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What We (Think We) Know May Not Be So

January 20, 2016 • Editors' Pick, Emerging Ideas, INNOVATION, Strategic Spotlight, STRATEGY & MANAGEMENT

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How to Get (More of) What You Want in Negotiations

By Margaret A. Neale and Thomas Z. Lys

The results of empirical research on the performance of negotiators offers many surprising, and often counterintuitive findings that are often at odds with the commonly held beliefs of most negotiators. In this article, we discuss two counterintuitive ways highlighted by empirical research that will help you get (more of) what you want in your negotiations. First, negotiators often underestimate the power of the powerless in negotiations and try to match the dominant behaviors of their powerful counterpart. Second, negotiators can use persons which are seemingly adverse to their interests strategically.

 

1.The Curious Case of Not Having Power and Still Getting (More of) What You Want

Not surprisingly, negotiators would prefer to have more power to less. But are you really doomed to getting less of what you want when you are less powerful than your counterpart? Probably the most straightforward reason for differential power in negotiations is due to negotiators’ alternatives: what happens if no deal were reached; how easy is it for you to simply walk away from the current negotiation and take your alternative instead. Decades of research have confirmed that he or she who has the better alternatives (i.e., can more easily walk away) claims more of the available surplus in the interaction.1 What choices do you have when your alternatives are not particularly attractive – when you do not have the upper hand in a negotiation? Must you simply settle for less, sometimes substantially so?

By understanding and leveraging the paradoxical power of being less powerful, having less power than your counterpart can be your secret weapon. Consider that the amount of power that a negotiator possesses dramatically influences the goals they have in the negotiation. High power players are concerned primarily with value claiming (e.g., who gets what). Low power negotiators realise that for them to get (more of) what they want, they need to be able to take advantage of the potential synergy that exists between them and their counterparts. When compared to negotiations between individuals of equal power, those that were between high- and low-powered counterparts create more value and it is the low-power party who is the engine for this value creation.2

By understanding and leveraging the paradoxical power of being less powerful, having less power than your counterpart can be your secret weapon.

It is not always obvious how powerful you are compared to your counterpart in a particular negotiation. Recent research identifies a strategy that can help you get (more of) what we want in your negotiations when it is not clear who is more or less powerful.3 Powerful negotiators often exhibit dominant behaviours such as expanding their body posture and taking up more physical space, using gestures often, reducing interpersonal distances, and speaking in a loud voice. In contrast, negotiators who are less powerful typically express deference by making themselves physically more compact, limiting their physical gestures, maintaining interpersonal distances, and speaking softly.

When you encounter a negotiator who behaves dominantly you may be tempted to match your counterpart’s bluster with your own dominant behaviours. While sometimes quite tempting, you would be better advised to be disciplined by complementing your counterpart’s dominance with deference. Matching dominance with dominance often increases the aggressiveness of both parties and leaves little space for value creation. Both parties are simply focused on claiming more.

In contrast, behaving in a complementary fashion – meeting your counterpart’s dominance with your deference – can benefit the disciplined negotiator in surprising ways. Even though in most situations, the dominant negotiator will get more than her deferent counterpart, the deferent counterpart claims significantly more value when behaving deferentially than the value that is ultimately claimed by a counterpart matching dominance with dominance, with the increased value claiming coming from greater value creation. So the pool of resources that is available for division becomes larger – and the split of this larger pie benefits the deferent negotiator proportionately more. But the complementarity works both ways: If you negotiate with a counterpart who is deferential, you are better off responding more dominantly. More value is created and both you and she gets more than the value that would have been available to two deferential negotiators.

But before you rush to apply this strategy, you need to consider a couple of important caveats. Deference is not yielding; it is an active state of cooperation and agreeableness that involves subtle persuasion and influence tactics in the pursuit of one’s interests while avoiding direct conflict. The complementarity between a dominant and a deferent negotiator creates opportunities for successful coordination. Dominant negotiators are more likely to express their preferences or positions while their deferent counterparts, by asking questions and making proposals.

Deference is not yielding; it is an active state of cooperation and agreeableness that involves subtle persuasion and influence tactics in the pursuit of one’s interests while avoiding direct conflict.

Importantly, human beings naturally respond deferentially to a dominant player or dominantly to a deferential player in cooperative social settings. This dance of coordination is typically associated with increased liking and positive emotions between the parties. As such, even if the social setting is characterised by the mixed motives of cooperation and competition – the hallmark of negotiated interactions – a skilled counterpart will do well to frame the overall exchange as cooperative and complement her counterpart’s dominance with deference or deference with dominance.

So the next time you face a potential titan in a negotiation, you should consider using this negotiation jujitsu of power complementarity if you want to claim more.

 

2. Sometimes Your Foes May Help You Get (More of) What You Want.

A negotiator’s reservation price – the bottom line or the worst possible deal that the negotiator will accept – is an incredibly strategic piece of information. It is the least a seller is willing to accept or the most a buyer is willing to pay. However, while in a purchase the reservation price is often indeed a ‘price’, that term is used more widely, frequently referring to a basket (or baskets) of characteristics that comprise the worst deal one is willing to accept, the tipping point between an agreement and an impasse.

Negotiators often query their counterparts, asking for their bottom lines. Not surprising, you would be well advised not to share your true reservation price with your counterpart. If your reservation price becomes known to them, the most you can hope for is exactly that: your bottom line. And they will be able to reap the entire surplus (i.e., the difference between your reservation price and theirs) available in the negotiation.

