A lot of people think that negotiation means compromise. I want something favorable to me, you want something favorable to you and we meet in the middle. This is often a dangerous mindset. Negotiation often includes compromise but the most useful tools of negotiation bypass compromise altogether. Let's examine just two of these tools.
Negotiators strive to find ways to meet interests at low or no cost. A "negotiator's fable" offers a good illustration. Two sisters each wanted an orange but they had just one orange between them. Each wanted the whole orange and neither had anything they could trade to the other that the other valued more than the fruit.
In the end, they compromised. Each took half the orange and went on her way. One sister happily ate her fruit, throwing away the peel. The other peeled her half, throwing away the fruit and using the peel to garnish a dish.
The compromise in this story was completely unnecessary. Each sister could have had the full value of the orange if they had identified each other's true interests and acted accordingly. Compromise destroyed value that was there for the taking.
Real world negotiations often offer similar opportunities for negotiating parties to meet each other's interests in creative ways that cost far less than their value.
Negotiators increase the value of a deal by identifying differences in relative valuation. If I'm selling you goods and want to deliver them in four months while you ask for two months we can compromise at three months. But should we? What if it costs me $100,000 to deliver in three months (vs. four) and $250,000 to deliver in two and it's worth $50,000 for you to receive in three (again, in comparison with four) and $500,000 to receive them in two months?
In that case, our compromise is our worst option, destroying $50,000 in value compared with delivery in four months and $250,000 in value compared with delivery in two months. If we negotiate well we won't compromise -- we'll settle on a higher price and delivery in two months.