Have you ever been in an argument where after a while you realized that you and the other person were both arguing the same side?
What about in a negotiation? Have you ever been in one where after going back and forth for a while, you found that you and the other person both wanted the same outcome?
There’s a story about two sisters. I don’t know where this story first came from but it’s used commonly to illustrate an important point. Anyway, these two sisters both wanted a single orange. There was only one left and both insisted that they needed it. They each made their case as to why they deserved it or needed it more than the other, but in the end neither would budge. They both had to have it. So to be completely fair, they took a knife and sliced it in half and each walked away content, but not really happy. You see, they each only got half of what they needed.
The first sister took her half of the orange and squeezed out all the juice to make a very small cup of orange juice. It wasn’t much, but since she could only get half the orange it would have to be good enough.
At the same time, the other sister took her half of the orange and scraped the peel to get the zest which she needed for a recipe. It wasn’t quite enough but it would have to be good enough.
Obviously, there was another option. A better option.
The second sister could have scraped the zest off the peel and then handed the orange back to the first sister to squeeze out all the juice. Both would have had all that they wanted.
In every negotiation, there are three types of issues that we negotiate over. They are distributive, congruent, and integrative issues. Let me explain each of them in more detail.
Distributive issues are also known as fixed-pie issues, because they’re like a pie whose size is fixed (it can’t be made bigger or smaller) that two or more people have to split. These are the ones where there really is one thing that both parties want, and that thing has to be divided. The more you get, the less I get. The selling price of a car could be a distributive issue if there are no other terms being negotiated in the sale. In other words, if the only issue on the table is the price, then the more you pay me for my car, the better-off am but the worse-off you are.
Most people approach the majority of their negotiations is if all the issues on the table were distributive. But the truth is that most negotiations are not made up of purely distributive issues. This means that we can add value to the negotiation by approaching it differently
Congruent issues are ones where both sides want the same thing. An example of this would be in a negotiation over employment terms, both the employee and the company want to place that employee in a certain location. Both sides want the same thing so the issue doesn’t need to be a point of contention.
These issues are often not found in negotiations, simply because neither side is willing to state what they actually want. In the example of work location, the employer makes an assumption about where they think the person would want to work, and then offers them a position at that location, assuming that the employee will be unwilling to work at the employer’s preferred location. On the other side of the table, the employee feels like the location isn’t negotiable, or wants to be able to negotiate the salary so is willing to concede on location for now.
This seems so silly but I’ve seen this exact scenario play out. If the employee were just willing to say, “I would actually like to work in your Dallas, TX office if possible” then the employer would know the employee’s preference and would realize that Dallas was the ideal location for both people.
What’s the worst thing that would happen if the employee said that? What do you think? I think that the worst likely scenario, assuming that the employer doesn’t want to send them there, is that the employer would say something like, “We actually won’t be able to make that work right now” or “We might be able to get you to that office, but the relocation cost will be higher so we’ll need to lower your sign-on bonus.”
But neither side wants to lay their cards on the table because we’re so afraid that the other side will take advantage of us.
This does happen. An employer might use your location preference to get you to concede on another issue, like bonus or salary, even though you both wanted the job to be in Dallas. But the odds are that you will eventually find out that they wanted you in Dallas, and when you do you’ll be pretty upset with your employer. You’ll become an ineffective worker until you eventually quit, or you’ll take the issue to HR or upper management and they’ll have to make it up to you to keep you on board. Either way, it’s bad for the company. It’s especially bad for their reputation. So the employer has plenty of incentive to keep you happy. They have plenty of incentive to be honest with you. The ones that decide to take advantage are the ones with an unhappy workforce and it affects the success of the business.
Integrative issues are the ones where a combination of issues can be used to make both sides happy. This is where one issue is more important to you than it is to the other party, and another issue is more important to them than it is to you. Most issues that we treat as distributive are actually integrative, because most negotiations actually have more than one issue on the table.
