Theories of Negotiation

There is a voluminous literature on the theory of negotiation.⁶ Much of this is based on studies of lawyers.⁷ The research suggests that there are generalisations that can be made about the process of negotiation and bargaining.

A. Orientation

Research into the practice of negotiation by lawyers has not revealed high levels of sophistication. In early research, Williams identified two styles of bargaining among lawyers; competitive and co-operative. According to Williams’ typology, co-operative negotiators seek ‘fair’ agreements and ‘communicate a sense of shared interests, val­ues and attitudes using rational, logical persuasion as a means of co-operation’.⁹

⁴ CB Craver, Effective Legal Negotiation and Settlement (Charlottesville, VA, Michie Co, 1993).

⁵ DA Schon, Educating the Reflective Practitioner: Toward a New Design for Teaching and Learning in the Professions (London, Jossey-Bass Publishers, 1987).

⁶ See summaries in GT Lowenthal, ‘A General Theory of Negotiation Process, Strategy and Behaviour’ (1982) 31 Kansas Law Review 69; C Menkel-Meadow ‘Toward Another View of Legal Negotiation: The Structure of Problem Solving’ (1984) 31 UCLA Law Review 754.

⁷ HL Ross, Settled Out of Court: the Social Process of Insurance Claims Adjustment (Chicago, Aldine, 1970); G Williams, Legal Negotiation and Settlement (St Paul, MN, West Publishing Co, 1983); SR Gross and KD Syverud, ‘Getting to No: A Study of Settlement Negotiations and the Selection of Cases for Trial’ (1991) 90 Michigan Law Review 319, M Heumann and JM Hyman, ‘Negotiation Methods and Litigation Settlement in New Jersey: “You Can’t Always Get What You Want’’’ (1997) 12 Ohio State Journal on Dispute Resolution 253.

⁸ P Gulliver, Disputes and Negotiations: A Cross-Cultural Perspective (New York and London, Academic Press, 1979).

⁹ Williams, Legal Negotiation and Settlement (n 7) at 53.

Co-operative negotiators seek to build a sense of shared interests, values and attitudes, using logical persuasion to reach an agreement fair to both sides. They make conces­sions to build trust and seek a reasonable settlement. Williams characterised the main alternative to co-operative negotiation as the competitive or ‘adversarial’ style. The aim of this approach is the pursuit of one-sided gains by dominating the negotiating relationship.

Other researchers accepted the essential truth of Williams’ classification and articu­lated the implications of his findings. Condlin, for example, observed that

co-operative argument consists of non-coercive rational analysis in which the objective is to teach another about the truth of one’s substantive claims. This effort stops when the listener understands, or when the claims have been shown to be false... Competitive argument con­sists of rhetorical psychological manoeuvring designed to coerce an adversary, sometimes subtly and sometimes not, into deferring to one’s view when, if fully informed he would not or should not. The objective is manipulation not understanding. Efforts to persuade stop when the adversary agrees to do as one wishes^[2914]

Which approach is preferable in any given situation depends on the overall context, including the type of problem. It should also depend on the client’s preferences regard­ing outcome. However, Williams found that lawyers’ bargaining orientation tended not to change according to circumstances.

B. Problem Types

The issue of problem type is fundamental to negotiation strategy.^[2915] Theory suggests two broad type of problem, each requiring a different approach. One problem type involves distribution of a fixed resource, such as money or goods. In this type of prob­lem, the more of the resource one party gains, the less is available for the other.

C. Methods

i. Strategies and Skills

Different kinds of negotiating problems suit different processes. Finding the best solu­tion to an integrative problem involves identifying the underlying interests of the par­ties, generating solutions that satisfy those interests and selecting the best solutions. Successful resolution of a problem susceptible to integrative solutions depends upon thorough exploration of the situation, identification of a range of possible solutions revealed and a sound implementation plan. The skills and qualities that are compat­ible with this approach include openness, transparency, good communication, imagi­nation and creativity, open-mindedness and effective decision-making.

