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Business

How to Negotiate: The 5 Stages of the Negotiation Process

Written by MasterClass

Last updated: Feb 21, 2020 • 3 min read

Negotiation skills aren’t just for businesspeople. Negotiation training comes in handy in a variety of real-world situations, whether at work (like negotiating a job offer) or at home (like deciding whose turn it is to do the dishes). The first step to being a skilled negotiator—and finally “getting to yes”—is understanding the five basic stages of the process.

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What Is Negotiation?

Negotiation is a process by which two or more people (or groups) resolve an issue or arrive at a better outcome through compromise. Negotiation is a way to avoid arguing and come to an agreement with which both parties feel satisfied.

Negotiation can be used by a variety of groups in a variety of situations—for instance, between individuals at a market looking to get the best price on an item, between startups looking to merge organizations through business negotiations, or between governments who want to come to a peace agreement. In your daily life, you may find yourself at work in salary negotiations or sales negotiations. Negotiation strategies are also a great tool for conflict management and conflict resolution—even in your personal life.

The 2 Types of Negotiation

There are two possible types of negotiation, depending on the point of view and leadership styles of each negotiating party:

  1. Distributive negotiation: Also sometimes called “hard bargaining,” distributive negotiation is when both parties take an extreme position and one side’s win is believed to be the other side’s loss (a win-lose solution). This operates on a “fixed pie” principle, in which there is only a set amount of value in the negotiation, and one side will walk away with the better deal. Examples include haggling prices in real estate or at a car dealership.
  2. Integrative negotiation: Parties engaging in integrative negotiation don’t believe in a fixed pie, instead asserting that both sides can create value or mutual gains by offering trade-offs and reframing the problem so that everyone can walk away with a win-win solution.
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The 5 Stages of the Negotiation Process

While there are many approaches to negotiation tactics, there are five common steps that most effective negotiations follow to achieve a successful outcome:

  1. Prepare: Negotiation preparation is easy to ignore, but it’s a vital first stage of the negotiating process. To prepare, research both sides of the discussion, identify any possible trade-offs, determine your most-desired and least-desired possible outcomes. Then, make a list of what concessions you’re willing to put on the bargaining table, understand who in your organization has the decision-making power, know the relationship that you want to build or maintain with the other party, and prepare your BATNA (“best alternative to a negotiated agreement”). Preparation can also include the definition of the ground rules: determining where, when, with whom, and under what time constraints the negotiations will take place.
  2. Exchange information: This is the part of the negotiation when both parties exchange their initial positions. Each side should be allowed to share their underlying interests and concerns uninterrupted, including what they aim to receive at the end of the negotiation and why they feel the way they do.
  3. Clarify: During the clarification step, both sides continue the discussion that they began when exchanging information by justifying and bolstering their claims. If one side disagrees with something the other side is saying, they should discuss that disagreement in calm terms to reach a point of understanding.
  4. Bargain and problem-solve: This step is the meat of the process of negotiation, during which both sides begin a give-and-take. After the initial first offer, each negotiating party should propose different counter-offers for the problem, all the while making and managing their concessions. During the bargaining process, keep your emotions in check; the best negotiators use strong verbal communication skills (active listening and calm feedback; in face-to-face negotiation, this also includes body language). The goal of this step is to emerge with a win-win outcome—a positive course of action.
  5. Conclude and implement: Once an acceptable solution has been agreed upon, both sides should thank each other for the discussion, no matter the outcome of the negotiation; successful negotiations are all about creating and maintaining good long-term relationships. Then they should outline the expectations of each party and ensure that the compromise will be implemented effectively. This step often includes a written contract and a follow-up to confirm the implementation is going smoothly.

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