Chapter 2 - Two Different Approaches: Win-Lose and Win-Win
Generally speaking, there are two forms of negotiation: a win-win in which the negotiator seeks to achieve mutual benefits, and a win-lose in which they seek their own benefit in a way that may be detrimental to others. Each requires a different attitude and set of tactics.
Win-Lose
A win-lose scenario involves a contentious situation in which there is a stake that will be divided among participants, and in order to have more of the stake, the opposing party will end up with less. A common analogy is two children who are arguing over how to slice a pie so that each gets a fair portion, which generally begins with each child seeking to get the most for themselves and short-change their sibling, but proceeds toward a fair settlement.
In the business world, there is more at stake than a wedge of pie: millions of dollars are budgeted within a company, with each executive attempting to get as much as possible to pursue his initiatives. In any sales negotiation, the seller wants to get as much as possible and the buyer wants to pay as little as possible, and the difference in business negotiations can be quite substantial.
The author remarks that in these examples, the amount is always fixed: the budget is as much as it is, and the pie cannot be made larger. This is not necessarily the case in real situations, in which additional factors can be pulled into the negotiation to better satisfy both parties, though parties often lock into this mentality.
It is also noted that win-lose negotiations become contentions and hostile because each party is being asked to accept a loss for the benefit of the other, and gains nothing in return. Specifically, the author suggests:
- Each party sees its own benefit as the only thing that matters
- Neither party values the continuing relationship with the other
- One side generally has greater bargaining power than the other
The author refers specifically to car dealing, in which the dealer wants to get as much as he can out of the client and the client looks to pay as little as he can for the car. Dealers who sell cars every day are very polished at negotiating and use a lot of deceptive tricks to give customers a sense of being disadvantaged - but ultimately the customer has the power to walk out of the dealership.
(EN: The automotive industry is actually shifting a bit, as consumers and dealerships are both beginning to recognize that a car is not a one-time sale, but a potential ongoing relationship for several vehicle purchases over time and service in-between. The value-of-relationship approach began in the luxury sector, has trickled down to the premium sector, and is even beginning to evidence itself in the standard and economy markets. In future this might need to be shifted to a private car sale, in which the seller and buyer do not expect ever to do business again.)
Win-Win
A win-win negotiation is one in which each party expects to gain some value from their interaction, and both costs and benefits are subject to discussion.
Reputation is an implicit value in any negotiation. In negotiating with a merchant, the merchant wishes to profit by the sale but also recognizes that if it mistreats or short-changes the customer, the merchant's reputation will suffer and his future income will be damaged - or to put a positive spin on it, a merchant who serves his customers needs well will benefit from recommendations and positive word-of-mouth.
Timing of a transaction may be a factor. Consider that a person who is buying a house is likely selling one they already own, and may be willing to offer more in exchange to a seller who is able to accommodate their needs
Particularly in business, there is a sense that there is value in a relationship - particularly in that it is easier to do repeated business with a given party rather than shop for a new provider or find a new customer each time. Especially when there is a need for collaboration on a regular or ongoing basis, ensuring both parties gain from a negotiation is valuable.
Unlike the win-lose scenario, win-win negotiations aren't necessarily about gaining value at the expense of the other party, but about creating value for both, often through trades or compromises. (EN: Though, strictly speaking, acting in a way to accommodate the needs of the other party often entails taking on an expense, which is ultimately the same as paying a price.)
Lose-Lose
There is the rare occasion when negotiations become so contentions that the sides seek to damage one another, and are willing to take a little damage to themselves in doing so. The author sees this as highly irrational, but it does occur: consider the negotiation in the political arena between bitter enemies, contentious negotiation between companies and unions, or parties to a bitter divorce.
A more common instance of lose-lose is the tactics of compromise, in which parties recognize that neither is going to get what they want in a situation and are working to minimize the damage to both sides. This is often the case in situations where there is insufficient budget to sustain resources - such as when a company must lay off 10,000 workers or reduce budget by $10M and department heads debate who will take the deepest cuts.
Lose-lose is usually the aftermath of a deal gone bad. Where there is value in the relationship, it can be framed as helping one another to minimize losses - but when one side seems intent on damaging the other out of vindictiveness, it's generally necessary to take a break so that the parties can think more logically.
As a party in a los-lose negotiation, the key is to neutralize the other side's anger or irrationality. Resist the temptation to counterattack with your own impassioned and illogical demands, but instead address the hostility and present a rational perspective on the outcomes.