty personality type.
  • You will also focus on the many contextual elements that affect the negotiation process and learn to adjust your strategies and tactics appropriately.
  • Then, you will learn to read individuals and situations to effectively devise a negotiation strategy.
  • Lastly, you will work to execute your chosen strategy through numerous tactics and procedures. This is what it takes to become a great negotiator.

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