Broadly speaking, negotiation is an interaction of influences. Such interactions, for example, include the process of resolving disputes, agreeing upon courses of action, bargaining for individual or collective advantage, or crafting outcomes to satisfy various interests. Negotiation is thus a form of alternative dispute resolution. 

Negotiation involves two basic elements: the process and the substance. The process refers to how the parties negotiate: the context of the negotiations, the parties to the negotiations, the relationships among these parties, the communication between these parties, the tactics used by the parties, and the sequence and stages in which all of these play out. The substance, however, refers to what the parties negotiate over: the agenda, the issues, the options, and the agreement(s) reached at the end.

Skilled negotiators may use a variety of tactics ranging from a straight forward presentation of demands or setting of preconditions to more deceptive approaches such as cherry picking. Intimidation and salami tactics may also play a part in swaying the outcome of negotiations.

Approaches To Negotiation

Given the above definition, negotiation occurs in business, non-profit organizations, government branches, legal proceedings, among nations and in personal situations such as marriage, divorce and parenting. See also negotiation theory.

Advocacy Approach

In the advocacy approach, a skilled negotiator usually serves as advocate for one party to the negotiation and attempts to obtain the most favorable outcomes possible for that party. In this process the negotiator attempts to determine the minimum outcome(s) the other party is (or parties are) willing to accept, then adjusts their demands accordingly. A "successful" negotiation in the advocacy approach is when the negotiator is able to obtain all or most of the outcomes their party desires, but without driving the other party to permanently break off negotiations, unless the BATNA  is acceptable.

Win-Lose Approach

Traditional negotiating is sometimes called win-lose because of the assumption of a fixed "pie", that one person's gain results in another person's loss. This is only true, however, if only a single issue needs to be resolved, such as a price in a simple sales negotiation. If multiple issues are discussed, differences in the parties' preferences make win-win negotiation possible. For example, in a labor negotiation, the union might prefer job security over wage gains. If the employers have opposite preferences, a trade is possible that is beneficial to both parties. Such a negotiation is therefore not an adversarial zero-sum game.

Win-Win Approach

During the early part of the twentieth century, academics such as Mary Parker Follett developed ideas suggesting that agreement often can be reached if parties look not at their stated positions but rather at their underlying interests and requirements. During the 1960s, Gerard I. Nierenberg recognized the role of negotiation in resolving disputes in personal, business and international relations. He published The Art of Negotiating, where he states that the philosophies of the negotiators determine the direction a negotiation takes. His Everybody Wins philosophy assures that all parties benefit from the negotiation process which also produces more successful outcomes than the adversarial “winner takes all” approach.

In the 1970s, practitioners and researchers began to develop win-win approaches to negotiation. Getting to YES was published by Roger Fisher and William Ury as part of the Harvard negotiation project. The book's approach, referred to as Principled Negotiation, is also sometimes called mutual gains bargaining. The mutual gains approach has been effectively applied in environmental situations (see Lawrence Susskind and Adil Najam) as well as labor relations where the parties (e.g. management and a labor union) frame the negotiation as "problem solving".

Emotions In Negotiation

Emotions play an important part in the negotiation process, although it is only in recent years that their effect is being studied. Emotions have the potential to play either a positive or negative role in negotiation. During negotiations, the decision as to whether or not settle, rests in part on emotional factors. Negative emotions can cause intense and even irrational behavior, and can cause conflicts to escalate and negotiations to break down, while positive emotions facilitate reaching an agreement and help to maximize joint gains.

Affect effect: Dispositional affect effect the various stages of the negotiation process: which strategies are planed to be used, which strategies are actually chosen, the way the other party and its intentions are perceived, the willingness to reach an agreement and the final outcomes. Positive affectivity (PA) and negative affectivity (NA) of one or more of the negotiating sides can lead to very different outcomes.

Positive Affect in Negotiation

Even before the negotiation process starts, people in a positive mood have more confidence, and higher tendencies to plan to use a cooperative strategy. During the negotiation, negotiators who are in a positive mood tend to enjoy the interaction more, show less contentious behavior, use less aggressive tactics and more cooperative strategies. This in turn increases the likelihood that parties will reach their instrumental goals, and enhance the ability to find integrative gains. Indeed, compared with negotiators with negative or natural affectivity, negotiators with positive affectivity reached more agreements and tended to honor those agreements more. Those favorable outcomes are due to better decision making processes, such as flexible thinking, creative problem solving, respect for others' perspectives, willingness to take risks and higher confidence. Post negotiation positive affect has beneficial consequences as well. It increases satisfaction with achieved outcome and influences one’s desire for future interactions. The PA aroused by reaching an agreement facilitates the dyadic relationship, which result in affective commitment that sets the stage for subsequent interactions.

PA also has it’s drawbacks: it distorts perception of self performance, such that performance is judged to be relatively better than it actually is.  Thus, studies involving self reports on achieved outcomes might be biased.

