Leverage

Definition

Leverage in negotiation refers to the power that one party has to influence the other party's decisions and outcomes. It is a crucial aspect of negotiation power, as it allows negotiators to secure better deals or concessions based on their strengths and advantages, which can stem from various sources like resources, information, or relationships.

5 Must Know Facts For Your Next Test

1. Leverage can come from various sources, including expertise, unique resources, or the ability to walk away from a deal, which significantly impacts negotiation dynamics.
2. The concept of leverage is not static; it can change during negotiations as new information is revealed or circumstances shift.
3. Understanding your own leverage, as well as that of the other party, is critical for developing effective negotiation strategies.
4. Leverage can be both positional (based on one's formal authority) and personal (based on relationships or reputation).
5. Effective negotiators often create leverage through preparation, including researching their counterpart’s needs and interests.

Review Questions

• How does understanding leverage influence a negotiator's strategy?
  • Understanding leverage allows negotiators to tailor their strategies to maximize their advantages and minimize their weaknesses. By identifying their own sources of leverage, such as valuable resources or superior alternatives, negotiators can approach discussions with confidence and assertiveness. Additionally, recognizing the other party's leverage enables negotiators to anticipate potential challenges and prepare counter-strategies that can shift the balance of power in their favor.
• What are the implications of positional versus personal leverage in negotiation outcomes?
  • Positional leverage is based on formal authority, such as a job title or contractual obligations, while personal leverage stems from relationships and reputation. The implications of these types of leverage are significant; positional leverage can dictate terms in a hierarchical situation, but personal leverage may facilitate collaboration and trust-building. Understanding how to effectively utilize both types of leverage can lead to more favorable negotiation outcomes, as negotiators can appeal to different motivations based on the context.
• Evaluate how changes in circumstances during a negotiation can impact leverage and overall results.
  • Changes in circumstances during a negotiation can dramatically shift the balance of leverage between parties. For instance, if new information is introduced that alters perceived value or urgency, it may enhance one party's leverage while diminishing the other's. This dynamic highlights the fluid nature of leverage; effective negotiators continuously assess and adapt their strategies in response to evolving situations. By staying attuned to these changes, they can pivot their approach to maintain or enhance their advantage throughout the negotiation process.

Related terms

BATNA:

Best Alternative to a Negotiated Agreement; the best option a negotiator has if the current negotiations fail.

ZOPA:

Zone of Possible Agreement; the range in which two parties can find common ground during negotiations.

Negotiation Tactics: Specific strategies or actions employed by negotiators to gain an advantage and influence the outcome of negotiations.