Negotiation Process [5 Steps/Stages of Negotiation]

5 Steps of Negotiation Process

The negotiation process permeates the interactions of almost everyone in groups and organizations. In today’s loosely structured organizations, in which members work with colleagues over whom they have no direct authority and with whom they may not even share a common boss, negotiation skills become critical.

The negotiation process consists of certain phases. The following figure depicts a model describing the basic features of the negotiation process. They are—the preparation phase (information gathering); developing and selecting a strategy (setting the ground rules), opening moves (exploring and proposing the matter), bargaining and problem-solving, and closure and implementation of the negotiation process.

The essence of the five steps of the negotiation process is the actual give and take in trying to hash out an agreement, a proper bargain suitable for all parties.

In this post, we will look at the negotiation process, which is made up of five steps. These steps are described below;

Preparation and Planning

Before the start of negotiations, one must be aware of the conflict, the history leading to the negotiation of the people involved and their perception of the conflict, expectations from the negotiations, etc.

Before starting the negotiation, it needs to do homework.

Moreover, before any negotiation takes place, a decision needs to be taken as to when and where a meeting will take place to discuss the problem and who will attend.

Setting a limited time scale can also be helpful to prevent disagreement from continuing. This stage involves ensuring all the pertinent facts of the situation are known in order to clarify one’s own position.

It also needs to prepare an assessment of what the other parties’ negotiation goals are. What are they likely to ask for?

Skilled negotiators invest more time and effort in planning the process they intend to use. It serves as a guideline for them. In this phase, a detailed analysis is required on certain issues.

It can be the nature of conflict, history of conflict, parties involved in it, own assessment as well as others’ goals, and so on.

The important questions to resolve are:

  1. How entrenched are they likely to be in their position?
  2. What intangible or hidden interests are important to them?
  3. What are they likely to ask for?

Developing One’s BATNA

Negotiators need to know their Best Alternative to a Negotiated Agreement (BATNA). It is made up of a variety of elements.

These can include deadlines; alternatives such as other suppliers or customers; your own resources; their resources; information you gain before and during the negotiation; the level of experience you or other parties have; your as well as the other party’s interests; and knowledge about the matters under consideration.

Each party has a BATNA. It guides in responding to the situation.

Determining one’s Best Alternative to a Negotiated Agreement (BATNA) is important because it tells us whether a particular negotiation is worth undertaking or continuing in the light of the alternative way that might serve your interests.

Fisher and Ury outline a simple process for determining one’s BATNA.

  1. Develop a list of actions that one might conceivably take if no agreement is reached.
  2. Improve some of the more promising ideas and convert them into practical options.
  3. Select tentatively the one option that seems the best.

The goal of negotiating is to arrive at a good agreement. It is a measure of the balance of power among the negotiating parties based on the resources they control or can influence to respond to their interests that will be addressed in a given negotiation.

BATNAs are critical to negotiation because one cannot make a wise decision about whether to accept a negotiated agreement unless one knows what the alternatives are.

The better you understand your BATNA and the BATNA of other parties, the better you are able to judge whether to continue the negotiation or to walk away before an unappealing agreement is reached. Assessment of the other parties’ BATNAs helps to influence them and make them change it.

Choice of style—win-win or win-lose

There are two fundamental choices—a cooperative style (A win-win style ensures that both parties gain some benefit) and a competitive style (It is designed to maximize only one side’s advantage at a specific cost to the other.

This is an aggressive stance and, therefore, a win-lose approach to negotiation). It is important to decide whether it is more appropriate to aim for a win-lose competitive outcome or a cooperative win-win approach. It is decided depending on the nature of the conflict.

Team selection

Who do you need to include in your team, and what will their respective roles be?

Team selection should be based on certain criteria like;

  • personal qualities; functional skills that are required (for example, product or services),
  • specialist areas (like technical issues such as performance, quality assurance, warranties maintenance, commercial issues like price, delivery payment terms, legal issues, etc.);
  • Team playing skills (like compatibility with team members, balance of functional and personal skills—need to be complementary across the team, credibility, personal regard by the other sides);
  • Negotiating roles (like leading, note-taking, listening, reviewing, surveillance).

Developing an interesting map

The best way is to test your assumptions about the stakeholders’ interests. Then, connect the interests of one stakeholder with the other.

A part of the job of developing an interest map is to figure out how the interests of each stakeholder relate to one another.

An interest map offers you a mechanism for determining what information you need, what questions to ask, what assumptions to question, and what elements will be most helpful to you and other parties in reaching mutually satisfactory results through a good negotiation process.

By underscoring your focus on interests, your interest map will help you avoid getting stuck on emotional hot buttons or cultural obstacles to developing a workable negotiation process and an agreement that works for the parties.

