CHAPTER 9

Negotiation: Competition or Collaboration

A subset of difficult conversations is that of negotiation. In this capacity, we are looking at those discussions in which leaders are bargaining for results that are of benefit to their organizations. The process for negotiating is related to having difficult employee conversations, but the audience is different, as are the issues being discussed. Leaders are regularly faced with opportunities to negotiate. In any negotiation, both parties want outcomes that are in their self-interest or the interest of their organizations. It is because these self-interests clash that negotiation is required. If they did not clash, they would not be negotiating. Each party wants to get at least some of what they want without having to give up too much.

It could be said that negotiation is part of everyday life and that we are all negotiators, except that we do not always recognize it as such. It happens in families when parents negotiate children’s bed or bath times. It happens when couples negotiate the issue of who is going to take the dog out on a cold day. It happens at work when we discuss our remuneration. We negotiate when we buy a car or a house. Negotiating issues with physician-leaders will be different, but the principles we have found to be effective are the same. There are any number of negotiation strategies (high/low; walk away; take-it or leave-it; unreciprocated offers; bogeys; etc.). We want to help you create the frame for any negotiations, within which you can use whatever strategies seem most appropriate. We have identified several foundational elements to any negotiating process.

Clarifying the goal: It is important to be clear on what your goal in the negotiation is. To this end, it is important to gather data to support your position and to understand opposing points of view. It is also important to understand the goal and position of your counterpart. In both cases, it is important to understand that the ultimate goal has self-interest at its root. Understanding the motivations of your counterpart’s self-interest is a necessary precondition for having a problem-solving mindset, rather than an adversarial one. It is similarly important to know those issues on which you are willing to compromise.

Setting the frame: The mindset going into a negotiation sets the frame for negotiation. Commonly, negotiation is seen as a battle. When the frame is characterized as a battle, the approach of both parties is that you have something I want, for which I want to give you very little. This frame sets up a win/lose situation at the outset. This approach is adversarial in nature. Power and domination are the prevailing behaviors. Although these competitive circumstances will periodically occur, it is important to realize that there are multiple possible approaches to negotiation.

Work at the Levinson Institute has determined that there are four basic negotiation strategies they call “The Four C’s”:

• •Concession: a nonprocess where one party merely acquiesces to all the demands of the other (Lose–Win). This approach would occur when there is such a perceived power differentiation that for the weaker side to proceed, the potential damage could be even worse to them.
• •Compromise: a process whose emphasis is on preserving relationships but whose outcome leads to a suboptimal solution that gives neither party enough of what they want to be satisfied (Lose–Lose). In this scenario, both sides believe that the relationship could be at risk if they were to proceed and that maintaining the relationship is more important than either side gaining an advantage.
• •Competition: a process leading to one party achieving a high outcome and the other a low outcome without sustaining the relationship (Win–Lose). This is basically the value-claiming approach, in which the opposing sides are determined to get the outcome beneficial to them regardless of the impact on their opponent.
• •Collaboration: a process for achieving mutually satisfying, optimal agreements while simultaneously building trust (Win–Win). This strategy is a value-creating approach, in which the two sides look for opportunities for both to get their desired outcomes with the possibility that there are some innovative solutions that neither side had considered prior to the negotiation process. In this case, both sides place a high value on the relationship while maintaining a similarly high value on the outcome (Parekh 2012).

Graphically, these four negotiation strategies can be seen in Figure 9.1. This model presents the intersection of the importance of the negotiation outcome and the importance of the outcome to the two parties involved. As negotiations guru Chester Karrass has said, “In business, you do not get what you deserve, you get what you negotiate.” This model is illustrative of that insight.

Figure 9.1 Negotiation scenarios and their strategies

Source: Parekh (2012).

When going into any negotiation, it is important to consider the degree to which outcome is important and the degree to which relationship is important. With respect to outcome, conceding and compromising are value surrendering strategies. Although you may occasionally find yourself with no other options, only rarely should you be forced to resort to a value surrendering frame for negotiation. Competitive (value-claiming) and collaborative (value-creating) negotiations are much more common in the professional world. For that reason, we will be focusing the rest of this chapter on value-claiming and value-creating negotiation. Depending on the importance of the relationship, a value-creating negotiation is usually the preferred scenario, although a competitive, value-claiming negotiation is sometimes required or easier.

In short-term, transactional negotiations with strangers, the outcome is typically more important than the relationship. Think about the last time you bought a car. You know that the dealership was competing! In health care, as with most businesses, many relationships are long term and beneficial, predisposing you toward a value-creating negotiation strategy. When having a value-creating frame entering into the negotiation, the outcome is likely to be more mutually beneficial. Become diligent in focusing on the goal and not on winning whenever possible.

