When most veterinarians think about negotiation, they think of bargaining with a sales rep over the price of a new digital radiology unit or dickering with a car dealer over the cost of a new vehicle. However, the truth is negotiations take place continually in life: between business owners and employees, veterinarians and horse owners, parents and children. Any time a decision requires input from more than one person, negotiation is involved. Because these types of decisions are so common, negotiation skills are essential for effective communication.
Negotiation is the process by which two or more parties try resolve their differing interests. Some things are common to all negotiations, whether between warring countries or family members: Negotiation occurs between two or more parties that have a conflict of needs, desires, or interests requiring resolution. The parties negotiate voluntarily because they feel they can gain a better outcome than if they simply accept what the opposing party offers. The parties prefer to negotiate rather than fight or sever a relationship. They prefer to bargain rather than have one of them dominate and the other one capitulate. They prefer to figure out their conflict themselves rather than take their dispute to a higher authority for resolution.
To be successful, both negotiating parties must move from their opening positions to reach an agreement. As John F. Kennedy said, “You cannot negotiate with people who say what’s mine is mine, and what’s yours is negotiable.” In addition, good negotiators manage intangibles as well as tangibles. They consider not only money and goods but also all parties’ emotions, pride, reputation, and relationships. These factors can be remarkably important in preserving relationships for the future.
A critical concept for all negotiators is BATNA, or best alternative to negotiated agreement. Knowing the best alternative to an agreement before entering into a negotiation is critical to making good decisions. Because they understand their true “bottom line,” negotiators with a firm understanding of their BATNA have power and confidence and are generally more successful in achieving their goals.
Types of Negotiation
Some negotiations are zero-sum or distributive, and some are mutual gains or integrative. Distributive bargaining is essentially a competition over who will get more of a limited resource. This type of bargaining occurs when one party’s goals conflict directly with another’s. Integrative negotiation is a collaborative, cooperative activity that aims to meet all parties’ needs.
Distributive Negotiation
Because distributive bargaining is competitive and generally centers on haggling about a price, both parties’ interests are in direct conflict. Both parties are seeking to maximize their gain of a fixed resource—often money. Because these negotiations result in a winner and a loser, distributive tactics should be reserved for situations where:
- A single, simple deal is being made, and a future relationship with the other party is not important.
- An integrative negotiation has progressed to the point of each side “claiming value.”
An equine veterinarian purchasing a used truck from a car salesperson would do well to use distributive bargaining techniques.
In distributive bargaining, each party’s goal is the optimal point at which negotiations will conclude. This is called their target point. They also have a resistance point, beyond which they will break off negotiations and walk away. The opening offer will serve as an anchor for the negotiation. The anchor point is very important because all negotiation will take place around this initial stake in the ground. If opening offers (whether from seller or buyer) are too far from the target point, it is possible that no negotiation will occur. For instance, if the used truck salesperson states that the truck’s price is $55,000, but the target point of the prospective buyer is $35,000, it is quite unlikely that a negotiation will occur; the buyer will simply assume he cannot afford the vehicle.
The spread between the buyer’s and seller’s resistance points is known as the bargaining range, and the other party will immediately reject any offer outside this range. If the truck dealer’s lowest acceptable price (his resistance point) for the used truck is $47,500, he will summarily dismiss an offer of $35,000. Through the process of making offers and counteroffers, each party begins to reveal their resistance point.
Consider a seller with an opening price of $55,000, a target of $50,000, and a resistance point of $47,500 bargaining with a buyer who has a target of $47,500 and a resistance point of $52,500. The bargaining range is between $47,500 and $52,500—the spread between the two resistance points (see Figure 1). Within a few minutes of conversation, each party will understand the other’s position better and might be able to make a deal that satisfies both. A positive bargaining range occurs when the buyer’s resistance point is above the seller’s, leaving room to reach a mutually agreeable price. In the case of a negative bargaining range, the seller’s minimum price is higher than the maximum the buyer is willing to pay. In this case, the negotiation will end, the parties will rethink their resistance points, or the buyer will pursue an alternative.
The concept of BATNA is very important in distributive negotiation. If the veterinarian has identified a used truck at another dealership with an asking price of $52,500 (the BATNA), she will be much more likely to press the current salesperson for a sale price on the subject truck closer to her target and less likely to agree to a price close to her resistance point.
Distributive bargaining’s basic strategies are to push for a price very close to the seller’s resistance point by making extreme offers and small concessions. During negotiations, it is best if you can get the other party to make the opening offer, because then you will have some idea of their bargaining range. Because concessions are essential, if you must make the opening offer, make sure it is sufficiently distant from your resistance point to allow room for an exchange of offers. Research shows that parties are more satisfied with agreements after a series of concessions rather than acceptance of the first offer. With no bargaining, people often feel as though they could get a better price elsewhere, and they might walk away. When making concessions, one can determine when a counterpart’s resistance point is near because their successive concessions become smaller.
