Negotiating strategically

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Negotiating in a business

Transcript of Negotiating strategically

  • 1. -mvAinilemyolManagemerHtXlCVTIVl. 1989. Vol III. No. I.pp J7-M Consider Both Relationships and Substance When Negotiating Strategically Grant T. SavageJohn D. Blair Ritch i. SorensonTexas Tech UniversityW hen David Peterson, director of services for Dicker-son Machinery, arrives at his office, he notes fourj|)poinlmcnts on his schedule. With his lengthy experienceChoosing Negotiation Strategies in fiegoliating impoilant contracts for this large-equipment Petersons appointments are not unicjue. Researchers repair service, be does not take long to identify the agenda .md scholars have examined similar situations. What strategic lor each appointment. advice does tbe negotiation literature offer tor handlingA sieering c luich disk salesman from Roadworks willthese four situations?arrive al 8:30 a.m. Peterson has relied for years on disksOne of the best developed approat hcs is ,i.,

2. February, 79S9Any one approach to negotiation clearly will not Each interaaion with another negotiator constituteswork in all situations. Executives need a framework for an episode that draws from current and affects future rela-determining what strategies are best in different situations. tionships. Intertwined with pure concerns about relation-We believe the best strategy depends on desired outcomes. ships are concerns about substantive outcomes. Many timesIn this article, we characterize the two major outcomes atnegotiators are motivated to establish or maintain positiveissue in the previous examples as substantive and relation- relationships and willingly "share the pie" through mutuallyship outcomes. Although both types of outcome have been beneficial collaboration. Other negotiations involve substan-(iiscussed in the literature, relationship outcomes havetive outcomes that can benefit one negotiator only at thereceived much less attention. Our contention is that a sys- expense of the other (a fixed pie). These cases often motivatetematic model of strategic choice for negotiation mustnegotiators to discount the relationship and claim as much ofaccount for both substantive and relationship outcomes. Inthe pie as possible.articulating such a model, we suggest that executives canMost negotiations, however, are neither clearly win-approach negotiation strategically by assessing the negotia-win nor win-lose situations, but combinations of both (antion context: considering unilateral negotiation strategies;indeterminate pie). Such mixed-motive situations, in whichtransforming unilateral into interactive negotiation strate-both collaboration and competition may occur, are particu-gies: and monitoring tactics and reevaluating negotiation larly difficult for managers to handle strategically.-" The rela-strategies. tionship that exists prior to the negotiation, the relationshipthat unfolds during negotiations, and the desired relation-ship often will determine whether either negotiator will beAssessing the Negotiation Context motivated to share the pie, grab it, or give it away.At ru( itil context for any negoliation is the managerscurrent and desired relationship with the other party. Unfor-tunately, in their rush to secure the best possible substantiveoutcome, managers often overlook the impact of the nego-lidtion on their relationships. This oversight can hurt a man-agers relationship with the other party, thus limiting his orher ability to obtain desired substantive outcomes now or inthe future.Assessing The Negotiation Context NtGOTIAIION CONTEXT: Re dtive Power and Leve of Cont itiMANAGERS STRATFCY EXISTINGNEGOTIATIONXSUBSTANTIVESITUATIONEPISODE /OUTCOMESOF NEGOTIATION OTHER PARTY S STRATEGY 38 3. Consider Both Retationshipi and Substance When Negotiating StrategicallyIn any case, managers should keep existing and These questions will help managers determinedesired relationships in mind as they bid for substantivewhether their relationship with the other party Is based onoutcomes. For example, when negotiators are on the losingindependence, dependence, or interdependence. Addi-enti of a win-lose negotiation, they should examine thetionally, these questions should help executives considerimplications of taking a short-term loss. During his third how and whether their relationship with the other parlyappointment, Petersons willingness to make only minimal should be strengthened or weakened. Often managers willgains in service contracts for the short term may create a find themselves or their organisations in interdependeniposilivf relationship that will lead to a lucrative, long-term relationships that have both beneficial and detrimcnl.ilcontract with Tarco. The relative importance of possible aspects. These relationships are called mixed-motive situa-substantive and relationship outcomes should help execu- tions in the negotiation literature because they providetives decide whether and how to negotiate. To guide theirincentives for both