Negative Affect in Negotiation

Negative affect has detrimental effects on various stages in the negotiation process. Although various negative emotions affect negotiation outcomes, by far the most researched is anger. Angry negotiators plan to use more competitive strategies and to cooperate less, even before the negotiation starts. These competitive strategies are related to reduced joint outcomes. During negotiations, anger disrupts the process by reducing the level of trust, clouding parties' judgment, narrowing parties' focus of attention and changing their central goal from reaching agreement to retaliating against the other side. Angry negotiators pay less attention to opponent’s interests and are less accurate in judging her interests, thus achieve lower joint gains. Moreover, because anger makes negotiators more self-centered in their preferences, it increases the likelihood that they will reject profitable offers. Anger doesn’t help in achieving negotiation goals either: it reduces joint gains and does not help to boost personal gains, as angry negotiators don’t succeed in claiming more for themselves. Moreover, negative emotions lead to acceptance of settlements that are not in the positive utility function but rather have a negative utility. However, expression of negative emotions during negotiation can sometimes be beneficial: legitimately expressed anger can be an effective way to show one's commitment, sincerity, and needs. Moreover, although NA reduces gains in integrative tasks, it is a better strategy then PA in distributive tasks (such as zero-sum).

Best Alternative to Negotiated Agreement

In negotiation theory, the best alternative to a negotiated agreement or BATNA is the course of action that will be taken by a party if the current negotiations fail and an agreement cannot be reached.  If the current negotiations are giving you less value than your BATNA, there is no point in proceeding. Prior to the start of negotiations, the parties should have ascertained their own individual BATNAs.  It was developed by negotiation researchers Roger Fisher and Bill Ury of the Harvard Program on Negotiation (PON), in their series of books on Principled Negotiation that started with Getting to YES. Nobel Laureate John Forbes Nash has included such ideas in his early undergraduate research.

For example, if I have a written offer from a dealer to buy my car for $100 dollars, then my BATNA when dealing with other potential purchasers would be $100 since I can get $100 for my car even without reaching an agreement with such alternative purchaser.

A party should generally never accept a worse resolution than its BATNA. Care should be taken, however, to ensure that deals are accurately valued, taking into account all considerations (such as relationship value, time value of money, likelihood that the other party will live up to their side of the bargain, etc.) These other considerations are very difficult to value, since they are often based on uncertain considerations, rather than easily measurable and quantifiable factors.  Examples of other offers that might or might not be better than the BATNA in the example above might be:

An offer of $90 by a close relative (is the goodwill generated worth $10 or more?)

An offer of $125 in 45 days (what are the chances of this future commitment falling through, and would my prior BATNA ($100) still be available if it did?)

An offer from another dealer to offset $150 against the price of a new car (do I want to buy a new car right now, the offered car in particular? Also, is the probably minuscule reduction in monthly payments worth $100 to me today?)

BATNA is seen in negotiation fields as the single most important source of negotiation power. Negotiators don't use their BATNA merely as a safety net, but rather as a point of leverage in negotiations.

Consider the following business example: Company one can choose to buy from companies two, three and four - but companies two, three and four can only sell to company one. Company one can use their powerful BATNA position to leverage a better deal by playing companies two, three and four against each other. This is a common practice among purchasing and procurement managers in the business world.

Recommended Reading

Getting To Yes

Getting to YES (ISBN 1-84413-146-7) is the reference book dealing about win-win negotiation. Written by Roger Fisher, professor and Director of the Harvard Negotiation Project; William Ury,negotiation and mediation consultant and director of the Negotiation Network at Harvard University & Associate Director of the Harvard Negotiation Project; and Bruce Patton, founder and director of Vantage Partners, Deputy Director of the Harvard Negotiation Project. This book has become a negotiation best seller with over 2 million copies sold in 20 different languages as of 1999.  It has also broadly influenced negotiation literature.  The book discusses not bargaining over positions; separating people from the problem; focusing on interests, not positions; inventing options for mutual gain; insisting on using objective criteria; and developing the best alternative to a negotiated agreement (BATNA) if the negotiation fails. Getting to YES also includes techniques to defuse "dirty tricks" from the other side. The book also recommends not to use these "dirty tricks" techniques as they are often used to win over the "adversary" and not to reach a negotiated deal.

Although the book explains how to reach a wise and fair agreement, it seems the low natural negotiation skill humans have inborn refrain from using efficiently these techniques. Beyond Reason: Using Emotions as You Negotiate and Getting past NO are follow ups to Getting to Yes and aim to explain how to handle difficult deals and tough emotions.  The authors recommend that both sides know and use these techniques to achieve a more efficient win win deal.

Getting Past No

Getting past NO Negotiating Your Way from Confrontation to Cooperation (ISBN 0-553-37131-2 ) is the reference book dealing about Win/Win in difficult negotiation. It is the sequel to Getting to YES. Written by William Ury (negotiation mediation consultant and director of the Negotiation Network at Harvard university & associate director of the Harvard Negotiation Project) revised edition 1993.  The book explain in details how to: have the joint problem-solving mentality together; break the five barriers to cooperation (your reaction, their emotion, their position, their dissatisfaction, their powe); prepare, prepare, prepare yourself by identifying/developing Interests of each side, options, and standards; BATNA - Best Alternative To a Negotiated Agreement; and what do you aspire to? what would you be content with? what could you live with?