You probably know people who approach all discussions as though they’re distributive bargaining sessions—these individuals usually aren’t very enjoyable to be around. By reserving this approach for those situations that are truly one-time transactional agreements with no relationship components, you will have the most rewarding results.
Integrative Negotiation
With integrative negotiation, the negotiating parties’ goals are not mutually exclusive—this is win-win bargaining. The focus is on commonalities rather than differences; interests (the “why”) rather than positions (the “what”); meeting the needs of all parties; an exchange of information between sides; and an enlargement of the pie through innovative ideas.
To be a successful integrative negotiator, one must:
- Build trust by showing honesty, curiosity, and integrity.
- Have a positive outlook that sees abundance rather than scarcity.
- Recognize that others’ interests have equal validity as your own.
- Be able to see the big picture.
- Have strong listening skills.
By facilitating a reciprocal flow of information, both sides gain understanding of their counterpart’s needs and concerns, leading to less extreme resistance points. Identifying the other’s true objectives and desired outcomes can lead to recognition of common ground and areas of alignment. This makes searching for solutions that meet both sides’ goals more successful and satisfying. By generating multiple alternatives, innovative solutions might arise that increase overall value.
For example, an associate might want to pursue acupuncture training, but the required tuition and time away exceed her contractual Continuing Education budget and allotted days off. She and the practice need to have an active dialogue focused on understanding the costs, benefits, goals, and threats of this desire. By defining all parameters of the “problem” collectively, both the associate’s and the practice’s needs and priorities can be accurately identified. The practice might have concerns about the tuition fees, travel costs, and lost time in production or emergency duty, as well as concerns about retaining this employee after paying for her skills acquisition. The associate might desire to add an additional profit center to the practice to increase her value as an employee as well as her potential earnings. She might also want to add a skill she could pursue in the future in her own practice if she decides emergency duty is a poor lifestyle once she becomes a parent, for instance.
A collaborative approach to this situation that involves voicing all concerns and aspirations has the highest likelihood of producing an agreement that honors both parties’ needs. One creative solution would be for the practice to pay the associated expenses, and the associate to agree to a certain number of subsequent years of service or repayment of prorated expenses if he or she departed prematurely. One can easily imagine the associate’s poor morale if the practice owner simply denied her request or the owner’s anger and feelings of betrayal if an associate promptly departed after receiving practice-financed training without a repayment clause.
In this situation, both parties must consider their BATNA. The associate’s BATNA might be to pay for the training herself and use vacation time to attend courses. The practice’s BATNA could be to give the associate unpaid leave to attend the course, with her assuming all expenses in excess of her continuing education budget. When assessing these BATNAs, a negotiated settlement is likely to be more satisfactory for all parties.
Steps for Integrative Negotiation
When entering into integrative negotiation, follow this sequence of collaborative steps:
- What is the problem or objective? Depersonalize it.
- State the problem or objective as a specific goal to be attained.
- Explore all possible aspects and related issues of the problem or objective.
- What is most important? What is least important?
- What obstacles must be overcome to achieve the goal?
- What interests are present? Interests are underlying concerns, needs, desires, and fears that motivate a negotiator to take a particular position.
- Are they substantive (related to the focus of the negotiation)?
- Are they process-oriented (related to how the negotiation unfolds)?
- Are they relationship-based (related to value placed on relationships)?
- Are they interests “in principle” (related to fairness or values)?
- Explore why different parties desire certain solutions. Why do they want what they want?
- What criteria will be used to judge proposed solutions? Agree on criteria before generating solutions.
- What are possible solutions to solve the problem? Brainstorm multiple alternatives.
- Avoid judging or evaluating solutions while brainstorming.
- Avoid ownership of solutions.
- Ask outsiders.
- Attempt to expand the pie, creating additional value.
- Evaluate solutions on the basis of the criteria determined previously. Narrow choices by rank ordering, and judge solutions on how they will be accepted by those implementing them.
- Consider combining options into packages that please multiple interests.
- Try to reach consensus rather than voting so all parties will be fully committed to implementing the negotiated settlement.
- Formalize the agreement in writing.
Take-Home Message
Negotiation is unavoidable and takes place regularly during the ordinary events of our professional and personal lives. Understanding the difference between distributive and integrative negotiations and being familiar with effective negotiation processes can contribute to more satisfying outcomes.
Related Reading
- Hiring Your First Staff Member at Your Equine Practice
- 6 Ways to Improve Equine Practice Profitability
- Veterinary Wellness Briefs: Smart Financial Moves for Equine Practitioners
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