This is especially true in the high-stakes, “win-lose” realm of distributive negotiations.
What is distributive negotiation?
In a distributive negotiation, two or more parties are trying to divide a limited, fixed pool of resources—money, time, goods, or services. Since resources are limited, everyone is competing to get the most out of the negotiation.
4 Tactics to Use Distributive Negotiation Effectively
There are four techniques that can help you use distributive negotiation effectively. Here’s how they work in a scenario most of us can relate to: negotiating a salary for a new job.
Know Your BATNA
Your best alternative to a negotiated agreement, or BATNA, is your backup plan if the negotiation fails. You should always determine your BATNA before starting a negotiation.
For salary negotiations, the ideal BATNA would be other job offers. But even in salary negotiations, a BATNA isn’t always about money. There may be other deal breakers—working hours or commuting time, for example (more on that below).
Set Your Reservation Value
Your reservation value is the worst deal you are willing to accept, so you should also always set it before entering a negotiation.
To determine your reservation value in salary negotiations, research the market rate for your job. Even without other offers lined up, your reservation value can indicate if the company in front of you understands your value.
Anchoring is the process of starting a negotiation with an extreme demand, knowing that it will be rejected. By starting the negotiation this way, you make your reservation value seem more reasonable. Just make sure your demand isn’t so extreme that your negotiation partner walks away immediately.
For your salary negotiation, you can use anchoring by proposing a figure higher than your reservation value. Say the average salary range for your industry is $45,000 a year. Perhaps you could anchor with $55,000. If your potential employer rejects that, you begin to negotiate back and forth until you reach an agreement that works best for both of you.
But again, don’t go crazy—if you start negotiations at $100,000, they may quickly decide you’re not right for the company.
In a distributive negotiation, you may need to give up something to get something—this is also called distributive bargaining.
Knowing your BATNA and reservation value makes it easier to concede on certain things. For example, you may agree to $40,000 a year with a $5,000 sign-on bonus or an agreement to work fully remotely.
Finding the Right Negotiation Approach
Distributive negotiation is a useful technique when you’re trying to get the largest slice of the proverbial pie, but it isn’t the only way to approach a negotiation.
No matter which strategies you end up using, always remember to prepare thoroughly, listen to others, be flexible, and strive for a positive outcome.