Friday, November 23, 2012

Negotiations: Win-win (integrative) vs. zero-sum (distributive) outcomes

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In this post I'll go over two approaches to negotiations: the more familiar zero-sum (distributive) approach and the superior win-win (integrative) approach - and illustrate both with an example of negotiating for an orange.

I'll also provide 3 requirements for achieving win-win outcomes.




TWO APPROACHES TO NEGOTIATIONS – DISTRIBUTIVE AND INTEGRATIVE

Contrary to what you might believe based on recent, high-profile negotiations, it is possible to have quick negotiations that result in win-win outcomes.   Unfortunately, when many people think about negotiations, many unpleasant, adversarial interactions come to mind.  Examples might include the current US Congressional battle over the “fiscal cliff”, collective bargaining impasses in various professional sports – most recently the NHL lockout and NFL officials, or the last time you bought a car.  However, not all negotiations have to be like that.

 

THE ORANGE EXAMPLE

Suppose you and a friend are each cooking a dish for a dinner party.  Your recipe calls for one orange.  Your friend’s recipe also requires one orange.  Unfortunately, there’s only one orange left in the house and there’s no time to run to the store for another.  How would you resolve the situation?


DISTRIBUTIVE NEGOTIATIONS ARE A ZERO-SUM GAME

In a distributive negotiation, if one person gets more, the other person gets less.  In the orange example, one fair way to divide the orange would be to cut it in half, with each person getting 50%.  If one person gets a little more, the other person would have to get a little less.  It is a zero-sum game in which one person’s gains always come at the expense of another.  Haggling over the price of a used car is another example of a distributive negotiation – for every dollar advantage you gain by getting the price lowered, the dealer loses by receiving one dollar less.

In the orange example, the outcome is suboptimal for both participants.  However the orange is split, each dish will have to be prepared with less orange as the recipe calls for. 

INTEGRATIVE NEGOTIATIONS CREATE WIN-WIN SITUATIONS

The alternative to the distributive approach is integrative negotiating.  Integrative negotiations require both parties to understand what’s important to them, what their priorities are, and what trade-offs they’re willing to make.  The overall negotiation can be disaggregated into individual issues than can be negotiated separately.  In the best cases, there will be issues that are critical to one party but less important to the other, and vice versa. That allows each party to give ground on issues less important to them in exchange for the issues they do value.

Let’s return to the orange example.  If you both take an integrative approach, you might learn that your friend needs the juice of one orange and your friend might learn that you only need the zest of one orange.  Now you can reach a win-win agreement in which you remove the zest of the entire orange, then give it to your friend who can now squeeze the juice from an entire orange.  Instead of each of you getting 50% of what you need, you can work together to each get 100%.

3 REQUIREMENTS FOR INTEGRATIVE NEGOTIATIONS

Integrative negotiations aren’t always as easy as the orange example.  Here are three elements that are needed to reach mutually beneficial, integrative results:


  • Awareness:  To make the right trade-offs, each side must understand the interests at play and the relative importance of each interest to each party.  You have to be self-aware of your own priorities and understand the other party's.

  • Trust:  To arrive at mutually beneficial trade-offs, both sides must be transparent about needs and priorities.  If you don’t trust the other party, you might not want to let on that a particular issue is less important to you, fearing that the other party won’t offer you as much to concede it

  • Cooperation:  Integrative negotiations are an exercise in collaborative problem solving.  Individual issues and priorities are like puzzle pieces that both parties have to work together to assemble into a win-win outcome


I’ll provide some advice and tools for preparing for integrative negotiations in a future post.

ONE MORE FOOD ANALOGY – DON’T JUST DIVIDE THE PIE, EXPAND IT

A common analogy used to illustrate the difference between distributive and integrative negotiations is that of sharing a pie.  Distributive negotiations is all about how to slice and distribute the pie.  Integrative negotiations focus on how to make the pie bigger so that each party comes away with more.

7 comments:

  1. Your blog is truly insightful. Can you please post the additional advice and tools for preparing for integrative negotiations. Thx

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  2. Very good job simplifying the definitions and differences.

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  3. Very good job simplifying the definitions and differences.

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  4. It is really useful and gives the clear idea.
    Thanks!

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  5. informative post! I really like and appreciate your work, thank you for sharing such a useful facts and information about collective bargaining strategies, keep updating the blog, hear i prefer some more information about jobs for your career hr jobs in hyderabad .

    ReplyDelete