What Does it Mean to Create or Claim Value?
Creating and claiming value are two of the most fundamental aspects of negotiation strategy that exist in tension with one another. In any negotiation, the parties must decide whether to be competitive, cooperative, or some of both. (David Lax and James Sebenius call this the "negotiator's dilemma."[1] It is similar to the "prisoners' dilemma" in game theory, because the best outcome for one person is not necessarily the best for both, but if both pursue their best option, they will often both get the worst outcome. This is explained further below, and in the prisoners' dilemma essay.)
Value is created (or the "pie is enlarged") in negotiations through the cooperative process of integrative or interest-based bargaining. This means that the parties in a dispute have managed to find ways to increase the amount of beneficial goods (things they want or that will make their situation better than before) that will be divided between them. This may also be called "joint value" or "joint gains," meaning that new developments are considered improvements by both sides.
The primary way to create value is to focus on the underlying interests of the disputing parties -- why do they want what they want? By sharing information openly and communicating with one another, the parties work to find shared interests and create joint value. Creating value makes it more likely that both sides will get something they want out of the negotiation. This type of mutually-beneficial outcome is called a "win-win" solution.
The competitive process of claiming value involves dividing up a "fixed pie," or the total amount of value available to the disputing parties. This process is most closely associated with distributive bargaining, in which each side tries to get as much of the pie as possible. The more one side claims, the less the other side gets. This is also known as a "win-lose" negotiation. To claim value in a negotiation, you use competitive tactics to try to convince the other side that he wants what you have to offer much more than you want what he has. Some tactics for "winning" at distributive negotiation include starting high; conceding slowly; exaggerating the value of your concessions; minimizing the value of the other's concessions; concealing information; arguing forcefully for principles that imply favorable settlements; making commitments to accept only highly favorable agreements; and being willing to outwait your opponent.[2]
The Link Between Creating and Claiming Value
Davis Lax and James Sebenius argue that creating value and claiming value are linked activities. Creating new value improves both parties' outcomes. However, having created new value, negotiators must still divide the resulting "pie." Unfortunately, the cooperative strategies needed to create value tend to undermine the competitive strategies used to claim value (and vice versa). The exaggeration and concealment needed for effective competition is directly opposed to the open sharing of information needed to find mutual benefits. On the other hand, taking an open cooperative approach makes one vulnerable to the hard bargaining tactics of a competitive negotiator.[3] Therefore, if both parties cooperate, the result is usually good, while if one cooperates and the other competes, the competitor usually does better. However, if both compete, they usually come out worse than they would if both cooperated -- which is the same "payoff structure" as that of the prisoners' dilemma game. The assumption, however, is that claiming value in integrative (i.e., cooperative) situations is more likely to be balanced. This is because the parties are expected to develop cooperative relationships and communicate freely, which is not generally allowed in prisoners' dilemma games.
[1] Lax, David and James Sebenius. "The Manager as Negotiator: The Negotiator's Dilemma: Creating and Claiming Value," in Goldberg, Stephen, Frank Sander and Nancy Rogers, eds. Dispute Resolution. 2nd ed. Boston, MA: Little, Brown and Co., 1992. 49-62.
[2] The listed strategies were drawn from: David Lax and James K. Sebenius, The Manager as Negotiator: Bargaining for Cooperation and Competitive Gain. (New York: Free Press, 1986), 30-32.
[3] Ibid.
Use the following to cite this article:
Spangler, Brad. "Creating and Claiming Value." Beyond Intractability. Eds. Guy Burgess and Heidi Burgess. Conflict Research Consortium, University of Colorado, Boulder. Posted: September 2003 <http://www.beyondintractability.org/essay/creating_value/>.
Sources of Additional, In-depth Information on this Topic
Additional Explanations of the Underlying Concepts:
Online (Web) Sources
The Art of Getting the Best Deal. Financial Times.
Available at: Click here for more info.
This article outlines some of the basic steps of a business negotiation, including determining BATNAs and identifying a zone of possible agreement.
Glaser, Tanya. "Creating and Claiming Value--Summary." University of Colorado: Conflict Research Consortium.
Available at: http://www.beyondintractability.org/articlesummary/10350/.
