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Institute of Leadership & Management
MANAGING
NEGOTIATIONS
How to negotiate in business

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Institute of Leadership & Management
Contents
••
Click on the headings to be taken to that section.
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Institute of Leadership & Management
Section one:
What is
negotiation?
This workbook will enable you to prepare
for successful negotiations. It will also
help you negotiate, reach agreements
and build good relationships with
counterparts and colleagues.
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copied, reproduced, communicated, or otherwise distributed without the prior written permission of ILM.

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Institute of Leadership & Management
What is negotiating?
Whenever we need or want something from other people to achieve our goal, we
participate in negotiating. It is something that we do regularly whenever we agree a
price for the supply of goods or services.
• • Click on the orange circles in the diagram below to see
examples of negotiation.
Examples of
managerial
negotiation
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Institute of Leadership & Management
A problem-solving process
Being able to negotiate successfully is a key managerial skill, especially as more and
more work gets done through complex networks of individuals.
Negotiation is a problem-solving process in which two parties have conflicting
interests. You persuasively explain your case and the other person (or group) –
your counterpart – explains theirs. Your aim is to achieve maximum benefit from
the discussion whilst being aware of the need to reach agreement. To do this you
bargain by exchanging offers and counter offers, concessions and compromise until
you reach a mutually acceptable solution. Negotiating well requires a careful balance.
Satisfy your own needs
Maintain a good relationship
with the other party
Successful negotiation
Human behaviour is unpredictable and every negotiating situation is unique and
often complex and uncertain. There are no prescribed rules; however, there are
certain principles that generally apply to all negotiations.
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Institute of Leadership & Management
Negotiating strategy
Choosing the best negotiation strategy to match the situation can make a
considerable difference to your success. There are two main strategies for
bargaining.
Competitive bargaining (also called distributive or positional) is about negotiating
over who gets what share of a fixed ‘pie’. The parties are less interested in forming
a lasting relationship or creating a positive impression than winning. Haggling over
the price of a second-hand item is an example of competitive bargaining. You keep
information confidential (for example, you do not let your counterpart know how
badly you want the item), because information is power and the more you know
about the other person’s situation, the stronger your bargaining position. So, for
example, you let your counterpart make the first offer. You can always go lower!
Cooperative bargaining (also called interest-based or integrative) is about
collaborating to find and agree the best win-win solution that meets everyone’s
interests and results in good long-term relationships. All parties feel they have
gained something they want without giving up something important. To succeed
it requires openness, information sharing, willingness to be flexible and trust. This
means you try to make the first offer.
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Institute of Leadership & Management
••
Click the icon to reveal elements of each bargaining style.
Competitive
bargaining
Cooperative
bargaining
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Institute of Leadership & Management
••
Task one: Strategy for negotiating
For a successful agreement you need to think ahead and develop a strategy for your
negotiation.
In your own words, briefly describe the requirements of a negotiation strategy
using the space provided.
A negotiation
strategy
should have...
••
Approaches to negotiating
Lewicki et al (2015) distinguish five different approaches to negotiating.
Click on the buttons to reveal some methods that can be used in negotiation.
Collaborative
problem-solving
Compromising
Accommodating/
yielding
Contending
Delaying/inaction
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Institute of Leadership & Management
Emotions in negotiation
Being an effective negotiator requires a broad range of interpersonal skills such as
effective listening, self-confidence, respect for others, patience, positive attitude,
persistence and the ability to deal with emotions. Emotions play a powerful
role in negotiation; for example, participants often give up too much, against
their interests, just to arrive at an agreement. Be aware of your behaviour, your
emotional reactions to situations and how others see you.
Fisher and Shapiro (2007) have identified five key concerns that trigger people’s
emotions during negotiation. You can use these to encourage positive emotions in
yourself and others without getting overwhelmed by them. This can help you to
transform disagreement into an opportunity for mutual gain.
