Rich Dad Education Blog

Distributive Negotiation

Defined by Negotiations.com, distributive negotiation is “a type or process that normally entails a single issue to be negotiated. The single issue often involves price and frequently relates to the bargaining process. Also referred to as ‘Win–Lose’, or ‘Fixed–Pie’ negotiation because one party generally gains at the expense of another party.”

Distributive negotiation is generally a very uncomfortable, in-your-face method of resolving disputes or points of contention. Often, such sessions consist of each party strategically attempting to strong-arm the other party with the objective of persuading or forcing the other party to knuckle under and concede defeat. Rarely do both parties express satisfaction with the final outcome of such negotiations, and often, neither party is fully satisfied with the end agreement. The practice of using distributive negotiation is slowly, but steadily, falling out of favor with many professionals whose line of work calls for regular negotiation with others. However, there are still some situations in which utilizing this approach to negotiation may be your best bet. As a general rule though, it would be wise to consider another approach if the person with whom you are involved in a dispute is someone:

• with whom you will have continued interaction past the resolution of the current situation. One or both of you is likely to harbor bitterness and ill will toward the other, especially in circumstances in which the negotiations became particularly heated or one or both parties illustrated their willingness to play hardball. Even if both parties reach an agreement they can both live with, the end will not necessarily justify the means in the minds of either one of the participants, and lingering feelings of resentment are likely to remain.

• who has less to lose than you do. Never try to strong-arm someone who has more leverage. The old saying has always held true, and will continue to hold true: “The person who cares the least is in control.”

• who has the ability to tarnish your reputation. Do not go toe-to-toe with someone who is well-known and generally liked or respected in your community, organization, or industry. Successfully engaging in distributive negotiations requires many techniques that could be perceived by some to teeter on the borderline of being underhanded or sneaky. You do not want to anger or wound the pride of someone who can ruin your good reputation with the people whom you rely upon for success, such as customers, coworkers, associates, or other business contacts.

If there is nothing to discourage or prohibit you from playing hardball and the other party clearly has no interest in investing the time or energy in reaching a conclusion that benefits you as much as it does him or her, consider the following points:

Play it cool. Do not seem overly excited about what they have to offer. Coming across too eager makes you seem as if you are in desperate need of something that they have to offer. This gives them a very strong standing in negotiations.

Mum’s the word. Share as little information as possible with the other party. Make them wonder what you are up to. This tactic will generate anxiety and lead them to second-guess their position if used properly.

Don’t show any weakness. Be careful how you phrase things. Never, under any circumstance, begin a sentence with, “I don’t suppose you would be interested in…” or “I’m sure you wouldn’t want to…” Be confident, act aloof, and exude power and superiority. Do not undermine your position.

Search for weakness. Has the price of that vacation property you are eyeing been reduced three times in two months? Does that car salesman rigidly stick to a script and have absolutely no idea how to answer your more difficult questions? Have you been told that the businessman with whom you are interacting relies on his partner to be the bad guy because he has a hard time saying no and sticking to it? Look for any weakness that you can exploit in order to get the upper hand.

Portray yourself as a hot commodity. Tell the representative about the better, more appealing offer that their competition just extended to you. But if you are going to make something up, make it believable. If you get too greedy and demand a ridiculously good deal, a company is unlikely to even try to compete with the deal you claim to have been offered.

Create a fear of loss. Studies show that people are more likely to budge and be willing to compromise when they perceive that they are at risk for losing something they already have, rather than when they are being promised something that would benefit them in some way.

Express your willingness to walk away…but only if you really are. Be sure you really can walk away. They just might call your bluff, and, in fact, are more likely to do so if they sense that you are not serious.

Hire appropriate representation. In a situation which involves legal issues, whether criminal or civil, do not attempt to represent yourself, as doing so can potentially have devastating ramifications. Some studies have indicated that 85 percent of people believe they are in the top 10 percent of effective negotiators. Obviously, most people find it hard to accurately gauge their skills at negotiation. Do not open yourself up to liability by overestimating your ability to negotiate.

