'The 7 Habits of Highly Effective People' Update: A Win-Win Is Always The Best Negotiating Strategy Thirty years after its initial publication, 'The 7 Habits of Highly Effective People' gives an updated look at the art of negotiating.

This is an excerpt is from the classic best-seller, The 7 Habits of Highly Effective People, and has been edited for brevity. Habit 4 discusses many approaches to negotiation and why one strategy stands out from the rest. The 30th-anniversary edition of the celebrated book by the late author is being published next month by Simon and Schuster.

Win/Win is a frame of mind and heart that constantly seeks mutual benefit in all human interactions. Win/Win means that agreements or solutions are mutually beneficial, mutually satisfying.

With a Win/Win solution, all parties feel good about the decision and feel committed to the action plan. Win/Win sees life as a cooperative, not a competitive arena. Most people tend to think in terms of dichotomies: strong or weak, hardball or softball, win or lose.

But that kind of thinking is fundamentally flawed. It's based on power and position rather than on principle. Win/Win is based on the paradigm that there is plenty for everybody, that one person's success is not achieved at the expense or exclusion of the success of others.

Win/Win is a belief in the third alternative. It's not your way or my way; it's a better way, a higher way.

Of the five philosophies discussed —Win/Win, Win/Lose, Lose/Win, Lose/Lose, and Win—which is the most effective? The answer is, "It depends." If you win a football game, that means the other team loses.

Weigh options for the long term

If you work in a regional office that is miles away from another regional office, and you don't have any functional relationship between the offices, you may want to compete in a Win/Lose situation to stimulate business. However, you would not want to set up a Win/Lose situation where you need cooperation among people or groups of people to achieve maximum success.

If you value a relationship and the issue isn't really that important, you may want to go for Lose/Win to genuinely affirm the other person. "What I want isn't as important to me as my relationship with you. Let's do it your way this time." You might also go for Lose/Win if you feel the expense of time and effort to achieve a win just isn't worth it.

There are circumstances in which you would want to Win, and you wouldn't be highly concerned with the relationship of that win to others. If your child's life were in danger, for example, you might be peripherally concerned about other people and circumstances. But saving that life would be supremely important.

The best choice, then, depends on reality. The challenge is to read that reality accurately and not to translate Win/Lose or other scripting into every situation.

Most situations, in fact, are part of an interdependent reality, and then Win/Win is really the only viable alternative of the five.

Respect your counterpart

Win/Lose is not viable because, although I appear to win in a confrontation with you, your feelings, your attitudes toward me, and our relationship have been affected. If I am a supplier to your company, for example, and I win on my terms in a particular negotiation, I may get what I want now. But will you come to me again? My short-term Win will really be a long-term Lose if I don't get your repeat business. So an interdependent Win/Lose is really Lose/Lose in the long run.

If we come up with a Lose/Win, you may appear to get what you want for the moment. But how will that affect my attitude about working with you, about fulfilling the contract? I may not feel as anxious to please you. So we're into Lose/Lose again. Lose/Lose obviously isn't viable in any context.

And if I focus on my own Win and don't even consider your point of view, there's no basis for any kind of productive relationship. In the long run, if it isn't a win for both of us, we both lose. That's why Win/Win is the only real alternative in interdependent realities.

But if individuals cannot come up with a synergistic solution—one that is agreeable to both—they can go for an even higher expression of Win/Win—Win/Win or No Deal.

Walking away can make sense

No Deal basically means that if we can't find a solution that would benefit us both, we agree to disagree agreeably—No Deal. No expectations have been created, no performance contracts established. I don't hire you or we don't take on a particular assignment together because it's obvious that our values or our goals are going in opposite directions.

It is so much better to realize this up front instead of downstream when expectations have been created and both parties have been disillusioned.

When you have No Deal as an option in your mind, you feel liberated because you have no need to manipulate people, to push your own agenda, to drive for what you want. You can be open. You can really try to understand the deeper issues underlying the positions.

With No Deal as an option, you can honestly say, "I only want to go for Win/Win. I want to win, and I want you to win. I wouldn't want to get my way and have you not feel good about it, because downstream it would eventually surface and create a withdrawal. On the other hand, I don't think you would feel good if you got your way and I gave in. So let's work for a Win/Win. Let's really hammer it out.

And if we can't find it, then let's agree that we won't make a deal at all. It would be better not to deal than to live with a decision that wasn't right for us both. Then maybe another time we might be able to get together."

The concept can lead to bigger fish

Sometime after learning the concept of Win/Win or No Deal, the president of a small computer software company shared with me the following experience.

"We had developed new software which we sold on a five-year contract to a particular bank. The bank president was excited about it, but his people weren't really behind the decision.

"About a month later, that bank changed presidents. The new president came to me and said, "I am uncomfortable with these software conversions. I have a mess on my hands. My people are all saying that they can't go through this and I really feel I just can't push it at this point in time.'

"My own company was in deep financial trouble. I knew I had every legal right to enforce the contract. But I had become convinced of the value of the principle of Win/Win.

"So I told him, "We have a contract. Your bank has secured our products and our services to convert you to this program. But we understand that you're not happy about it. So what we'd like to do is give you back the contract, give you back your deposit, and if you are ever looking for a software solution in the future, come back and see us.'

"I literally walked away from an $84,000 contract. It was close to financial suicide. But I felt that, in the long run, if the principle were true, it would come back and pay dividends.

"Three months later, the new president called me. "I'm now going to make changes in my data processing,' he said, "and I want to do business with you.' He signed a contract for $240,000."

Always weigh cost-benefit

Anything less than Win/Win in an interdependent reality is a poor second best that will have an impact on the long-term relationship. The cost of that impact needs to be carefully considered. If you can't reach a true Win/Win, you're very often better off to go for No Deal.

The Win/Win or No Deal approach is most realistic at the beginning of a business relationship or enterprise. In a continuing business relationship, No Deal may not be a viable option, which can create serious problems, especially for family businesses or businesses that are begun initially on the basis of friendship.

In an effort to preserve the relationship, people sometimes go on for years making one compromise after another, thinking Win/Lose or Lose/Win even while talking Win/Win. This creates serious problems for the people and for the business, particularly if the competition operates on Win/Win and synergy.

Without No Deal, many such businesses simply deteriorate and either fail or have to be turned over to professional managers. Experience shows that it is often better in setting up a family business or business between friends to acknowledge the possibility of No Deal downstream and to establish some kind of buy/sell agreement so that the business can prosper without permanently damaging the relationship.

Of course, there are some relationships where No Deal is not viable. I wouldn't abandon my child or my spouse and go for No Deal (it would be better, if necessary, to go for compromise—a low form of Win/Win). But in many cases, it is possible to go into a negotiation with a full Win/Win or No Deal attitude. And the freedom in that attitude is incredible.