••
Click on the buttons to reveal each key concern.
Appreciation
is about:
Affiliation is about:
Autonomy is about:
Status is about:
Role is about:
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Know your bargaining range
Knowing your bargaining range helps you to get the best possible deal without
either giving lots of concessions or being pushed into an agreement you might
later regret.
••
Click on the arrows below to reveal the definitions.
What you
hope to
get out of
negotiating
What you
will settle
for
What you
don’t want
to happen
What is
unacceptable
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Your goal in negotiation is to reach an agreement that is closest to the outcome you
had hoped to reach prior to starting the negotiation. Knowing your bargaining range
beforehand will help you to do this.
YOUR
BARGAINING
RANGE
YOUR
OBJECTIVE
YOUR
WATNA
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Anchoring
Anchoring (Tversky and Kahneman, 1974) is the first offer presented and is
important because it influences the final outcome. Your offer should be realistic but
aggressive. You may well need to do plenty of background research to collect the
information to help you decide on an appropriate and realistic anchor. Then, if your
counterpart offers first, try to reanchor using objective information you collected in
your research.
Power in negotiating
According to Spangle and Isenhart (2003), power is the degree of leverage or
influence a party has during negotiation. It can come from many different sources
such as their position or role in their organisation, their knowledge about the topic
of negotiation or their counterpart’s needs and wants, or it may come from the
strength of their BATNA. Power may be real or perceived. The relative power a party
possesses influences the outcome of negotiation and so you should assess the
power held by both parties prior to negotiating.
Be aware of the extent of your authority when negotiating. What are you allowed to
agree or commit to before you need to seek higher authority from your manager?
Are you authorised to make agreements with customers or colleagues from other
departments? Are you allowed to spend money or commit people or time, including
your own, on behalf of your organisation? If so, to what extent?
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Institute of Leadership & Management
••
Task two: Extent of my authority when negotiating
In your own words explain the extent of your authority when negotiating.
Type your answer in the space provided.
The extent of
my authority for
negotiating is:
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Institute of Leadership & Management
••
Task three: Use of negotiating techniques
Identify techniques that you can use for negotiating and type them in the first
column below. Then briefly describe the use of each of the techniques in the
second column.
Technique I can use for negotiation
How I would use it
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Understanding your counterpart
Finding out about your counterpart might include financial information, details on
competitors or any other information relevant to the negotiation. Questions that
can help you to gather relevant information include:
••
What are their needs and wants?
••
What is the order of their importance to your counterpart?
••
Who does my counterpart need to satisfy?
••
What do I understand to be their objective?
••
How much do they need me/my service?
••
What is not important to them?
••
What negotiation strategy are they likely to use?
••
What arguments might they use in negotiation?
••
What do I believe are their BATNA, WATNA and WAP?
••
Are they likely to be open, willing to share information and value collaboration?
••
Are they likely to use information against me to leverage a better outcome for
themselves?
••
What common interests do we have that might indicate opportunity for mutual
gain?
Knowing what is or is not important to your counterpart may help you make small
concessions appear valuable or gain extra value from items they might give away.
••
Task four: Researching my counterpart in a negotiation
In your own words using the space provided, explain how you can use research
on your counterpart to support a successful negotiation.
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Institute of Leadership & Management
Cultural differences
When there are cultural differences among parties to a negotiation, it is important
to be aware of and sensitive to them. Cultural/linguistic differences can result in
misunderstanding. In some cultures, people value getting to know other people
before discussing technical details of the agreement, while in others, people want
to resolve technical issues first. Cultures may have different concepts of time,
such as taking considerable time to negotiate a deal, whereas others want a faster
pace. In some cultures, disclosure of information is believed to encourage trusting
negotiation, whereas others keep information to themselves. Some cultures believe
periods of silence can offer a chance to think or present ideas but others find silence
uncomfortable. In some cultures, you are encouraged not to disagree with those
who should be respected whereas other cultures consider everyone equal.
