Business Negotiations – Week 6 Lecture 1

Power in Negotiation

Why is Power Important to Negotiators?

In negotiation, by the word “power” we mean the capabilities negotiators can assemble to give themselves an advantage or increase the probability of achieving their objectives. Most negotiators believe that power is important because it gives one negotiator an advantage over the other party. Negotiators who have this advantage usually want to use it to secure a greater share of the outcomes or achieve their preferred solution.

Power comes from one of the two perceptions:

1. The negotiator believes he or she currently has less power than the other party. In this situation, a negotiator believes the other party already has some advantage that can and will be used, so he or she seeks power to offset or counterattack the other’s advantage.

2. The negotiator believes he or she needs more power than the other party to increase the probability of securing a desired outcome. In this situation, the negotiator believes that added power is necessary to gain or sustain one’s own advantage in the upcoming negotiation.

In general, negotiators who are less concerned about their power (relative to the other) or who have matched power with the other – equally high or low – find that their deliberations proceed with greater ease and simplicity toward a mutually satisfying and acceptable outcome. In contrast, negotiators who do care about their power and seek to match or exceed the other’s power are probably seeking a solution in which they either do not lose the negotiation or dominate the negotiation.

Definition of Power

There are two perspectives on power in negotiation: power used to dominate and control the other (more likely in a distributive bargaining context) and power used to work together with the other (more likely in an integrative negotiation). From the power holder’s point of view, the first perspective implies that power is fundamentally dominating and coercive in nature. From the receiver’s point of view, this use of power implies more powerlessness and being more dependent on the other for outcomes. The second perspective implies that the power holder jointly develops and shares power with the other party. The receiver experiences this power as empowering and creating more independence. 

Sources of Power – How People Acquire Power

There are five major types of power: expert power, reward power, coercive power, legitimate power, and reference power. Additionally, there are five sources of power: informational sources of power, personality and individual differences, position-based power, relationship-based sources of power, and contextual sources of power. 

Information power is derived from the negotiator’s ability to assemble and organize facts and data to support his or her position, arguments, or desired outcomes. It is the most important source of power. Negotiators may also use information as a tool to challenge the other party’s position or desired outcomes, or to undermine the effectiveness of the other party’s arguments. The exchange of information in negotiation is also at the heart of the concession-making process. 

Power based on personality and individual differences comes from individual differences and differences in personal orientation to power. Individuals have different psychological orientations to social situations. Three very important include cognitive, motivational, and moral orientations. These are individual differences that affect how individuals acquire and use power. 

Power is also shaped by the structural characteristics of an organization, that is, how a group or organization is designed so that some individuals have more power or authority than others. Power based on traditional organizational hierarchy comes in two forms: legitimate power, which is grounded on specific title, duties, and responsibilities of a job description; and resource power, based on the control over resources (budget, finance, etc.) associated with that position.

Power based on relationships also has two types of power: goal interdependence and referent power. Goal interdependence is concerned with how parties view their goals, and how much achievement of their own goal depends on the help received from the other party toward goal attainment. Referent power is derived from the respect or admiration one commands because of attributes like personality, integrity, interpersonal style, etc. A contextual source of power is based on the context, situation, or environment in which negotiations take place. 

While having power in negotiation is certainly important, very often negotiators are at the receiving end of the deal. When this happens, it is important to know how to deal with those who have more power. Here are some suggestions that you can use when dealing with those who have more power.

· Never do an all-or-nothing deal. Low-power parties should enter into deals with several other partners so that no single high-power player could wipe the low-power partner out. 

· Make the other party smaller by establishing multiple relationships and engage in multiple negotiations.

· Make yourself bigger by building coalitions with other low-power players so as to increase their collective bargaining power.

· Build momentum through doing deals with those high-power targets that have the most to gain, and maximize visibility of those deals to other parties. 

· Use the power of competition to leverage power

· Constrain yourself.

It is important to know that power can be highly elusive and short-lived in negotiation. Almost anything can be a source of power if it gives the negotiator a temporary advantage over the other party. Moreover, power requires a great deal of sophistication and experience to use it.