3D Negotiation: Powerful Tools to Change the Game in Your Most Important Deals
By David Lax and James K. Sebenius
Summary written by Brett Reeder, Conflict Research Consortium
Citation: Lax, David A. & Sebenius, James K., 2006, 3D Negotiation: Powerful Tools to Change the Game in Your Most Important Deals,Harvard Business School Press, Boston, MA
Lax and Sebenius introduce a cognitive frame and a comprehensive set of processes referred to as "3D negotiation," which includes: the setup, the deal design and "at the table tactics.
Lax and Sebenius contend that "by establishing and maintaining multiple perspectives on a bargaining process, you will be a far more successful negotiator." (p 38) To do so they developed a cognitive frame and a comprehensive set of processes referred to as "3D negotiation". According to 3D negotiatio, there are three dimensions of any negotiation, but most negotiators pay attention to only one. This dimension is referred to as the "first dimension" and consists of the tactics "at the table". The two other, often ignored, dimensions include deal design (the "second dimension") and the pre-negotiation set up (the "third dimension"). Taken together these three dimensions provide the broad perspective necessary to successfully achieve your negotiation goals.
The "Negotiator's Dilemma" Creating and Claiming Value
Most contemporary "one dimensional" negotiators fall into the broad categories of "win-win" and "win-lose". Win-lose negotiators use tactics to maximize their share of the "pie" (or spoils). In contrast, win-win negotiators use tactics aimed at "making the pie bigger" through joint problem-solving action. Because both of these types of negotiators are stuck in the first dimensional tactics, Lax and Sebenius choose to label these tactical approaches differently, referring to the win-lose approach as value claiming and the win-win approach value creating. Yet these labels transcend all three dimensions. That is, both value creating and value claiming approaches can be applied not only to the tactics of a negotiation (as is the case for win-lose and win-win negotiators), but also to its set up and deal design. Additionally 3D negotiation does not preference either approach. Rather, 3D negotiation advocates using both value creating and value claiming approaches selectively and in concert. As such, Lax and Sebenius assert that, "At the end of the day, you want to create all possible value jointly, claim a full share of it, and prevent yourself from being exploited by a value-claimer." (p 205) Unfortunately "there's an inherent tension between the cooperative moves needed to create value jointly and the competitive moves that enable you to claim value individually." (p 17) Further, the manner in which the "pie" is expanded will likely affect the way it is eventually divided. Also, anticipation of the future division of spoils may well hamper cooperative attempts at value expansion. To overcome this tension, the 3-D negotiator must be a master of both claiming and creating value. She must also be able to balance the two techniques effectively across all three dimensions and manage the tension between them. Indeed, according to Lax and Sebenius, such management is "at the very heart of the art and science of negotiation." (p 17)
The "Third Dimension:" Set Up
The set up happens "away from the table" before negotiation begins and consists of the scope, sequence, and process of the negotiation. The scope refers to the who and what of the negotiation. To set up the scope of a negotiation, the 3-D negotiator develops an "all party map". This map consists of a full set of the parties to the negotiation, both potential and actual. The map should also include the interests of the parties, their relationship to each other, and the minimum benefits and maximum costs each party is willing to accept (also referred to as their deal/no-deal options). This map should then be used to analyze a proper sequence of, and process for, the negotiation. In the analysis of the sequence, it is important to consider whether negotiations should be held publicly or in private, and whether all parties should be immediately included. For example, it may be beneficial to start with private talks with various individual parties before bringing everyone together for public negotiations, or it may be better to immediately begin negotiation with all stakeholders. When developing the process, it is important to consider the role of third parties, special procedures and specific negotiation systems. This will likely require an understanding of the cultural norms and individual personalities of the parties involved. Further important considerations relevant to the process include how the process is to be determined and how it could be modified. The set up essentially ensures that the scope, sequence and process of a negotiation is consistent with your desired outcome for the negotiation. Lax and Sebenius summarize the set up as "acting to ensure that the right parties have been involved, in the right sequence, to deal with the right issues, that engage the right set of interests, at the right table or tables, at the right time, under the right expectations, facing the right consequences of walking away if there is no deal." (p 12) This third dimension literally sets the stage for successful (or unsuccessful) negotiation and the 3-D negotiator knows that "a bad setup makes tactics at the table more or less irrelevant" (p 13)
The "Second Dimension": Deal Design
Even if properly set up, a poor deal design can doom negotiations before they start. While the set up happens "away from the table" and tactics are used "at the table", the deal is designed both at and away from the table. Lax and Sebenius introduce three essential aspects of a properly designed deal: moving northeast, making lasting deals, and negotiating in the spirit of the deal. Moving northeast is a reference to the desired direction a deal would move on a two axis graph in which the x-axis represents the value of a deal for one party (increasing from left to right) and the y-axis represents the value of the same deal for another party (increasing from bottom to top). Thus, by moving "north east" (or up and to the right) value is increased for both parties, the pie expands and value is created (as opposed to claimed). To move northeast, negotiators should probe behind positions to uncover interests. There is an abundance of literature on this point, but the basic idea is that interests are the things parties want out of negotiation, while positions are the stand parties take in relation to the issues at hand. Because positions can be changed without changing the interests they represent, incompatible positions can be transformed into compatible ones. Dovetailing is another technique used to aid parties in moving northeast and involves combining differing interests that are "relatively easy for one side to give and relatively valuable for the other side to get..." (p 123) Thus, dovetailing entails looking carefully at the interests of the parties and creatively identifying high-benefit moves for one side that are also low-cost for the other side to concede. When combined with a mutual desire to maximize the pie, dovetailing can use differences in interests to create more mutual value. In addition to moving northeast, it is important to make lasting deals, since your interests will likely not be met by a deal that doesn't last. In order to make deals last, it is important to design accommodations for predicable change into your agreements. When you know attitudes or contexts are likely to change over the course of the agreement, you need to take this into account. Additionally, it may be helpful to include other parties which increases the chance that everyone's interests can be met. It also adds to the coercive power of the agreement (because there are more resources and interests involved). Deals are also unlikely to last when negotiations ignore the spirit of the deal. As Lax and Sebenius put it, "while parties can agree to the same terms on paper, they may actually have very different expectations as to how those terms will be met. And because they fail to achieve a true meeting of the minds, the deal they've signed may well fall apart." (p 163) Thus, it is essential that the "what" (underlying social contract) and the "how" (ongoing social contract) of the negotiations are clear to all parties. Even if you are in the right according to the actual wording of the agreement, if you violate the spirit of the deal you are likely to run into problems durring its implementation or in future negotiations.