You may need to adapt to expectations of negotiators from other cultures. Be open,
flexible and respectful, and communicate clearly with them to maintain rapport and
minimise misinterpretation.
Try to understand what culture the other person believes they belong to as this
will prevent you from making incorrect assumptions about them. Being able to deal
effectively with cultural differences will give you an advantage as you will build good
relationships and ask good questions, and thereby quickly gain a true understanding
of others.
••
Task five: Dealing with cultural differences
In your own words, and using the space provided, explain how cultural
differences might affect negotiation.
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Institute of Leadership & Management
Section two:
How do
I negotiate?
Negotiating takes place in an atmosphere
of uncertainty. This section will show you
how to prepare for the process so that
you are not working in the dark.
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Institute of Leadership & Management
The four stages of negotiation
In negotiation, neither party knows what the other really wants or is prepared to
accept or concede. There are four stages.
••
Click on the arrows to find out about each stage.
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Institute of Leadership & Management
Stage one: Preparation
An effective negotiator makes considerable effort to gather all relevant data. You
need to understand your own offer, concessions and bargaining position. You also
need to find out as much as you can about your counterpart. The information is
often included in an official preparatory document drafted before the negotiation
process.
• • Click on the orange circles to find out what you need to do at the
Preparation stage.
Preparation
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Institute of Leadership & Management
••
Task six: Determining my purpose, scope and objective
Identify a situation where you need to negotiate something at work. Describe
and clarify the topic or issue you need to negotiate by responding to the
questions below. Use the space provided.
What is the topic or issue that you need
to negotiate?
What is the extent of the topic or issue?
For example:
• Who does it affect?
• When does it happen, and to
what extent?
• Who is your counterpart?
Why do you need to negotiate
this issue?
The scope of my negotiation is:
The purpose of my negotiation is:
What is the most you hope to achieve as
a result of your negotiation?
The objective of my negotiation is:
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Institute of Leadership & Management
Researching my counterpart
What can you achieve by anticipating your counterpart’s interests, needs, goals,
strengths and weaknesses?
••
Click on the arrows to find out.
1. The most appropriate
approach to negotiation
••
Task seven: How I believe my counterpart
is likely to negotiate
Assess the likely objectives and negotiation stances of your counterpart. Use
the spaces provided.
What outcome from
the negotiation is my
counterpart hoping to
achieve?
Why do you think
this is the case?
What attitude do
you believe they
will take during the
negotiation?
What strategy do you
believe they will use?
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Institute of Leadership & Management
••
Task eight: Researching the strengths and weaknesses
of my counterpart
Research your counterpart’s strengths and weaknesses in relation to the topic of
your negotiation by asking other people or doing desk research.
Write your counterpart’s strengths and weaknesses in columns A and B below.
Then give the source of your information in column C.
A. Strength
B. Weakness
C. Source
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Institute of Leadership & Management
Preparing my negotiating strategy
Taking your research into consideration, choose a negotiation strategy with the best
chance of achieving your objective. Your choice will depend on your counterpart,
the relationship you have with them, the level of common interest between you and
how each party is likely to behave while negotiating. It will also depend on what you
are negotiating and the time you have to agree.
When negotiating, act according to your perception of the likely response of your
counterpart. You need to prepare for how you will deal with any situation that may
arise.
••
Task nine: Preparing my negotiating strategy
Is it more appropriate for you to use a competitive or a collaborative strategy?
Why?
Explain and justify your choice of negotiating strategy and identify your
priorities by responding to the questions below.
Which negotiation strategy do you plan
to use?
How do you justify this choice of
strategy?
What issues are important for you in
the negotiation? Please list them in
order of priority to you.
1
2
3
4
5
My priorities are:
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Institute of Leadership & Management
Understanding my bargaining position
Questions that can help you assess the strength of your bargaining position include:
••
How important is my issue?
