By Charles B. Craver
When people prepare for bargaining encounters, they spend hours on the factual issues, the legal issues, the economic issues, and the political issues. They spend no more than ten to fifteen minutes on their negotiation strategy. When they begin their interaction, they have only three things in mind relating to their negotiation strategy: (1) where they plan to begin; (2) where they hope to end up; and (3) their bottom line. Between their opening offer and the conclusion of their encounter, most individuals “wing it”thinking of the interaction as wholly unstructured. If they only understood how structured bargaining transactions are, they would know what to do during each stage of the process.
In this article, we will explore the six distinct stages of the negotiation process: (1) preparation; (2) establishment of negotiator identities and the tone for the interaction; (3) information exchange; (4) exchange of items to be divided; (5) closing the deal; and (6) maximizing the joint returns. We will discuss the purpose of each stage and the most effective ways to accomplish the objectives underlying each.
There is no substitute for thorough preparation when individuals have to negotiate. Information is power, and the person who is better prepared will exude an inner confidence that is likely to undermine the confidence of her less prepared adversary. People must know the relevant facts, economic issues, and, where applicable, any legal or political issues. Someone planning to purchase a new car needs to know what the dealer paid for the vehicle in question. They should never look at a dealer invoice, because it is a basically meaningless document that doesn’t tell you how much the dealer actually paid. It doesn’t include the 2-4% “hold-back” which the dealer gets if it sells the car by a certain date, and manufacturer-to-dealer rebates and incentives that are almost always in the hundreds of dollars and often several thousand dollars. The best way to obtain such information is to go on line to edmunds.com or kbb.com. These sites have good estimates of actual dealer cost. Someone negotiating the salary for a new job should also do his or her homework. What are similar positions paying? By asking friends in the industry or looking on-line at monster.com or careerbuilder.com the candidate can get a good idea of what similar positions are paying. When in doubt, negotiators should always spend extra time making sure they have generated as much information as they can about the matter to be addressed.
When bargainers have gathered all of the relevant information, they have to ask themselves three critical questions. First, what happens to their side if no agreement is reached? Roger Fisher and William Ury, in their best-selling book Getting to Yes, call this your BATNA for your Best Alternative to a Negotiated Agreement. I simply call it my “bottom line,” recognizing that I don’t wish to enter into any agreement that would be worse than this point. Negotiators must always remember that bad deals are worse than no deals when their nonsettlement alternatives would be preferable to what they have agreed upon. Most negotiators ask this initial question to determine their bottom lines, but they fail to ask the second part of this question. What happens to the opposing party if he fails to reach an agreement with you? It is imperative for bargainers to place themself in the shoes of the other side and estimate what would probably happen to it if they did not achieve an agreement with this side. People who only know their own bottom lines generally behave as if their opponents have no pressure to settle, and they concede all of the bargaining power to their adversaries. If the opposing side’s nonsettlement alternatives are worse than this party’s, that side has more pressure to settle, and this side possesses more bargaining power....