Keep in mind that it is possible, and often necessary, to shift the frame of the negotiation for other parties. Parties who initially adopt a value-claiming approach can sometimes be influenced to shift to a value-creating strategy. Describing the vision of a win–win scenario is sometimes enough to achieve this shift, but sometimes, you will need to drive the discussion down the path of value-creation, producing the initial understanding necessary to generate ideas that can demonstrate the potential of this approach to the other party.

Managing emotions: Even the most important decisions in life are made with a heavy dose of emotion. In fact, emotion often trumps reasoning and data. The same is true when negotiating. In an earlier chapter, we noted that effective leadership requires a high level of emotional intelligence. Nowhere is this skill more important than in a difficult negotiation. Having a clear understanding and control of your own emotional state is paramount for effective negotiating. When entering into negotiations with a win–lose mindset, the desire is to dominate rather than to understand. A win–lose mindset creates excessive emotion, anxiety, and anger, none of which benefit the negotiation process. Equally important is being observant of the emotional state of your counterpart so that you can both anticipate and appropriately respond to their queries or challenges. It is important to act rather than to react. In the most difficult times, demonstrating a calmness with a self-effacing sense of humor will offset tensions on both sides. It has been demonstrated that the inability to manage emotions leads to more errors in negotiations and significantly more financial loss than negotiations conducted in a neutral emotional state. Interestingly, these results exist regardless of whether the emotions are related to the negotiations or are incidental (Lerner 2005).

Creating a bond: Although the outcome of any negotiation is to have something that you did not have going into the process, negotiating is ultimately about relationships. Antagonistic relationships will result in antagonistic negotiations. We learn from hostage negotiators that bonding with those with whom we negotiate has the potential to have much better outcomes than not bonding. In addition, being willing to maintain a sense of humor is desirable, particularly one that is self-deprecating. You can be hard on issues but remain kind to people. Because negotiations are often serial in nature, you want to be remembered for the humane treatment you offered, rather than how difficult you were to deal with. Particularly in a value-creating negotiation, your counterpart needs to see you as a person who is approachable and not as an adversary.

Putting in the work to problem solve: If the frame you set is one of value-creating negotiation, the next step is to prepare yourself to put in the work necessary in taking a problem-solving approach. True collaboration keeps both parties’ interests as the objects of focus, rather than their differences. Using this approach, all parties strive to arrive at a solution that best meets the underlying motivations of both parties. This means that the parties will commit the time necessary for deep conversations to better understand the reasons for their differences. Gaining a deep understanding of the other party and their motivations is the highest goal. Significant time needs to be spent on the front end of these talks to ensure that all parties have the same understanding of the problem or issue. This approach requires extensive exploration, using data, research, terms, and definitions about which both parties agree. The intent is to seek as much of a unified understanding of the issue as possible. This is the foundation of the ensuing brainstorming and genesis of ideas that is the basis of value-creation. There will always be compromises with the intent that small compromises for one party create substantial value for the other party. They keep in mind that they are not engaged in a “zero-sum” game. “Agreeing to disagree” is not an acceptable response. This only shuts down productive discourse and ends negotiations. Rather, they are looking for creative options that will, as much as possible, satisfy the underlying interests of both parties. This is the hard work of a value-creating negotiation. In our experience, failure in these negotiations is usually the result of one or both parties not committing to do the heavy lifting required to produce success.

What to Do When All Else Fails

Rarely do negotiations go as expected. In fact, expecting the unexpected is a good mindset to maintain. Being fluid and creative is an antidote to being rigid and behaving defensively. Logic and reasoning will only go so far toward achieving the final result. Most negotiations are a dance where both parties have periods of yielding, compromising, and competing, even when negotiations are characterized by a problem-solving approach. Even with the best of intentions and utilizing all of the aforementioned skills, negotiations can stall. What do you do then?

BATNA: In any negotiation, an important concept to consider is the best alternative to a negotiated agreement (BATNA). Coined by Harvard Law School professors, Roger Fisher and William Ury (2011), this is a concept that will help you understand the context and leverage present in a negotiation. By definition, your BATNA is your best option if you fail to come to an agreement in the current negotiation. By knowing your BATNA, you can protect yourself from accepting terms that are too unfavorable and not in your best interest. On the other hand, if the proposed terms are better than your BATNA, you can either accept or continue to negotiate. Knowing both your and the other party’s BATNA in a negotiation will give you a more accurate assessment of each party’s leverage in the negotiation. It is always easier to assess your BATNA than it is to speculate about the other party’s BATNA on the basis of whatever limited information you have. However, obtaining enough knowledge to have a good idea of the other party’s BATNA can give you a significant advantage in the negotiation.