This page is a summary of D. Lax's and J. Sebenius's article, The Manager as Negotiator: The Negotiator's Dilemma: Creating and Claiming Value. Lax and Sebenius argue that negotiation necessarily includes both cooperative and competitive elements, and that these elements exist in tension. Negotiators face a dilemma in deciding whether to pursue a cooperative or a competitive strategy. The authors suggest strategies to resolve this dilemma, and ways to encourage cooperative approaches to creating mutually beneficial outcomes.
"Distributive Bargaining." ,
Available at: http://www.colorado.edu/conflict/peace/treatment/distbarg.htm.
This page explains and gives examples of distributive bargaining. Distributive bargaining is an alternative to principled negotiation in which the parties assume that the conflict is structured in a win-lose way and the best strategy is to bargain over who is going to get how much. Distributive bargaining tends to be much more competitive and adversarial than principled negotiation, as each party tries to do better than the others in the negotiation. The page also includes suggestions for further reading on the topic.
"Negotiations and Resolving Conflicts: An Overview." ,
Available at: http://web.cba.neu.edu/~ewertheim/interper/negot3.htm.
This web page offers a well-organized and fairly comprehensive overview of the primary negotiation strategies. It covers the key aspects of integrative and distributive bargaining or claiming value, and provides other general advice about how to proceed in negotiation situations.
Offline (Print) Sources
Lax, David and James Sebenius. "Claiming Value." In The Manager as Negotiator: Bargaining for Cooperation and Competitive Gain. New York, NY: Free Press, January 1, 1986. Pages: 117-153.
Chapter Six of this work, "Claiming Value," discusses the dynamics of distributive bargaining situations. It concentrates on tactical advice for how to succeed in this type of negotiation.
Lax, David and James Sebenius. "Creating Value." In The Manager as Negotiator: Bargaining for Cooperation and Competitive Gain. New York, NY: Free Press, January 1, 1986. Pages: 88-116.
Chapter Five of this work, "Creating Value," discusses the dynamics of integrative bargaining situations and various ways in which parties may identify common interests. It concentrates on tactical advice for how to succeed in this type of negotiation.
Lum, Grande, Irma Tyler-Wood and Anthony Wanis-St. John. Expand the Pie: How to Create More Value in Any Negotiation. Seattle, WA: Castle Pacific Publishing Company, December 2002.
This work focuses specifically on techniques for creating value, or exapnding the pie in negotiations so as to increase the potential for win-win outcomes. The work is based on the experiences of the authors who are professional business negotiators. It offers a great deal of practical advice on how to successfully carry out collaborative negotiations.
Lewicki, Roy J., David Saunders and John Minton. "Strategy and Tactics of Distributive Bargaining." In Negotiation, 3rd Edition. Burr Ridge, IL: Irwin-McGraw Hill, 1999. Pages: 70-106.
This chapter describes the nature of distributive bargaining situations and offers advice on fundamental strategies and tactical tasks that will help one effectively claim value in negotiation. The process of taking positions during bargaining and the role of concessions are thoroughly covered as are the issues of commitments and closing the deal. Lastly, the chapter describes hardball negotiation tactics for those wanting to really put pressure on their opponent. Click here for more info.
Lewicki, Roy J., David Saunders and John Minton. "Strategy and Tactics of Integrative Bargaining." In Negotiation, 3rd Edition. Burr Ridge, IL: Irwin-McGraw Hill, 1999. Pages: 107-138.
This chapter offers an overview of the integrative negotiation process, which is essentially a process of creating value or options for the disputants' mutual gain. The piece highlights key aspects and steps that must be included in order to carry out the process. As a general rule a certain should be followed in order to achieve an integrated outcome, however, this chapter also explains that there are some intangible factors that contribute to whether parties are able to reach an integrative solution to their problems. Lastly, this chapter discusses why integrative negotiation is difficult to achieve. Click here for more info.
Lax, David and James Sebenius. "The Negotiator's Dilemma: Creating and Claiming Value." In The Manager as Negotiator: Bargaining for Cooperation and Competitive Gain. New York, NY: Free Press, January 1, 1986. Pages: 29-45.
This chapter focuses specifically on the tension between cooperation and competition in negotiation. In order to achieve anything the parties must be somewhat cooperative, but to advance their own interests they must also behave competitively. Finding a balance between these two approaches is the key to successful negotiation.
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