How can you expand the size of the pie in negotiations?

We have the ability to create choice by altering our interpretations of the world.
— Sheena Iyengar

Negotiation is a process to:

  • make a decision
  • resolve the differences on the substantive issues
  • manage the relationship
  • creatively reach an optimal agreement on value

This definition of negotiation highlights how important it is to prepare before you start the actual negotiation.

To make a decision in a negotiation you need to understand what will satisfy you and what you need to do to satisfy the needs and interests of the other party. Do they value the process of expanding the pie or are they fixed on a single outcome?

The best negotiations end in a resolution that satisfies all parties.
— Bazerman & Neale

Such agreements are rare. Most commonly, successful negotiations end in trade-offs. Where each party gives up something of lesser value to them in return for something of greater value. Because people often value the multiple issues in a negotiation differently, trade-offs can speed up and improve a conflict's resolution.

A distributive negotiation usually involves a single issue - a 'fixed-pie' - in which one person gains at the expense of the other. For example, haggling over the price of a rug in a bazaar is a distributive negotiation.

Most negotiations, however, have more than one substantive issue at stake, and each party values the issues differently. The outcomes available are no longer a fixed-pie divided among all parties. Finding an agreement that is better for both parties is an integrative negotiation

The integrative negotiation approach is linked to a problem-solving mindset which emphasises trust, affinity and joint gain. The distributive negotiation approach links to a competitive orientation, emphasising power, control and individual gain, taking value from you.

Parties in a negotiation often don't find these beneficial trade-off's because each assumes its interests directly conflict with those of the other party. "What is good for the other side must be bad for us", is a common and unfortunate perspective that most people have. I call this the mythical 'fixed-pie' mindset.

For example:

It's Friday evening, and you and your spouse are going to dinner and a movie. Unfortunately, you prefer different restaurants and different movies. It's easy to think of the negotiation as purely distributive - your choices are at your spouse's expense - and compromise on both issues.

But if you look beyond fixed-pie and consider how much you value each of your choices, you may discover that you care more about choosing the restaurant, and your spouse cares more about choosing the movie. That way, you can find a restaurant and movie combination that you each value over a compromise, resulting in an integrative agreement.

Business negotiations also provide opportunities for mutually beneficial trade-offs. The more you prepare for a negotiation the more you will be able to move between a distributive and an integrative negotiation to expand the size of the pie.