Why is Negotiation Important? The Importance and Prevalence of Negotiation Explained

Why is negotiation important?

Negotiation finds its way into many daily interactions, from buying a used car and our personal life settling a legal dispute and brokering a global business world. Negotiation skills are vital to any agreement between two or more parties involved. Yet, few people have strong negotiation skills or receive training before engaging in the practice. Knowing how to negotiate and work with others well can benefit anyone who would like to achieve personal and business success. This article seeks to bridge the gap between successful negotiations and make relevant and important information accessible to anyone who would like to learn more about negotiating skills. It will define the negotiation process, outline the importance of good negotiation skills, describe the types of negotiation, and provide tips for preparing for, participating in, and ending future negotiations. This article aims to encourage everyone to develop a negotiation mindset and engage in the negotiation process. 

Defining Negotiation: 

Negotiation is the push and the pull between two or more parties working to resolve a conflict or divide an amount of money, goods, services, or interests among them. The goal of a negotiation is to reach a mutually beneficial agreement at the bargaining table between the parties that resolves the dispute. Each party is likely working to resolve the dispute in a way that benefits them. Yet, they are all required to give and take in ways that benefit other negotiating parties to ensure a mutually beneficial deal can be reached. Because of this, it is a strategic conversation that seeks to avoid confrontation but may encounter tense moments as the parties work to resolve their dispute. The parties will engage in conversation around offers and counteroffers until the parties create a solution somewhere between the initial proposals. The negotiation process typically includes the following steps: 

  • Prepare: The first step for the parties is to prepare for the negotiation, which is vital for a successful negotiation. This includes understanding what both parties will need from the negotiation and others options that may help sway the negotiation. This will be discussed further in a later section. 
  • Exchange: Once the parties have prepared, the next step in a negotiation is to exchange information. This is a strategic step because each party will want to share enough information for the other parties to understand where they are coming from with their points and offers. Still, they also want to keep the information private and retain bargaining power and reserved information. 
  • Bargain: The next step is the bargaining process. This can involve clarifying the issues involved in the negotiation and then offering different options for how the parties can resolve the dispute. This step may be a quick back-and-forth, or it can go on for many days. Tips for how to exchange and bargain well will be explored in later sections. 
  • Agreement: A negotiation will often end in some agreement. Either the parties will agree in a way that resolves the dispute between them, or they will agree that they cannot reach an agreement and need to move on. 

Each negotiation will be slightly different, but understanding these steps can help orient a person within the throes of negotiation and encourage further success. 

The Importance of Negotiation: 

Negotiation is a vital part of everyday life. There are many ways that negotiation can be used for personal, professional, or community gain. The importance of negotiation is evident in a few key benefits of negotiation. These include: 

  • Dispute Resolution:  The first and most evident benefit of negotiation is that it is vital for dispute resolution, which carries a whole host of benefits with it. When disputes are resolved effectively, personal and professional relationships are created or preserved, and productivity and happiness increase. 
  • Community Goals: Negotiation can be used to achieve community goals among a group of people. While one person may not have negotiation power, a collective may have a larger sway and accomplish goals that would not have been possible for an individual. 
  • Professional Success: Good negotiators will find themselves in better positions professionally than they would if they were not comfortable negotiating things like salary, title, and responsibilities. They will also often perform better, especially in business dealings. 

Negotiation’s impact in all areas of life demonstrates the necessity for understanding the process and basic tips for successful negotiation for a successful life. 

Types of Negotiation: 

Because preparing for negotiation also includes understanding the type of negotiation that one will be going into, it is necessary to discuss the types of negotiation available for someone to participate in because it determines how the parties will be able to negotiate. Sometimes this can be chosen by the parties, but other times the nature of the negotiation dictates it. Common types of negotiation include: 

  • Distributive:  Distributive negotiation is the type of negotiation that will result when a fixed pool has to be divided among the parties. In this type of negotiation, any time one party gains, the others lose. Distributive negotiation is often found in sales contracts when there is nothing else to add to the negotiation. 
  • Integrative: Integrative negotiation is often called collaborative negotiation. It is the result of the parties working together to create more value between the parties to accomplish a winning result for all parties. A win here does not mean a loss for the other parties. Instead, this type of negotiation often offers wins in other areas of the negotiation. This can be accomplished in many negotiations if the parties are willing to work to create value. 
  • Collective: Collective bargaining and negotiation is a type of negotiation where one or more parties consist of teams that are bargaining on behalf of the whole. This is common in labor disputes and occasionally in major business negotiations. 
  • Last Chance: Another common type of negotiation is last-chance or one-shot negotiation. A last-chance negotiation results when one or both parties cannot work together again and offer their final offer with little room for negotiation. This is uncommon because good negotiation is vital for successful outcomes in business and life, and last-chance agreements usually could be more productive. 
  • Multiparty: Finally, there are multiparty negotiations, which are negotiations that involve more than two parties. These types of negotiation typically require advanced skills because the parties are balancing the needs and want of each party against each other. These are most common in politics and international relations.  