Let’s look at the negotiations that take place when buying a house. Let’s say that you get a home inspection and the inspector finds something that they are confident can be completely repaired for $5,000. You can now choose to back out of the home purchase, have them make the repair, or just deduct $5,000 from the sale price of the house.
Looking at this from the buyer’s side, they want the house so they don’t like option 1. But they can’t decide between option 2 and 3. Either way allows them to make the repair right? Well, in option 2, they get the repair made now. In option 3, they save $5,000 on the purchase which they can use toward the repair, right? Wrong. They save about $24 a month on their home payment (assuming 4% interest on a 30 year mortgage). So the buyer is better off taking option 2, and this is really important to them because this repair really needs to be made.
Now let’s look at it from the seller’s side. Option 1 is a bad option for them. It means the house goes back on the market, and chances are they’ll have to make the repair anyway. Option 2 will cost them $5,000 now. Option 3 lowers the amount that they will get from the sale of the house by $5,000. Assuming that the sale is schedule to take place in the near future, the seller is actually indifferent between options 2 and 3. Either option costs them $5,000 out of their pocket either today or in the very near future.
The outcome of this issue in the negotiation matters less to the seller than it does to the buyer. The seller has to pay $5,000 out of pocket no matter what choice is selected. It’s just how it is, and they can’t avoid it. But to the buyer, the choice is important. This is an integrative issue.
When there are integrative issues, we can bundle issues together to find options the both sides prefer. We can actually create value. But when we choose instead to negotiate each issue separately and treat them as distributive, both sides only get a piece of what they actually want. In this case we divide the value.
So what do you do about it?
The first step toward becoming a better negotiator is to recognize that these different types of issues exist. One you internalize the fact that you’re not always fighting for a bigger share of a single pie, the options open up dramatically.
Take the example of the sisters and the orange. They were fighting over two completely different pies. But since they both assumed they were fighting over one pie, they each walked away with only half the pie they were fighting for and half the pie the other was fighting for. Then, they used the half of their pie and threw out the half of the other’s pie. What a waste of good pie. Now I’m being figurative here, I know they were fighting over an orange and not a pie.
Do you see how this could be useful?
Here are a few tips for approaching a negotiation.
- Identify exactly what you want before you get to the negotiating table. Write it down so you don’t lose sight of it. Write it in code if you’re afraid the other person might see it, but write it down.
- Spend some time talking with the other person. Try to understand them and their desires. This takes a little empathy, but if you can figure out exactly what they want then you can often find win-win solutions.
- Get them to open up by opening up yourself. Display a level of trust. People are more trusting of people that they think trust them. I’m not saying to put your negotiating position on the table for all to see. I’m not saying that you should show all your cards. But show a little. It’s communication between negotiating parties that allows us to find congruent and integrative issues with possible win-win solutions.
- Approach negotiations with a win-win attitude. If you approach them with an attitude of sticking it to them, then you’ll probably find a way to do that, even if it means you don’t get all that you want. Sometimes you’ll get a bigger piece of the pie by thinking win-lose, but in any situation where a possible ongoing business relationship exists, you’ll lose a lot more in the long run by thinking win-lose. Win-lose very often turns into lose-lose. So think win-win and you’ll open things up to many more possibilities that are mutually beneficial.
- Don’t get trampled over. As you’re thinking win-win, I don’t want you to become a pushover. Remember to write down what you want and then stick to it. Some people are very aggressive win-lose negotiators and they just love the overly cooperative. Don’t lose sight of what you’re there to do. Look for good win-win solutions but be firm in your position. Most people will respect you for you strong position and eagerness to help everybody win.
When it comes to negotiations, there are so many techniques and some work better than others. In other articles, I’ll talk about some of those techniques to help you have more of an edge as you negotiate. But for now, use this information about the different issues that we negotiate to look for win-win solutions. As you prepare for your next negotiation, plan ahead by thinking through the issues. Figure out what you want and write it down. Think about what the other person might want and write it down. Then, look for ways that you can both leave the room feeling like winners.
Do this and you’ll not only get more out of the deals you make, you’ll build bridges instead of burning them.
People will want to do business with you, and when that happens, everybody wins.