Knowing the strategic value of the reservation price, negotiators who are asked to share their bottom lines often respond with an answer that is, in effect, a faux bottom line – one that is much better than the one they would be willing to accept. In fact, a negotiator might be able to get an extraordinary deal if he were able to convince his counterpart that his reservation price was just slightly different than the counterpart’s. If an agreement were reached, the negotiator could essentially capture the entire surplus. However, a counterpart is unlikely to believe that a reasonable negotiator would share his or her true reservation price. So, how can a negotiator convince his or her counterpart that the revealed bottom line is real?

The recent tug of war between Congress and the Obama Administration regarding the proposed nuclear deal with Iran provides an interesting setting to explore such a situation. According to official accounts, the Obama Administration was close to agreement with Iran when the Republican Caucus invited Israel’s Prime Minister Netanyahu – a staunch critic of the proposed agreement – to outline his objections in a speech to Congress. In addition, Netanyahu’s speech was preceded by numerous accounts in the press of how the two leaders disliked each other.

On March 3rd 2015, in a speech lasting almost three quarters of an hour – Prime Minister Netanyahu outlined his concerns. Such an agreement he believed, would provide Iran with a path to the bomb rather than assuring that Iran would never develop nuclear weapons.

Consider the impact of Netanyahu’s speech on Obama’s position in the negotiation with Iran. Obama would like to persuade the Iran negotiators that his reservation price is more extreme than it really it – to get a better deal from the US perspective. However, statements from the US negotiators about their bottom line is likely not to be credible – and Iranian negotiators are likely to believe that the US true reservation price is even more favourable to them – rejecting the US proposals and pressing for a better deal. Too often this strategy increases the likelihood of impasse, even when there are agreements that exceed both parties’ true reservation prices.

So what is one to do, particularly when facing an impasse? Obviously revealing one’s true reservation price is not the answer because it cannot be verified and, thus, is not credible. An alternative strategy is to enlist an ally. For example, when contemplating purchasing an expensive home, one could enlist one wealthy ally (or even better several) to make a low bid on the property only to walk away with much fanfare when her (low) offer is not accepted. Psychologically, such a strategy may create uncertainty in the seller’s mind as to the true value of the house, making them more willing to entertain a lower offer than they otherwise might have considered.

Of course for such a strategy to work, this ally cannot be easily associated with the negotiator. So, a statement by United States Secretary of State John Kerry to the Iranian counterpart that the US simply cannot accept this deal would carry little credibility. The connection and the interests between John Kerry and the US negotiators are too closely aligned.

What is one to do, particularly when facing an impasse? Obviously revealing one’s true reservation price is not the answer because it cannot be verified and, thus, is not credible. An alternative strategy is to enlist an ally.

For the strategy to work, the US would need to enlist an ally whose interests are not so obviously aligned. So the spectacle in Washington – Netanyahu addressing a joint session of Congress, amplified by the highly public animosity between President Obama and Prime Minister Netanyahu – may have had the effect of credibly raising Iran’s assessment of the US’s reservation price and, in the process, helped the US negotiators gain concessions from the Iranians that they otherwise might not be able to secure. And of course, the more President Obama and Prime Minister Netanyahu appear adversarial, the more likely Netanyahu’s intervention would help the US obtain a better deal from the Iranians. So the press reports on how President Obama was offended by Prime Minister Netanyahu’s interference in US politics, or the stories that the Republican Caucus was out to make the President look bad, or the analysis showing that Netanyahu’s motives were simply to increase the likelihood of his reelection, all increase the likelihood of the strategy working. So, too, did the recent legislation that the agreement has to be ratified by Congress – this was simply icing on this strategic ‘cake’.

But there is a final ironic twist to Netanyahu’s speech: It will increase the likelihood that the Iranian parliament will ratify the treaty. The reason for this is that often negotiators faced with uncertainty of complex situations, turn to their opponents’ reactions to assess how good a deal they got. So if the Israelis (Iran’s self-proclaimed enemy) and the Republican Congress hate the deal, it must be good for Iran.

Interestingly, these effects are not dependent on what the Prime Minister’s intentions were – whether he intended to help the US in the Iranian nuclear treaty negotiations or to derail such a deal – from the perspective of negotiation strategy, Netanyahu strengthened the hand of the US negotiators and increased the likelihood that Iran would ratify the agreement.

About the Authors

margaret-neale-webthomas-lys-webMargaret A. Neale (left) is a faculty member at the Stanford University Graduate School of Business and Thomas Z. Lys (right) is a faculty member at the Kellogg School of Management at Northwestern University.

They are the co-authors of Getting (More of) What You Want: How the Secrets of Economics and Psychology Can Help You Negotiate Anything in Business and Life. (New York: Basic Books.)

A British version of the book is published by Profile Books while a Dutch version (Handboek onderhandelen: psychologische en economische tactieken om elke situatie naar je hand te zetten) is published by Maven Publishing.

 

References

1. Pinkley, R. L., Neale, M. A., & Bennett, R. J. (1994). The impact of alternatives to settlement in dyadic negotiation. Organizational Behavior and Human Decision Processes, 57(1), 97-116. Morris, M. W., Larrick, R. P., & Su, S. K. (1999). Misperceiving negotiation counterparts: When situationally determined bargaining behaviors are attributed to personality traits. Journal of Personality and Social Psychology, 77, 52-67.

2. Mannix, E.A., & Neale, M.A. (1993). Power imbalance and the pattern of exchange in dyadic negotiation. Group Decision and Negotiation, 2, 119-133.

3. Wiltermuth, S.S., Tiedens, L.Z., & Neale, M.A. (in press). The benefits of complementarity in negotiations. Negotiations and Conflict Management Research.

 

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