••
Are there several issues?
••
If so, what is their order of importance?
••
What arguments support my case?
••
Is my case strong enough for me to show little willingness to compromise?
••
Am I willing to make concessions to get an early agreement?
••
What counter-arguments to my arguments is my counterpart likely to make?
If your counterpart needs you more than you need them, you have a good
bargaining position. If you need them more than they need you, ask yourself how
you can build your position.
Neither party is likely to get everything they want, and you will probably need to
make concessions or trade-offs to achieve a successful agreement. You will need
to decide on your bargaining range. You will also need to plan your approach to the
negotiation.
••
Click on the buttons to find out the consequences of each approach.
Approach
Possible consequence
Make high demands early –
then make concessions
Make low demands early on –
then make concessions
Make moderate demands
early – then refuse to give
concessions
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Institute of Leadership & Management
••
Task 10: My bargaining position
Bearing in mind your objective, strategy for negotiation and priorities,
describe below your BATNA, WATNA and WAP, as well as any compromises or
concessions you could make to reach agreement. Type your answers below.
My Best Alternative To a Negotiated
Agreement is:
My Worst Alternative To a Negotiated
Agreement is:
My Walk Away Point is:
Compromises I could make are:
1
2
3
Concessions I could offer are:
1
2
3
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Institute of Leadership & Management
Organisational, legal and ethical
requirements in negotiating
You may well have a handbook containing all the organisational policies and
procedures that apply to your work area. These describe how your organisation
complies with the law and may include how it approaches negotiation. You need to
be aware of, and adhere to them. Ethical aspects relate to moral judgment and so
may be referred to in your organisation’s statement of values or their policies. You
should not do or accept anything that could be construed as bribery, favouritism or
inequality.
••
Task 11: Policies, procedures and legal and
ethical requirements
Explore your organisation’s policies and procedures relevant to negotiating. Describe
how you will ensure that you adhere to these policies and procedures as well as legal
and ethical requirements when you negotiate.
Type your answers below.
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1. Opening
••
Meet in a quiet setting with privacy and sufficient space, without interruptions
••
Establish the relationship with your counterpart before starting the negotiation
••
Adopt a powerful mindset (Neale and Lys, 2015) and speak with authority
••
Be careful of what your body language is saying
••
Begin negotiating by summarising your opening position
‘Negotiation is about finding a
solution to your counterpart’s
problem that makes you better
off than you would have been
had you not negotiated.’
Margaret Neale (2015)
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2. Bargaining
This is a series of exchanges in which one party
makes an offer and the counterpart counter offers.
You need to keep within the limits of your authority.
The following checklist will help you to maximise the
opportunities that arise during negotiation:
••
Be polite, respectful, firm and calm
••
Present your key commitments
••
Empathise with your counterpart’s point of view
and assert your own
••
Question them for information
••
Emphasise common ground
••
Argue about interests (issues) not positions
••
Be flexible and anticipate compromise
••
Treat your counterpart as you would want to be
treated regardless of how you are treated during
the negotiation
••
Be open to creative solutions that may lead to
agreement
••
Keep focus on your key issues and their
importance to you
••
Be prepared to concede wisely – things that cost
you little but have value to your counterpart
••
Always expect something in return – ‘if I give you
this, then will you give me that’
••
Make sure everything you offer is within your plan
••
Summarise arguments and seek acceptance
••
Have the confidence not to settle for less than
you feel is fair
••
Make sure you are not beaten down below your
WAP
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Institute of Leadership & Management
The key to successful negotiation
‘Always ask for the things you
want, even if you think you
won’t get them.’
Margaret Neale, 2015
Research on the Harvard Negotiation Project (Fisher and Shapiro, 2007) has
identified seven interconnected elements that are key to successful negotiation.
••
Click on the buttons to reveal more information about each element.
