Carlos, a candidate for a job in your group, is watching you carefully. He’s a good fit for the job — in
fact, you think he would be a star. You are pleased to have such an excellent candidate, but so far, he is showing no signs that he will negotiate on salary. Are you a good enough negotiator to find a creative solution? Or will he thank you as he shakes your hand and walks out the door to accept another company’s offer?
You negotiate every day at work. Some of those negotiations are formal, such as with job candidates like Carlos. But far more negotiations are informal. If you have a disagreement about a due date or a decision, for example, you negotiate a solution. To reach your goals for your group, you must be a good negotiator.
What does it mean, though, to be a good negotiator? Does it mean that you always get what you want, even at the expense of the other party?
For a horse trade — or what’s called a zero-sum negotiation — the answer to that question is a
definitive yes. You are working with one source of value, usually money. So a gain by one side means a loss by the other. Think about buying a car. If you pay less — in other words, if you negotiate well
— the seller makes less. You gain, the seller loses.
At work, though, you typically are not involved in zero-sum negotiations. Instead of one source of value, there are many — and that changes everything. Here’s an example. Aaron is an office supply dealer who is negotiating with Betsy. Both Aaron and Betsy want a long-term relationship — this is
not a one-off purchase like a car. Aaron offers Betsy a volume discount on office supplies; in return, Betsy sets up meetings for Aaron with peers in her company. In this scenario, both sides win: Betsy gets her discount and Aaron gets valued leads.
For you to be a good negotiator, you must be able to find solutions that give both parties something they want. You can use many strategies to drive negotiations toward win-win solutions — let’s look at
three. As you begin negotiating, you need to:
Decide what you will do if the negotiation falls through
Identify your walk-away price and the area of possible agreement, and
Look for opportunities to create value
The first strategy for negotiations is to decide what you will do if the negotiation falls through —
before you begin to negotiate. This is called your BATNA, or your “Best Alternative To a Negotiated Agreement.” In the hiring situation, for example, if you are unable to reach an agreement, your BATNA might be to use a temporary contractor.
As you identify your BATNA, you want to consider what would happen if the negotiations fell through. How much of your time would be required to find and hire a temporary contractor? What would you have to pay that contractor? What would it cost your group to invest time in teaching the contractor, who might leave six months later? Reflecting on such questions helps you identify both your BATNA and your walk-away price.
The second strategy for negotiations is to identify your walk-away price and the area of possible
agreement. Your walk-away price is often called the reservation price: It’s the least favorable point at
which you will accept a deal.
Your reservation price is usually influenced by your BATNA. The moment when your deal with the contractor — which is the BATNA in our example — looks better than your deal with the job
candidate, you are likely to walk away from the negotiations.
The other party also has a reservation price — for our job candidate that might be to continue his job
search or take another job. By studying the other person’s needs and goals, you can guess at that
person’s reservation price. Between the two reservation prices — yours and the other party’s — is the
area, or Zone, Of Possible Agreement, called the ZOPA. The larger the ZOPA, the more likely the two parties will reach an agreement.
In some zero-sum negotiations, there may not be a zone of possible agreement. Imagine your reservation price for a car negotiation is $20,000 and the seller’s reservation price is $25,000. There is no overlap in the prices that each of you would accept, so there can be no agreement. The third strategy for negotiations is to look for opportunities to create value. You want to widen
the zone of possible agreement — so that both people can leave satisfied. To widen the ZOPA, look
for creative solutions that might offer something of value to the other party. Think back to your job candidate — would the option to work at home two days a week be something that Carlos might value highly? Or perhaps flexible hours? What else might induce him to consider a lower salary? Your success as a negotiator depends on your creativity in locating additional sources of value. But why take on this challenge alone? If you frame the negotiations as a collaboration, you can work together to locate sources of value. Share some of your needs and goals, and ask about the other party’s interests. Focus on the differences in your interests — what matters to you that the other person
might be willing to trade? And what is of keen interest to the other person that perhaps is not that important to you?
By applying these three strategies — deciding what you will do if the negotiation falls through,
identifying your walk-away price and the area of possible agreement, and looking for opportunities to create value — you will sharpen your skills as a negotiator. Then you will be able to engineer solutions that satisfy both parties in the negotiations — truly a win-win.