Integrative Bargaining

A sales representative for a women’s sport wear manufacturer has just closed a $15,000 order from a small clothing retailer the sales rep calls in the order to her firm’s credit department. She is told that the firm can’t approve credit to this customer because of a past slow payment record. The next day, the sales rep and the firm’s credit manger meet to discuss the problems. The sales rep doesn’t want to lose the business. Neither does the credit manager. But also doesn’t want to get stuck with an uncollectible debt. The two openly review their options. After considerable discussion they agree on a solution that meets both their needs: The credit manager will approve the sale, but the clothing store’s owner will provide a bank guarantee that will ensure payment if the bill is not paid within 60 days. His sales credit negotiation is an example of integrative bargaining. In contrast to distributive bargaining, integrative bargaining operates under the assumption that there exists one or more settlements that can create a win-win solution.

In terms of intra-organizational behavior, all things being equal, integrative bargaining is preferable to distributive bargaining. Why? because, the former builds long term relationship. It bonds negotiators and allows them leave the bargaining table feeling that they have achieved a victory. Distributive bargaining, however, leaves one party a loser. It tends to build animosities and deepen divisions when people have to work together on an ongoing basis.

Why, then don’t we see integrative bargaining in organizations? The answers lies in the conditions necessary for this type of negotiation to succeed These include parties who are with information and candid about their concerns, a sensitivity by both parties to the others needs; the ability to trust one another, and a willingness by both parties to maintain flexibility. Because these conditions often don’t exist in organization, it is not surprising that negotiation often take on a win-at-any-cost dynamics.

There are some ways to achieve more integrative outcomes. For example, individuals who bargain in teams reach more integrative agreements than those who bargain individually. This happens because more ideas are generated when more people are at the bargaining Table. So, try bargaining in teams. Another way to achieve higher joint gain settlements is to put more issues to the table. The more negotiable issues that are introduced into a negotiation, the more opportunity there is for logrolling where issues are traded because of their difference in preferences. This creates better outcomes for each side than if each issue were negotiated individually.

Finally, you should realize that compromise may be your worst enemy is negotiating a win-win agreement. This is because compromising reduces the pressure to bargain integratively. After, all if you or your opponent caves in easily it doesn’t require anyone to be creative to reach a settlement. Thus people end up settling for less than they could have obtained if they had been faced to consider the other party’s interests, trade off issues and be creative. Think of the classic example where two sisters are arguing over who gets the orange. Unknown to the other party, one sister wants the orange to drink the juice, whereas the other sister wants the orange peel to bake a cake. If one sister simply capitulates and gives the other sister the orange then they never would have been forced to explore their reasons for wanting the orange and thus they never would find the win-win solution: They could each have the orange because they want different parts of it.