the WHEEL of negotiation
The Wheel of Negotiation is a visual representation demonstrating the relationship of the different negotiating styles across many different characteristics. The right-hand side of the Wheel captures the distributive negotiations while the left-hand side illustrates the integrative or collaborative types of negotiations. The model is circular based on the relationship between High Dependency and Auctions. High Dependency occurs when trust is high, dependency is high, relationship is high, deals are complex, information is open, and parties can’t afford to walk away without substantial loss (unions, JVs, strategic partners, problem solving, marriage etc.). When High Dependency negotiations fail, the parties typically end up on the right side of the Wheel haggling over remaining elements.
Negotiations are not static and do not occur in only one sector of the Wheel, quite often as things change (especially behaviors and reactions) the style of the negotiation will move clockwise or counter-clockwise in response. You will have a natural pendulum motion except at the very extremes as noted above.
- Your Behaviors – your behavior is the most important determinant when it comes to the negotiation style. See “Style is Everything“
- Number of Variables – as the complexity of the deal increases the style tends to move clockwise around the wheel
- Risk Tolerance – Risk averse parties usually take a defensive stance limiting the options and variables, the more averse you are to risk the more counter-clockwise the negotiation will move
- Internal Objectives – (Price Focus vs. Profit Focus) distributive negotiations have a heavy emphasis on price while integrative negotiations strive to generate incremental profit through creativity. Price is always distributive
- Frequency – distributive negotiations are geared towards one-off deals. While collaboration/integrative negotiations tend to occur over and over again with our trading partners
- Results focus – you will notice deals that focus primarily on short term gain will have a distributive nature to them, while long term strategic deals necessitate collaboration
- Nature of the product or service – commodity items will create distributive opportunities, while complex items move the negotiation towards collaboration
- Precedents – If you have dealt with the other party harshly in the past expect a decided hard edge to future negotiations. Trust takes a long time to establish. Every deal lays the ground work for future deals