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The Three Dimensions of Negotiation

Negotiation in business is a strategic communication process between two or more parties to reach a mutually beneficial agreement. It involves discussing and compromising various aspects such as prices, terms, conditions, services, or any other elements pertinent to a deal or collaboration. 

Negotiation skills are crucial in business as they help in securing favorable outcomes, building relationships, and maximizing value for all involved parties.

According to Ernest Bevin, former British secretary of state for foreign affairs, “The first thing to decide before you walk into any negotiation is what to do if the other fellow says no.”

Effective negotiation often involves preparation, active listening, understanding the needs and priorities of both sides, creative problem-solving, and the ability to find common ground. 

It's not solely about getting what one wants but also about finding solutions that satisfy the interests of everyone involved. Successful negotiations can result in better deals, stronger partnerships, and long-term positive relationships between businesses.

Elements in negotiation

In negotiation, the three key elements are often referred to as "The Three P's": People, Problem, and Process.

People: People focus on the individuals involved in the negotiation. It encompasses their personalities, emotions, values, perceptions, and communication styles.

Understanding the people aspect involves recognizing that negotiators bring their motivations, biases, and personal backgrounds to the table. Effective negotiators pay attention to these factors to build rapport, establish trust, and manage emotions during the negotiation.

Problem: Focusing on the problem allows negotiators to move beyond positions and delve into the underlying interests. It involves exploring potential solutions, alternatives, trade-offs, and creative options to address the fundamental issues at hand.

Successful negotiation often involves reframing the problem to uncover mutually beneficial solutions that cater to the interests of both sides.

Process: The process is the framework within which the negotiation takes place. It includes the strategies, tactics, stages, and methods used to negotiate effectively.

Having a well-defined negotiation process helps in guiding discussions, managing time, dealing with impasses, and ultimately reaching an agreement. It involves planning, setting objectives, exchanging information, making proposals, bargaining, and finalizing the agreement.

Understanding and effectively managing these three elements—people, problem, and process—enriches the negotiation experience, facilitates constructive communication, and increases the likelihood of achieving mutually satisfactory agreements.

The Three Dimensions of Negotiation 

In negotiation, the three dimensions referred to by Josh Kaufman in his The Personal MBA book as "setup, structure, and discussion" contribute significantly to the process and outcome. 

These dimensions delineate different phases and aspects of negotiations:

01. Setup

In the business world, setting up a negotiation is like preparing the groundwork for a successful deal or collaboration. It's the initial phase where you create the conditions that can lead to a favorable outcome. 

This phase involves everything that happens before the actual negotiation begins. It encompasses preparation, planning, and laying the groundwork for the negotiation process.

Imagine it as preparing for a crucial presentation or meeting. Just as you'd meticulously plan for such an event, the setup in negotiation involves similar preparation. Environmental factors, such as market conditions, industry standards, and the specific context of the negotiation, heavily influence the process and its potential success.

In his book, Negotiation Genius: How to Overcome Obstacles and Achieve Brilliant Results at the Bargaining Table and Beyond, Deepak Malhotra said, “Wise negotiators create a comprehensive list of what they are assuming and what they do not know before negotiation.”

Researching your negotiating partner in a business context is akin to gathering information about a potential business collaborator or client. Understanding their needs, preferences, and priorities can significantly impact how you present your proposals and tailor your offers to align with their interests.

Ultimately, this preparation phase is about positioning yourself strategically. By comprehensively understanding the business environment and your negotiating partner, you equip yourself to navigate the negotiation landscape more effectively. This groundwork often sets the stage for a positive and fruitful business negotiation, leading to mutually beneficial outcomes.

02. Structure

Structure refers to the framework, format, and guidelines established for the negotiation process itself. This involves determining the agenda, defining the sequence of discussions, setting rules or procedures, and establishing the overall framework that governs the negotiation.

Imagine it as designing the framework for a partnership. When you structure your proposal thoughtfully, you're essentially creating a roadmap that presents your ideas, offerings, and expectations in a clear and organized manner.

This structured approach allows you to offer various options and alternatives to your potential business partner. By considering different possibilities in advance, you're better equipped to present a range of solutions or scenarios that cater to their needs and interests.

The goal here is to create a proposal that's not just about what you want but also addresses what your partner desires. It's about finding common ground where both parties benefit. When your proposal is well-structured, it provides valuable choices for your partner to consider, fostering a more constructive negotiation process and increasing the likelihood of reaching a mutually agreeable outcome in the business partnership.

03. Discussion

The discussion dimension is the actual interaction and communication that takes place between the negotiating parties.

It is like the moment when you unveil your offer to the other party. It's the time to present your proposal, delve into the specifics, and engage in a back-and-forth dialogue aimed at reaching a mutually acceptable agreement.

Think of it as a crucial business meeting where you articulate your offer, address concerns, and iron out the finer points. During this phase, both parties work towards removing obstacles that might hinder the deal. It's a dynamic exchange where you aim to bridge gaps and find common ground.

This discussion isn't just about pushing your agenda but also about understanding the needs and perspectives of the other party. It involves active listening, responding to queries, and making adjustments to your proposal as necessary.

Ultimately, the discussion phase continues until both sides either come to an agreement that satisfies their respective interests or decide to halt negotiations. It's a critical stage where the negotiation process unfolds, where ideas are exchanged, compromises are made, and the groundwork is laid for a successful business deal.

Tips for Successful Negotiation

  • Justify your position: Before negotiations, make sure you have evidence to support your stance and show you've done your homework and are eager to make a deal.
  • Put yourself in their shoes: Keep in mind that the other party also has objectives they aim to achieve from the deal. What can you propose that assists them in reaching their goals without compromising beyond your limits or capabilities?
  • Know when to walk away: Before starting negotiations, it's wise to set your bottom line and identify when you'd prefer to stop bargaining instead of pushing further. If both sides are firmly stuck in their positions, it might be futile to pursue a deal. Even if ending negotiations isn't your preference, taking a break can allow everyone to regroup and maybe approach the table again with a new outlook.

Negotiation, with its multifaceted dimensions, embodies the intricate dance of human interaction, strategy, and problem-solving. These dimensions - whether it's understanding the people involved, framing the problem at hand, or orchestrating the process - collectively shape the negotiation landscape.

The dimensions of negotiation form a tapestry where each thread intertwines with the others, influencing the outcome. People bring their personalities, motivations, and emotions, underscoring the significance of empathy and communication. Addressing the problem beyond surface positions, and exploring underlying interests, fosters avenues for creative solutions. Meanwhile, the structured process guides the negotiation journey, providing a framework for productive discussions and resolution.

This holistic view acknowledges negotiation not as a linear process but as a dynamic interplay of elements. It's about creating an environment that fosters collaboration, respects diverse perspectives, and navigates challenges toward mutually beneficial agreements. Understanding these dimensions empowers negotiators to navigate complexities, forge meaningful connections, and craft solutions that transcend mere transactions, fostering enduring relationships and value creation.

Ayrin Saleha Ria works at Future Startup as a full-time Research Associate. She has a background in Applied Sociology. Before joining the FS team, she worked and volunteered with a number of social organizations. As someone who comes from a social science background, she takes a deep interest in research around important social-economic challenges in our society. A voracious reader, Ayrin is passionate about working for the betterment of society, takes a deep interest in human society and behavioral science, and loves books.

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