competitive and cooperative actions.decision process, managers should begin by assessing ihoir In his relationship with the Roadwork salesman.relative power and the level of conflict between them andPeterson has considerable power. He is satisfied wiih histhe other party. Both are key determinants of their currentcurrent vendor and has other vendors wanting to sell himrcLitionship with the other party. the same product. The numerous choices available allowExhibit 1 illustrates the negotiation context, showing him to make demancJs on the salesman. Similarly. Petersonihose aspects of the situation and negotialion episode thatli.ts more relative power than the mechanic. On the olher^hape relationship and substantive outcomes. Exisling levelshand, he has relatively little power wiih Tarco. since theof power and conflict influence (1) the relationship between contractor can choose from a number of equipment-servicethe executive and the other party and (2) (he negotiationshops. Moreover. Tarcos representative did noi make thestrategies they choose. These strategies are implementeciinitial contact and has not actively sought Dickersonsthrough appropriate tactics during a negoliation episocie a services.one-on-one encounter, a telephone call, or a meeting with rtiultiple parties and result in substantive and relationshipoutcomes.Level ol ConflictThe multiplearrows linking strategies, tactics.and theThe levei of conflict underlying a potentkil negoti.i- tUHOtialion episode in Exhibit 1 show the monitoring proc- lion establishes how the negotiators perceive the affectiveess through which both the manager and the other party dimension of their relationship ihat is. ils degree of sup-refine their strategies and tactics during an episode. A com-fjorliveness or hostility. Managers can assess the relaliori-plex .lnd lengthy negotialion.such asj union tontratt nego-shi[is level of conflict by identifying the difleretices betweenli.ition. m.iy include many episodes; a simple negotiation edc h partys interests. On what issues do both parties agree?m.iy be (omj^leted within one episode. Each episode, On what issues do they disagree? How intense and hownonetheless, influences future negotiations by changing theingrained are these differences?"managers and the other party s relative power, the level ofAnswers to these c]uestions will reve.il whcMhcrconflict between them. ,ind their relationship.negotiations will easily resolve differences and whether ihe relationship is perceived as supportive or hostile. TheseRelative Power questions, like the questions about relative power, should also help exec utivesccinsidcn how ut( omes. Not surprisingly, the creciibility of (he exet utives strategy to use. The left side represents, in a ciifferent form,.ij^gressive tactics and, thus, the "success of (he firmly compet- the analysis in Exhibit 2: thus. Exhibit 3 also shows how thei!ivt strategy often rests on the organizations power vis-a-vismanagers substantive and relationship priorities lead to U/JJ-ihc other party. When following a firmly competitive strat-Litoral strategies based solely on the managers position. Theegy, the manager seeks a win-lose substantive outcome andright side illustrates how ihesc unilateral strategies may beis willing to accept a neutral or even d bad reLitionship. continued, modified, or replaced after ihe mtin.iger consid-4. Active Avoidance (AT). Managers should consider ers the other partys potential or apparent priorities.",((lively avoiding negotiation if neither the relationship nor Managers should examine the appropriateness of .ithe substantive outcomes are important to them or theunilateral negotiation strategy by accounting for the otherorganization. Simply rctu-.ing o negoliaio is ihe most (Jiret t partys priorities before they use ii. Sometimes such s rutinycand active form ol avoitJance. Exe(utives cin simply tell thewill simply justify its use. For example, when hothsubst.intivtother party they are not inierestcd in or willing lo negotiate.and relationship outcomes are important to an executive,Such an action, however, will usually have a negative impact the appropriate unilateral strategy is trusting collaboration. Ifon the organizations relationship with the other party. tho manager antici[iatOS thai tho othor party also values bothMoreover, managers must dcierniine which issues uro asubstanlivo .HHI tc^Luionship ouicomos (soo Exhibit 3. Situa-v.isteof time to negotiate. We Ireat dvoicJjnc clikcsuhorcii- tion 1), ho or she would continue [o favor this strategy. Alti.iiion, as an explicit, strategic behavior ralher than as ,nother times, scrutiny of tho other partys priorities may sug-o|)iic;)n (aken by default when the manager is uncertain gest some modifications. We discuss next each of the intor-.ihout what lo do. .Ktivo varialions of tho classic, unilateral strategies.However, we retogni/e that ihese utiiI.iUt>il sir.iic-7. Pri/H ;/)/oc/ Collaboration (C2). Tho CI collabora-gifs ,irc most successful only in a limited set of situations. Intivo strate