Integrative Negotiation

“Integrative negotiation is often referred to as 'win-win' and typically entails two or more issues to be negotiated. It often involves an agreement process that better integrates the aims and goals of all the involved negotiating parties through creative and collaborative problem solving. Relationship is usually more important, with more complex issues being negotiated than with Distributive Negotiation.”
-Negotiation.com

Integrative negotiation is much less adversarial, and more geared toward making sure that everyone walks away from the table at least somewhat satisfied. Whenever possible and practical, you should attempt to use this form of negotiation, as you never know what bridges will be burned and what will be lost when you rely on distributive negotiation.

While more effort goes into integrative negotiation than into adversarial negotiation, it is much less mentally and emotionally taxing since your objective is not to outsmart the other party, but brainstorm a solution that meets everyone’s needs as fully as possible.

Before your meeting:

Do your research. Find out as much as you can about the other party and his or her situation.

Put yourself in someone else’s shoes. Resist the urge to demonize the other party. Try to see the situation from his or her perspective. In so doing, you may begin to see that there is not a good guy and bad guy, or a right and wrong position.

Determine your ideal scenario. Explore your desires and goals. Ask yourself what you want and why you want it.

Put some thought into how you can best explain your position to the other party.

Determine what you are willing to give up – prioritize. Once you have set your goals, set your boundaries.

Determine where your absolute limits are: the absolute most you can pay, everything you can stand to live without, and the things you may definitely want but don’t really need. By the same token, identify what is a matter of values and what you absolutely can and will not compromise on.

The Meeting

Rid yourself of preconceived notions. Assumptions have no place in negotiations, and only serve to muddle everything and prevent everyone from achieving a good, solid understanding of the circumstances.

Set your sights high. Negotiation is all about a little bit of giving and a little bit of taking. Don’t state your bottom line right off the bat. From that point, it is virtually impossible to achieve an outcome that you can be happy with.

Practice good communication. Ask the right questions, and really listen to the answers. Read between the lines and, if necessary, keep asking questions until you are sure you have a clear and accurate picture of what the other party is looking for in the way of an agreement. If the other party seems willing to disclose information about his or her position and you trust that the information is honest, go ahead and meet in the middle by also practicing disclosure…selectively. There are times when both parties only seem to have a problem that cannot be solved, when in reality, the things they want do not exclude each other. There is a popular allegory contributed to the late social worker and author, Mary Parker Follett, that beautifully illustrates this point. Two sisters are fighting over one orange, which they both desperately want, and they both assert that they need the whole orange. At first glance, there does not appear to be any way to amicably resolve the issue. The sisters could resort to threats (attempting to tattle on the other), could ask their parents to arbitrate the dispute, or could trade the orange for something that the other also wants or needs. In the course of the negotiations, the sisters discover that one sister wants the orange to make orange juice, while the other sister needs the rind of the orange for a recipe that calls for orange zest. As you can see, in some situations, the issue is not what is originally seemed.

Learn to practice active listening in order to further minimize misunderstandings. However, if possible, avoid using the infamous phrase, “So what I hear you saying is…” and similar introductory phrases, and, instead, focus on speaking to them as you would speak to a family member or close personal friend in a situation in which you are trying to help solve a problem for them.

Don’t think of it as a winner/loser scenario. “Pride cometh before the fall.” Don’t get so caught up in winning that you deprive yourself of a mutually beneficial resolution to a problem. Ask yourself if winning is really all that important and what you stand to gain, as well as if it is worth the risk of losing.

Treat the negotiation as a brainstorming session. Approach the negotiation as a meeting in which two people with no hostility for each other are collaborating in the hopes of finding a solution that will simultaneously solve both of their problems.

He who speaks first loses. Make a proposition, then pause in silence as you wait for the other party to respond. Do not speak again until after he or she has given you something to respond to. Even if half an hour passes in silence—and it most likely is only a couple minutes and simply feels like an eternity—do not fill the silence with your voice. Do not fidget, clear your throat, or make any nervous body movements whatsoever. Remember those staring contests when you were a child? This is the same thing. Do not blink.

Be realistic. All your issues may not be resolved in one setting. Tackle separate issues in just such a manner – separately. Be willing to adjourn and meet again if either party becomes too emotionally involved or a stalemate seems imminent. And be open to the possibility that despite your best efforts, all attempts at amicably resolving the issue at hand may be to no avail, and you may have to play hardball after all.