The conclusion of distributive problems usually involves different aspirations, approaches and sets of skills. Since the resource is fixed, the purpose of the negotia­tion is for both parties to gain as much of it as they can. However, if settlement is to be possible, they know that they will have to limit their aspirations. The limit of what each party will accept creates an overlap, a ‘settlement zone’. The problem for opponents in this situation is that revealing their limit leaves them in a weak bargain­ing position. A party is unlikely to give you what you hope for if they know you will accept less.

In the absence of precise knowledge of the other side’s limits, opponents discussing shares of scarce resources usually try to shift the other side’s expectations of what they can get from the negotiation. This involves a bluffing, demonstrating a degree of intransigence. A ‘positional approach’ is often used.

ii. Choice of Approach and Strategy

While both competitive and co-operative negotiators can proceed by ‘positional’ bar­gaining they do so with very different orientations towards settlement. At the extreme, competitive negotiators pretend that they are indifferent to settlement. To the extent that they appear willing to consider it, they demand an unrealistic share of the distri­bution. They make few offers or counter-offers and may even deliver a ‘take it or leave it’ ultimatum. They run a high risk that the negotiation will break down.

Competitive positional bargaining misses the opportunity to explore the integrative potential of the situation. In situations where parties foresee a long-term business or personal relationship, a competitive exchange may harm future relationships. An extreme focus on issues of distribution may also impede exploration of other issues, including how long-term relationships could be made to work better.

Given the different orientations of competitive and co-operative bargainers, the competitive negotiator is likely to be at an advantage in a simple haggle, for example, over price. Rigid commitments at or near the other side’s minimum acceptable settle­ment point is a basic tenet of competitive negotiation and the discovery of that point is the fundamental aim of competitive strategy.^[2916] The lion’s share of a fixed resource is likely to go to the person making extreme demands and few, if any, concessions.

Maximising integrative potential is achieved by a problem-solving approach in which basic, underlying interests are identified, understood and explored and creative solutions to meeting these needs proposed and tested.

iii. Principled Negotiation

US academics Roger Fisher and William Ury popularised a method they called principled negotiation. The method assumes that the aim of negotiation is a fair and reasonable agreement, efficient in expression and operation, and capable of improv­ing, or at least not harming, any continuing relationship between the parties.^[2918] They claimed that principled negotiation was robust enough to use in any situation against whatever approach an opposing negotiator used. They also suggested that it would produce a fair outcome on distributive issues and exploit the integrative potential of a situation.

The key elements of principled negotiation are a focus on interests, rather than positions, and the search for creative ways of satisfying those interests. Principled negotiators resolve distributive problems, not by positional bargaining, but by iden­tifying objective criteria for valuing any limited resource. They reduce the interper­sonal friction with the other negotiator by ‘focusing on the problem, not the people’. They build on the potential for co-operation, encouraging attention to long-term relationships between parties. They consider the other side’s interests and produce an agreement maximising the advantages for both sides. If both sides adopt a principled negotiation strategy, agreement is more likely.

D. The Ethics of Negotiation

i. Consonance of Approaches with General Ethical Principles

a. Ethical Idealism and Ethical Relativism

Research studies suggest that negotiation behaviour may reflect ethical orientation. For example, one study compared the orientation to negotiation of ethical idealists and ethical relativists.

b. Autonomy, Beneficence, Non-maleficence and Justice

There is powerful case for saying that principled negotiation is the strategy most consistent with honesty and integrity. Principled negotiation also promotes widely accepted core ethical principles; promoting individual autonomy, beneficence, non­maleficence and justice.^[2920] By seeking to meet people’s needs, principled negotiation respects and promotes individual autonomy; by attempting to expand the ‘negotiating pie’ it supports beneficence; by not taking advantage of the other side it respects the principle of non-maleficence; by identifying objective criteria for resolving distribu­tional issues it does justice. In contrast, none of these general ethical goals are met by other methods. Positional bargaining, for example, promotes one individual at the expense of another and can therefore be said to be neither beneficent nor just. Co-operative bargaining potentially sacrifices parties’ best interests for the sake of agreement.

