I had occasion to read Interest-based Negotiations at Kaiser Permanente which describes an effective use of Interest Based Negotiation on a massive scale. Kaiser had a combination of union labor issues, increasing competitive pressure, and rising costs. A combination of IBN and a Labor Management Partnership have been used since the late 90’s to resolve issues, reduce costs,and improve internal efficiency and patient care. The net result is consistent with Lean and continuous improvement or Kaizen teams found in manufacturing.
IBN (also called integrative) uses team processes to determine all parties’ actual requirements and interests. Often the interests are not in conflict even when initial bargaining positions may be in harsh opposition. One example cited in literature describes two young girls arguing over an orange. Using distributive bargaining their mother cuts the orange in half and gives each girl half. Neither girl gets what she wants. Had they analyzed their interests (fundamental requirements) they would have found that one girl wanted to eat the orange, the other wanted the peel for baking. IBN would have given each girl 100% or what she wanted and revealed the absence of conflict.
Distributive negotiations typically assume an “us or them,” zero sum situation. A position (I want it all.) is assumed. The position statement doesn’t describe why something is desired and is usually based on assumptions and decisions about what must be said to get the desired result. The combination of withholding of information and adversarial approach precludes trust and successful communication resulting in conflicts which can be almost impossible to resolve. Distributive negotiation is not inherently adversarial, but the assumption that there is only one pie and someone gets the big piece often leads to adversarial positions.
Distributive and Integrative (or Interest Based) are defined and discussed as if they are separate techniques for negotiating. I find this to be a somewhat artificial distinction. Many situations/issues have a distributive component and many bargaining position focus on the distribution, but I believe this is often incomplete analysis of the situation. Life is not so black and white and rarely fits well into the words we use to define it. Looking at all parties’ interests should always be done to find opportunities to redefine the issue and find unapparent possibilities.
IBN is not limited to labor union negotiations. Many years ago I applied IBN to save a capital equipment sale which had polarized. We were negotiating a custom capital equipment sale to a large manufacturer. The customer’s VP of manufacturing stated that exclusivity was an absolute requirement. Our business manager replied that they could have exclusivity if they placed multiple orders and there was ongoing business. Since the system was for a pilot line to demonstrate scale up or a research product the customer absolutely wouldn’t commit to multiple systems. At this point both gentlemen puffed up their chests and bristled visibly with our man almost leading our team out of the room. I was the engineering and project manager and just wanted to build a fun piece of equipment and did not want to walk away from a few million dollar sale. Being less emotionally involved I could see that the conflict was not in fundamental requirements. The customer wanted to insure that we did not sell useful technology to their competition. Our business manager just wanted to preserve his ability to make his sales goals. I suggested that we offer conditional exclusivity. We offered exclusivity for one year after the initial sale with extensions based on future equipment purchase. We also offered and option to extend exclusivity for a few hundred thousand per year if the pilot line was producing promising results but the customer was not ready to commit to more systems. The exclusivity extension fee was comparable to our profit on a system so our business manager was happy. The fee was 10% of the system cost so the customer had an economical way to protect the technology if it was still considered promising. By breaking down the positions and understanding the underlying requirements we found a solution which did not compromise either sides needs.
Interest Based Negotiation is not about partnering or even sharing fairly. It is about recognizing that the fundamental needs that drive bargaining positions are often so different that we are not even talking about sharing the same pie (or orange.)
