Insights into Negotiations: Know your Zone of Possible Agreement (ZOPA) during negotiations

A key element of a successful negotiation is knowing the value of your expected outcome and the limits of your willingness to agree to a deal. Negotiators need to understand what the optimal terms for an agreement are and when an agreement will be of no benefit.

In negotiations, understanding your BATNA (Best Alternative To a Negotiated Agreement) is essential for knowing when to walk away from an undesirable agreement. But knowing your ZOPA (Zone of Possible Agreement) is equally important to successful negotiation outcomes.

A Zone of Possible Agreement exists when there is an opportunity for an agreement that could benefit both parties in a negotiation process, and which is better than their BATNAs. Thus, when some sort of mutually beneficial terms could overlap, there is an opportunity for a win-win agreement to be made.

The ZOPA represents a range at which negotiating parties can find common ground and agree on a way forward. It is neither the ‘worst-case scenario’ nor ‘lowest selling point’ but a possibility for a compromised win-win deal.

Brad Spangler (2013) explains the role of ZOPAs in distributive and integrative negotiations.

He argues that “In a distributive negotiation, in which the participants are trying to divide a “fixed pie,” it is more difficult to find mutually acceptable solutions as both sides want to claim as much of the pie as possible. Distributive negotiations over a single issue are zero-sum — there is a winner and a loser. There is no overlap of interests between the parties; therefore, no mutually beneficial agreement is possible.”

However, he explains that integrative negotiations which involve creating value or “enlarging the pie” allow parties to “combine their interests to create joint value.” This, he argues, “is possible when parties have shared interests or are dealing with multiple issues. To achieve integration, negotiators can deal with multiple issues at the same time and make trades between them. This is so that one might get more of something that one values whilst getting more of something that is of value. That way, both parties can ‘win,’ even though neither gets all that they originally thought they wanted.

While a ZOPA presents an ideal opportunity for positive outcomes for all negotiating parties, determining whether a ZOPA exists is not always simple. Identifying a ZOPA may take some time as parties explore each other’s interests, options, and intentions.

Identifying the ZOPA

Before you can identify your ZOPA, clearly understand your BATNA and your walk-away position. Knowing your best possible alternatives if an agreement can’t be reached is the first step in being able to determine your ZOPA.

Next, you need to know what your negotiation counterpart’s BATNA could be. If you know what their bottom line is, you can then determine if any overlap between your walkaway point and theirs exists. Once you know this, you should be able to establish a possible ZOPA.

In short, if both sides know what their BATNAs are, the counterparts should be able to communicate effectively to identify the ZOPA. When the terms of each party’s desired outcomes align, a ZOPA has been reached and the likelihood of a positive agreement increases. However, when parties involved in the negotiation are not aware of their BATNAs or overestimate the power of their alternatives, the likelihood of finding common ground and a subsequent ZOPA is slim.

In these instances, negotiators enter a ‘Negative Zone of Possible Agreement’ and won’t be able to reach a deal unless each party will adjust what they see as acceptable.

A six-year research* into director-level perceptions of various aspects of supply chain management by PanAvest International investigated director-level perceptions of negotiations in the supply and value chain management environment.

The purposive study*, entitled “director level perceptivities on aspects of negotiations,” drew on a sample of approximately 64 international organisations, including Fortune 1000, FSTE 250, and JSE 100 companies, as well as state-owned enterprises and government departments. The study involved various CEOs, CFOs, COOs, directors, and officers from engineering, marketing, logistics, supply chain management, project management, procurement, and related industries.

Examining an array of issues relating to negotiations, bargaining, agreements, and contracts, the study revealed that in Africa*, approximately:-

1. 4% of public sector lead negotiators were familiar with the term BATNA.

2. 22% of private sector procurement practitioners were familiar with the process to follow to determine ZOPA.

3. 3% of developmental project negotiations involved the pre-establishment of ZOPA(S)

Could the lack of appreciation for ZOPA be among the reasons there are many unfortunate project and deal outcome challenges?

Assessing opportunities for ZOPAs and increasing your chances of negotiation success is therefore another key element of negotiations planning. While being aware of possible ZOPAs can help to facilitate mutually beneficial agreements, negotiators must keep the following considerations in mind.

Planning is key but does not guarantee negotiation success

Although you can clearly understand your BATNA and research your counterpart’s potential BATNAs, you will seldom have a confirmed ZOPA. In addition, you will not always know who you will negotiate with, what their ultimate intentions are, and whether they will compromise to reach a win-win agreement.

Preparing will put you in a position to have a provisional ‘walk away’ line from your side, but you will still need to establish the walk-away line of your counterpart–if this is possible. While you should always be well prepared, you may need to accept the fact that a ZOPA may not be reached.

Understand the ZOPA boundaries

Knowing the limits to a ZOPA before you enter a negotiation places you in a position to steer the discussions towards a favorable outcome. However, it is important to remember that sometimes your negotiation counterpart may not reveal their BATNA, leaving you in a position where you are not sure of their bottom line or walk-away boundary.

Negotiations can be fluid

Understanding that things are constantly shifting and changing allows a negotiator to adapt to the negotiation process and refine the ultimate end goal. Since anything can happen in a negotiation, successful negotiators need to accept that a ZOPA can change, grow or shrink during the process and they should be able to adapt to these changes to reach a positive agreement.

Understanding your BATNA, researching and establishing your negotiation counterpart’s potential BATNAs, and identifying the Zone of Possible Agreement between you allows negotiators to enter negotiations proactively and ready to agree that is beneficial to all involved.

To recap, ZOPA negotiation is concerned with a scope in which deals can be made so that both negotiating parties can leave the negotiations contented. Leading experts, including Chris Voss and Harry Warren, rightly point out that ZOPA is the “bargaining range which allows both parties to leave with a reasonably satisfying outcome”

To conclude, ZOPA, as pontificated by Kartik Menon, is a “bargaining range where two or more negotiation parties establish a common ground for a potential win-win outcome. This range is where negotiating parties will often compromise and strike a deal with no party worse off than before. The key to this is for the parties to strive toward a common goal and establish a framework that accommodates some requirements and specifications from each.

>>>is an international chartered director and Africa’s first-ever appointed Professor Extraordinaire for Industrialisation and Supply Chain Governance. He is the CEO of PanAvest International and the founding non-executive chair of MY-future YOUR-Future and OUR-Future (“MYO”) and the highly popular daily Nyansakasa series. He is currently the non-executive chair of the Minerals Income and Investment Fund (MIIF). Professor Boateng was previously the non-executive chair of the Public Procurement Authority (PPA). For more information on Nyansakasa, visit www.myoglobal.org.