Many people’s concept of negotiation seems to be informed mainly by the exchanges that lead to “deals” on TV’s myriad antiques shows. You know the routine: a seller sets a high price, a buyer offers considerably less, and the two miraculously meet somewhere in the middle after approximately 15 seconds of alleged haggling. This does not represent real world negotiation.
Such are the wonders of television. Time-constrained producers can ill afford meandering bargaining that might ultimately lead nowhere, and it seems reasonable to infer that viewers wouldn’t stand for it either. Thus almost every encounter is concluded suspiciously swiftly and to the beaming satisfaction of both parties.
Negotiation in the real world – particularly in the sphere of business – tends to be rather more demanding. The process is often long and complex. Reaching an agreement can be regarded as both an art and a science, and a fundamental understanding of the principal dynamics is frequently crucial to attaining a successful result.
Two types of negotiation
Real world negotiation is basically the act of two or more parties, each with different preferences, trying to arrive at a joint decision. They must engage in a tactical exchange of information –questions, answers, readjustments and reiterations – to achieve their shared goal.
1. Distributive negotiation
Aims to divide what we might call the pie of desirable outcomes. This is a win/lose zero-sum scenario. The size of the pie is fixed, and every extra slice that one party gains means a slice lost for the other party.
2. Integrative negotiation
Seeks to find a means of making the pie bigger for all concerned. In other words, because the size of the pie isn’t fixed in the first place, everyone works together to identify and carve up additional slices.
Different scenarios, different strategies
The initial task, then, is to recognise which sort of negotiation is occurring. There might be elements of both, but appreciating which is predominant is essential to making positive progress.
I once worked for a firm that paid 100% above the market rate for a vital component. It lavished a small fortune on lawyers in a desperate bid to get out of a five-year contract, but it couldn’t extricate itself. The director responsible for signing the deal had originally viewed it as a spectacular coup for the company, not realising that this negotiation was distributive rather than integrative.
The disaster had its roots in cognitive bias. We’re all prone to overconfidence in our capacity to analyse and manage uncertainty, which is why it’s important to prepare thoroughly for negotiation and to grasp the other parties’ perspectives. You have to have a feel for everyone else’s interests, strengths and weaknesses – not just your own.
Three key lessons
1. Training can be transformative
It opens people’s eyes to what’s actually negotiable and reveals numerous opportunities for discussion. In my experience, which includes many years of delivering real world negotiation training, participants return to their business lives with a whole new outlook and make step changes for the better.
2. Not everyone can negotiate
Just as it can greatly help many individuals, training can convince some people that this isn’t a task for them and that others should take up the reins. Nobody is ideally suited to everything, so there’s no shame in this – especially when it could save a business a lot of money in bad deals.
3. We’re negotiating all of the time
Training also shows us that negotiation has a role in pretty much everything we do. When we encounter a new colleague, when we give or receive praise or criticism, even when we discuss who should foot a bill – it’s all negotiation. Acknowledging this can help further develop our skills.
Looking back, I think that my limited understanding of negotiation was one of my most significant shortcomings during my early career. I figured that it was just a matter of turning up, indulging in a spot of toing and froing and emerging with a done deal.
The aforementioned antiques shows contribute to the perpetuation of this ill-advised stereotype. So, too, alarmingly, do several programmes purportedly centred on life in business.
The truth is that such portrayals are both misguided and misleading. Real-world negotiation is hugely removed from the convenient whimsy of snapping up a creaky grandfather clock for a tenner, and anyone in business who believes otherwise is likely to pay a much higher price for their failings soon enough.
David Falzani MBE is an Honorary Professor at Nottingham University Business School’s Haydn Green Institute for Innovation and Entrepreneurship and president of the Sainsbury Management Fellowship.