Whoever holds the power in a negotiation has the opportunity to get the most out of it, especially in a distributive negotiation. If you are in a negotiation where each party has conflicting preferences on certain issues, the person with the power will win. For example, if I am negotiating a job offer and the most important issue for me is to get the highest salary while the most important issue to the employer is to give the lowest salary, the person with the more power is going to win and the other person will give in. Now the question is who holds the power?

In every negotiation, the person who holds the most power is the person who has the better next best alternative. In the previous example, the person with more power depends on the job market conditions and the other person’s alternatives. If I am negotiating the job offer and I also have another job offer with another company, my negotiating power has increased. Why? Because I have something to fall back on, and my next best alternative is to go work for someone else. In today’s job market environment, the employer probably has the power since their next best alternative is to hire the next guy that comes along as so many qualified people are unemployed.

Here is another example. Have you ever gone up to a street vendor and tried to buy something and haggled with them to get a lower price? And then, when they said “no”, you said “ok”, and started to walk to away. At this point, they wanted to be your best friend and shouted out a much lower price and if you kept walking sometimes they would go even lower. Why do they do this? Because you have the power in the negotiation! You have the better alternative! Your next best alternative is to walk to the next street vendor and get the same product from them. Their next best alternative is to wait for the next customer to come along and hope they are willing to buy their product. Of course, this tactic doesn’t work well if you are trying to do this in a high tourist area where the vendor’s next best alternative is to wait for the next tourist who is dumb enough to pay full price.

Another way to get power is through information. A key to getting the best result in a negotiation is to get the most information from the other party without giving up your alternatives. Your goal should be to find out what the other party’s next best alternative is, so you can exploit that. Take another example where I am renting an apartment from a landlord. If I am able to find out that nobody else has been interested in that apartment and the landlord’s next best alternative is a vacant apartment with no income, I can exploit that to get a lower price. On the flip side, the landlord would not want to let me know that he has no other potential tenants and instead, try to find out if I have other apartments I am interested in. If I did not, then he could exploit that because he knows that I do not have any other alternatives.

Remember, your next best alternative is your source of power. Don’t give it away unless you are showing the other party that you hold the power in the negotiation.

Coming up in this series will be a post about preparing for a negotiation.