Negotiation Framework: Mutual Gain and Objective Criteria

I have to say that this may be the simplest and yet one of the most powerful negotiation framework out there. I have done some reading on the subject in the last few weeks and I have ended up to the conclusion that Fisher and Ury have something in this 4 step approach that has quickly improved how I interact with people.

So without further ado, here are two steps of the negotiation framework with more to follow soon. Hope you enjoy.

Negotiation Framework: Invent Options for Mutual Gain

Once the individuals involved have identified their interests, then they can explore options for mutual gain. This is not easy. A stressful negotiation inhibits creativity and free exchange. What is required is collaborative brainstorming in which people work together to solve the problem in a way that will lead to a win/win scenario.

The key to brainstorming is separating the inventing from the deciding.

Begin by taking 15 minutes to generate as many options as possible. No matter how outlandish any option is, it should not be subject to criticism or immediate rejection. People should feed off the ideas of others to generate new ideas. When all the possible options are exhausted, then sort through the ideas that were generated to focus on those with the greatest possibilities.

Clarifying interests and exploring mutual options creates the opportunity for dovetailing interests. Dovetailing means one person identifies options that are of low cost to them but of high interest to the other party. This is only possible if each party knows what the others’ needs are during a negotiation.

For example, in negotiating price with a parts supplier, a project manager learned from the discussion that the supplier was in a cash flow squeeze after purchasing a very expensive fabrication machine. Needed cash was the primary reason the supplier had taken such a rigid position on price.

During the brainstorming session, one of the options presented was to prepay for the order instead of the usual payment on delivery arrangement. Both parties seized on this option and reached an amicable agreement in which the project manager would pay the supplier for the entire job in advance in exchange for a faster turnaround time and a significant price reduction.

Such opportunities for win/win agreements are often overlooked because the negotiators become fixated on solving their problems and not on opportunities to solve the other person’s problems during a negotiation.

Negotiation Framework: Use Objective Criteria, When Possible

Most established industries and professions have developed standards and rules to help deal common areas of dispute.

Both buyers and sellers rely on the blue book to establish price parameters for a used car.

The construction industry has building codes and fair practice policies to resolve proof of quality and safe work procedures.

The legal profession uses precedents to adjudicate claims of wrongdoing.

Possible, you should insist on using external, objective criteria to settle disagreements.

For example, a disagreement arose between a regional airlines firm and the independent accounting team entrusted with preparing the annual financial statement. The airline firm had made a significant investment by leasing several used airplanes from a larger airline.

The dispute involved whether this lease should be classified as an operating or capital lease.

This was important to the airline because if the purchase was classified as an operating lease, then the associated debt would not have to be recorded in the financial statement. However, if the purchase was classified as a capital lease, then the debt would be factored into the financial statement and the debt/equity ratio would be much less attractive to stockholders and would-be investors.

The two parties resolved this dispute by deferring to formulas established by the Financial Accounting Standards Board. As it turns out the accounting team was correct, but, by deferring to objective standards, they were able to deflect the disappointment of the airline managers away from the accounting team and preserve a professional relationship with that firm.

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