We All Bargain — Here’s Why (and How to Do a Better Job)

Apr 1, 2022

Bargaining’s a fact of life. We all engage in it. We bargain with our spouse. We bargain with our boss – or used to. We bargain with our children and grandchildren, and they with us. That said, there’s often more to bargaining – even in comparatively trivial domestic situations – than meets the untrained eye.

Simply put the ultimate objective of bargaining is, or ought to be, a win-win outcome.

Professional negotiators frequently refer to something known as BATNA: best alternative to a negotiated agreement.

That’s often too technical for many involved in negotiation, which is why one of the most frequently used expressions in elementary bargaining strategy is: “It depends on what the other side does.”

A Reactive Approach

For most routine negotiations, a reactive approach – basing your reaction on the other side’s actions – is sufficient.

When the stakes are low, skilled negotiators know how to pivot with relative ease from one tactic to another as the opposite side makes moves. My wife’s an expert at this manoeuvre and I’m still struggling to figure out how she does it. Often (and this is what she’s probably driving at), that’s enough to ensure that the final settlement captures value for both participants.

But from time-to-time, dealmakers find themselves in complex negotiations with higher stakes. In that situation, it’s preferable to understand ‘something more subtle.’

Distributive vs. Integrative Bargaining

That ‘something more subtle’ involves the distinction between two words: distributive and integrative. The former, almost always, delivers a win-lose outcome. The latter, almost always, delivers a win-win outcome.

As proof of the merits of this second approach to bargaining I offer a quote from John F. Kennedy:

“Collective bargaining has always been the bedrock of the American labor movement. I hope that you will continue to anchor your movement to this foundation. Free collective bargaining is good for the entire Nation. In my view, it is the only alternative to State regulation of wages and prices – a path which leads far down the grim road of totalitarianism. Those who would destroy or further limit the rights of organized labor – those who would cripple collective bargaining or prevent organization of the unorganized – do a disservice to the cause of democracy.”

The point of the quote, whether you are pro- or anti-union, is that it recognizes there is little to be gained by confrontation and much to be gained by compromise in any bargaining situation.

Distributive Bargaining

The central tenet of distributive bargaining is that each party has a target point and a resistance point. The target point is what the parties would like to achieve most. The resistance point is the minimum result which would be accepted by the parties.

When engaged in distributive bargaining, tactics focus on trying to get your opponent to agree to your specific target point or to get as close to it as possible.

Integrative Bargaining

According to the online platform Beyond Intractability: “Integrative or ‘interest-based’ bargaining is a form of negotiation in which each party attempts to understand the other’s interests, on the expectation that it will achieve a better result by helping the opponent create a solution it sees as responsive to its own concerns.

Integrative bargaining tends to bond negotiators and allows each to leave the bargaining table feeling that he/she has achieved a victory. Distributive bargaining, however, leaves one party a loser.

The classic example involves two teenagers and an orange. If there’s only one orange in the refrigerator and both teenagers demand it simultaneously, a distributive bargain might well involve each of them getting half of it.

In an integrative approach, each might ask the other why he or she wanted the orange, discovering in the process that one wanted to eat the inside while the other wanted the peel to bake a cake. The integrative bargain is obviously better for both.

5 Bargaining Tips

Business negotiation is a world of contradictions. So is bargaining for a new car or finalizing a real estate transaction. It’s even evident when negotiating with your five-year-old or making a bargain with your rebellious teen. You’ll even have to bargain, as I said at the beginning of this blog, when trying to find common ground with a spouse or partner.

And these are just a few of the situations we’ll all find ourselves in throughout our lives.

You’ve got to be firm but flexible, open and sharing. Your state of mind is the most important thing.

Maintaining a positive collaborative attitude will prevail over a negative one.

If you strive for a mutually beneficial outcome, you’ll find the whole exercise much easier. The following five tips may help you to prepare for your next negotiation, no matter who it’s with or what it’s about.

  1. Look for areas of common ground.
  2. Don’t get anchored – try not to adopt a non-negotiable extreme position. (Very helpful when children and young adults are involved).
  3. Be prepared to compromise.
  4. Aim for a win-win and try to find an outcome that benefits everyone.
  5. Have a plan B. Can you live with an outcome different from your initial desire?

Finally, never ignore the fact that – especially when confronted with a high-stakes negotiation – there are experts out there who can help.

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