Understanding your own BATNA is also easier said than done. At first glance, your BATNA may seem obvious, but you need to make sure you have done your due diligence to consider all your possible alternatives. One mistake that many leaders make is not calculating the comprehensive value of their alternatives. It may seem easy to compare the purely financial value of different alternatives, but, as always, the devil is in the detail. You must look beyond the apparent, basic revenue or costs and recognize the financial nuances that are hidden in the fine print. For example, one airline ticket may appear to be significantly cheaper than another until you consider additional costs such as add-on fees for baggage, specific seats, or refreshments.

Equally important, you must factor in nonfinancial factors such as operational constraints, levels of control and autonomy, commitment level required, and estimates of sustainability. Recognizing the high impact but nonfinancial components of each alternative and considering the associated value or cost to you will allow you to consider the comprehensive value of each alternative when determining your BATNA.

Ultimately, the BATNA is a construct that provides a simple framework on which to organize the knowledge you possess with regard to a particular negotiation. Depending on the subject of the negotiation, this knowledge may include clinical/operational expertise, evidence-based medicine, information about competitors, market trends, or the political environment. The more knowledge you possess in any negotiation, the more successful you will be. Can you imagine negotiating the purchase of a house without knowing the local market conditions, the interest rate environment, and the average sale price of comparable houses in the area? In any negotiation, it pays off to do your homework and research.

The Psychology of Negotiation

As powerful as knowledge can be in a negotiation, psychology also plays a significant role. One example of this involves the process of making the first offer. In our experience, there is a prevailing belief that you should never make the first offer in a negotiation. Popular opinion suggests that by doing so, you risk “showing your cards” too early, negatively impacting the negotiation. To the contrary, studies have shown that making the first offer has positive effects on the results of a negotiation. These studies suggest that making the first offer sets the tone and anchors the negotiation in favor of that party. This anchoring effect is primarily psychological, effectively influencing the thought process of the other party regardless of the knowledge and facts they carried into the negotiation. Interestingly, it has also been demonstrated that actively considering the other party’s BATNA, and hence the least attractive deal they may be willing to accept, can eliminate the anchoring bias of the first offer. In other words, actively focusing on the facts after the first offer is made can counteract the psychological factors in play. This area of study confirms the strong effects of psychology in negotiation while reinforcing how essential it is to be informed and to also intentionally focus on that information.

In a previous chapter, we discussed the interaction of nature and nurture as being instrumental in differentiating the physician from the general population. Not surprisingly, both brain functioning and personality play a role in negotiation. In all human activity, there is brain involvement that influences and determines how we behave. The area of negotiation is no different. Neuroimaging studies have determined that several brain systems are involved in negotiations. Research at the Max Planck Institute for Human Cognitive and Brain Sciences in Germany used real-time functional magnetic resonance imaging (fMRI) to better understand neural correlates of social decision making. They found that the anterior insula, ventral striatum, and lateral orbitofrontal cortex appear to be strong determinants of later overt behavior in negotiation situations (Hollmann et al. 2011). The research was able to reliably predict acceptance or rejection of an offer in a negotiation before the subject revealed the decision with an overt response. This occurred with a 70 percent prediction rate.

Researchers found that the negotiation process can be broken down into three phases: preparation, the offer, and the response. Within each of these, the brain is processing significant amounts of information in a different part of the brain to help the negotiator guide the best outcome. They determined that during negotiation there are three phases and three brain systems (Hollmann et al. 2011). The reason these findings are important is that negotiation is typically seen as a rational process in which one party is trying to outwit the other through both strategic moves and behavioral cues. However, the research has demonstrated that in a competitive negotiation, the dopamine system is really driving behavior. Competition can bias the way the brain weighs rewards and can influence overpaying if the competition becomes fierce. So, when the autonomic nervous system goes into overdrive, triggering a quickened heart rate and sweating, the dopamine system is kicking in, and the negotiator is at risk for becoming overly aggressive.

There is also a relationship between negotiation and the Big Five Personality Factors. Research has determined that agreeableness, conscientiousness, and extraversion recur as the most statistically relevant factors in negotiation. The research focused on both traditional negotiation (value-claiming) and problem-solving negotiation (value-creating). The type of negotiation determines the degree to which these traits are effective (Falcão et al. 2018). The results indicated that conscientiousness played a significant role in both kinds of negotiation. This finding is likely due to the role of planning and being prepared prior to entering into a negotiation. There is no substitute for planning, and “shooting from the hip” weakens the negotiation process. It is important to differentiate between being impulsive and being creative.

Extraversion played a positively related role in both types of negotiation. In the problem-solving negotiation, adaptable extraversion was instrumental in coming to a positive outcome. This would be expected from the standpoint that adaptable extraversion would lead one to demonstrate a collaborative tone for problem solving. This is likely related to the degree to which adaptable extraverts can appear to be cooperative, gregarious, and social. In the problem-solving negotiation, parties recognize that competition may be counterproductive, so extraverts may need to temper their dominant tendencies.

