What Is Negotiation?
Negotiation is a strategic discussion intended to resolve an issue that both parties find acceptable. Negotiations involve give and take, where one or both parties will usually need to make some concessions. Negotiation occurs between buyers and sellers, employers and prospective employees, two or more governments, and other parties.
Key Takeaways
- Negotiation is a strategic discussion between two parties to resolve an issue that both find acceptable.
- Negotiations occur between buyers and sellers, employers and prospective employees, or the governments of two or more countries.
- Successful negotiation usually involves compromises on the part of one or all parties.
Stages of Negotiation
- Preparation: Before negotiations begin, individuals should know what they hope to gain, what concessions they will make, and the desired goal. Preparation can include researching the other party to determine their point of view. When negotiating the price of a new car, buyers often come prepared with pricing data or competing deals. Job seekers bring information to support their accomplishments when negotiating a salary for a new position.
- Exchanging Information: Both sides present their initial positions of what they want and are willing to give in return. Individuals should clearly articulate their wishes and listen to the other side to find a middle ground or points that are negotiable.
- Bargaining: After both sides have been detailed, this is when individuals will bargain. An important key to this step is to hear the other party out and refrain from being dismissive or argumentative. Successful negotiations require give and take on both sides, and an adversarial relationship is likely less effective than a collegial one.
- Closing the Deal: Once both parties are satisfied, negotiations will end. The next step may be a verbal agreement or a written contract that clearly outlines each party's position and can be enforced if one party doesn't hold up their end of the bargain.
According to a 2022 study by Fidelity, 58% of young professionals accepted a job offer without negotiating. For those who did negotiate, 87% received at least part of what they asked for.
Negotiation Process
The negotiation process continues until both parties agree to a resolution or negotiations break off without one. Experienced negotiators will often try to learn as much as possible about the other party's position before a negotiation begins, including the strengths and weaknesses of that position, how to prepareto defend their positions, and any counter-arguments the other party will likely make.
The time it takes for negotiations to conclude depends on the circ*mstances. Negotiation can take as little as a few minutes when bargaining the price of an item at a garage sale, or much longer, like in company mergers and acquisitions. Some negotiations require a skilled negotiator such as a professional advocate, real estate agent, or attorney.
Negotiation Strategies
- Justify the Position. Individuals should come to negotiations ready to back up their position, including research and a commitment to reaching a deal.
- Consider the Other Side. Remember that the other side has things it wants out of the deal, too. Individuals should determine what they can offer to help them reach their goals without giving away more than they want to or can afford.
- Keep Emotions in Check. It's easy to get caught up in the moment and be swayed by personal feelings, especially anger and frustration. However, emotions cause negotiators to lose sight of the goal.
- Know When to Walk Away. Know what to accept as a minimum and when to walk away. If both sides are hopelessly dug in, pausing negotiations gives everyone involved a chance to regroup and possibly return to the table with a fresh perspective.
Examples of Negotiation
A car buyer may be interested in a new SUV but doesn't want to pay the full manufacturer's suggested retail price (MSRP). They may offer what they consider a fair price. The dealer can accept the offer or counter with another price. A good negotiator may be able to reduce the cost and the dealer may still earn a profit.
An individual's new job offer may come with a low salary. An employer's first compensation offer is often not its best possible offer, so it may have some room to negotiate. Even if a higher salary isn't feasible, the employer may be willing to offer something additional, such as more vacation time or better benefits. This is where the individual may succeed with good negotiation skills.
What Makes a Good Negotiator?
Some of the key skills of a good negotiator are the ability to listen, to think under pressure, articulate their point of view, and compromise, within reason.
What Is the Zone of Possible Agreement (ZOPA)?
ZOPA stands for the zone of possible agreement. ZOPA is a way of visualizing where the parties' positions in a negotiation overlap. It is within that zone that compromises can be reached.
What Is BATNA?
BATNA means the best alternative to a negotiated agreement. It refers to the next course of action a negotiator may take if a negotiation fails to arrive at a satisfactory conclusion. Veteran negotiators often go into a negotiation knowing what their BATNA is.
The Bottom Line
Negotiating is essential in daily life, business, and international affairs. Being a successful negotiator means defining a personal goal, trying to understand the other party's position, and compromising if necessary. A successful negotiation leaves everyone satisfied that they have gotten a deal they can live with.
