The Power of Understanding

Increasing Negotiation and Leadership Performance through the Power of Understanding

Laws of Power 36: Expand the ZOPA

By Karen S. Walch

A goal in the battle of classic negotiation power is to win at claiming as much as you possibly can of the ZOPA, or Zone of Potential Agreement. Knowledge is required about how to seize as much of the value that exists within the ZOPA space. Skill at claiming this value is a cornerstone to winning as much as you can in classic negotiation approaches. This week’s law will address the ZOPA, or perceived zone of value between two parties as they negotiate. Within this perceived bargaining range, an agreement is possible between the negotiators. Outside the zone, no amount of negotiation can yield an agreement.

In contract to classic notions of claiming the value solely for you, this week’s law will address how to expand the perceptions about the zone’s boundaries through mutual adjustment before claiming your own value.

As we continue our series’ theme of integrative approaches, this week explores how to use integrative techniques to enhance the quality of the settlement and resistance points in a negotiation.

For example, if negotiator A wants to lend money at a certain interest rate, say 20 percent, over a certain period of time and negotiator B wants to borrow money at 10 percent, the ZOPA is 10 on the lower end and 20 percent on the higher end.

Rather than a contest of wills regarding the settlement point, the negotiators can enhance the process of exchange with problem solving and integrative negotiation tactics. Through dialogue about the nature of the relationship, risk sharing, and problem solving, the parties can expand the quality of the opportunities within the ZOPA.

One of the fundamental principles of an integrative approach to any negotiation is that when the parties perceive their interdependency they are able to find a way to resolve their differences about the settlement point. Both parties influence each others’ outcomes and decisions. This mutual adjustment continues throughout the negotiation as both parties act to influence each others’ perceptions about the anchor points or boundaries of the ZOPA.

With an integrative approach to the setting of the ZOPA or bargaining range, the parties recognize that the more information negotiators can have about the other party, the better. As the parties define their outer limits of their accepted settlement (how high or low), they convey how willing they are to go with their offers. Negotiators who prepare for an integrative and problem solving approach will encourage the parties to exchange information, attempt to influence others to problem solve rather than embattle with others over the settlement point.

Jack, a recent student, recently noted how an integrative strategy requires that the parties work toward a solution that takes into account each person’s requirements. By remembering this principle, he made an effort to do the necessary preparation in order to optimize the outcome for both parties. If both he, the buyer, and Justin, the seller, could agree on their highest or lowest range about the car’s value through dialogue, then a ZOPA could realistically be established.

He did not want to prepare a set of “dirty tricks” or play games with Justin, the seller. He wanted to experiment with the process where both parties could be better off than they would be if they failed to make a deal.

Jack recalled from his negotiation classes that there is no correct figure or equilibrium in the zone. However, as he practiced integrative negotiation strategies in his latest car buying experience, he was more satisfied with not only what he bought his car for, but also how fairly he felt he was treated in process.

Some of the techniques that Jack used was to know what his walk away point was and what the value other similar cars were before he started the negotiation. He was also prepared to split the difference of the ZOPA range, but wanted to encourage dialogue about what each party needed before they set the anchor points at the start of the negotiation. Jack was prepared for the uncertainty about an accurate picture of the ZOPA and recalled that it was normal that a reading of the other side’s walkaway is usually imperfect.

Jack used the general car market conditions, along with reading the behavior of the other party, the seller’s apparent interest in making a deal, and the patterns of offers and concessions that took place. He was mindful throughout the process that information is almost always incomplete and subject to interpretation so he should continue to ask questions and encourage problem solving discussions.

Although it became time consuming and frustrating, Jack made an effort in the initial discussion before the ZOPA was set to understand better how the other party, Justin, viewed his alternatives and how Justin perceived Jack’s.

Jack was aware that it is common for negotiators to be guarded about revealing information about his own situation and that concealment, camouflage, and deception are classic strategies. However, with this in mind, and with preparation about his walk away, he was able to remain focused on a problem solving process with the seller.

As a result of Jack’s experiment with the problem solving approach in a car buying situation, he learned that the potential for agreement expanded beyond just the price of the car. Through discussion of various alternatives with Justin, Jack realized that there were opportunities beyond just the sale of the car. Without the preparation for a problem solving dialogue, Jack would not have known that it was just the price of the car that was so critical to Justin.

By utilizing his integrative strategy Jack learned that Justin not only wanted to avoid selling the car at a suboptimal price, needed to sell the car quickly, and that he was moving to the city where Jack knew a friend who had a car dealership.

Law 36 preparation questions

1. What are the different judgments of the parties about the future? Short term, long term? And why?

2. Assess the levels of the parties’ risk tolerance and sharing? And why?

3. Evaluate the time preferences of the parties for the time required for the negotiation and the contract terms. And why?

Extra credit

For more on expanding the ZOPA, read Bargaining for Advantage by G. Richard Shell (Viking, 2006).

48 Laws for 21st Century Global Negotiators: Join Thunderbird Professor Karen S. Walch, Ph.D., as she explores the laws of power for 21st century global negotiators. Each Monday she discusses one law and provides an exercise to identify and enhance individual negotiation power. Go to the main menu for the series.