In a previous post, we took a look at collaborative bargaining situations where both parties in the negotiation would like to maintain a good working relationship with one another and jointly achieve a “win-win” outcome. This is not the only type of negotiating that takes place. Most likely, when you picture a negotiation process you are picturing a distributive bargaining situation. Distributive bargaining occurs when there are resource constraints, and one of the negotiating parties stands to lose something important. Common distributive bargaining situations include negotiating for the purchase of a home or car, formulating union contract agreements, and asking your boss for a pay raise.
Every negotiation situation has the potential to require distributive bargaining skills. You may already intuitively know some distributive bargaining strategies and tactics. In fact, some folks are quite good at implementing the distributive bargaining tactic of creating disruptive behavior when trying to negotiate for what they want.
Come to think of it, distributive bargaining situations seem to all have the same set of five basic dance steps from start to finish. Let’s look at each of those steps in more detail right now.
1. Define your limits
Each party in a distributive bargaining negotiation needs to know their resistance and target points relative to the desired outcome. Resistance points are the points at which the parties will break negotiations if crossed, while target points are the point at which each party would like to see a settlement reached. These are not typically shared with the other party sitting across the table from you. Sometimes you discover these points only when you cross them and the other party reacts.
2. Obtain information
You need to try to obtain information about the other party’s target and resistance points, if you can. This information can be obtained or assessed either indirectly or directly. Indirect assessment means determining what information the other party used to set his or her resistance point and target point. You may find yourself making assumptions about the basis for the other party’s thresholds or ask around to see if you can find out anything useful. Direct assessment doesn’t usually occur in the distributive bargaining process as the parties usually don’t want to directly reveal accurate or precise information about their target and resistance points.
3. Make an opening offer
Another step in a distributive bargaining scenario is making an opening offer. Opening offers can anchor a negotiation situation and set the tone for the process. The attitude with which the opening offer is given is also important. Remember, you send a message to the other party with your opening offer. An exaggerated opening offer is usually coupled with a tough competitive stance. In this case, be sure to have viable alternatives ready in case he goes below the other party’s resistance point.
4. Make concessions
Once the negotiations begin with the opening offer, the parties must make concessions. Without concessions, there is no negotiating. Concession making should be done in good faith. This step can continue as long as the negotiating parties wish. At some point, one party needs to signal the other party with both their actions and their words that the concessions are almost over and it’s about time to close the deal.
5. Hopefully, close the deal
There are several tactics for closing a deal. You might use a closing tactic known as “assume-the-close” where you act as though the deal is concluded even if you aren’t quite finished. This is in the hope that the other party will agree with you and stop negotiating at that point as well. You can also offer a “deal sweetener” as a special concession thrown in at the end of everything. Or you might just reach an agreement that doesn’t violate anyone’s resistance points.
As you can see, distributive and collaborative bargaining are very different ways to negotiate. While someone has something significant to lose in a distributive bargaining situation, a collaborative bargaining strategy takes place when the parties want to preserve a positive relationship and decide to work together to come up with the best solution for both parties. The implication in collaborative bargaining is that both parties want to deal with one another in a fair and open way that leads them to effective problem solving and a mutually agreeable outcome. This may not be the case in a distributive bargaining situation, where the final outcome may well be a win-lose situation versus a win-win.
If you are looking to refine or validate your communication and negotiation skills, take a look at Learning Tree’s 3-day course on effective communications. This course is certainly a great place to begin or revisit how well you are communicating and to learn some new skills and techniques for communicating with others even better still.