Thursday, December 03, 2009

What is Wrong with the Win-Win Negotiation Concept?



On several groups on LinkedIn, a discussion was started with the hypothesis that win-win does not work in sales negotiations. One contribution to the discussion caught my particular attention. Someone answered by quoting Einstein who taught physicists that the result of observations depends on the position of the observer. I think this is the perfect short answer. Here is the long answer why I believe so.


Let me introduce the concept of the Negotiation Matrix. There are two parties (A and B). They both come to the negotiation table having defined their Walk Away Point (WAP); meaning if they were forced to make concession beyond this point, they would walk away from the negotiation table. Just as an aside the win-win concept might already let us forget this walk away option.


In the Negotiation Matrix, we represent the negotiation options of A on the horizontal axis. All negotiation results to right of the WAP, A considers as a win . Outcomes on the left of the WAP are perceived as a loss by A. The negotiation options of B are represented on the vertical axis. B considers a negotiation outcome as a win if it is above the WAP. Results below the WAP are perceived as a loss by B. The two axis cross at the respective WAP.


This can also be considered the optimal negotiation outcome. At this point, both parties have obtained a maximum of concessions from each other without any party feeling as loser yet. However the win-win concept will accept any negotiation result in quadrant I as a desired outcome ( win-win) of a negotiation. But this is an altruistic concept from the point of view of A and B.


Neurological research carried out with fERM have shown that the human brain has a specific Altruistic area but also a specific Lust area. For judging the suitability of the win-win concept for commercial negotiations, two findings are of crucial importance. First, the Lust center can be triggered by presenting the potential of winning monetary awards. Second, when both the Altruistic center and the Lust center are triggered, the Lust center is stronger and will force the decision in its favor.


This triggering of both centers is exactly what happens in a commercial negotiation. The Altruistic center of both the seller and buyer is triggered because we have been taught to strive for a win-win result in order to maintain an established relationship. For the seller, the Lust center is triggered because of the commission check that can be expected by winning the deal or at least by the desire to get as much cash as possible from the sale. The buyer might have personal monetary incentives in form of a bonus or is at least motivated to outlay as little cash as possible for the purchase. The Lust center being stronger, quadrant I is hardly the desired outcome for neither A nor B. Only for an observer C not involved in the negotiation, this is the optimal quadrant. There is no stimulus to the Lust center.


The seller (lets assume he is A) and the buyer (let say she is B) from their point of view, due to the force of the Lust center might though rather end up in a win-lose (quadrant IV) or a lose-win (quadrant II) situation. What probably both try to avoid is ending up in a lose-lose situation (quadrant III).


Negotiation results ending in quadrant IV or quadrant II are though, contrary to what the win-win concept would stipulate, not necessarily harmful to a relation. It is acceptable that A sees himself in quadrant I and positions B in quadrant IV if simultaneously B sees herself in quadrant I and projects A in quadrant II. For the external observer this still is a win-win situation, because both A and B will manifest a probably even stronger feeling to walk away as winners as they think they have defeated their opponent.


As a seller or buyer, you must thus take care that your vis-à-vis does not perceive him/herself as a loser. From your own perspective you are not obliged to see your vis-à- vis as a winner and thus a win-win outcome for the negotiation. I believe knowing this will make you more at ease in negotiations and is probably more in line with how human brains work.

2 comments:

  1. This is an intriguing and new (at least to me and I've been in the negotiation biz a long time) strategic look at commercial negotiations. The difference between buyer and seller rationale here is striking.

    The buyer's priciple philosophy should be Total Cost of Ownership (TCO) which is based in great part in objective dollars and numbers. All of the posts from sales bretheren do not refer to TCO in any way which may explain the gulf between the two professions.

    Christian's graphic casts negotiation strategy in a different light and his blog provides a beneficial perspective for buyers and sellers. Bravo

    (Copy of post by Robert Menard on Sales Management Assocuation Group on LinkedIn.

    ReplyDelete
  2. Thanks for sharing such an wonderful write-up.Everything is very open and represents very clear explanation of issues.Luckily, I browsed your website accidentally, I bookmarked it.I really appreciated with it.

    ReplyDelete

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