Skilled negotiators often use a planning form to facilitate negotiation planning. This planning process offers some significant advantages shown below:

  1. Putting down your thoughts on paper helps to sort them out and avoid contradictions.
  2. During team negotiations, it is useful to have a document for all members to contribute, criticize, etc. This helps prevent members from going off-track during the negotiation.
  3. In the post-negotiation review and in between negotiations, it is helpful to review the tasks already done and those that are yet to be done.

Developing and Choosing a Strategy [Definition of Ground Rules]

Once the planning and strategy are developed, one has to begin defining the ground rules and procedures with the other party over the negotiation itself that will do the negotiation.

  • Where will it take place?
  • What time constraints, if any, will apply?
  • To what issues will negotiations be limited?
  • Will there be a specific procedure to follow if an impasse is reached?

During this phase, the parties will also exchange their initial proposals or demands.

Sound planning and careful preparation of ground rules are vital for a successful negotiation. We need to ask certain questions to set ground rules. Such questions should include the following aspects.

Why, Who, What, When, and How of Negotiation

  • Who will we be negotiating with?
  • What are our objectives?
  • Why are we interested in negotiations?
  • How are they to be valued, and in what order of importance are they to be ranked?
  • What time constraints, if any, will apply?
  • To what issues will negotiation be limited?
  • Will there be a specific procedure to follow if an impasse is reached?
  • When will it suit us best to hold the negotiations?
  • And when would it not?
  • How should we pitch our initial demands?
  • To what degree should we be prepared to modify these demands each time we are faced with counter-offers?
  • How should we negotiate?
  • How much time will we need to reserve?
  • What assumptions should we make in our planning?
  • How can we check their validity?
  • Where do we want to meet—on our ground, on theirs, or on neutral territory?
  • Where do we want the negotiations to take place?


You have to decide what variables in your position you are prepared to exchange in return for any counter-offers.

What order should you set for offering your concessions, and what else might you be prepared to include?

Concessions are important because they;

  1. enable the parties to move towards the area of potential agreement,
  2. symbolize each party’s motivation to bargain in good faith, and
  3. tell the other party the relative importance of the negotiating issues.


It is the difference between two parties’ bids and usually indicates where the settlement will finish. The higher one pitches one’s first bid, the more favorably positioned the midpoint will be for his side. The positioning of each subsequent bid can move the midpoint.

Each time it is your turn to bid, it will be you who will determine the new midpoint. One can move the midpoint in one’s favor by moving in smaller steps than the other side or even by not moving at all.

Technique of how to open the negotiation should also be planned. It requires a rehearsal of what you are going to say in your opening statements and how you are going to say it, as well as the analysis of the probable and possible opening comments that might be expected from the other side.

Another useful area that needs to be thought about is the seating arrangement.

Seating people full square opposite each other is generally considered to enhance the risk of confrontation. In one-to-one negotiations, it is better to opt for a cooperative arrangement, that is, to sit side by side.

The most flexible seating plan is to sit around the corner’ from the other party. This is friendly, relaxed, and non-invasive. It is, therefore, good for encouraging a cooperative atmosphere. If the climate turns aggressive, you can distance yourself without prejudicing your position.

Establishing the Issues and Constructing the Agenda

It gives a good idea of substantive elements a negotiation should cover to respond to our interests and what you assume to be the interests of other negotiating parties and outside stakeholders. Before a negotiation begins, all the aspects need to be answered.

During this phase, the parties will also exchange their initial proposals or demands.

Clarification and Justification

When initial positions have been exchanged, both parties will explain, amplify, clarify, bolster, and justify their original demands. This need not be confrontational.

Rather it is an opportunity for educating and informing each other on the issues, why they are important, and how each arrived at their initial demands.

This is the point where one party might want to provide the other party with any documentation that helps support its position.

It is the time of advancing demands and uncovering interests. After establishing the agenda, the opening moves in negotiation usually consist of each side putting forth its positions and demands. They need to explain, amplify, clarify, bolster, and justify their own original demands.

Building Confidence

Among negotiating parties, this is often an important first step or a series of steps that need to be undertaken. Confidence-building measures can be more elaborate.

When negotiating parties do not know each other well or if they have an unfriendly history, they can use a variety of tools to increase their comfort level with one another. Asking good questions and listening carefully are confidence-building elements in any negotiation.

Few other strategies can be used to negotiate in phases (trading agreements and performance on a piece-by-piece basis). Each small agreement that is made by both parties needs to be fulfilled.

In that case, the parties can work on larger, more complex, or more divisive issues. Early demonstrations that parties made, when become fulfilled, can increase all parties’ confidence that the overall process will be worthwhile. In each step, one should check one’s own BATNA.


The more you can explore the other side’s position, the stronger you will be. What do you need to explore? It is the who, what, and why of negotiation, their BATNA, style, goal, etc.

The use of one’s interest map can give an outline of questions rather than the skeleton of the perfect solution. The more information you get from them, the more accurate the assessment of how your BATNA is affected will be. It helps in responding to the problem creatively and effectively.

