Truth 4. Win–win, win–lose, and lose–lose negotiations
Management guru Mary Parker Follett tells a story of two sisters quarreling over a single orange. Both sisters want the orange, and they are willing to fight for it. They state their demands, and the negotiation escalates. Battle weary, the sisters finally agree to compromise and cut the orange exactly in half. One sister squeezes the juice from her half to make fresh orange juice and discards the peel. The other sister grates her half of the peel for an orange scone recipe and throws out the juice. The garbage truck comes and goes with the discarded remains....
In the heat of the argument, the sisters overlooked a simple win–win solution: One sister would get the whole peel, the other all the juice. Tragically, by the time the sisters realized their error, the fruit’s remains were gone. By acting purely competitively, the “Orange Sisters” turned an easy win–win into a lose–lose negotiation. Why? The sisters made demands and stated positions but failed to communicate their interests.
Most negotiations contain potential for win–win agreements. For example, had the sisters been willing to reveal what their goals, interests, and intentions were, they might have discovered the win–win solution of giving the entire peel to one sister and all the juice to the other.
Win–win negotiation is the process of crafting arrangements that represent mutual gains for all parties involved. Win–win deals involve both creating value and claiming value. To create value, we need to cooperate with the other party and genuinely work with their interests in mind. For example, the sisters needed to find it in themselves to ask questions and gain insight about why each needed the orange.
When it comes to claiming value, no one wants to get no part of the orange or just a sliver. For this reason, each negotiator must be her own best advocate. And, so, it’s necessary to make claims in a negotiation. But making claims is different from making demands. Claiming value, then, refers to how negotiators garner resources for themselves and their companies. It’s possible to be both competitive and cooperative in a negotiation: competitive about looking after your own interests but cooperative in terms of exploring creative options.
Too often, I see negotiators make one of two mistakes: They either concede too quickly—accommodate excessively—or act too tough. Both mistakes can result in win–lose outcomes or lose–lose outcomes.
Win–win negotiation
A true win–win negotiation is a solution in which parties have reached an agreement that cannot be mutually improved upon. Had the sisters come up with the elegant solution of giving the entire peel to one and the entire fruit to the other, this would have been win–win. The term win–win negotiation actually reflects an important economic concept: Win–win solutions lie on what economists refer to as the Pareto Optimal Frontier, after the Italian economist Vilfredo Pareto.
A true win–win negotiation is a solution in which parties have reached an agreement that cannot be mutually improved upon.
Lose–lose negotiation
Pareto’s litmus test was simple: If there is no way to improve upon an agreement from the standpoint of either party, the negotiators have reached the Pareto Optimal Frontier. However, if there is another agreement that both parties would prefer or that one party prefers and the other is indifferent to, the negotiators have suboptimized, failing to reach the Pareto Optimal Frontier. When this happens, I call it a lose–lose agreement.
These are the tell-tale signs of a lose–lose negotiation:
The other party immediately accepted your first offer.
You made an offer, the other party counteroffered, and then you agreed to split the difference.
You and the other party considered fewer than five potential deals.
You didn’t ask the other party any questions.
The other party didn’t ask you any questions.
Neither party tried to “tweak” the deal to improve it.
You revealed nothing to the other party.
The other party revealed nothing to you.
You negotiated only one issue (such as price).
You negotiated more than one issue, but you negotiated each independently of the others.
If your negotiation is characterized by three or more of these symptoms, there is a very good chance you suboptimized and ended up with a lose–lose deal. Fortunately, you can do several things to make sure you never end up on the “lose–lose frontier” again.
Win–lose negotiation
Win–lose negotiations happen when one party makes all the concessions and the other party makes excessive demands. In the orange example, imagine if one sister had been tougher than the other. The tough sister would have gotten the entire orange for herself, and the concessionary sister would have not gotten anything. We call this win–lose negotiation. Win–lose negotiators create problems in long-term relationships because parties often want to get even or hold a grudge.
Negotiators struggle with the question of whether to be tough and demanding or nice and conciliatory. “Do I want to succeed, or do I want to build relationships?”
Sometimes negotiators opt to make concessions and sacrifices because they want the other party to like and trust them, and frankly it’s just more comfortable. The downside: These negotiators perform less well economically.
In this book, we move away from the stark choice of being tough versus being soft. Tough, unrelenting negotiators risk not making deals at all (lose–lose), or they may win this one but leave the other party feeling embittered and resentful (win–lose).