A process in which two or more parties which has different preferences must take a joint decision and come to an agreement.
We know that lawyers and auto sales people spend a significant amount of time on their jobs negotiating. But so too, do managers. They have to negotiate salaries for incoming employees cut deals with their houses work out differences with their peers and resolve conflicts with employees. Others have to negotiate labor contracts and other agreements with people outside their organizations. For our purposes we will define negotiation as a process in which two or more parties that have different preferences must make a joint decision and come to an agreement. To achieve this goal both parties typically use a bargaining strategy.
How do bargaining strategies differ?
Two general approaches to negotiation are distributive bargaining and integrative bargaining. Let’s see what is involved in each.
You see a used car advertised for sale in the newspaper. It appears to be just what you’ve been looking for. You go out to see the car. It’s great and you want it. The owner tells you the asking price. You don’t want to pay that much. The two of you then negotiate over the price. The negotiating process you are engaging in is called distributive bargaining. Its most identifying feature is that it operates under zero sum conditions. That is any gain you make is at the expense of the other person and vice versa. Every dollar you can get the seller to cut from the price of the used car is a dollar you save. Conversely every dollar more he or she can get from you come as your expenses. Thus, the essence of distributive bargaining is negotiating ever who gets what share of a fixed pie. Probably the most widely cited examples of distributive bargaining are traditional labor management negotiations over wages and benefits. Typically labor’s representatives come to the bargaining table determined to get as much as they and from management. Because every cent more that labor negotiates increases management’s costs, each party bargains aggressively and often treats the other as an opponent who must be defeated. In distributive bargaining each party has target point hat defines what he or she would like to achieve. Each also has a resistance point that marks the lowest acceptable outcome. The area between their resistance points is the settlement range. As long as these ranges of aspiration overlap each other to some extent there exists a settlement area in which each one’s aspirations can be met.
When engaged in distributive bargaining you should try to get your opponent to agree to your specific target point or to get as close to it as possible. Examples of such tactics are persuading your opponent of the impossibility of getting to his or her target point and the advisability of accepting a settlement near yours; arguing that your target is fair, but your opponent’s isn’t and attempting to get your opponent to feel emotionally generous toward you and thus accept an outcome close to your target point.
Negotiation in which there is at least one settlement that involves no loss to either party.
The sales credit negotiation is an example of integrative bargaining. In contrast to distributive bargaining integrative problem solving operates under the assumption that at least one settlement can create a win-win solution. In general integrative bargaining is preferable to distributive bargaining. Why? Because the former builds long term relationships and facilitates working together in the future. It bonds negotiators and allows each of leave the bargaining table feeling that he or she has achieved a victory. Distributive bargaining on the other hand leaves one party a loser. It tends to build animosities and deepen divisions between people who have to work together on an ongoing basis.
Why, then don’t we see more integrative bargaining in organization s? The answer lies in the condition necessary for this type of negotiation to succeed. These condition include openness with information and frankness between parties a sensitivity by each party to the other’s needs the ability to trust one another, and willingness by both parties to maintain flexibility, Because many organizational cultures and intra-organizational relationships are not characterized by openness trust and flexibility it isn’t surprising that negotiations often take on a win at any cost dynamics.