c. The Ethical Evolution of Bargaining

It has been suggested that bargaining practices have evolved from a warrior concept based on self-interest and opportunism, through mercantile and civil styles.^[2921] This progression is marked by increasing recognition of the rights of the other side to expect benefits from the exchange. The most recent stage of bargaining evolution, the constructive concept, embraces willingness to explain and explore all interests on the basis of reciprocity. The development of negotiation theory is consistent with broader social theory. Habermas, for example, identifies the importance of commu­nication exploring shared values through argumentation.^[2922] Kohlberg regards devel­opment towards non-arbitrary social co-operation as an advanced stage of moral development.^[2923]

ii. Consonance with Ethical Principles of Lawyers

a. The Adversarial Imperative

There is considerable literature in the US on whether the lawyer’s duty to her client obliges her to take a partisan, and therefore competitive, stance in negotiation.^[2924] It is therefore necessary to consider whether English lawyers’ duty to pursue each client’s best interests produces a similar conclusion. In the context of the adversarial system, a client’s best interests could be interpreted as a duty to do the best deal possible using a competitive and positional approach. There are competing arguments for and against using competitive and positional bargaining or principled negotiation.

There is some doubt about whether effective competitive negotiation, while consis­tent with adversarial principles, requires unethical conduct. Misleading the other side regarding the ‘bottom line’ is a clear example. Although earlier versions of the ABA Model Rules prohibited making false statements of material fact, estimates of value were not treated as material facts.^[2925] Therefore, bluffing in bargaining was arguably allowed under the model rules.

There is a question mark over the issue of whether principled negotiation is consis­tent with adversarial principles and with professional legal ethics. Seeking an outcome that is objectively fair, which is what principled negotiation offers, may be inconsistent with an obligation to promote the best interests of each client. If a lawyer has an opportunity to take ‘fair advantage’ of the other side, is it a denial of the adversarial ethos not to do so?

b. Principled Negotiation

Proponents of principled negotiation argue that it offers superior outcomes to a distributional approach, because it focuses on interests not just resources. There are of course, some who doubt its claims to offer a panacea for conflict. Critics suggest that principled negotiation has less value when there are no continuing relationships to consider, or when dealing with negotiators who have the leverage to achieve their goals by the exercise of power.^[2926]

Fisher concedes that there are very narrow circumstances where interests are irrel­evant and effective positional bargaining offers the best outcome. He says that in

single issue negotiations among strangers where the transaction costs of exploring interests would be high and where each side is protected by competitive opportunities, haggling over positions may work better than joint problem solving. A typical case would be negotiating a sale on the New York Stock Exchange.^[2927]

Therefore, it may be argued that positional bargaining trumps principled negotiation in a narrow category of circumstances. This is where interests and future relationships are irrelevant and only a distribution of scarce resources is required. Conducted prop­erly, however, problem-solving bargaining is more rigorous and resistant to exploita­tion than an adversarial approach based on positional strategies.

Some critics doubt the implicit claim of principled negotiation to ethical superiori- ty.^[2928] It can be argued, for example, that objective criteria are persuasive rationalisa­tions for positions and that warnings about reaching agreement are just subtle threats. Principled approaches to bargaining, which depend on honesty and problem solving, offer a more coherent theoretical basis for the lawyer’s role in dispute resolution. Condlin argues that the strength of principled negotiation lies not in its effectiveness, but in its ability to harness the ‘power of legitimacy’.^[2929]

Principled negotiation is an even better fit with a more co-operative litigation culture. There is research evidence, for example, that providing the other side with too much information is potentially dangerous against a competitive negotiator. However, modest information provision improves outcomes, even when unreciprocated.^[2930] This supports the idea that lawyers in civil dispute resolution should be required to co-operate with each other and with non-lawyer representatives of other parties.

E. Potential Influences on Bargaining Culture

i. Personal Perceptions

There is evidence that personal perceptions of performance and ethicality are affected by feedback received on performance. An experiment by Kim et al tested the reaction of negotiators to feedback.^[2931] Negotiators bargained with previous opponents having been told that, on a previous exercise, they had been found to be either good or poor negotiators or ethical or unethical negotiators. It was found that this feedback changed bargaining behaviour. Negotiators who received positive feedback on their effectiveness became more competitive. Those receiving negative feedback on competence not only became less competitive, but also less able to identify mutually compatible interests.