Any of these types of negotiation may be present in negotiation. However, they will often have various outcomes and skills required, so understanding which type of negotiation one is entering is vital to preparing for negotiation. 

Preparing for Negotiation: 

Now that we have established an understanding of the basic process of negotiation and what types of negotiation one may encounter, we will begin discussing the various tips for participating in negotiation so that you may feel more confident. This section will explore the important components of preparing for negotiation. When preparing for a negotiation, the following steps should be taken. 

  • Research: If you take the time before the negotiation, doing a lot of research can be helpful. Understanding how the other party often negotiates, what the stakes are outside of the actual negotiation, and what type of negotiations you are entering. 
  • Interests: Because the only way to find a win-win solution is through collaborative negotiation, it is important to consider the underlying interests that may be at play underneath the immediate requests and needs. This includes both your interest and the interests of the other parties. 
  • Best Alternative: It can also be helpful to identify your best alternative to a negotiated agreement or your BATNA. This is the best option that could result if the parties cannot reach an agreement. It is important to consider this for both parties because it can often indicate the pressure each side will put on the negotiation based on how much they could accomplish without the agreements. 
  • Concessions: It is unlikely that someone will walk away from a negotiation with everything they would like. This means that you will need to give concessions at some point within the negotiation, and it is best to prepare for these. If you have done adequate research on interests and BATNAs, you can identify which concessions you will give early on and prioritize the most important things. 
  • Rapport: You can start building rapport when you begin interacting with the other parties. Knowing how to relate to others will give you a better understanding of the goals that everyone has. Rapport will also help you decide how much information should be shared early on and how much should be kept close. 

These steps and many others will help new and seasoned negotiators achieve their goals through negotiation and create a winning deal. 

Negotiation Tactics: 

 Much of the work of laying the foundation for negotiation is done during the preparation stage. However, it is also crucial to understand how to approach and conduct yourself during a negotiation. Some will use gimmicks and tactics to ensure that the negotiation is going their way, but understanding the process and preparing well can often be the best strategy. However, a few tips can take a negotiation novice to a professional in no time. These include: 

  • Rapport: While rapport is a vital part of the preparation process, it is also an important consideration at the beginning of any negotiation. By entering the space with openness and friendliness, the other side will continue to trust that you are willing to work with them to accomplish shared and individual goals. 
  • Avoid Bullying: Depending on a person’s negotiating style, they may come across as a bully in negotiations. However, true bullying is the last chance, a one-shot negotiator who will not listen to reason from the other side. It is important to acknowledge feelings that could lead to bullying in yourself and diffuse attempts at bullying when possible. One can avoid bullying by asking questions and calling the actions what they are. These tactics can diffuse questions or by time to come up with other options. 
  • Multiple Equivalent Simultaneous Offers: Another way parties can diffuse tension and help the other side see value is by offering multiple equivalent simultaneous offers to the other side. These are outcomes that the offering side sees as equal outcomes but offer value to the other party differently. When a party sees multiple offers, it can create an atmosphere of cooperation and encourage the other party to acknowledge the value received. 
  • Active Listening: Another skill that is invaluable to a good negotiator is the ability to listen to the other side actively. This means that instead of thinking of the next step while the other side is talking, you are asking open-ended questions and listening to the answers to identify values that can be divided. Without listening to the other side, the parties will often be stuck in a loop with no new ideas. 

Negotiation is a learned skill, so being a good negotiator means you must keep negotiating. However, not every negotiation is a formal, life-or-death situation. Instead, negotiation is an important part of everyday life, and it is possible to gain valuable negotiating practice through conversations such as where to go for dinner, dividing up the household chores, and deciding how to paint the house. 

After the Negotiation:

 As we discussed earlier, most negotiations will end with an agreement that resolves the issue or end with an agreement to end without a resolution. If the parties resolve, they will likely put that agreement in a written contract and work together. If they do not agree, they will likely continue to negotiate or go their separate ways. After each negotiation, especially when the skill set is new, it is important to evaluate what went well and what could be improved. Critiquing yourself and your decisions, or having someone else do it for you, will further grow your negotiation ability. Practicing and dissecting negotiations will ensure that you reach the benefits of negotiation more frequently and find effective ways to reach resolutions. 

Emily Holland
Latest posts by Emily Holland (see all)
error: ADR Times content is protected.