The important categories and sub-categories of oral behavior include seeking as well as giving information.

In seeking information, the behavior usually takes the interrogative form and asks questions such as “What is your annual production and sales of watches?”

Giving information takes two forms. In the external form, the negotiator gives the information as a matter of fact as in “Last quarter, we produced 4 million watch pieces.” The internal form involves opinions or qualifications of presented facts.

It also includes the expression of feelings such as “Your insistence on a just-in-time delivery system makes us feel comfortable.”

Extensive exchange of data may reduce chances of making mistakes. An open behavior acknowledges such a mistake and corrects it, “I’m sorry. The 10 million units I’d mentioned were the figure two years ago.”

Bargaining and Problem Solving

The essence of the negotiation process is the actual give and take in trying to hash out an agreement, a proper bargain. It is here where concessions will undoubtedly need to be made by both parties.

This is the phase of bargaining and discovering new options. This is where lateral thinking skills are invaluable in finding concessions that the other side will consider worthwhile but will cost you little.

This is known as searching for variables and is vital not only in offering concessions but also in evaluating those you receive.

Some of the other behaviors that are observed are agreeing (some proposals of the other party can be readily acceptable while the rest cannot) and disagreeing. In contrast, blocking involves disagreeing without assigning any reason.

An example may be, “Absolutely, under no circumstances will we consider that action.” Disagreeing sometimes escalates from disagreement with the content of a proposal to direct disagreement with the personal tactics or motives of the other party.

An example of such disagreement is a statement like, “You are deliberately trying to mislead us.”

Negotiators refer to this kind of behavior as attacking. Attacking usually brings out defending behavior from the other party

“We are not trying to mislead you, but you are not being clear in what you want.” Thus, defending behavior often turns the attack around.

At this stage, promises, threats, bluffing, and personal attacks are likely to emerge. Effort must be made not to personalize at this stage; participants must be objective and should focus on facts and not on assumptions.

The actual give-and-take process takes place during this stage. Parties reach a settlement and try to improve the outcome.

During the bargaining, the first bid should be as high as possible but still realistic.

There is always a possibility that in negotiation, the price or the demand will always be reduced. If the initial bid is not pitched high, then it will be more difficult to bring it up at a later stage. Low expectations generally produce low results.

The actual process of negotiation is the give-and-take process.

So, concessions have to be made. The initial concessions that you make should be small and tentative. If your initial offer is too large, problems would arise. If there is a deadlock, then certain tactics should be used to overcome them.

Small concessions should be tied to a condition that will give you something in exchange. Always try to couple the concession you offer with another concession of similar magnitude in return so that your case is not weakened.

While receiving and giving concessions, it should not only be given reluctantly, it should also be received reluctantly. Accept concessions slowly with apparent pain.

Alternatively, you might choose to give no reaction at all to an offer. Next is to link all the issues into one package. A net loss on the concession trading regarding one item can then be set off against a benefit somewhere else. If you are offered a package deal, split it up.

If you are offered a range of items, search for a global package. Summarize regularly and feel free to suggest a recess when you need time to plot your course further.

In the course of negotiations, especially lengthy ones, it is easy to lose the focus of the negotiation. A brief, concise summary of what has been discussed to date in the negotiation and what the other party has agreed to in whole or in part needs to be documented.

Closure and Implementation

The final step in the negotiation process is a formalization of the agreement that has been worked out and developing and procedures that are necessary for implementation and monitoring.

For major negotiations – this will require hammering out the specifics in a formal contract.

Negotiation Process has five stages. In all steps of a negotiation process, the involved parties bargain in a systematic way to decide how to allocate scarce resources and maintain each other’s interests.

This step focuses on working out an agreement and developing a procedure for its implementation and monitoring.

Settling the Deal

When an agreement has been reached after a complex negotiation, it is vital to confirm that both parties have actually agreed to the same deal. Misunderstandings can arise at this stage. It needs the help of a lawyer to clarify your doubts, if any.

For a contract to be signed, all contractual considerations should be taken into account. Then, standard terms and conditions need to be written clearly.

Provision should be made where damages are to be applied. If you want, a provision of ‘guarantee’ should be made and not a warranty. Please note that a ‘warranty’ is not legally a condition of a contract.

Improving the Outcome

The best result comes in a negotiation where there is a combination of three important attributes: skill, aspiration, and power. Power influences the other party. It can also be abused. But it should not be used to threaten the weaker party.

High aspirations win higher rewards by making initial demands high. The optimum position, in order to negotiate the best deal, is to have high levels of power, aspiration, and skill.

In the case of resistance to finalizing an agreement because of uncertainty as to how it will work out in practice, apply the re-opener provision.

This provision is an agreement stating that after a given period of time, the decision arrived at by the parties will be subject to re-examination and possible modification. The closure of the negotiation process is nothing more formal than a handshake.