1. A good negotiating
relationship and rapport
2. Good communication
3. Interests
4. Options
5. Legitimacy
6. Commitment
7. Conclusion
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Institute of Leadership & Management
••
Task 12: Optimising opportunities when negotiating
Carry out your negotiation and identify the opportunities that arose.
List these in column A below. Then, in column B, describe in your own words
how you optimised each of them.
A
The opportunities that arose
during my negotiation were:
B
I optimised these
opportunities by:
How I kept within the limits of my own responsibility
while optimising these opportunities:
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Institute of Leadership & Management
Staying flexible
Negotiations are often complex and uncertain. Negotiators are continuously trying
to make sense out of the discussion and order the information. They may find it
difficult to access relevant information rapidly or critical data may not be available.
This means you need to remain flexible and open to new issues, information and
opportunities to improve the quality of your agreement or add value to it as the
negotiation proceeds. As cases are presented and arguments are worked out, the
interests and power bases of the parties become critical.
••
Task 13: Adapting the conduct of my negotiation
Identify the changing circumstances that occurred during your negotiation
and describe how you adapted your conduct accordingly. Type your
answers below.
The changing circumstances that
occurred during my negotiation were:
I adapted my conduct by:
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Closing
For a successful negotiation resulting in action, the details should be written
down and signed by both parties at the end of the negotiation. This will ensure
commitments are kept and things happen as a result of your agreement.
••
Task 14: Making an accurate record of outcomes
and agreements
In your own words, respond to the questions below. Use the space provided.
1
2
3
4
5
1
2
3
What were the outcomes of your negotiation?
What agreements were made?
What will be done as a result?
Who by?
When?
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References
Collins, P. (2009) Negotiate to Win: Talking Your Way
to What You Want. Sterling Publishing Co. Inc., NY.
Diamond, S. (2011) Getting More: How You Can
Negotiate to Succeed in Work and Life. Penguin Books,
London.
Fisher, R. and Shapiro, D. (2007) Building
Agreement: Using Emotions as You Negotiate. Random
House Business Books, London.
Grant, A. (2013) Give and Take. Weidenfeld and
Nicolson, London.
Hames, D. S. (2011) Negotiation: Closing Deals,
Settling Disputes, and Making Team Decisions. Sage,
Thousand Oaks, CA.
Lewicki, R. J. Saunders, D. M. and Barry, B. (2015)
Negotiation. 7th ed. McGraw Hill Education, NY, USA.
Neale, M.A. and Lys, T.Z. (2015) Getting More
of What You Want: How the Secrets of Economics
and Psychology Can Help You Negotiate Anything in
Business and Life. Profile Books, London.
Spangle, M. and Isenhart, M.W. (2003)
Negotiation. Communication for Diverse Settings.
Sage, CA. USA.
Thompson, L.L. (2006) Negotiation Theory and
Research, Psychology Press, Hove.
Tversky, A. and Kahneman, D. (1974) Judgment
Under Uncertainty: Heuristics and Biases.
Science, 185, 1124-1131.
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be copied, reproduced, communicated, or otherwise distributed without the prior written permission of ILM.

34 Institute of Leadership & Management
••
Task checklist
Below is a list of all the practical exercises in this workbook to
help you record your activity. Completing these will give you
the practical skills you need to have successful negotiations.
Strategy for negotiating
Extent of my authority when negotiating
Use of negotiating techniques
Researching my counterpart in a negotiation
Dealing with cultural differences
Determining my purpose, scope and objective
How I believe my counterpart is likely to negotiate
Researching the strengths and weaknesses of
my counterpart
Preparing my negotiating strategy
My bargaining position
Policies, procedures and legal and ethical requirements
Optimising opportunities when negotiating
Adapting the conduct of my negotiation
Making an accurate record of outcomes and agreements
Copyright © The Institute of Leadership and Management 2015. These materials may not, in whole or part, be
copied, reproduced, communicated, or otherwise distributed without the prior written permission of ILM.