Distributive negotiation and how to approach it
Distributive negotiation and how to approach it
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Distributive negotiation is the process of dividing up the pie of value in negotiation. Distributive negotiation can be thought of as haggling—the back-and-forth exchange of offers, typically price offers.
The basic structure of a simple distributive negotiation (not win-lose as it is often incorrectly called) can be described as following. It all starts from describing the boundary of each side, which is called red line.
Red line: the point beyond which each party does not agree.
This limit is subjective, which is very normal to happen in any negotiation. Our analysis will be a matter of concern to you. Our analysis will be scientific / rational and therefore objective, but this does not mean that some of the parameters of the problem we describe cannot be subjective. We are talking about human interactions, so this is normal (and desirable).
The boundaries of the two sides, determine the value that each side gives to the negotiated object and jointly the negotiating margin: that is, the points (for example prices) on which an agreement can be reached. One more thing to mention, of course, that they are compatible: for example, the limit of the buyer is greater than the limit of the seller.
The difference between these two limits (when they are numerical, for example prices) determines the added value that results from the specific coexistence (of the two individuals concerned with the subjective determination of their boundaries at the specific time) and which is commonly called "negotiating pie". The aim in this type of negotiation is the sharing of the pie (who will "eat" what); hence the name distributive.
Despite what is commonly understood and said, the distributive negotiations are essentially defined and described so 'simply'. Of course, parameters such as the values of the item under negotiation, the opening offer, the objectives, the alternative offers, remain important. However, sooner or later they will be connected to the only component/building block of the distributive negotiation which is the limit (of each side). To do this, however, we must also introduce the other critical/structural element of (any) negotiation, which in the information (or the lack of the information). That is, what you know and what you do not know about the only unknown in the distributive negotiation that is the limit of the other.
Finally, it worth to mention the usual and substantial difference between the intuitive and detailed evaluation of the results related to distributive negotiations. In this kind of negotiation, while most were very satisfied with the result on an intuitive level, the results (at an analytical level) were not correlated.
This is perfectly normal because, we usually judge how we did based on the goals we had originally set since, after all, we lack the information about the boundary of the other side, which is the best we can achieve. Moreover, in order for the analysis to emerge, information is required that we usually do not have either before or after the negotiation. Therefore, we judge based on our goals and/or how we felt about the process.
How we feel about the outcome of the negotiation, also affects to some extent our relationship with the other side, which is a crucial element especially in sensitive areas negotiations (for example company, family, team etc.).
Distributive negotiation strategies (methodology described by Chris Voss can be applied in any negotiation, Get the book here “Never Split the Difference”)
1. What are my specific goals for this negotiation?
§ Think through best/worst-case scenarios but only write down a specific goal that represents the best case.
§ Set an optimistic but reasonable goal and define it clearly.
§ Write it down.
§ Discuss your goal with a colleague (this makes it harder to wimp out).
§ Carry the written goal into the negotiation.
2. What is a summary of facts up till now?
§ Summarize and write out in just a couple of sentences the known facts that have led up to the negotiation. So you can be ready to respond with tactical empathy with your counterpart
§ Why are you there?
§ What do you want?
§ What do they want?
§ Why?
3. Labels, Accusation Audit
§ Prepare 3-5 labels that summarize how the counterpart feels about these facts. Anticipate how your counterpart feels about these facts you’ve just summarized.
§ It seems like _________ is valuable to you.
§ It seems like you don’t like _________.
§ It seems like you value __________.
§ It seems like _________ makes it easier.
§ It seems like you’re reluctant to _________.
4. Calibrated Questions:
§ Prepare 3-5 calibrated Questions to reveal value to you and your counterpart and identify and overcome potential Deal Killers. Effective negotiators look past their counterparts’ stated positions (what the party demands) and delve into their underlying motivations (what is making them want what they want).
§ What are we trying to accomplish?
§ How is that worthwhile?
§ What’s the core issue here?
§ How does that affect things?
§ What’s the biggest challenge you face?
§ How does this fit into what the objective is?
§ How can I help to make this better for us?
§ How would you like me to proceed?
§ What is it that brought us into this situation?
§ ?How can we solve this problem?
§ What’s the objective? / What are we trying to accomplish here?
§ And the Mother of all questions: “How am I supposed to do that?”
5. Questions to identify behind the table deal killers
§ When the decision is done by committee, you want to get the support of that committee
§ How does this affect the rest of your team?
§ How onboard are the people not on this call?
§ What do your colleagues see as their main challenges in this area?
6. Questions to identify and diffuse deal killing issues
§ People you are negotiating with are comfortable with the way things are. Change might look like they aren’t doing their job. How do you make them look good in the face of such change?
§ Pick 2-3 of these sets of question and ask together to get information that will help you identify the real issue at hand
§ What are we up against here?
§ What is the biggest challenge you face?
§ How does making a deal with us affect things?
§ What happens if you do nothing?
§ What does doing nothing cost you?
§ How does making this deal resonate with what your company prides itself on?
7. Noncash offers:
§ Prepare a list of noncash items possessed by your counterpart that would be valuable.
§ Ask yourself “What could they give that would almost get us to do it for free?”
Voss, Chris. Never Split the Difference (p. 252). Penguin Random House, UK. Hard copy edition.
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Sincerely,
Stathis 👋