However, in the traditional value-claiming negotiation, extraversion that included more dominant, competitive behaviors was instrumental in positive outcomes. Demonstrating competitive behaviors helps when one party seeks to get more than the other party. When there is either a zero-sum game or a win–lose outcome, a domination-oriented approach to negotiation can assist. In these negotiations, demonstrating a minimum concern for social relationships and maximizing assertiveness were instrumental in achieving the desired outcomes.

Agreeableness had mixed findings, being both a virtue and a curse. In competitive negotiation, agreeableness had a negative influence. By agreeing too quickly, and too often, it can imply that the party wishes to accept outcomes that are less rigorous than his or her counterpart. This can seem to be a weakness in negotiations characterized by competitive domination and puts the opponent in a superior position. In these negotiations, maintaining a low level of agreeableness, including offering fewer concessions, is advantageous. However, in problem-solving negotiations, a balanced level of agreeableness facilitates a desire to seek beneficial outcomes for both parties. It indicates that the parties want collaboration over competition. When using problem-solving negotiations, being more agreeable reduces defensiveness and dominant behavior, and it is foundational to positive interactions. At the same time, the negotiator must have a balanced level of agreeableness, as excessive agreeableness can result in conceding rather than seeking mutually beneficial outcomes. A summary of the personality traits required for successful negotiation in both value-creating and value-claiming negotiations is found in Figure 9.2.

Figure 9.2 Desired personality traits and successful negotiation strategies

Source: Falcão et al. (2018).

Psychology of Negotiation for Physician-Leaders

As you will recall from Chapter 3, the typical physician is high in conscientiousness, extraversion, and agreeableness, but does vary by specialty and individual physician. Knowing your personality construct before entering into negotiations is clearly important. In particular, understanding the tendencies to which you are conscientious, extraverted, and agreeable are prerequisites for managing these traits. Once you understand these tendencies, tailoring your behavior to the negotiation situation will assist in coming to the desired outcome.

In health care settings at an organizational level, a problem-solving, value-creating approach is typically desired more than one that is competitive and value claiming. In value-creating negotiation, collaboration is valued more than competitiveness. Positive interpersonal relationships are valued, in which parties are seeking solutions that benefit the greater good. This implies that all parties are “on the same team” and seeking mutually desirable outcomes. When physician-leaders find themselves in negotiation situations, they need to help set the frame early so that they can determine the kind of negotiation they are facing and adapt their styles accordingly.

Coach’s Corner

Negotiation is an omnipresent component of both professional and personal life. As such, it can feel second nature and almost simplistic. Yet effective negotiation is both a science and an art. With thorough preparation and proper strategy, physician-leaders can reap the rewards of fruitful negotiation.

1. 1.Identify your natural tendencies in regard to negotiation

• •Using your personal psychological profile that you identified in Chapter 3, reflect on how your natural tendencies will influence you in a negotiation. Understanding your natural inclinations, what approach and tactics should you employ to be most effective in a negotiation? How should you play on your strengths and mitigate your weaknesses?

1. 2.Always identify your BATNA

• •In every negotiation, take time to identify your realistic Best Alternative to a Nonagreement. It is easy to fall into the trap of letting assumptions or emotion guide a negotiation instead of starting with facts such as your BATNA.

1. 3.Practice makes perfect

• •Recognize and embrace all of your opportunities to negotiate both in your personal and professional life. You will find that they occur almost daily. Practice applying the personal tactics you have identified, and assess your success in each instance.

References

Falcão, P.F., M. Saraiva, E. Santos, and M.P. Cunha. June, 2018. “Big Five Personality Traits in Simulated Negotiation Settings.” EuroMed Journal of Business 13, no. 2, pp.201–213. https://www.emeraldinsight.com/doi/abs/10.1108/EMJB-11-2017-0043?journalCode=emjb (accessed February 7, 2019).

Fisher, R., and W. Ury. 2011. Getting to Yes: Negotiating Agreement without Giving in. 3rd ed. New York, NY: Penguin Books.

Hollmann, M., J.W. Rieger, S. Baecke, R. Lützkendorf, C. Müller, D. Adolf, and J. Bernarding. October, 2011. “Predicting Decisions in Human Social Interactions Using Real-Time fMRI and Pattern Classification.” PLoS One 6, no. 10, p. e25304. https://doi.org/10.1371/journal.pone.0025304 (accessed February 7, 2019).

Lerner, J.S. 2005. “Negotiating under the Influence: Emotional Hangovers Distort Your Judgment and Lead to Bad Decisions.” Negotiation 8, no. 6, pp. 1–3. https://projects.iq.harvard.edu/lernerlab/publications/negotiating-under-influence-emotional-hangovers-distort-your-judgment-and-lea (accessed March 6, 2019).

Parekh, R. 2012. Collaborative Negotiation. Jaffrey, NH: The Levinson Institute, Inc.