First Dimension Tactics
Once the negotiation has been properly set up and the deal adequately designed, the negotiations can begin "at the table". At this point tactics come into play, and the 3D negotiator employs tactics that "both create and claim value, ideally on a long-term basis." (p 205). In general, tactics should first aim to create value through joint problem solving, and then focus on claiming value in the expanded pie. To create value, the 3-D negotiator should ask, listen, and learn form the other parties. When divulging information, she should do so strategically and with a persuasive style. Further, an appealing process should be fostered, which is perceived as fair by both sides. As soon as the pie has been expanded as far as possible, the 3-D negotiator will begin to claim value. To do so effectively, the negotiator must first learn as much as possible about the true ZOPA (Zone of Potential Agreement). The ZOPA is the area between the point where each side will walk away from an agreement (the deal/no-deal options), and is thus the range of possible agreement. Once the negotiator has as much information on the ZOPA as possible, she should begin to shape the other parties perceptions of the ZOPA. In doing so, she is attempting to make the other parties give up as much as possible (within the rang of the ZOPA), because they think she can and will walk away from a lesser agreement. Shaping ZOPA perceptions is done primarily by anchoring. Anchoring is essentially presenting the baseline for discussion, by making the first offer. Studies have shown that ZOPAs tend to pull toward the initial offer, or anchor, as long as it's realistic. Such anchoring can be done with specific offers or with general problem definitions and cognitive frames (the latter is referred to as meta-anchoring), but anchors are only effective as long as they are perceived as realistic. Thus when one lacks adequate information regarding the ZOPA, it may be beneficial to let the other parties make the first offer. This prevents anchoring an agreement too low or to such an extreme that it is viewed as unrealistic. Further, when other party's present anchors that are extreme it is important to dismiss them explicitly and immediately so they don't become the basis for the negotiation.
3D Audit and Strategy
The pragmatic application of the concepts of 3D negotiation are embodied by what Lax and Sebenius call the "3D barriers audit" and the "3D strategy to overcome barriers". A 3D barriers audit is a systematic assessment of the situation in terms of its set up (third dimension), deal design (second dimension), and tactics (first dimension). It is meant to uncover potential barriers to your ideal agreement. Once a 3D barriers audit has been performed, a 3D strategy is developed, aligning a combination of tactics, deal design and set up. Essentially the audit is an analysis and the strategy is a set of solutions to the problems identified by the audit. To perform a 3D audit and develop its corresponding 3D solution, a negotiator must first have a clear sense of her ideal agreement. Then, using this ideal end point as the beginning, she should "map backwards" identifying the tactical, design and set up barriers and solutions to achieving her ideal agreement. In doing so it is also essential to think in the long term because the negotiator may have to deal with the parties again, and even if she doesn't, the other parties have to live up to their end of the deal in order the her interests to be met. Additionally a negotiator's reputation for future negotiations may be effected by the way she negotiates this agreement.
3D negotiation calls for a continual process of auditing and strategy development across three dimensions: tactics (the first dimension), deal design (the second dimension) and set up (the third dimension). While, for analytical purposes, the three dimensions have been presented here as distinctly separate, this is not representative of the reality of negotiation. In the real world, the boundaries between the three dimensions are much more fuzzy and a problem in one dimension may call for a solution in another. In this way, 3D negotiation expands the way negotiation is thought about, allowing negotiators to recognize that problems they run into during the course of a negotiation and the solutions to them may not be limited to "at the table" tactics. Further, 3D negotiation moves beyond the first dimensional "win-win" and "win-lose" approaches by advocating a mastery and balance of both value creating and value claiming approaches across all three dimensions. Such ideas and pragmatic practices are presented in 3D Negotiation to ensure the reader's negotiations are not limited to a single dimension in a three dimensional world.