What is a 'Negotiation'

A negotiation is a strategic discussion that resolves an issue in a way that both parties find acceptable. In a negotiation, each party tries to persuade the other to agree with his or her point of view.

In advance of the negotiation, participants learn as much as possible about the other party's position, what the strengths and weaknesses of that position are, and how to prepare to defend their positions and counter the arguments the other party will likely make.

BREAKING DOWN 'Negotiation'

Many offers that people assume to be firm and final are actually flexible. For example, negotiation can be used to reduce debts, to lower the sale price of a house, to get a better deal on a car or to improve the conditions of a contract. Negotiation is an important skill when accepting a new job.

Often, the employer's first compensation offer is not a company's best offer, and the employee can negotiate for higher pay, more vacation time, better retirement benefits and so on. Negotiating a job offer is particularly important because all future increases in compensation will be based on the initial offer.

Key Factors in Negotiation

There are understood to be seven elements or factors that come into play in successful negotiations:

  • Who are the parties in the negotiation and what are their interests are? What is the background of all involved and how does that affect their position in the discussion?
  • What is the relationship of the parties and their intermediaries in the negotiation? How are the parties connected and what role does that play in the terms of the negotiation process?
  • How will the needs of the parties involved be best communicated in order to secure their agreements through negotiation? What is the most effective way to convey the desired outcomes and needs? How can the parties be certain they are being heard?
  • Are there any alternatives to what either party initially wants? If a direct agreement is not possible, will the parties need to seek substitute outcomes?
  • What options may be possible to achieve an outcome? Have the parties expressed where there may be flexibility in their demands?
  • Are what each party requests and promises legitimate? What evidence do the parties offer to substantiate their claims and show their demands are valid? How will they guarantee they will follow through on the results of the negotiation?
  • What is the amount of commitment required to deliver the outcome of the negotiations? What is at stake for each party, and do the negotiations consider the effort that will need to be made to achieve the negotiated results?
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