What People Still Get Wrong About Negotiations

Most of the parties in negotiations don’t made wise trades across the various issues – outcome they throw corporate cash in the garbage can and burn it.  The question is: Why?

There are two main reasons. First, many executives mistakenly believe that they’re negotiating over a fixed pie and that gains for one side necessarily mean losses for the other. Second, they focus exclusively on how to claim value for themselves (by taking as much as they can of that mythical fixed pie) rather than coming up with ways to increase the size of the pie.

The simple genius of value creation in negotiation is that everybody benefits. That principle is not new, but I find that people at all managerial levels have lost sight of it and urgently need to be reminded. In our political, social, personal, and professional lives, we’ve become more polarized and intransigent than ever. We’re less willing and able to see our counterpart’s point of view. We’re less inclined to engage in problem-solving, and without the understanding that comes from that process, we have trouble finding mutually beneficial deals. As the policy expert Heather McGhee explains in The Sum of Us, we routinely forgo the “solidarity dividend”—the gains we could achieve from working productively across boundaries to accomplish what we can’t do on our own. In short, despite what we’ve learned over the years, we keep getting negotiation wrong.

Some of the negotiation strategies that can help you become the best value creator possible are:  

Preparing for Value-Creating Negotiations.  Before entering into a negotiation, it’s important to think through all the issues that you and your counterpart might care about.  Once you’ve identified a broad list of issues, the next step is to determine their relative importance. Every multi-issue negotiation will require you to make trade-offs, explicitly or implicitly. 

No issue should be resolved first. Any process that negotiates the issues sequentially is a barrier to finding the trades across issues that allow for value creation. This doesn’t mean that you need to talk about everything at the same time. But it does mean that you should avoid finalizing an agreement on any one issue before you’ve had the opportunity to discuss them all. Once you have a better idea of the totality of issues on the table, you can begin exploring relative preferences across issues, finding trades, and creating value. In economics lingo, your goal should be to jointly define the Pareto-efficient frontier—that is, the range of options such that there is no option that is better for one or more parties without making another party worse off.

All too often, however, negotiators fail to share information about preferences on the various issues, fearful that they will be exploited if the other side knows what they value. They keep all their cards hidden and assume that this is the secret to being a tough negotiator.  To elicit the information necessary to create value, resolve conflicts, and reach efficient agreements.  The author recommends four strategies. You should have all of these in your toolbox and know how to select the right one for a given situation:  Build trust and share information.  Ask questions.  Give away some information. And Make multiple offers simultaneously. 

So which of the above negotiation strategies should you start with to create more value? That depends on the context. If you have a great relationship with your counterpart, strategy 1 will be the obvious choice: You share information, turn the negotiation into a problem-solving session, and work together to define the Pareto-efficient frontier. If your relationship is good but not good enough for strategy 1, move on to strategies 2 and 3. In cases where trust is low or the relationship is weak, strategy 4 can help you create value.

Many of us have made deals we aren’t fully satisfied with— and perhaps the other side isn’t either. In such cases, there may still be value left on the table. So why stop just because you’ve come to an agreement? Why not try to improve the deal with a post-settlement settlement (PSS), an idea first suggested by the decision theorist Howard Raiffa.

show less