Surprisingly, in the experiment, people were significantly more likely to behave ethically having been told that they had been experienced as unethical in the previous negotiation. If they had been told that they appeared ethical, they behaved less ethically thereafter. This was attributed to the fact that, having been experienced as unethical, a negotiator is more likely to consider that their bluffing is transparent and to stick to the truth as closely as possible, and vice versa. There are a number of implications of such studies. They suggest, for example, that education and training could be at least as important as rules in building an ethical professional culture of negotiation.

ii. Bargaining Reputation

Generally, lawyers develop bargaining reputations^[2932] and this is particularly true in small fields of practice. It is unlikely that lawyer negotiators would consistently tolerate colleagues who tried to take advantage of others. Negotiators who always make unreasonable demands could find that opponents refuse to enter negotiation or do not take the process seriously. This would disadvantage clients who want their lawyers to achieve a settlement. Therefore, a lawyer may be unfair to future clients by being unreasonable on behalf of a present client. In theory, the transaction costs of lawyers with bad negotiating reputations are increased. Others may deal with them cautiously or not at all.

iii. Client Preferences

The discussion so far has assumed that lawyers have free choice in how they approach negotiation. In fact, the requirement that they act in clients’ best interests suggests that the choice of negotiation strategy should reflect client goals. Therefore, if clients are more concerned with long-term relationships, principled negotiation would be an appropriate method. If they are more concerned with their share of a limited resource, effective positional bargaining may be preferred. In participatory models of the lawyer and client relationship^[2933] lawyers would discuss the client’s preferences and the implications of particular approaches. Therefore, it is arguable that lawyers should be able to discuss the advantages of different approaches to negotiation with clients and implement them as appropriate.

In a culture in which client autonomy is promoted, the issue of whether clients should be present in negotiations is raised. With integrative bargaining their presence and participation may be necessary. Only clients can reflect on their own wants and preferences and decide that solution A is better than solution B in satisfying these interests. A lawyer may, however, feel constrained in their behaviour by the presence of a client, perhaps feeling that it limits their flexibility. Much of the guidance given to lawyers appears to assume that initial instructions are sufficient. They envisage that clear instructions are taken and advice given at the outset of a matter, but do not deal with what should happen thereafter. Clients may only hear that an offer has been made after negotiation has taken place.

Some people may be troubled by the fact that their lawyer used dubious tactics in representing them. Discovering the client’s wishes may therefore extend to the means as well as the ends of negotiation. In theory, this could be an ongoing responsibility. A lawyer is in no position to know how the client values different possibilities, or to evaluate creative solutions suggested by the other side. Respecting client autonomy regarding the goals and methods of negotiation has considerable disadvantages for lawyers. One problem is that the client’s preference may result in the lawyer having to use a style of negotiation she is uncomfortable with. Another is that consulta­tion makes the process more longwinded, complicated and, potentially, costly. Subordinating the lawyer’s choice of method to the client’s instructions, either in general or for the specific negotiation, promotes the client’s autonomy at the expense of the lawyer’s.

iv. Professional Culture

It is arguable that the bluff and deception associated with positional bargaining sets an unfortunate precedent. If misleading others is acceptable in some situations the rationale can easily be extended. This may blur the 'bright line’ between the ethical and unethical and create uncertainty, encouraging the escalation of unacceptable behav­iour.³⁰ Principled negotiation would make it easier for legal professionals to be honest. For example, principled negotiators need not disclose all information but should make it clear that they are not doing so and why.³¹ It is arguable that a professional culture that aspires to honesty and integrity should set clearer boundaries for behaviour.

It is likely that supporting and promoting principled negotiation would improve the position of clients generally. The main reason is that it would increase trust between lawyers. Co-operation between negotiators is crucial in producing the best possible outcomes to integrative bargaining. Trust is vital to co-operation and generally ben­efits markets by facilitating agreement and reducing transaction costs.

In a competitive bargaining environment, each interaction carries risks, encourag­ing caution. Protagonists are unsure what to expect, and this breeds excessive caution and results in poor solutions for clients in the long term.³² The balance of the argu­ment therefore seems to be to regulate to promote an environment of trust between legal professionals. Candour promotes trust most effectively when there is a perceived commitment to shared ethical norms.³³

III.