Power In Negotiation

Benjamin Franklin is credited with saying that “Necessity never made a good bargain!

In his wonderful book, Practical Negotiating, Tom Gosselin contends that “In negotiating, power is a function of alternatives.”   Gosselin is right, of course, and hopefully a discussion of alternatives brings to mind Ury & Fisher’s BATNA (Best Alternative to  a Negotiated Agreement) concept.  Gosselin goes further though and breaks down the alternatives concept and outlines how to go about forecasting the other side’s alternatives.

Gosselin separates these alternatives into three categories: (1) alternative sources, (2) alternative currencies, and (3) alternative skills and behaviors. The point being that the more alternatives a bargainer has the more power in the negotiation. Gosselin believes that these categories or levels of alternatives are “cascading” and a negotiator should therefore explore each exhaustively before moving to the next. It is imperative to evaluate your alternatives before each negotiation and at least attempt to evaluate your opponent’s.

The role of alternative sources in negotiation is illustrated in Practical Negotiating by the example of the Toyota Prius. A car buyer has many alternatives but a buyer who wanted a gas/electric hybrid that was reliable and got nearly 50 miles per gallon had only one choice for the first decade or so after the Prius was introduced. The predictable effect on negotiation was that the Prius was sold at or above sticker for a number of years. From personal experience, it is the only car for which I have ever paid the sticker price. Gosselin also makes the important point that you should carefully distinguish need from want.

Alternative currencies refers to the “tangible or intangible resources that are perceived to have value by the receiving party.” The identification of resources that have a higher value to the receiver than the giver can provide win-win opportunities for resolution. The most obvious example is where one party provides goods or services in settlement rather than money. The provider’s cost is hopefully lower than the retail or market value of the goods or services. Acknowledgement of regret or apologies also go a long way in mediated settlement but cost the giver almost nothing.

Gosselin believes that how you negotiate is as important as what you negotiate. How a proposal is presented can change the value of the currency to the other side. By understanding the other side’s needs it is possible to better position the proposal to address those needs. I agree that a skillful negotiator can present a proposition so that its value is more easily understood and accepted by the other side. Here Gosselin points out the value (he calls it power) of the reationship. By acknowledging and understanding the other side’s position and treating it and the party with respect a skillful negotiator can affect the outcome.

Few negotiators are fortunate enough to know the other side’s true power (i.e., alternatives) and therefore power in negotiating is really a function of the perception of power rather than actual power. This is obviously true to a certain extent in the mediated settlement context but unlike many negotiations the negotiator’s power is dependent on the strength of legal arguments related to liability, damages and defenses. Legal research and factual discovery allow us a better glimpse at the other side’s “power in negotiation.”

This post discusses just one step in the very detailed outline of negotiation technique in Practical Negotiating. Although we will revisit Gosselin’s instruction in this blog from time to time, his systematic approach to negotiations is well worth the read.

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