Negotiators often fall back on positional bargaining, the traditional haggling approach to negotiation. One side makes a strong opening demand, the other side stakes their own claim, and they exchange concessions until they either split the difference or come to an impasse. This type of win-lose approach overlooks opportunities to create value as opposed to just distributing value.
You can convert a win-lose negotiation into a win-win negotiation when you:
- Explore the differences that exist between the parties. To find those differences, you have to probe beyond apparent incompatible bargaining positions to understand the other side’s true interests.
- Learn each side’s core interests-the underlying needs, hopes, fears and concerns. Which ones are shared and which ones are different?
- Focusing on differences to create new sources of value may seem counter intuitive. But value-creating differences, those that one party can meet relatively easily, but that offer significant value to the other side, and vice versa, are the key to joint gains.
- Negotiators can capitalize on their differences in interests, priorities, forecasts about the future, risk attitudes, and so on.
To take one example, differences in beliefs about how future events will unfold, e.g., what a key price will be or whether a technology will work, can form the basis of mutually beneficial contingent agreements. In a contingent agreement, the parties bet on their different predictions by stipulating what will happen if each side’s expectations come true. Performance-based clauses in sports or executive contracts and milestone-based payments in strategic alliances are examples of contingent agreements.
In our personal and professional lives, we are taught to look for common ground. Though this is time honored advice, it can lead us away from potential joint gains. By searching for differences in your negotiations, you and your counterpart are likely to discover numerous possibilities to create value and improve everyone’s outcomes.
This article is by Harvard Professor James Sebenius, co-author of the book 3-D Negotiation: Powerful Tools to Change the Game in Your Most Important Deals. He is part of the Program on Negotiation at Harvard Law School.